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Ritchie Bros. reports third quarter 2022 results

11/07/2022

Robust service revenue growth of 15% outpaces strong 7% growth in GTV

VANCOUVER, BC, Nov. 7, 2022 /CNW/ - Ritchie Bros. Auctioneers Incorporated (NYSE: RBA) (TSX: RBA), (the "Company", "Ritchie Bros.", "we", "us", or "our") reported the following results for the third quarter, for the three months ended September 30, 2022.

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

"I am proud of the efforts our teams have made across the organization to deliver strong financial performance in what continues to be an uncertain environment while also enhancing the customer experience through our growth strategies and making progress on our marketplace technology," said Ann Fandozzi, CEO of Ritchie Bros.

In addition, Eric Jacobs, CFO of Ritchie Bros. added, "we are pleased with our continued strong financial performance in the quarter with our double digit service revenue, earnings per share and adjusted earnings per share growth."

Third Quarter Financial and Business Metric Highlights1:

  • Gross transaction value ("GTV")1 increased 7% year-over-year to $1.4 billion or 10% year-over-year when excluding the impact of foreign exchange
  • Total revenue increased 25% year-over-year to $411.5 million
    • Service revenue increased 15% year-over-year to $246.7 million
    • Inventory sales revenue increased 43% year-over-year to $164.8 million
  • Net income increased 33% year-over-year to $42.9 million
  • Diluted earnings per share increased 31% year-over-year to $0.38 per share
  • Diluted adjusted earnings per share increased 18% year-over year to $0.53 per share
  • Adjusted EBITDA1 increased 12% year-over-year to $102.5 million
  • Cash provided by operating activities was $263.9 million for the nine months ended September 30, 2022

_____________________________

1

For information regarding Ritchie Bros. use and definition of this measure, see "Key Operating Metrics" and "Non-GAAP Measures" sections in this press release

Financial and Operational Highlights














Three months ended September 30, 










% Change

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


2022


2021



2022 over 2021

GTV


$

1,358,242


$

1,270,258



7

%

Service revenue



246,696



214,193



15

%

Service revenue as a % of total GTV



18.2

%


16.9

%


130

bps












Inventory sales revenue



164,783



115,489



43

%

Inventory return



17,530



12,496



40

%

Inventory rate



10.6

%


10.8

%


(20)

bps












Net income attributable to stockholders



42,909



32,336



33

%

Adjusted EBITDA



102,544



91,247



12

%

Diluted earnings per share attributable to stockholders


$

0.38


$

0.29



31

%

Diluted adjusted earnings per share attributable to stockholders


$

0.53


$

0.45



18

%

 

GTV by Geography















Three months ended September 30, 











% Change



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



2022



2021


2022 over 2021














United States


$

855,491


$

798,725


7

%


Canada



314,872



266,574


18

%


International



187,879



204,959


(8)

%


Total GTV


$

1,358,242


$

1,270,258


7

%


 

For the third quarter:

  • GTV increased 7% year-over-year to $1.4 billion driven by a rebound in lot volumes and continued strong mix adjusted prices, partially offset by an unfavourable impact of foreign exchange and unfavorable asset mix. GTV increased 10% when excluding the impact of foreign exchange.
  • Service revenue increased 15% year-over-year, or 13% year-over year when excluding the impact of the SmartEquip acquisition, driven by solid contribution from both Auctions & Marketplace ("A&M") and Other Services revenues. Service revenue as a percent of GTV increased 130 bps year-over-year to 18.2%.
  • Inventory return increased 40% year-over-year to $17.5 million due to higher volume of inventory deals, driven primarily by strategic accounts in the United States. Solid execution from the at-risk team drove a robust 10.6% inventory rate.
  • Net income increased 33% year-over-year to $42.9 million as a result of strong growth in operating income, higher interest income from a rise in interest rates and a lower effective tax rate.
  • Adjusted EBITDA increased 12% driven by total revenue growth of 25%, partially offset by an increase in selling, general & administrative expenses of 25%, and an increase in costs of services of 18%. Total costs increased primarily due to planned investment in growth initiatives, investments in marketplace technology, higher performance based compensation and inflation.
  • Total number of organizations activated on the Business Inventory Management System increased by 42% as compared to the second quarter of 2022.
  • Debt / net income was 2.1x for the twelve months ended September 30, 2022.
  • Adjusted net debt1 / adjusted EBITDA1 was 0.5x at and for the twelve months ended September 30, 2022.

