Ritchie Bros. reports second quarter 2019 results, raises dividend and announces interim Co-Chief Executive Officers

VANCOUVER, Aug. 8, 2019 /PRNewswire/ - Ritchie Bros. Auctioneers Incorporated (NYSE & TSX: RBA, the "Company" or "Ritchie Bros.") reported the following results for the three months ended June 30, 2019:

 (All figures are presented in U.S. dollars)

Net income attributable to stockholders for Q2 2019 increased 18% to $54.0 million, and diluted earnings per share ("EPS") attributable to stockholders increased 17% to $0.49 per share, compared to the same period in 2018.

Consolidated results:

• Total revenue in Q2 2019 increased 27% to $393.2 million as compared to Q2 2018
• Service revenue in Q2 2019 increased 9% to $234.6 million as compared to Q2 2018
• Inventory sales revenue in Q2 2019 increased 68% to $158.6 million as compared to Q2 2018
• Total selling, general and administrative expenses ("SG&A") in Q2 2019 decreased 4% to $97.7 million as compared to Q2 2018
• Operating income in Q2 2019 increased 20% to $78.0 million as compared to Q2 2018
• Cash provided by operating activities was up 49% to $160.4 million for the first half of 2019

Auctions & Marketplaces segment results: 

• GTV¹ in Q2 2019 increased 5% to $1.5 billion and increased 7% when excluding the impact of foreign exchange as compared to Q2 2018
• A&M total revenue in Q2 2019 increased 31% to $359.7 million as compared to Q2 2018
• Service revenue in Q2 2019 increased 12% to $201.1 million as compared to Q2 2018
• Inventory sales revenue in Q2 2019 increased 68% to $158.6 million as compared to Q2 2018

Other Services segment results:

• Other Services total revenue in Q2 2019 decreased 2% to $33.6 million as compared to Q2 2018
• Ritchie Bros. Financial Services ("RBFS") revenue in Q2 2019 increased 19% to $8.1 million as compared to Q2 2018

"We delivered impressive second quarter results driven by our highest ever Q2 GTV performance of $1.5 billion and 7% growth on a constant currency basis." said Ravi Saligram, Chief Executive Officer, Ritchie Bros. "Furthermore, our strong second quarter performance reinforced the power of our business model to achieve operating leverage and drive strong cash flow. We generated 27% total revenue growth together with disciplined cost management and achieved 20% operating income growth and record quarterly diluted earnings per share of $0.49. We are pleased that our operating free cash flow* grew 64% on a trailing twelve-month basis and we achieved an adjusted net debt* to adjusted EBITDA* ratio of 1.8 times."

Saligram continued, "our US region led our live auction performance with 10% growth fueled by the massive $94 million Columbus, OH auction. Our global online channel had strong GTV growth from Marketplace-E up 47% in the quarter along with GovPlanet up over 200%. RBFS continues to deliver with strength posting 19% revenue growth and its 30th consecutive double-digit growth quarter." 

Other Company developments:

• In Q2 2019, our Board of Directors authorized a share repurchase program for the repurchase of up to $100 million of our common shares over the next 12 months, which was approved by the Toronto Stock Exchange "TSX". During Q2 2019, we repurchased $42.0 million of common shares.
• Increased quarterly cash dividend by 11% to $0.20 per share

Announcement of Interim Chief Executive Officers and Promotions
The Board of Ritchie Bros. announces that Sharon Driscoll, Chief Financial Officer, and Karl Werner, President, International, have been named interim Co-Chief Executive Officers of the Company, in addition to their current roles effective October 1^st concurrent with the date of Mr. Saligram's departure. Ravi will work closely with Sharon, Karl and the executive team to assure a smooth transition. The Board continues its search for a successor to Mr. Saligram as Chief Executive Officer. That search, together with the announcement of Mr. Saligram' s intention to step down from his positions at the Company, were announced on June 24, 2019. Sharon and Karl will assume their new roles on October 1, 2019.

Ritchie Bros. also announced the following appointments and promotions:

• Jeff Jeter who was recently appointed President, Upstream and Emerging Businesses, North America will now also assume responsibility for digital operations. He will continue to play an important role in accelerating momentum behind key growth initiatives including oversight of North American strategic accounts, the Government business and the commercial roll-out of Ritchie Bros. Asset Solutions.
• Kari Taylor, currently Chief Sales Officer, U.S. Regions, will become President, US Regions, overseeing both sales and operations functions in the US.
• Kieran Holm, currently SVP, Operations Excellence & Efficiencies, will become President, Canada, responsible for all aspects of the region's sales and operations.
• Matt Ackley, currently SVP Product Management & Digital Marketing will become Chief Marketing Officer responsible for the entire Marketing function including digital product management and the global development of Ritchie Bros. Asset Solutions.

