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Ritchie Bros. reports first quarter 2018 results

05/10/2018

VANCOUVER, May 10, 2018 /CNW/ - 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.  

_____________________________

1 

Agency proceeds is a non-GAAP financial measure calculated by subtracting the cost of inventory sold and ancillary and logistical service expenses from total revenues. Agency proceeds is an element of the performance criteria for certain annual short-term incentive awards we grant to our employees and officers.  Agency proceeds is reconciled to the most directly comparable GAAP measure from the Company's consolidated financial statements under "Non-GAAP Measures".

2

GTV represents total proceeds from all items sold at our live on site auctions and online marketplaces. GTV is not a measure of financial performance, liquidity, or revenue, and is not presented in our consolidated financial statements.

3

A&M agency proceeds is a non-GAAP financial measure that provides useful information about the performance of our A&M contracts for different financial periods. A&M agency proceeds is calculated as A&M total revenues less cost of inventory sold and is reconciled to the most directly comparable GAAP measures in our consolidated financial statements under "Non-GAAP Measures".

4

A&M agency proceeds rate is a non-GAAP financial measure that provides useful information about the performance of our operations by comparing the margins we earn on our contracts for different financial periods. A&M agency proceeds rate is calculated by dividing A&M agency proceeds (non-GAAP measure) by GTV. A&M agency proceeds rate is reconciled to the most directly comparable GAAP measures in our consolidated financial statements under "Non-GAAP Measures".


Financial Overview
(Unaudited)




Three months ended March 31,






$ Change


% Change

(in U.S. $000's, except EPS)

2018

2017

2018 over 2017


2018 over 2017

Service revenues

$

176,016

$

123,379

$

52,637


43%

Revenue from inventory sales


84,162


76,048


8,114


11%

Total revenues


260,178


199,427


60,751


30%

Costs of services


36,657


24,340


12,317


51%

Cost of inventory sold


75,791


63,401


12,390


20%

Selling, general and administrative expenses


97,470


70,575


26,895


38%

Acquisition-related costs


1,633


8,627


(6,994)


(81%)

Operating income


32,873


23,597


9,276


39%

Net income attributable to stockholders


17,138


10,377


6,761


65%

Diluted earnings per share

attributable to stockholders

$

0.16

$

0.10

$

0.06


60%

Diluted adjusted EPS attributable to

stockholders (non-GAAP measure)

$

0.16

$

0.12

$

0.04


33%

GTV

$

1,160,712

$

899,410

$

261,302


29%

Agency proceeds (non-GAAP measure)

$

169,807

$

124,499

$

45,308


36%

A&M revenue

$

232,567

$

179,078

$

53,489


30%

A&M revenue rate


20.0%


19.9%


n/a


10 bps

A&M agency proceeds (non-GAAP measure)

$

156,776

$

115,677

$

41,099


36%

A&M agency proceeds rate (non-GAAP measure)


13.5%


12.9%


n/a


60 bps

 

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)






Three months ended March 31,


2018


2017






GTV

$

1,160,712

$

899,410

Service revenues

$

176,016

$

123,379

Revenue from inventory sales


84,162


76,048

Total revenues


260,178


199,427

Cost of services


36,657


24,340

Cost of inventory sold


75,791


63,401

Selling, general and administrative expenses


97,470


70,575

Acquisition-related costs


1,633


8,627

Depreciation and amortization expenses


16,191


10,338

Gain on disposition of property, plant and equipment


(345)


(721)

Foreign exchange gain


(92)


(730)

Total operating expenses


227,305


175,830

Operating income


32,873


23,597

Interest expense


(11,310)


(8,133)

Other, net


913


2,284

Income before income taxes


22,476


17,748

Income tax expense


5,269


7,315

Net income

$

17,207

$

10,433

Net income attributable to:






Stockholders


17,138


10,377


Non-controlling interests


69


56


$

17,207

$

10,433

Earnings per share attributable





to stockholders:






