Ritchie Bros. reports first quarter 2018 results

VANCOUVER, May 10, 2018 /PRNewswire/ - Ritchie Bros. Auctioneers Incorporated (NYSE & TSX: RBA, the "Company" or "Ritchie Bros.") reported the following results for the three months ended March 31, 2018:

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

Net income attributable to stockholders of $17.1 million improved 65% compared to $10.4 million for the same quarter in 2017. Diluted earnings per share ("EPS") attributable to stockholders increased 60% to $0.16 versus $0.10 in the first quarter of 2017. Other key first quarter highlights included:

Consolidated results:

• Total revenues, as presented under the new revenue standard, were $260.2 million; a 30% increase over the first quarter of 2017
• Total Company agency proceeds¹ (non-GAAP measure) of $169.8 million increased 36% from $124.5 million in the first quarter of 2017
• Cash provided by operating activities of $67.2 million
• Repayment of $29.2 million in long-term debt in the first quarter of 2018
• Declared quarterly dividend of $0.17 per common share

Auctions & Marketplaces ("A&M") segment:

• Gross Transaction Value ("GTV")² of $1.2 billion increased 29% from $0.9 billion in the first quarter of 2017
• Total revenues of $232.6 million increased 30% from $179.1 million in the first quarter of 2017
• A&M agency proceeds³ (non-GAAP measure) of $156.8 million increased 36% from $115.7 million in the first quarter of 2017
• A&M revenue rate improved 10 basis points ("bps") over the first quarter of 2017; and A&M agency proceeds rate⁴ (non-GAAP measure) improved 60 bps over the first quarter of 2017

"We achieved strong revenue and agency proceeds growth in the first quarter as our teams leveraged the capabilities of the combined company to win new business, tap into existing customers and drive multi-channel offerings despite supply constraints and fewer auctions and selling days. In the quarter, over 70% of our live industrial auctions posted strong year-on-year growth comps across major geographies through excellent price realization and improvement in rate," said Ravi Saligram, Chief Executive Officer.

Saligram continued, "we are encouraged to see early signs of recovery starting in Canada and growth momentum internationally but continue to navigate very tight supply conditions in the US market. RBFS, Mascus and the Government business performed extremely well and we are beginning to experience the benefits of the Caterpillar Alliance. Overall, we're off to a good start in the year and will continue to be focused on executing against our multi-channel initiatives."

Effective January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers ("Topic 606"). Revenues on inventory sales and ancillary and logistical services are presented gross of the related expenses rather than net. Accordingly, in addition to total revenues, the Company has added a new metric to our disclosures called agency proceeds (non-GAAP measure), which presents revenues as previously reported and is calculated as total revenues under Topic 606 less the cost of inventory sold and ancillary and logistical service expenses.  

Financial Overview
(Unaudited)

Results of operations – first quarter update
For the three months ended March 31, 2018

Consolidated Performance Highlights

Total revenues increased 30% to $260.2 million in the first quarter. Total revenue growth driven by incremental volume from the acquisition of IronPlanet Holdings, Inc. (the "Acquisition"), live auction performance, an increase in the volume of inventory contracts in Canada and Europe and the partial fee harmonization implemented in the first quarter.  Foreign exchange had a positive impact on total revenues in the first quarter of 2018. 

Agency proceeds (non-GAAP measure) improved 36% to $169.8 million versus $124.5 million in the first quarter of 2017 driven by GTV and service revenues growth and higher fee revenues.

Cost of services increased 51% to $36.7 million in the first quarter. The increase was primarily due to the Acquisition and the costs associated with the inspection and appraisal activities that support our online channels. The increase is also due to an increase in GTV at our live on site auctions over the comparative period and the growth of our ancillary business.

Selling, general and administrative ("SG&A") expenses increased $26.9 million, or 38% in the first quarter of 2018 compared to the first quarter of 2017. This increase is primarily due to the Acquisition, investment in talent to support new businesses and initiatives, and $4.6 million in share unit expenses in the first quarter of 2018 compared to $0.6 million in the first quarter of 2017. The $4.0 million increase in share unit expenses was primarily due to mark-to-market costs driven by a growth in the Company's share price, as well as incremental compensation costs resulting from a performance share unit modification on March 1, 2018.