_____________________________

1

For information regarding Ritchie Bros. use and definition of this measure, see "Key Operating Metrics" and "Non-GAAP Measures" sections in this press release

 

Result by Segments












Three months ended September 30, 2022

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


A&M


Other


Consolidated

Commissions


$

108,238



$

108,238

Fees



85,689


52,769



138,458

Total service revenue



193,927


52,769



246,696

Inventory sales revenue



164,783




164,783

Total revenue



358,710


52,769



411,479

Ancillary and logistical service expenses




14,417



14,417

Other costs of services



24,601


2,503



27,104

Cost of inventory sold



147,253




147,253

Selling, general and administrative



116,337


16,856



133,193

Segment profit


$

70,519


18,993


$

89,512

Total GTV



1,358,242


N/A



N/A

A&M service revenue as a % of total GTV- Rate



14.3

%

N/A



N/A

 














Three months ended September 30, 2021


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


A&M


Other


Consolidated


Commissions


$

110,275


$


$

110,275


Fees



68,607



35,311



103,918


Total service revenue



178,882



35,311



214,193


Inventory sales revenue



115,489





115,489


Total revenue



294,371



35,311



329,682


Ancillary and logistical service expenses





11,433



11,433


Other costs of services



22,728



947



23,675


Cost of inventory sold



102,993





102,993


Selling, general and administrative



94,203



12,305



106,508


Segment profit


$

74,447


$

10,626


$

85,073


Total GTV



1,270,258



N/A



N/A


A&M service revenue as a % of total GTV- Rate



14.1

%


N/A



N/A


 

Auctions & Marketplace segment results:

  • A&M service revenue increased 8% year-over-year to $193.9 million with A&M take rate increasing 20 basis points to 14.3% driven by higher buyer fees implemented in early 2022, partially offset by lower straight commission rates from a higher volume of activity in strategic accounts in the United States.
  • Inventory sales revenue increased 43% year-over-year to $164.8 million primarily due to a higher mix of GTV contracted via inventory deals. This increase in mix was mainly seen within strategic accounts in the United States.

Other Services segment results:

  • Other Services total revenue increased 49% year-over-year to $52.8 million primarily due to stronger performance and execution in RBFS, the addition of SmartEquip, higher ancillary revenue driven by higher activity for value-added services, and strong growth in Rouse. Other service revenue increased 35% when excluding the impact of the SmartEquip acquisition.
    • RBFS revenue increased 47% year-over-year to $16.6 million driven in part by higher number of deals funded.
    • SmartEquip revenue of $5.2 million was recognized in the third quarter of 2022, which was its third full quarter since its acquisition in November 2021.
  • Ancillary and logistical service expenses increased 26% year-over-year to $14.4 million, in line with higher ancillary revenue which was driven in part by increased auction volume.
  • Other costs of services increased 164% year-over-year to $2.5 million mainly due to the acquisition of SmartEquip.

Dividend Information

Quarterly dividend
On November 2, 2022, the Company declared a quarterly cash dividend of $0.27 per common share, payable on December 14, 2022 to stockholders of record on November 23, 2022.

Third Quarter 2022 Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended September 30, 2022 at 5am Pacific time / 8am Eastern time / 1pm GMT on November 7, 2022. The replay of the webcast will be available through December 7, 2022.