Basic

$

0.16

$

0.10


Diluted

$

0.16

$

0.10

Weighted average number of share outstanding:






Basic


107,355,381


106,851,595


Diluted


108,643,897


107,788,949

 

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








March 31,


December 31,


2018


2017

Assets












Cash and cash equivalents

$

278,944


$

267,910

Restricted cash


62,414



63,206

Trade and other receivables


182,157



92,105

Inventory


34,350



38,238

Other current assets


30,657



27,026

Assets held for sale


251



584

Income taxes receivable


17,515



19,418

Total current assets


606,288



508,487







Property, plant and equipment


522,871



526,581

Equity-accounted investments


6,915



7,408

Other non-current assets


26,807



24,146

Intangible assets


259,052



261,094

Goodwill


674,097



670,922

Deferred tax assets


19,934



18,674

Total assets

$

2,115,964


$

2,017,312













Liabilities and Equity












Auction proceeds payable

$

303,416


$

199,245

Trade and other payables


170,777



164,553

Income taxes payable


2,021



732

Short-term debt


5,861



7,018

Current portion of long-term debt


9,264



16,907

Total current liabilities


491,339



388,455







Long-term debt


771,030



795,985

Other non-current liabilities


44,857



46,773

Deferred tax liabilities


34,712



32,334

Total liabilities


1,341,938



1,263,547







Contingencies






Contingently redeemable performance







share units


16,576



9,014

Stockholders' equity:







Share capital:








Common stock; no par value, unlimited shares








authorized, issued and outstanding shares:








107,471,895 (December 31, 2017: 107,269,783)


144,387



138,582


Additional paid-in capital


44,327



41,005


Retained earnings


601,205



602,609


Accumulated other comprehensive loss


(37,619)



(42,514)

Stockholders' equity


752,300



739,682

Non-controlling interest


5,150



5,069

Total shareholders' equity


757,450



744,751

Total liabilities and equity

$

2,115,964


$

2,017,312

 

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







Three months ended March 31,

2018



2017

Cash provided by (used in):






Operating activities:







Net income

$

17,207


$

10,433


Adjustments for items not affecting cash:








Depreciation and amortization expenses


16,191



10,338



Stock option compensation expense


2,343



1,311



Equity-classified PSU expense


3,035



1,012



Amortization of debt issuance costs


1,066



445



Other, net


2,131



(1,042)


Net changes in operating assets and liabilities


25,265



112,045

Net cash provided by operating activities


67,238



134,542

Investing activities:







Property, plant and equipment additions


(2,564)



(1,863)


Intangible asset additions


(7,034)



(5,664)


Proceeds on disposition of property, plant and equipment


1,066



1,505


Other, net


(4,674)



-

Net cash used in investing activities


(13,206)



(6,022)

Financing activities:







Dividends paid to stockholders


(18,245)



(18,160)


Dividends paid to NCI


-



(41)


Issuances of share capital


4,313



3,412


Proceeds from short-term debt


308



1,219


Repayment of short-term debt


(1,754)



(1,009)


Repayment of long-term debt


(29,237)



-


Repayment of finance lease obligations


(802)



(438)


Other, net


-



(48)

Net cash used in financing activities


(45,417)



(15,065)

Effect of changes in foreign currency rates on







cash, cash equivalents, and restricted cash


1,627



3,336


Increase


10,242



116,791


Beginning of period


331,116



758,089

Cash, cash equivalents, and restricted cash, end of period

$

341,358


$

874,880

 

Segmented Information
(Expressed in thousands of United States dollars)










Three months ended March 31, 2018


A&M

Other

Consolidated

Service revenues

$

148,405

$

27,611

$

176,016

Revenue from inventory sales


84,162


-


84,162

Total revenues


232,567


27,611


260,178

Costs of services


21,448


15,209


36,657

Cost of inventory sold


75,791


-


75,791

Selling, general and administrative








expenses ("SG&A")


93,002


4,468


97,470

Segment profit

$

42,326

$

7,934

$

50,260

Acquisition-related costs






1,633

D&A expenses






16,191

Gain on disposition of property, plant








and equipment ("PPE")






