Second Quarter 2021 Earnings Review and Update - Seeking Alpha
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Second Quarter 2021 Earnings Review and Update
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 US and Canadian securities legislation (collectively, “forward-looking statements”), including, in particular, statements regarding future financial and operational results, 2021 opportunities, and any other statements regarding events or developments that Ritchie Bros. 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 Ritchie Bros.’ control, including risks and uncertainties related to: the duration and impact of the COVID-19 pandemic on Ritchie Bros.’ operations, the operations of our customers general economic conditions and conditions affecting the industries in which Ritchie Bros. operates; the maintenance of important business relationships; our ability to commercialize new platform solutions and offerings; deterioration of or instability in the economy, the markets we serve or the financial markets generally; strategic transactions; as well as the risks and uncertainties set forth in Ritchie Bros.’ Annual Report on Form 10-K for the year ended December 31, 2020 and Ritchie Bros.’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, which are available on the SEC, SEDAR, and Ritchie Bros.’ websites. The foregoing list is not exhaustive of the factors that may affect Ritchie Bros.’ 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 presentation and Ritchie Bros. 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. This presentation contains certain non-GAAP financial measures. For a discussion of non-GAAP measures and the most directly comparable GAAP financial measures, see the Appendix to this presentation as well as our our quarterly report on form 10-Q for quarter ended June 30, 2021, which are available on the SEC and SEDAR websites and at: investor.ritchiebros.com. These non- GAAP financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understand and assessing our financial condition and results. Therefore, these measures should not be considered in isolation or as alternatives to measures of profitability, liquidity or other performance under GAAP. These measures may not be comparable to similarly-titled measures used by other companies. This presentation also includes certain forward-looking non-GAAP financial measures. We are unable to present a quantitative reconciliation of this forward-looking non-GAAP financial information because management cannot reliably predict all of the necessary components of such measures. Accordingly, investors are cautioned not to place undue reliance on this information. All figures are in US dollars, unless otherwise noted.
Today’s Speakers
The trusted global marketplace for
insights, services, and transaction
solutions for commercial assets.
Ann Fandozzi Sharon Driscoll
Chief Executive Officer Chief Financial Officer
Second Quarter Highlights
• 2Q 2021 GTV growth of 2%
Performance Solid Results • 2Q 2021 Total Service Revenue growth of 8%
• 2Q 2021 Adjusted Operating Income* growth of 1%
Despite tight supply • Increasing dividend ~14% to 25 cents
• Continue vigilance on hygiene, disinfection protocols and aligning with local
protocols amid growing concerns around variants
Health and Safety Top priority • Continuing to provide PPE gear for our team members and customers
• Reinforcement safety message via Town Halls, Local Forums & Weekly Emails
• Lead with innovation – enhancing digital experience for buyers
• 9% increase in bids per lot despite lapping tougher comparable from last year
• Driving strong used equipment prices
Customers Our True North • Continue to learn how to best service customer needs in current environment
• Welcoming customers back to our auction theaters
• COVID-19 impacts on health and safety, business confidence and macro environment
• Distribution speed and effectiveness of vaccine
•
Environment Unprecedented •
Size, shape, type and focus of infrastructure and stimulus programs
Lumpy supply caused by tight commercial asset inventories
Adjusted numbers are Non-GAAP measures; please see appendix for reconciliation.Accelerate growth: Scaling Satellite Yards
• International sites are performing well - higher levels of GTV / ft2
Core to Customer • Significant percent of new consigners in international markets
Yards
Centric Strategy • Launched six locations with satellite yards strategy in the second
quarter in the United StatesBusiness Inventory Management System
KPI Journey: 2021 focus on Adding Organizations Total Organizations Activated*: 34% Growth Q/Q
1.60x
Organizations 1.40x 1.34x
1.20x
Number of Assets 1.00x
1.00x
per Organization
0.80x
Services 0.60x
per asset
0.40x
0.20x
Revenue
0.00x
1Q21 2Q21
*Quarter End; 1Q21 = 1Gross Transaction Value Overview
Historical Trends 2020 to 2021 Bridge Auction Days
260 15%
240 13%
240
220
226 11%
220
200
180 9%
Days
YoY
160 7%
6%
140 5%
120
3% 3%
100
80 1%
60 -1%
2Q19 2Q20 2Q21
Auction days Auction Day Growth
• Strong performance in International offset by • GTV broadly flat excluding the benefit from • Total auction sales days increased compared
United States foreign exchange and headwinds from to last year despite calendar shifts in auction
Auction Shifts calendar
• Strong used equipment pricingSecond Quarter Financial Overview
Total Service Revenue Adjusted Operating Income & Adjusted EPS*
Total Service Revenue Other Service Revenue Adjusted Operating Income Adjusted EPS
$253 mm +8% $41 mm +20% $89.5 mm +1% $0.55 +2%
• Strong growth in Other Service • $6.2mm revenue contribution from • No adjusting items in the quarter • No adjusting items in the quarter
Revenue balanced by A&M Service Rouse Services
• Cost of service declined 1%
