A global leader in used equipment sales Investor overview - - PowerPoint PPT Presentation

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A global leader in used equipment sales

Investor overview presentation August 2016

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Forward looking statements and non-GAAP measures

This presentation contains forward-looking statements.

Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions. Actual results may differ materially from those expressed herein. Additional information concerning factors that could affect the Company’s actual results is included in the Company’s filings with securities regulators. The Company undertakes no obligation to update publicly any forward-looking statements except as required by securities legislation.

This presentation contains 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 earnings releases, our Form 10-Q interim report and 10-K annual report, which are available at: investor.ritchiebros.com All figures are in US dollars, unless otherwise noted. While rounding may occur in performance numbers for presentation purposes, percent change figures are calculated using full, unrounded numbers.

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Ritchie Bros. overview

The trusted source for buying and selling industrial equipment

• Global leader for industrial auctions; unreserved process

– No minimum bid/reserved price. No buy-backs. – Ensures the sale of goods on the day of the auction at global market price

• Cater to the needs of heavy equipment owners

– Customers are from the construction, trucking, agricultural & resource sectors

• 345 auctions; $4.25 billion in Gross Auction Proceeds during 2015

– Industry leader by wide margin; Enormous growth opportunity, with a highly fragmented market

• Provide multichannel sales solutions to expand the breadth of

services available to equipment sellers:

– EquipmentOne launched in 2013 – Mascus (equipment sales listing service) acquired in 2016

Strong financial performance

• $515.9 million of revenue during fiscal 2015
• $121.1 million of adjusted net income¹ during fiscal 2015

Publicly listed on the NYSE and TSX (as RBA)

• Market cap of approx. US$3.8 billion

RBA Auction - Circa 1958 RBA Auction - Now

Ritchie Bros. has a strong heritage – selling used equipment since 1958

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¹ Net Income attributable to stockholders

4 32% 50% 10% 7%

Canada United States Europe Other

Global reach

44 auction sites in 14 countries worldwide

• More than half of auction purchases are made by bidders from
• utside the region of the auction
• Allows RBA to effectively transfer equipment between regions

experiencing different economic cycles

• Consignors benefit from global market pricing for their

equipment, generated by international demand

• Buyers benefit from a global supply, with an ability to purchase

and ship equipment from weak economic regions to areas with stronger growth

32% 47% 12% 9%

Canada United States Europe Other

2015 Regional breakdown of revenue

(Revenue breakdown - % of 2015 total)

Ritchie Bros.’ online bidding allows customers from around the world to bid on equipment at any of our auctions.

• Real-time information from live auctions available online to registered

bidders

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$481 Mil

2014 Revenue breakdown - % of 2014 total

$516 Mil

US comprised a greater proportion of revenue in 2015 relative to 2014.

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Global equipment market size is $360 billion

Ritchie Bros. is a global leader in used equipment sales, with $4.2 billion of equipment sold in 2014 However, this represents only 1.2% of a highly fragmented global used equipment exchange market The US market alone represents over $50 billion, 7x Canada – a key market for growth

Mining Oil & Gas Transportation Agriculture Construction

Source: Internal estimates; based on historical OEM unit sales, estimates of fleet turnover, and average selling prices at RB

• auctions. Allocation by geography

based on sector GDP.

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Mining Oil & Gas Transportation Agriculture Construction

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100,000 200,000 300,000 400,000 500,000 600,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Registrants Lots 20,000 40,000 60,000 80,000 100,000 120,000 140,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Consignors Buyers

Growing seller and buyer base

5.0% CAGR in consignments

• ver last 10 years

6.4% CAGR in buyers

• ver last 10 years

8.2% CAGR in registrants

• ver last 10 years

5.2% CAGR in Lots

• ver last 10 years

Consignments & buyer base

(Metrics are for industrial auctions only)

Auction registrants & lots

(Metrics are for industrial auctions only)

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Growth of Gross Auction Proceeds (GAP)

US$4.25 billion of GAP produced during fiscal 2015 GAP: The aggregate dollar amount transacted through Ritchie

• Bros. Auctioneers

and EquipmentOne

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Includes transactions of AssetNation and EquipmentOne online marketplaces in 2012 - 2015

Gross Auction Proceeds (US$ millions)

4,245 $- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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Four external influences on GAP

The pricing environment

• A strong pricing environment will enhance market values of equipment sold at auctions
• Stable or increasing pricing environment provides consignors with more confidence to

sell equipment through unreserved auctions

The mix of categories of assets sold

• RBA sells a wide variety of industrial and agricultural equipment and other products.