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, commercial transportation, agriculture, energy, mining, and forestry, the company's selling channels include: Ritchie Bros. Auctioneers, the world's largest industrial auctioneer offering live auction events with online bidding; IronPlanet, an online marketplace with weekly featured auctions and providing the exclusive IronClad Assurance® equipment condition certification; Marketplace-E, a controlled marketplace offering multiple price and timing options; Ritchie List, a self-serve listing service for North America; Mascus, a leading European online equipment listing service; Ritchie Bros. Private Treaty, offering privately negotiated sales; and sector-specific solutions GovPlanet, TruckPlanet, and Ritchie Bros. Energy. The Company's suite of solutions also includes Ritchie Bros. Asset Solutions and Rouse Services LLC, which together provides a complete end-to-end asset management, data-driven intelligence and performance benchmarking system; SmartEquip, an innovative technology platform that supports customers' management of the equipment lifecycle and integrates parts procurement with both OEMs and dealers; 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 and growth and value 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 duration and impact of the COVID-19 pandemic on the Company's operations, the operations of customers, and general economic conditions, including inflation, rising interest rates and foreign exchange rate fluctuation; 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 acquired companies, and to receive the anticipated benefits of such acquisitions; and the risks and uncertainties set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 and our subsequent quarterly reports on Form 10-Q, which are 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.

Key Operating Metrics

We regularly review a number of metrics, including the following key operating metrics, to evaluate our business, measure our performance, identify trends affecting our business, and make operating decisions. We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our operational strategies.

We define our key operating metrics as follows:

Gross Transaction Value : 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.

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

Inventory rate : Inventory return divided by inventory sales revenue.

Inventory Management System activations : Number of organizations activated on IMS. An organization is considered activated on IMS when a customer has signed an annual multi-channel contract and has an IMS instance setup to allow for equipment to be directed to one of our transaction solutions digitally. 

Bids per lots sold : Each bid is completed electronically through our real-time online bidding system. A lot is defined as a single asset to be sold, or a group of assets bundled for sale as one unit. This metric calculates the total number of bids received for a lot divided by the total number of lots sold. This metric excludes GovPlanet transactions.

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". This metric excludes GovPlanet transactions.

GTV and Selected Condensed Consolidated Financial Information

GTV and Condensed Consolidated Income Statements – Third Quarter
(in U.S. dollars $000's, except share, per share amounts and percentages)
(Unaudited)














Three months ended September 30, 










% Change





2022



2021


2022 over 2021


GTV


$

1,358,242


$

1,270,258


7

%


Revenue:











Service revenue


$

246,696


$

214,193


15

%


Inventory sales revenue



164,783



115,489


43

%


Total revenue



411,479



329,682


25

%


Operating expenses:











Costs of services



41,521



35,108


18

%


Cost of inventory sold



147,253



102,993


43

%


Selling, general and administrative



133,193



106,508


25

%


Acquisition-related costs



2,031



10,255


(80)

%


Depreciation and amortization



24,290



21,907


11

%


Foreign exchange (gain) loss



(430)



360


(219)

%


Total operating expenses



347,858



277,131


26

%


Gain on disposition of property, plant and equipment



333



1,068


(69)

%


Operating income



63,954



53,619


19

%


Interest expense



(9,199)



(8,807)


4

%


Change in fair value of derivatives, net






%


Other income, net



2,866



602


376

%


Income before income taxes



57,621



45,414


27

%


Income tax expense



14,697



13,057


13

%


Net income


$

42,924


$

32,357


33

%


Net income attributable to:











Stockholders


$

42,909


$

32,336


33

%


Non-controlling interests



15



21


(29)

%


Net income


$

42,924


$

32,357


33

%


Earnings per share attributable to stockholders:











Basic


$

0.39


$

0.29


34

%


Diluted


$

0.38


$

0.29


31

%


Weighted average number of share outstanding:











Basic



110,838,237



110,410,172


0

%


Diluted



112,209,535



111,391,396


1

%


 

Condensed Consolidated Balance Sheets
(in U.S. dollars $000's, except share data)
(Unaudited)










September 30, 2022


December 31, 2021

Assets







Cash and cash equivalents


$

438,771


$

326,113

Restricted cash



76,303



102,875

Trade and other receivables



307,409



150,895

Less: allowance for credit losses



(3,963)



(4,396)