Revenue growth • 39% increase in RBFS
• SG&A costs up 11%; negatively
• 155% increase in transactions impacted by FX
facilitated for retail to $36m
Adjusted numbers are Non-GAAP measures; please see appendix for reconciliation. Percentages: YoY GrowthAuction and Marketplaces
A&M Service Revenue: +6% YoY Inventory Revenue: -7% YoY Inventory Return & Rate*
14 14%
12.6
11.8
12
12%
10
8.8 10%
8.8%
$ millions
8
Rate
7.6%
8%
6
5.5%
6%
4
2 4%
0 2%
2Q19 2Q20 2Q21
Return Rate
Service Revenue as % of Total GTV : 13.8% • United States : -25% • Inventory rate increased ~120 bps YoY to
~8.8%
Regional Service Revenue growth: • Canada : -59%
• Robust contribution from At-Risk team
• United States : -4% • International : +29%
• Canada : +13%
• International : +48%
* Return = Inventory Sales Revenue – Cost of Inventory Sold; Rate = Return / Inventory Sales RevenueTotal Operating Expense
Total operating expense +2% Maximizing Customer Experience with Disciplined Cost Management
Total Operating Expense
• We expect a permanent level of costs savings compared to pre-
pandemic model
2Q21 39 131 112 25 $307
• Foreign Exchange had a positive impact to Net Income however
impacted all line items
Cost Of Service
• Costs were flat despite FX impact and some relaxing of COVID protocols
2Q20 39 143 101 17 $300
SG&A
• Material Foreign Exchange headwind in the quarter due to changes in
CAD / USD compared to a year ago
• Investing in growth in Rouse and RBFS with additional expenses to
2Q19 50 150 98 17 $315 remediate our SOX control environment
• Expect 3Q SG&A run rate levels closer to 2Q due to investment in
growth initiatives
0 50 100 150 200 250 300 350
$mm Other
Cost Of Service Cost of Inventory SG&A Other (1) • Increase in Other due to amortization of acquired intangibles for Rouse
(1) Includes acquisition related costs, D&A, Gain on disposition of PPE and FX Gains/ Losses
and IT expense required for Modern ArchitectureBalance Sheet, Liquidity, & Operating Free Cash Flow
Adjusted Net Debt / TTM Adjusted EBITDA* TTM Operating Free Cash Flow: 80% YoY
450
410 390%
400
349 340%
350 334
OFCF / Adj/. Net Income
298
300
290%
260
252%
250 228 231 226
US$m
224% 240%
215%
200 204%
165
150 190%
152% 146%
100
130% 125%
118% 140%
50
0 90%
2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21
Trailing 4 Quarter Operating Free Cash Flow Operating Free Cash Flow / Adjusted Net Income
• Available credit facilities of $636mm of which $448mm is unused at end • Operating free cash flow was impacted by timing, size, and
of the 2nd quarter. number of auctions.
• No material debt maturities until October 2023
*Non-GAAP MeasureStrategic pillars
The trusted global marketplace for insights, services, and transaction solutions for commercial assets
Deliver the best customer Deliver the best Implement a modern architecture Coordinate growth around a Accelerate growth
experience in the industry employee experience for the business on which we can single, integrated inventory
scale & grow profitably management system that is the
foundation of our GTM
Seller Experience • Launched enhanced • All Product initiatives • IMS Activations • Progressing Texas
• Simplified contracts Safety programs for being built using growth of 34% QoQ sales coverage
• Progress on Easy Check field employees microservices in the model and
Out cloud • Continuing to add performance
• Launched various new customer
Buyer Experience employee • Started migration of centric feature to • Satellite sites
• Improving mobile development and D&I Iron Planet to the IMS showing positive
experience initiatives Cloud results to date;
• Developing enterprise • Designed added 6 new
search • Launching internal • Initiated Data architecture and go locations in Q2
Mobile app for Market Warehouse to market strategy
Call Center Place E in Q3 modernization by for Ritchie List
Enhancements moving to the Cloud
• Launched call back • Developing technology • Piloting using IMS
feature and improved enhancements for for transactional
routing Team Member workflowCurrent Trends and Looking Forward
2021 Priorities 2021 Opportunities 2021 Risks
• Health and Safety of our • Government stimulus • Continued low used inventory
employees and customers programs to restart economy levels due to slow OEM
• Continued execution against and significant infrastructure production
our five Strategic Pillars funding injections • Resurgence in COVID drives
• Improve customer experience • Continued rigor on expense new restrictions
management and further • Elongated recovery; demand
• Balance sheet strength
optimizing the current 100% softens significantly
financial flexibility
online operating model for
• Increased restriction to
further efficiencies
equipment movement
• Customers who have been
• Price performance softens
taking a “wait and see”
approach decide to move
equipmentAppendix
• Gross Transaction Value
• Sector Mix
• Mix Adjusted Pricing Indices: United States and Canada
• US GAAP – Reconciliation of 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.GTV Sector Mix and Used Equipment Pricing Trends
Sector Mix Used equipment prices: Mix Adjusted Pricing Indices
100% 20%
90% 17%
15%
80% 14%
70% ~21% ~21%
~20% ~20% ~23% 10%
~19% ~23% ~20% ~20%
60%
50% 5%
40%
0%
30% ~57% ~56% ~60% ~58%
~53% ~52% ~56% ~53% ~52%
20%
-5%
10%
0% -10%
2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21
Construction Transportation Other US Composite Canada Composite
• Construction assets include heavy equipment such as trucks, excavators, • Sign up for free monthly report:
cranes and dozers. https://www.rbassetsolutions.com/market-trends-report
• Transportation assets include vehicles, buses, trailers and trucks that are • Find prior reports at:
used for transport https://investor.ritchiebros.com/Market-Trends-ReportYou can also read