Jeff, Kari, Kieran and Matt will continue reporting directly to the Chief Executive Officer.

Erik Olsson Appointed Vice Chair of Board of Directors

• The Company also announced that Erik Olsson, a Director of the Company since 2013, has been named Vice Chairman of the Board as part of the Board's succession process. Ms. Briscoe will continue as Board Chair through May 2020 and intends to remain on the Board of Directors through 2021.

Saligram concluded, "It has been a privilege and an honor to lead the transformation of Ritchie Bros. I am highly confident about our future growth prospects given our outstanding management team, technology enabled platform driving significant network effects, and ability to penetrate all segments of the market with a full suite of multi-channel solutions and portfolio of growth initiatives. I firmly believe that Sharon and Karl in collaboration with the executive team will successfully guide Ritchie Bros. during this interim period in executing our strategic plan to drive growth and add shareholder value while continuing to keep the customer at the heart of everything we do. I would like to express my sincere thanks to all our employees for their support and I am optimistic that our best days are ahead of us."

Financial Overview
(Unaudited)

Segment Overview

Consolidated Performance Overview

GTV increased 5% to $1.5 billion and increased 7% when excluding the impact of foreign exchange. GTV from live on site auctions increased 5% to $1.3 billion and GTV from online marketplaces increased 5% to $236.6 million.

Total revenue increased 27% to $393.2 million with Service revenue growth of 9% and Inventory sales revenue growth of 68%. During the quarter, there was a large dispersal of pipeline equipment as part of the $94 million Columbus, Ohio auction held in June 2019.

Service revenue growth of 9% was driven by an 8% improvement in commissions revenue and a 12% increase in fee revenue. The increase in commissions revenue was primarily due to the Columbus, Ohio auction in the U.S. where the Company saw higher guarantee commission rate performance and improved straight commission rate in the International region. The increase in fee revenue was driven primarily by full implementation of the buyer fees harmonization in June 2019, higher proportion of low value lots, and fees earned from RBFS.

Inventory sales revenue increased 68% led by the Columbus, Ohio auction, GovPlanet revenue growth from the non-rolling stock program, and a higher volume of inventory sales contracts in the International region. 

Costs of services increased 17% to $50.3 million. The increase was primarily driven by a one-time fee paid to an unrelated third party in connection with a large dispersal of pipeline equipment at the Columbus, Ohio auction, on-going costs to support the growth of GovPlanet operations and overall cost growth in-line with the Company's service revenue growth.

Cost of inventory increased 83% to $149.8 million partially due to the overall increase in inventory sales volume as well as the trailing effect of selling through some lower performing inventory packages acquired in the previous quarter within our International region.

Selling, general and administrative ("SG&A") expenses decreased 4% to $97.7 million primarily due to foreign exchange fluctuations, lower compensation expense in the US and a decrease in professional fees, partially offset by on-going incremental costs related to the GovPlanet non-rolling stock program, and to support the growth in RBFS.

Foreign exchange had an unfavourable impact on total revenue and a favourable impact on expenses. These impacts were primarily due to the fluctuations in the Euro and Canadian exchange rates relative to the U.S. dollar.

Net income attributable to stockholders increased 18% to $54.0 million. The increase was primarily due to higher operating income coupled with lower net interest expenses, partially offset by higher taxes due to an increase in the effective tax rate.

Primarily for the same reasons noted above, diluted EPS attributable to stockholders increased 17% to $0.49 per share compared to $0.42 per share in Q2 2018.

Dividend Information
Quarterly dividend
The Company declared on August 7, 2019, a quarterly cash dividend of $0.20 per common share payable on September 18, 2019 to shareholders of record on August 28, 2019.

Q2 2019 Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended June 30, 2019, at 8am Pacific time / 11 am Eastern time / 4pm GMT on August 9, 2019.  The replay of the webcast will be available through September 9, 2019.

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

About Ritchie Bros.
Established in 1958, Ritchie Bros. (NYSE and TSX: RBA) is a global asset management and disposition company, offering customers end-to-end solutions for buying and selling used heavy equipment, trucks and other assets. Operating in a number of sectors, including construction, transportation, agriculture, energy, oil and gas, mining, and forestry, the company's selling channels include: Ritchie Bros. Auctioneers, the world's largest industrial auctioneer offers live auction events with online bidding; IronPlanet, an online marketplace with featured weekly auctions and providing the exclusive IronClad Assurance® equipment condition certification; Marketplace-E, a controlled marketplace offering multiple price and timing options; Mascus, a leading European online equipment listing service; and Ritchie Bros. Private Treaty, offering privately negotiated sales. The company's suite of multichannel sales solutions also includes RB Asset Solutions, a complete end-to-end asset management and disposition system. Ritchie Bros. also offers sector-specific solutions including GovPlanet, TruckPlanet, and Kruse Energy Auctioneers, plus equipment financing and leasing through Ritchie Bros. Financial Services. For more information about Ritchie Bros., visit RitchieBros.com.