Inventory



101,302



102,494

Other current assets



27,512



64,346

Income taxes receivable



6,523



19,895

Total current assets



953,857



762,222








Restricted cash





933,464

Property, plant and equipment



444,538



449,087

Other non-current assets



147,900



142,504

Intangible assets



323,228



350,516

Goodwill



946,770



947,715

Deferred tax assets



6,281



7,406

Total assets


$

2,822,574


$

3,592,914








Liabilities and Equity







Auction proceeds payable


$

441,439


$

292,789

Trade and other liabilities



266,139



280,308

Income taxes payable



38,678



5,677

Short-term debt



1,630



6,147

Current portion of long-term debt



4,296



3,498

Total current liabilities



752,182



588,419








Long-term debt



633,048



1,733,940

Other non-current liabilities



137,228



147,260

Deferred tax liabilities



60,916



52,232

Total liabilities



1,583,374



2,521,851








Commitments and Contingencies







Stockholders' equity:







Share capital:







Common stock; no par value, unlimited shares authorized, issued and







outstanding shares: 110,870,783  (December 31, 2021: 110,618,049)



239,141



227,504

Additional paid-in capital



81,937



59,535

Retained earnings



1,028,096



839,609

Accumulated other comprehensive loss



(110,372)



(55,973)

Stockholders' equity



1,238,802



1,070,675

Non-controlling interest



398



388

Total stockholders' equity



1,239,200



1,071,063

Total liabilities and equity


$

2,822,574


$

3,592,914

 

Condensed Consolidated Statements of Cash Flows
(in U.S. dollars $000's)
(Unaudited)











Nine months ended September 30,



2022


2021

Cash provided by (used in):







Operating activities:







Net income


$

274,436


$

121,277

Adjustments for items not affecting cash:







Depreciation and amortization



72,813



64,912

Share-based payments expense



31,396



23,306

Deferred income tax expense



7,887



2,228

Unrealized foreign exchange (gain) loss



(5,340)



(98)

Gain on disposition of property, plant and equipment



(170,499)



(1,311)

Loss on redemption of the 2021 Notes



4,792



Amortization of debt issuance costs



3,104



2,155

Amortization of right-of-use assets



13,929



9,458

Change in fair value of derivatives



(1,263)



Other, net



2,824



2,253

Net changes in operating assets and liabilities



29,827



79,938

Net cash provided by operating activities



263,906



304,118

Investing activities:







Acquisitions, net of cash acquired



(63)



728

Property, plant and equipment additions



(26,279)



(6,984)

Proceeds on disposition of property, plant and equipment



165,190



1,667

Intangible asset additions



(28,225)



(25,601)

Issuance of loans receivable



(7,027)



(2,622)

Repayment of loans receivable



4,744



436

Net cash provided by (used in) investing activities



108,340



(32,376)

Financing activities:







Dividends paid to stockholders



(85,284)



(76,144)

Acquisition of remaining interest in NCI





(5,556)

Dividends paid to NCI





(104)

Proceeds from exercise of options and share option plans



5,763



13,915

Payment of withholding taxes on issuance of shares



(3,860)



(9,160)

Net increase (decrease) in short-term debt



(4,176)



(9,271)

Repayment of long-term debt



(1,094,926)



(5,328)

Debt issue costs



(3,644)



(3,163)

Repayment of finance lease obligations



(7,877)



(8,445)

Net cash used in financing activities



(1,194,004)



(103,256)

Effect of changes in foreign currency rates on cash, cash equivalents, and restricted cash



(25,620)



(7,027)

(Decrease) Increase



(847,378)



161,459

Beginning of period



1,362,452



306,895

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


$

515,074


$

468,354

 

Non-GAAP Measures

This news release references 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 US GAAP.

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 the Company does 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.

Adjusting operating income eliminates the financial impact of adjusting items from operating income, which are significant recurring and non-recurring items that the Company does not consider to be part of its normal operating results, such as share-based payments expense, acquisition-related costs, amortization of acquired intangible assets, management reorganization costs, and certain other items, which the Company refers to as "adjusting items".

In 2021, the Company updated the calculation of adjusted operating income to add-back share-based payments expense, all acquisition-related costs (including any share-based continuing employment costs recognized in acquisition-related costs), amortization of acquired intangible assets, and gain or loss on disposition of property, plant and equipment. The Company has also adjusted for certain non-recurring advisory, legal and restructuring costs. These adjustments in 2021 have been applied retrospectively to all periods presented, as applicable.