There is no consistency to the mix of assets sold, as it varies at each auction held due to regional, seasonal and cyclical factors.

• The proportion of higher-valued items sold at each auction relative to smaller goods

impacts the auction proceeds generated

The mix of equipment age

• Newer equipment generally has a higher market value compared to older machinery

The number of Lots consigned

• Each sale generates proceeds. Increasing the number of Lots sold can bolster gross

auction proceeds

1 2 3 4

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Unreserved auction revenue model

Four main revenue streams support Ritchie Bros.’ unreserved auction business:

Unreserved Auction Straight Commission Guaranteed Proceeds (underwritten transaction) Inventory (underwritten transaction)

Consignors contract to sell their equipment through one of Ritchie

• Bros. unreserved auctions. A pre-determined percentage of the

selling price is provided to RBA as commission. Consignors are guaranteed to receive a pre-determined amount for their equipment, regardless of the final selling price at the auction. A stepped commission fee is negotiated, accounting for the additional risk being assumed by RBA. (Also known as an ‘at risk’ transaction) On rare occasions, Ritchie Bros. may choose to purchase equipment

• utright, obtaining title of the piece to sell at an upcoming auction.

TRANSACTION TYPE REVENUE

Straight Commission fee (% of auction proceeds) Stepped commission fee (x% of guaranteed proceeds; x+y% for proceeds above guaranteed amount) Gains on sale

Sellers

(Consignors)

Buyers Admin Fees & Value-added Services (VAS)

Admin fees and fees from value-added service activities

RBA provides many services to assist with the purchase of equipment, including financing , inspection services, painting etc.

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Revenue from other business lines supplement our revenue: EquipmentOne buyer and seller fees; Xcira revenue; Mascus revenue

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54% 46% 0% 10% 20% 30% 40% 50% 60% 70% Q1 2012 Q 2 Q 3 Q 4 Q1 2013 Q 2 Q 3 Q 4 Q1 2014 Q 2 Q 3 Q 4 Q1 2015 Q 2 Q 3 Q 4 Q1 2016 Q2 Online Onsite

Q2 2016: First time more than half of GAP sold online

Online purchases comprised 51% of GAP in Q2 2016, the first time more than half of GAP was generated by online buyers.

• Online transactions growing due to changing customer preferences, greater participation from non-

local bidders, the introduction of the Ritchie Bros. app, and growth of E1

• Sold approx. $650 million of assets through online transactions (incl. E1) during Q2 2016, an increase
• f 11% from Q2 2015
• 54% of buyers during Q2 2016 participated in our auctions online

*Industrial auction data

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Percent of buyers: # of buyers, on site or online

54% of total # of buyers were online (51% of total GAP was sold online)

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Investing in our digital capabilities

Public launch of Ritchie Bros. App has been highly successful

• Officially launched in App stores July 11, 2016
• Early reviews in App stores are all 5-stars, demonstrating strong user endorsement
• Including the beta testing period in Q1 and Q2 (prior to public launch), the app has

accumulated:

• 68 successful winning bids
• US$1.35 million of GAP
• Increased promotion of the App (and smartphone enabled bidding) will occur in coming

months

Creation of Enterprise Sales Solution direct user portals for key EquipmentOne accounts launched earlier this year

• Flexible, end-to-end solution that allows companies to better control asset management
• Product includes data integrations, automated process workflows, remarketing solutions,

public and private (e.g. dealer to dealer networks, internal corporate redeployment sites) disposition channels, and detailed reporting capabilities.

• New customers include one of the world’s largest transportation OEM’s and a leading energy

companies; interest in the product is aggressively growing

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Growing our breadth of services through acquisitions

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Since November 2015 we have deployed $90 million of capital to grow our sales channels and bolster our core business

• During Q3 2016 (to date) we have announced the acquisition of the remaining 49% stake of Ritchie
• Bros. Financial Services, a minority investment in Machinio, and the purchase of Petrowsky

Auctioneers

• Continue to evaluate M&A opportunities that could be strategically important and/or accretive to GAP

and earnings

Q4 2015 Q1 2016 Q3 2016 (to date)

(75% stake) (Minority interest)

Recent M&A Activity:

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Growing our sales platform

Ritchie Bros. offers four main sales channels to equipment owners

Business units are supported through Ritchie Bros. ownership of Xcira (online auction technology provider) and Ritchie Bros. Financial Services (financial solutions partner for equipment buyers).