Operating income increased 39% during the first quarter of 2018 to $32.9 million, compared to the first quarter of 2017. This increase is primarily driven from higher total revenues and lower acquisition-related costs, partially offset by higher costs of services and SG&A expenses. There were no adjusting items impacting operating income results in the first quarter of 2018. 

Net income attributable to stockholders increased $6.8 million, or 65%, in the first quarter of 2018 compared to the first quarter of 2017. This improvement is primarily due to operating income growth and lower income taxes partially offset by the increases in interest expense due to the increased indebtedness to fund the Acquisition.

Primarily for the same reasons noted above, diluted EPS attributable to stockholders improved 60% to $0.16 in the first quarter of 2018 compared to diluted EPS attributable to stockholders of $0.10 in the first quarter of 2017.

Auctions & Marketplaces Performance Highlights

GTV increased 29% to $1.2 billion in the first quarter compared to $0.9 billion in the first quarter of 2017. The increase is primarily attributable to the incremental volume from the Acquisition, together with the significant year over year growth from the Orlando auction in the quarter.  The increase was partially offset by the continuing equipment supply constraints, as well as the reduction of live on site auctions and sale days over the comparative period.

Total revenues increased 30% to $232.6 million in the first quarter compared to $179.1 million in the first quarter of 2017. Total revenue growth driven by incremental volume from the Acquisition, live auction performance, an increase in the volume of inventory contracts in Canada and Europe and the partial fee harmonization implemented in the first quarter. A&M revenue rate, which the Company calculates as A&M total revenues divided by GTV, for first quarter was 20.0%, a 10-basis point increase over the same quarter last year.

A&M agency proceeds (non-GAAP measure) improved 36% to $156.8 million versus $115.7 million in the first quarter of 2017 driven by GTV and service revenues growth and higher fee revenues. The overall A&M agency proceeds rate (non-GAAP measure) improved 60 basis points to 13.5% from 12.9% in the first quarter of 2017.  

New Accounting Standard
The Company adopted the new accounting standard related to revenue recognition effective January 1,2018. The prior periods presented here have been restated to reflect adoption of this new standard.

Dividend Information
Quarterly dividend
The Company declared on May 10, 2018, a quarterly cash dividend of $0.17 per common share payable on June 20, 2018 to shareholders of record on May 30, 2018.

Q1 2018 Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended March 31, 2018, at 8am Pacific time / 11 am Eastern time / 4 pm GMT on May 11, 2018.  The replay of the webcast will be available through June 11, 2018.

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 multitude 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 offering live on site auction events with online bidding; IronPlanet, an online marketplace with featured weekly auctions and providing its exclusive IronClad Assurance® equipment condition certification program; Marketplace-E, an online auction marketplace; Mascus, a leading European online equipment listing service; and Ritchie Bros. Private Treaty, offering privately negotiated sales. The Company 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 the unprecedented choice provided by 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 and payment of dividends. 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, 2017 and 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.

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 – First 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)

Segmented Information
(Expressed in thousands of United States dollars)

Selected Data
(Unaudited)

Non-GAAP Measures

This news release makes reference to various 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 generally accepted accounting principles.

The following table presents the Company's adjusted net income attributable to stockholders (non-GAAP measure) and diluted adjusted EPS attributable to stockholders (non-GAAP measure) results for the three months ended March 31, 2018, and 2017, as well as reconciles those metrics to net income attributable to stockholders and diluted EPS attributable to stockholders, which are the most directly comparable GAAP measures in the Company's consolidated income statements:

There were no adjusting items for the three months ended March 31, 2018.  The adjusting item for the three months ended March 31, 2017 was a $2.3 million (or $0.02 per diluted share) charge related to the change in uncertain tax provisions.

The following table presents the Company's agency proceeds (non-GAAP measure) results for the three months ended March 31, 2018 and 2017, as well as reconciles that metric to total revenues, which is the most directly comparable GAAP measures in the Company's consolidated income statements:

The following table presents the Company's A&M agency proceeds (non-GAAP measure) and A&M agency proceeds rate (non-GAAP measure) results for the three months ended March 31, 2018, and 2017, as well as reconciles those metrics to A&M total revenues and A&M revenue rate, which are the most directly comparable GAAP measures in the Company's consolidated financial statements:

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SOURCE Ritchie Bros. Auctioneers