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













Three months ended September 30, 










% Change

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


2022


2021


2022 over 2021

Operating income


$

63,954


$

53,619


19

%

Share-based payments expense



8,806



5,627


56

%

Acquisition-related costs



2,031



10,255


(80)

%

Amortization of acquired intangible assets



8,227



6,622


24

%

Loss (Gain) on disposition of property, plant and equipment and related costs



930



(1,068)


(187)

%

Non-recurring advisory, legal and restructuring costs



1,494



680


120

%

Adjusted operating income


$

85,442


$

75,735


13

%



(1)

Please refer to pages 13-14 for a summary of adjusting items during the three months ended September 30, 2022 and September 30, 2021.

(2)

Adjusted operating income represents operating income excluding the effects of adjusting items.



 

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

In 2021, the Company updated the calculation of diluted adjusted EPS attributable to stockholders to add-back certain adjustments that have been applied retrospectively to all periods presented, as applicable (refer to adjusted operating income reconciliation above).

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














Three months ended September 30, 










% Change


(in U.S. dollars $000's, except share and per share data, and percentages)


2022


2021


2022 over 2021


Net income attributable to stockholders


$

42,909


$

32,336


33

%


Share-based payments expense



8,806



5,627


56

%


Acquisition-related costs



2,031



10,255


(80)

%


Amortization of acquired intangible assets



8,227



6,622


24

%


Loss (Gain) on disposition of property, plant and equipment and related costs



930



(1,068)


(187)

%


Non-recurring advisory, legal and restructuring costs



1,494



680


120

%


Related tax effects of the above



(4,544)



(4,672)


(3)

%


Adjusted net income attributable to stockholders


$

59,853


$

49,780


20

%


Weighted average number of dilutive shares outstanding



112,209,535



111,391,396


1

%













Diluted earnings per share attributable to stockholders


$

0.38


$

0.29


31

%


Diluted adjusted earnings per share attributable to Stockholders


$

0.53


$

0.45


18

%




(1)

Please refer to pages 13-14 for a summary of adjusting items for the three months ended September 30, 2022 and September 30, 2021.

(2)

Adjusted net income attributable to stockholders represents net income attributable to stockholders, excluding the effects of adjusting items.

(3)

Diluted adjusted EPS attributable to stockholders is calculated by dividing adjusted net income attributable to stockholders, net of the effect of dilutive securities, by the weighted average number of dilutive shares outstanding.



 

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.

In 2021, the Company updated the calculation of adjusted EBITDA to add-back certain adjustments that have been applied retrospectively to all periods presented, as applicable (refer to adjusted operating income reconciliation above).

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













Three months ended September 30, 










% Change

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


2022


2021


2022 over 2021

Net income


$

42,924


$

32,357


33

%

Add: depreciation and amortization



24,290



21,907


11

%

Add: interest expense



9,199



8,807


4

%

Less: interest income



(1,827)



(375)


387

%

Add: income tax expense



14,697



13,057


13

%

EBITDA



89,283



75,753


18

%

Share-based payments expense



8,806



5,627


56

%

Acquisition-related costs



2,031



10,255


(80)

%

Loss (Gain) on disposition of property, plant and equipment and related costs



930



(1,068)


(187)

%

Non-recurring advisory, legal and restructuring costs



1,494



680


120

%

Adjusted EBITDA


$

102,544


$

91,247


12

%



(1)

Please refer to pages 13-14 for a summary of adjusting items during the three months ended September 30, 2022 and September 30, 2021.

(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 share-based payments expense, acquisition-related costs, loss (gain) on disposition of property, plant and equipment, terminated and ongoing transaction costs, and excluding the effects of any non-recurring or unusual adjusting items.



 

Adjusted Net Debt and Adjusted Net Debt/Adjusted EBITDA Reconciliation
The Company believes that comparing adjusted net debt/adjusted EBITDA on a trailing 12‑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. Measures of liquidity are noted under "Liquidity and Capital Resources".

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, its consolidated financial statements.