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75% ownership 100% ownership

Integrated technology platform Financial intermediary capitalizing on captive customer base to provide an alternative source of capital Integrated onsite/online auction network¹ Online marketplace Online listing service Brokerage channel for highly specialized assets

¹ Includes Petrowsky Auctioneers

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Multichannel solutions:

• Offers sellers more control over the sales price, time and

purchaser; opens up opportunities for RBA to bid on RFPs

• During 2015, EquipmentOne contributed approx. $120 million
• f GTV (Gross Transaction Value) to GAP; up 13% from 2014
• Operates primarily in the United States; expanded into

Canada in Q1 2016

• Website traffic up 11% in 2015, compared to 2014 (average

monthly user)

Commercially launched in 2013

Customers of EquipmentOne value having control over the process and price, more than the guarantee of sale. They prefer a negotiated price, over global market value.

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The launch of EquipmentOne provided customers with another sales solution – an online equipment marketplace The seller journey: sellers choose methods based upon needed degree of control

Our vision is to position appropriate solutions at each point of seller journey and connect them

High Control to Seller Low Effort for Seller Control over: Price Time Location Buyer Low High Uncertain Certain Some Certainty of Sale

Result: Transacting anyhow, anytime, anywhere

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Multichannel solutions:

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• Acquired during Q1 2016
• Provides equipment sellers with a turn-key suite of business tools

and software solutions catering to the needs of OEMs, dealers and large equipment fleet owners

– Generates sticky customer relationships

• Mascus generates 3.2 million monthly website visits
• Business currently has 360,000+ listings of equipment and other assets for sale
• Financial terms: €24.0 million (US$26.6 million)

– Additional cash consideration, totaling no more that €3.4 million (US$3.8 million) may be paid contingent upon certain operating performance targets being achieved over the next 3 years

• Expected to be marginally accretive to RBA’s performance immediately
• Performance of Mascus is fully consolidated into RBA’s financial reports

Mascus is a leading global online equipment sales listing service

Grows our service offering, to offer additional sales solutions to equipment sellers. Expands our buyer audience. Established a large presence in Europe.

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Strategic Roadmap

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Priority Discussion

• 1. Grow dividends with earnings

Highly valued return of cash to shareholders

• 2. Hold fully-diluted shares flat

Offset dilution from management stock options through share buybacks

• 3. Acquisitions

Accelerate top-line growth and leverage the model

• 4. Share buy-backs

Growth initiatives are a higher priority at this time

• 5. Pay down debt

Only if better economic returns are not available

 Capital allocation priorities

Consistently make use of cash on our balance sheet to facilitate underwritten transactions; The strength of our balance sheet is a competitive advantage.

(1) Priorities for cash utilization after operating CAPEX needs have been met.

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 

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Performance Metric

• Avg. Annual Growth Targets

2015 performance

• GAP Growth (%)

High Single Digit to Low Double Digits



+8% (organic)

• Revenue Growth (%) (1)

Mid Single Digit to High Single Digit



+16% (organic)

• SG&A Growth (%)

Will grow slower than revenues  +12% (organic, excl. D&A)

• Operating Income Margin

50 bps +  +360 bps

• EPS Growth (%) (2)

High Single Digit to Low Double Digits  +22% (adjusted)

• Net Capex Intensity (3)

<10%  2.8% (abnormally low)

• OFCF (4) % of Net Earnings

>100%  150%

• RONA (5) Increase

50 bps +  +910 bps

(excl. current portion of long term debt)

• Dividend Payout Ratio

55% to 60% * 53%

(*announced 6.3% increase to dividend Aug 8, 2016)

• Net Debt / EBITDA

<2.5X  0.5x

RBA’s evergreen financial model

Above model reflects our aspiration on how the model should work in the next 5 to 7 years

(1) Includes Tuck In and Bolt On acquisitions (2) Variances may occur in certain years based on tax rate that is influenced by geographic revenue mix (3) Net Capital Spending as % of Revenue (4) Operating Free Cash Flow (5) Return on Net Assets