(345)

Foreign exchange gain






(92)

Operating income





$

32,873

Interest expense






(11,310)

Other income, net






913

Income tax expense






(5,269)

Net income





$

17,207

















Three months ended March 31, 2017


A&M

Other

Consolidated

Service revenues

$

103,030

$

20,349

$

123,379

Revenue from inventory sales


76,048


-


76,048

Total revenues


179,078


20,349


199,427

Costs of services


12,587


11,753


24,340

Cost of inventory sold


63,401


-


63,401

SG&A expenses


67,111


3,464


70,575

Segment profit

$

35,979

$

5,132

$

41,111

Acquisition-related costs






8,627

D&A expenses






10,338

Gain on disposition of PPE






(721)

Foreign exchange gain






(730)

Operating income





$

23,597

Interest expense






(8,133)

Other income, net






2,284

Income tax expense






(7,315)

Net income





$

10,433

 

Selected Data
(Unaudited)






(in U.S. $000's)


March 31,


December 31,



2018


2017

Current assets

$

606,288

$

508,487

Current liabilities


491,339


388,455

Working capital

$

114,949

$

120,032

Total assets

$

2,115,964

$

2,017,312

Long-term debt


780,294


812,892

Stockholders' equity


752,300


739,682











Selected operating data










As at and for the three months ended March 31,


2018


2017

Number of consignments at industrial auctions


10,750


11,350

Number of bidder registrations at industrial auctions


119,000


114,500

Number of buyers at industrial auctions


29,000


29,150

Number of lots at industrial auctions


81,000


84,000

Number of permanent operational sites


35


35

Number of regional operational sites


5


5

Total auction sites


40


40

Number of industrial auctions


35


41











Average industrial auction data










Three months ended March 31,


2018


2017

GTV

$

15.9 million

$

16.4 million

Bidder registrations


2,405


2,319

Consignors


233


231

Lots


1,576


1,680

 

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:

















(in U.S. $000's, except share and

Three months ended March 31,

per share data)







Change


2018


2017


2018 over 2017

Net income attributable to stockholders

$

17,138


$

10,377


65%

Current income tax adjusting item:








Change in uncertain tax provision


-



2,290


(100%)

Adjusted net income attributable to

stockholders (non-GAAP measure)








$

17,138


$

12,667


35%

Effect of dilutive securities

$

-


$

27


(100%)

Weighted average number of

dilutive shares outstanding









108,643,897



107,788,949


1%









Diluted earnings per share

attributable to stockholders








$

0.16


$

0.10


60%

Diluted adjusted EPS attributable to

stockholders (non-GAAP measure)








$

0.16


$

0.12


33%

 

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:









(in U.S. $000's)

Three months ended March 31,








Change


2018


2017


2018 over 2017

Total revenues

$

260,178


$

199,427


30%


Less: cost of inventory sold


(75,791)



(63,401)


20%


Less: ancillary and logistical service










   expenses


(14,580)



(11,527)


26%

Agency proceeds (non-GAAP measure)

$

169,807


$

124,499


36%

 

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:









(in U.S. $000's)

Three months ended March 31,








Change


2018


2017


2018 over 2017

A&M total revenues

$

232,567


$

179,078


30%


Less: cost of inventory sold


(75,791)



(63,401)


20%

A&M agency proceeds (non-GAAP measure)

$

156,776


$

115,677


36%









GTV


1,160,712



899,410


29%









A&M revenue rate


20.0%



19.9%


10 bps

A&M agency proceeds rate









(non-GAAP measure)


13.5%



12.9%


60 bps

 

Cision View original content:http://www.prnewswire.com/news-releases/ritchie-bros-reports-first-quarter-2018-results-300646716.html

SOURCE Ritchie Bros. Auctioneers

please contact: Zaheed Mawani, Vice President, Investor Relations, Phone: 1.778.331.5219, Email: zmawani@rbauction.com
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