As at and for the twelve months ended September 30, 









% Change

(in U.S. dollars $millions, except percentages)



2022



2021


2022 over 2021

Short-term debt


$

1.6


$

18.5


(91)

%

Long-term debt



637.3



633.7


1

%

Debt



638.9



652.2


(2)

%

Less: cash and cash equivalents



(438.8)



(362.6)


21

%

Adjusted net debt



200.1



289.6


(31)

%

Net income


$

305.0


$

170.2


79

%

Add: depreciation and amortization



95.8



84.3


14

%

Add: interest expense



58.7



35.4


66

%

Less: interest income



(3.6)



(1.6)


125

%

Add: income tax expense



83.4



59.3


41

%

EBITDA



539.3



347.6


55

%

Share-based payments expense



34.0



21.5


58

%

Acquisition-related costs



29.0



22.2


31

%

Loss (Gain) on disposition of property, plant and equipment and related costs



(167.9)



(1.3)


12815

%

Non-recurring advisory, legal and restructuring costs



7.5



0.9


733

%

Adjusted EBITDA


$

441.9


$

390.9


13

%

Debt/net income



2.1

x


3.8

x

(45)

%

Adjusted net debt/adjusted EBITDA



0.5

x


0.7

x

(29)

%



(1)

Please refer to pages 13-14 for a summary of adjusting items during the trailing 12‑months ended September 30, 2022 and September 30, 2021.

(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 share-based payments expense, acquisition-related costs, loss (gain) on disposition of property, plant and equipment, terminated and ongoing transaction costs, and excluding the effects of any non-recurring or unusual adjusting items.

(3)

Adjusted net debt is calculated by subtracting cash and cash equivalents from short and long-term debt.

(4)

Adjusted net debt/Adjusted EBITDA is calculated by dividing adjusted net debt by adjusted EBITDA.



 

Adjusting Items Non-GAAP Measures

In 2021, the Company began adjusting for share-based payment expenses, amortization of acquired intangible assets and all gains or losses on disposition of property, plant and equipment, which the Company did not consider to be part of its normal operating results. These adjustments in 2021 have been applied retrospectively to all periods presented.

Adjusting items during the trailing twelve months ended September 30, 2022 were:

Recognized in the third quarter of 2022
  • $8.8 million share based payments expense.
  • $2.0 million of acquisition-related costs primarily relating to the share-based continuing employment costs for the acquisitions of Rouse and SmartEquip.
  • $8.2 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet, SmartEquip, and Rouse.
  • $0.9 million loss on disposition of property, plant and equipment and related costs includes a $1.3 million non-cash cost in the quarter relating to the adjustment made to recognize the Bolton property sale proceeds at fair value when calculating the $169.0 million gain on the Bolton property in the first quarter of 2022, offset by $0.3 million gain on disposition of property, plant and equipment in the quarter.
  • $1.5 million of non-recurring advisory, legal and restructuring costs, which include $1.1 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.3 million of severance and retention costs in connection with the restructuring of our information technology team during the first quarter of 2022 driven by our strategy to build a new digital technology platform, and $0.1 million of advisory costs relating to a cybersecurity incident detected in the fourth quarter of 2021.

Recognized in the second quarter of 2022

  • $13.6 million share based payments expense.
  • $3.4 million of acquisition-related costs related to the proposed acquisition of Euro Auctions and the completed acquisitions of SmartEquip and Rouse.
  • $8.4 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet, SmartEquip, and Rouse.
  • $1.2 million gain on disposition of property, plant and equipment and related costs includes a $1.3 million non-cash cost in the quarter relating to the adjustment made to recognize the Bolton property sale proceeds at fair value when calculating the $169.0 million gain on the Bolton property in the first quarter of 2022, and $0.1 million gain on disposition of property, plant and equipment in the quarter.
  • $9.7 million loss on redemption of the 2021 Notes and certain related interest expense includes (a) $4.8 million of loss on redemption of the 2021 Notes due to a difference between the reacquisition price of the 2021 Notes and the net carrying amount of the extinguished debt (primarily the write off of the unamortized debt issuance costs), (b) $0.7 million of deferred debt issuance costs written off due to the expiry of the undrawn $205.0 million DDTL Facility in the quarter, and (c) non-recurring interest expense of $4.2 million incurred in the quarter relating to the 2021 Notes, which were redeemed as a result of the discontinued Euro Auctions acquisition in April 2022.
  • $1.1 million of non-recurring advisory, legal and restructuring costs, which include $0.6 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.3 million of severance and retention costs in connection with the restructuring of our information technology team driven by our strategy to build a new digital technology platform, and $0.2 million of advisory costs relating to a cybersecurity incident detected in the fourth quarter of 2021.