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0.1050 0.1125 0.1125 0.1125 0.1125 0.1225 0.1225 0.1225 0.1225 0.1300 0.1300 0.1300 0.1300 0.1400 0.1400 0.1400 0.1400 0.1600 0.1600 0.1600 0.1600 0.1700

0.1000 0.1100 0.1200 0.1300 0.1400 0.1500 0.1600 0.1700 0.1800 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16

Declared 6.3% increase in quarterly cash dividend

Growing our dividend alongside earnings; announced a 1 cent increase to quarterly cash dividend on August 8, 2016

Committed to 55-60% dividend payout, based on earnings trailing 12 months

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Dividends declared ($US cash dividends)

7.1% increase 8.9% increase 6.1% increase 7.7% increase 6.3% increase 14.0% increase

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Allocating Cash to growth initiatives & shareholder returns

Use of Cash – H1 2016

(US$ mil)

$71 million spent on returning cash to shareholders

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$28 million spent on growth initiatives

$210.8 $166.5 $37.6 $1.4 $77.9 $18.1 $0.3 $28.3 $36.7 $34,2 $70.8 $15.0 $6.0 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000

Cash balance

• Dec. 31, 2015

Cash generated from

• perating

activities Cash from non-operating activities (sale of land) Proceeds from borrowings Issuance of share capital Other financing activities Acquisitions Share repurchases Dividends paid to shareholders Repayment of debt Other capital expenditures and financing costs Effect of changes in foreign currency Cash balance

• June 30,

2016

H1 and Q2 2016 financial performance

For six and three months ended June 30, 2016.

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Reported - % Growth Constant Currency - % Growth

Versus H1 2015 Versus H1 2015

GAP 4% 6% Revenue 7% 10% Operating Income (3)% (2)% Diluted EPS 2% n/a Operating Free Cash Flow

(12 month rolling)

(63)% n/a RONA excl. term loan reclass

(12 month rolling)

260 bps n/a ROIC

(12 month rolling)

60 bps n/a

H1 2016 financial highlights

While Q1 generated solid results, first half results for 2016 were proportionately impacted by larger Q2

Foreign exchange continues to have an impact on quarterly comparators 22

attributable to stockholders

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Reported - % Growth Constant Currency - % Growth

Versus Q2 2015 Versus Q2 2015

GAP 1% 3% Revenue 2% 4% Operating Income (15)% (13)% Diluted EPS (12)% n/a Operating Free Cash Flow

(12 month rolling)

(63)% n/a RONA excl. term loan reclass

(12 month rolling)

260 bps n/a ROIC

(12 month rolling)

60 bps n/a

Q2 2016 financial highlights

Revenue grew modestly on a tough comp versus prior year; maintained strong revenue rate

• Costs of Services and SG&A increased disproportionately on account of new businesses, headcount investment in

strategic initiatives, and increased auction volumes;

• Cash flow declined due to timing issues, but company remains a strong cash generator

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attributable to stockholders

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Income statement scorecard – Q2 2016

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3 months trailing

($US Millions except for EPS, %)

June 30, 2016 June 30, 2015 Better / (Worse)

GAP $1,275.7 $1,262.2 1% Revenues $158.8 $155.5 2% Revenue Rate 12.45% 12.32% 13 bps Operating Income $53.6 $62.8 (15)% Operating Income Margin 33.8% 40.4% (660) bps EBITDA $64.7 $74.7 (13)% Diluted EPS $0.37 $0.42 (12)% Q2 2016 Income statement scorecard

GAP and Revenue Rate increased modestly; Op income and EPS impacted by lower margins than in Q2 2015

attributable to stockholders

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Balance sheet scorecard – Q2 2016

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12 months trailing

($US Millions except for percent figures)

June 30, 2016 June 30, 2015 Better / (Worse) Operating Free Cash Flow $81.6 $218.1 (63)% Working Capital Intensity

• 19.8%
• 23.9%

(410) bps Capex Intensity 3.6% 3.2% (40) bps ROIC (Return on Invested Capital) 15.1% 14.5% 60 bps RONA (Return on Net Assets) 25.4% 25.3% 10 bps RONA excluding term loan reclassification 25.4% 22.8% 260 bps Debt / Adjusted EBITDA 0.6x 0.6x

no change

Q2 2016 Balance sheet scorecard

2015 financial performance

All figures for twelve months ended December 31, 2015

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Very strong results in 2015

Performance during 2015 demonstrates our commitment to execution, our strategy is gaining traction, and our agility in leveraging market opportunities