Forward-looking Statements
This news release contains forward-looking statements and forward-looking information within the meaning of applicable U.S. and Canadian securities legislation (collectively, "forward-looking statements"), including, in particular, statements regarding future financial and operational results, including growth prospects, payment of dividends and the repurchase of our common shares. 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 the Company's control, including the numerous factors that influence the supply of and demand for used equipment; economic and other conditions in local, regional and global sectors; the Company's ability to successfully integrate IronPlanet, and to receive the anticipated benefits of the Acquisition; and the risks and uncertainties set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, which is available on the SEC, SEDAR, and Company websites. The foregoing list is not exhaustive of the factors that may affect the Company'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 the Company 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.

GTV and Selected Condensed Consolidated Financial Information

GTV and Condensed Consolidated Income Statements – Second Quarter
(Expressed in thousands of United States dollars, except share and per share amounts)
(Unaudited)

Condensed Consolidated Balance Sheets
(Expressed in thousands of United States dollars, except share data)
(Unaudited)

Condensed Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
(Unaudited)

Selected Data
(Unaudited)

Industrial live on site auction metrics

Non-GAAP Measures
This news release references to non-GAAP measures. Non-GAAP 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 generally accepted accounting principles.

The non-GAAP measure diluted adjusted EPS attributable to stockholders* eliminates the financial impact of adjusting items which are after-tax effects of significant non-recurring items that management does not consider to be part of the normal operating results, such as acquisition-related costs, management reorganization costs, and certain other items, which the Company refers to as 'adjusting items'.

There were no adjusting items in Q2 2019 or in the comparative prior year period, and, accordingly, diluted adjusted EPS attributable to stockholders* was equal to diluted EPS attributable to stockholders, the most comparable GAAP measure in the consolidated income statements, for Q2 2019.

Adjusted EBITDA* and Adjusted Net Debt/Adjusted EBITDA* Reconciliation
The Company believe that comparing adjusted net debt/adjusted EBITDA* on a trailing 12-month basis for different financial periods provides useful information about the performance of the Company's operations as an indicator of the amount of time it would take the Company to settle both the short and long-term debt. The Company does not consider this to be a measure of liquidity, which is the ability to settle only short-term obligations, but rather a measure of how well the Company funds liquidity.

The following table reconciles adjusted EBITDA* and adjusted net debt*/adjusted EBITDA* to debt, cash and cash equivalents, net income, and debt as a multiple of net income, which are the most directly comparable GAAP measures in, or calculated from, the consolidated financial statements.

Operating Free Cash Flow* ("OFCF") Reconciliation
We believe OFCF*, when compared on a trailing 12-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.  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 and net capital spending, which are the most directly comparable GAAP measures in, or calculated from, our consolidated statements of cash flows:

Adjusting items during the trailing 12-months ended June 30, 2019 were:

Recognized in the second quarter of 2019

• There were no adjustment items recognized in the second quarter of 2019.

Recognized in the first quarter of 2019

• There were no adjustment items recognized in the first quarter of 2019.

Recognized in the fourth quarter of 2018

• There were no adjustment items recognized in the fourth quarter of 2018.

Recognized in the third quarter of 2018

• $1.5 million ($1.1 million after tax, or $0.01 per diluted share) of severance and retention costs in a corporate reorganization that followed the Acquisition;
• $4.9 million ($4.9 million after tax, or $0.04 per diluted share) due to gain on sale of an equity accounted for investment.

Adjusting items during the trailing 12-months ended June 30, 2018 were:

Recognized in the second quarter of 2018

• There were no adjustment items recognized in the second quarter of 2018.

Recognized in the first quarter of 2018

• There were no adjustment items recognized in the first quarter of 2018.

Recognized in the fourth quarter of 2017

• $2.2 million ($1.6 million after tax, or $0.02 per diluted share) of severance and retention costs in a corporate reorganization that followed the Acquisition;
• $10.1 million (or $0.10 per diluted share) benefit on remeasurement of deferred taxes due to the Tax Cuts and Jobs Act.

Recognized in the third quarter of 2017

• ·  There were no adjustment items recognized in the third quarter of 2017.

SOURCE Ritchie Bros. Auctioneers

Related Links

http://www.rbauction.com

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