Recognized in the first quarter of 2022

  • $5.4 million share based payments expense.
  • $8.5 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet, SmartEquip, and Rouse.
  • $169.8 million gain recognized on the disposition of property, plant and equipment of which $169.1 million related to the sale of a property located in Bolton, Ontario.
  • $9.6 million of acquisition-related costs related to the proposed acquisition of Euro Auctions and the completed acquisitions of SmartEquip and Rouse.
  • $1.3 million gain due to the change in fair value of derivatives to manage exposure to foreign currency exchange rate fluctuations on the purchase consideration for the proposed acquisition of Euro Auctions.
  • $2.3 million of non-recurring advisory, legal and restructuring costs, which include $0.9 million related to severance and retention costs in connection with the restructuring of our information technology team driven by our strategy to build a new digital technology platform, $0.5 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.4 million of SOX remediation costs, and $0.6 million of advisory costs relating to a cybersecurity incident detected in the fourth quarter of 2021.

Recognized in the fourth quarter of 2021

  • $6.2 million share based payments expense.
  • $7.9 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet, SmartEquip, and Rouse.
  • $14.0 million of acquisition-related costs related to the proposed acquisition of Euro Auctions and the completed acquisitions of SmartEquip and Rouse.
  • $0.1 million gain recognized on the disposition of property, plant and equipment
  • $1.3 million loss due to the change in fair value of derivatives to manage our exposure to foreign currency exchange rate fluctuations on the purchase consideration for the proposed acquisition of Euro Auctions.
  • $2.6 million of non-recurring advisory, legal and restructuring costs, which include $1.4 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.7 million of SOX remediation costs relating to efforts to remediate the material weaknesses identified in 2020, and $0.5 million of advisory costs relating to a cybersecurity incident detected in the fourth quarter of 2021.

Adjusting items during the trailing twelve months ended September 30, 2021 were:

Recognized in the third quarter of 2021

  • $5.6 million share based payments expense.
  • $6.6 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.
  • $10.3 million of acquisition-related costs related to the acquisitions of Rouse, and SmartEquip and proposed acquisition of Euro Auctions.
  • $1.1 million gain recognized on the sale of a property in Denver, Colorado.
  • $0.7 million of non-recurring advisory, legal and restructuring costs related to SOX remediation costs relating to efforts to remediate the material weaknesses identified in 2020, which has been retrospectively applied to the third quarter of 2021.

Recognized in the second quarter of 2021

  • $7.5 million share based payments expense.
  • $6.8 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.
  • $3.0 million of acquisition-related costs related to the acquisition of Rouse.
  • $0.2 million gain recognized on the disposition of property, plant and equipment
  • $0.2 million of non-recurring advisory, legal and restructuring costs related to SOX remediation costs relating to efforts to remediate the material weaknesses identified in 2020, which has been retrospectively applied to the second quarter of 2021.

Recognized in the first quarter of 2021

  • $3.8 million share based payments expense.
  • $6.6 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.
  • $2.9 million of acquisition-related costs related to the acquisition of Rouse.

Recognized in the fourth quarter of 2020

  • $4.6 million share based payments expense.
  • $5.6 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.
  • $6.0 million of acquisition-related costs related to the acquisition of Rouse.
  • $1.5 million of current income tax expense recognized related to an unfavourable adjustment to reflect final regulations published in the second quarter of 2020 regarding hybrid financing arrangements.

Cision View original content:https://www.prnewswire.com/news-releases/ritchie-bros-reports-third-quarter-2022-results-301669818.html

SOURCE Ritchie Bros. Auctioneers

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