Foreign exchange remains a headwind

27 2015 Reported - % Growth 2015 Organic - % Growth

Versus 2014 Versus 2014

GAP

1%

8% Revenue

7%

16% Adjusted Operating Income

20%

46% Diluted Adjusted EPS

22%

n/a Operating Free Cash Flow

(12 month rolling)

28%

n/a RONA

(12 month rolling)

1100 bps

n/a RONA excluding effects of

term loan reclassification

910 bps

n/a

attributable to stockholders

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Income statement scorecard – 2015

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12 months trailing

($US Millions except for EPS, %)

• Dec. 31, 2015
• Dec. 31, 2014

Better / (Worse) GAP $4,247.6 $4,212.6 1% Revenues $515.9 $481.1 7% Revenue Rate 12.14% 11.42% 72 bps Adjusted Operating Income $166.5 $138.2 20% Adjusted Operating Income Margin 32.3% 28.7% 360 bps Diluted EPS $1.27 $0.85 50% Diluted Adjusted EPS $1.13 $0.93 22% Full year 2015 Income statement scorecard

Increased Diluted EPS by 50% versus last year – through GAP growth, revenue rate improvement, expense control, excess land sales and tax planning strategies

attributable to stockholders attributable to stockholders

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Balance sheet scorecard – 2015

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12 months trailing

($US Millions except for percent figures)

• Dec. 31, 2015
• Dec. 31, 2014

Better / (Worse) Operating free cash flow $182.2 $141.8 28% Working Capital Intensity

• 3.2%
• 2.3%

90 bps Capex Intensity 2.8% 6.2% 340 bps ROIC (Return on Invested Capital) 15.1% 12.0% 310 bps RONA (Return on Net Assets) 25.7% 14.7% 1100 bps RONA excluding term loan reclassification 23.8% 14.7% 910 bps Debt / Adjusted EBITDA 0.5x 0.6x 0.1x 2015 Balance sheet scorecard

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Focused on generating long-term shareholder value through continued earnings and dividend growth.

A global leader in industrial auctions

• Substantial growth opportunity
• Focused on growth in the US and in key sectors

Diversifying services to meet broader customer needs

• Sales solutions: Ritchie Bros. Auctioneers, EquipmentOne, Mascus
• Complementary services: Ritchie Bros. Financial Services, Logistical Services
• Supportive business unit: Xcira (online auction technology solutions)

Focused on basics of:

• EPS growth
• Return on Net Assets
• EBITDA margin
• Operating free cash flow

Summary

Moerdijk, Netherlands auction

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Learn more about Ritchie Bros. auctions through our online videos:

www.youtube.com/ritchiebros

Appendices

Age of equipment sold trends Global auction site network

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11.5% 9.6% 4.2% 3.6% 8.7% 10.9% 8.6% 13.1% 12.1% 11.0% 5.0% 4.8% 8.7% 10.6% 11.2% 12.1% 12.2% 10.3% 5.0% 4.6% 9.7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% New 1 Yr Old 2 Yrs Old 3 Yrs Old 4 Yrs Old 5 Yrs Old 6 Yrs Old 7 Yrs Old 8 Yrs Old 9 Yrs Old 10 Yrs Old

18.5% of GAP¹ 3-5 yrs old: 35.8% of GAP¹

¹ Industrial auctions only. Excludes equipment over 10+ years and equipment with unknown ages.

Age of equipment sold improving from past years

Age of Equipment sold at Ritchie Bros. Auctions¹

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3-5 yrs old: 28.9% of GAP¹

6+ Yrs Old New to 1 yr Old

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Auction sites

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Investor Questions: ir@rbauction.com | 1-778-331-5500

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US GAAP

Reconciliation of Non-GAAP measures

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

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Reconciliation of Non-GAAP Measures

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Reconciliation of Non-GAAP Measures

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Reconciliation of Non-GAAP Measures

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Reconciliation of Non-GAAP Measures

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Reconciliation of Non-GAAP Measures

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Reconciliation of Non-GAAP Measures

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Reconciliation of Non-GAAP Measures

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Reconciliation of Non-GAAP Measures