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

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A global leader in used equipment sales

Investor presentation February 27, 2015 – Q4/14 information

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Forward looking statements

This presentation contains forward-looking statements (as such term is defined in Section 21E of the U.S. Securities Exchange Act of 1934, as amended), which reflect management's current views with respect to certain future events, company strategy and performance. All statements included in or accompanying this presentation, other than statements of historical fact, are 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. Please refer to our website at www.rbauction.com for a description and, as applicable, reconciliation of non- GAAP financial measures such as GAP (gross auction proceeds), EBIT and Adjusted EBIT, ROI and ROIC, RONA

• r Adjusted EPS.

All figures are in US dollars, unless otherwise noted.

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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 and resource sectors

• 349 auctions; $4.2 billion in Gross Auction Proceeds during 2014

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

• Launched EquipmentOne online marketplace in 2013 to provide

equipment owners a broader set of solutions

Strong financial performance

• $481.1 million of revenue during fiscal 2014
• $100.8 million of adjusted net earnings during fiscal 2014

Publicly listed on the NYSE and TSX (as RBA)

• Market cap of approx. US$2.7 billion

RBA Auction - Circa 1958 RBA Auction - Now

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

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2014 Highlights

Double-digit adjusted 2014 EPS growth $1.8 billion of online sales during 2014 CAD$1.4 billion of GAP in Canada

• 12% growth in annual adjusted EPS
• Helped by unusually low tax rate

Operating free cash flow 119% of adjusted net earnings

• Demonstrates the strength of our digital capabilities
• Leading multi-channel player in our space
• 5th consecutive year of strong GAP growth in Canada
• Bolstered by growth in both western and eastern

Canada

• Significant cash generating capabilities
• OFCF 131% of unadjusted net earnings

5 31.0% 45.2% 21.4% 2.4%

REGIONAL BREAKDOWN OF GAP (2014)

(Gross Auction Proceeds, $US billions) Canada: $1.3 B United States: $1.9 B Rest of World: $0.9 B EquipmentOne: $0.1 B

Global reach

44 auction sites in 14 countries worldwide

• Approx. 55% of auction purchases are made by bidders from outside

the region of the auction

• Allows RBA to effectively transfer equipment between regions

experiencing different economic cycles (transcends local market conditions)

• Consignors benefit from global market pricing for their equipment,

generated by international demand for their machinery

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

ship equipment from weak economic regions to areas with stronger growth

32.1% 46.5% 12.2% 9.2%

Canada United States Europe Other

REGIONAL BREAKDOWN OF REVENUE (2014)

(Revenue breakdown - % of 2014 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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Regional amounts represent GAP generated from Ritchie

• Bros. auctions. All sales from

RBA’s online marketplace, EquipmentOne, are included in the EquipmentOne segment (regardless of geography)

$4.2 B

$481 M

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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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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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$4,212 $- $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

Growth of Gross Auction Proceeds (GAP)

US$4.2 billion of GAP produced during fiscal 2014 GAP: The aggregate dollar amount sold through our multiple solutions

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Includes transactions of AssetNation and EquipmentOne online marketplaces in 2012 - 2014

GROSS AUCTION PROCEEDS (US$ millions)

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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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% OF GAP BY ASSET AGE

Age of equipment sold through RBA auctions

Equipment production levels in prior years is reflected in age of assets sold

• Drop in equipment production post financial crisis has impacted the age of assets available for sale.

Production has since returned to pre-crisis levels

• Other GAP influences remain strong: stable equipment pricing and growing number of Lots sold

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Excludes assets with unknown age and those over 10 years.

0% 2% 4% 6% 8% 10% 12% 14% 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 2009 2010 2011 2012 2013 2014

2014

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20,000 40,000 60,000 80,000 100,000 120,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Consignments Buyers 100,000 200,000 300,000 400,000 500,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Registrants Lots

Growing seller and buyer base

5.6% CAGR in consignments

• ver last 10 years

6.1% CAGR in buyers

• ver last 10 years

7.8% CAGR in registrants

• ver last 10 years

5.5% 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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Multi-channel solutions

• Provides access to a larger share of the equipment market
• Allows RBA to cater to a wider range of needs that

equipment sellers have

• Provides another entry point to gain a customer during the

equipment seller journey (some equipment sellers consider

• nline listings first)
• Offers sellers more control over the sales price, time and

purchaser; opens up opportunities for Ritchie Bros. to bid

• n RFPs
• During 2014, EquipmentOne contributed approx. $100

million of GTV (Gross Transaction Value) to GAP

Commercially launched on April 8, 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. 12

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 Listing Service Low High Uncertain Certain Some Certainty of Sale

Result: Transacting anyhow, anytime, anywhere

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EquipmentOne and Unreserved auctions – Better together

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A solution set that caters to equipment sellers with different needs,

• r at different points of the selling cycle.
• Certainty of sale
• Global market value
• Seller access to largest global buying

audience

• Ability to buy at largest global equipment

inventory online and onsite

• Highest level of service & support
• Single relationship for all occasions
• Choice to transact anyhow, anytime,

anywhere

• Choice of control, level of assistance
• Seller access to the world’s largest

equipment buyer base

• Buyer access to the largest global

equipment inventory

• Robust selling price data
• Technology-enabled

“better together” solutions

• Greater seller control over price,

timing, location, buyer

• Access to global buying audience online
• Strong technology platform
• Self-service tools or assistance from

world-class sales & operations

• Ability to buy anytime

“Better Together”

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RBA strategic roadmap to drive shareholder value

1 2 3

Objective: Restore revenue & earnings growth, drive cash flow, improve RONA

Strategic Pillars Key Strategies Key Enablers

* Disciplined execution * Analytical DNA * Accountability culture * Learning organization * Rewards & recognition * Talent development * Diversity to drive innovation * Sustainable, profitable growth * Strong cash flow generation * Continuously improving RONA

Key Outcomes

Operational Efficiencies & Effectiveness A: Sales Productivity

• Territory management & coverage

based on market potential

• Consistent go to market processes
• Improve selection, onboarding and

training of new hires

• Consistently utilize sales tools

C: Org Structure and SG & A

• Regional org structure with P&L and

B/S accountability

• Target SG&A growth lower than

revenue growth

• Flatten levels

D: Performance Metrics

• P&L and balance sheet scorecard
• Operational metrics
• Accountability at all levels

Incentive Compensation

• Tie to P&L and balance sheet measures
• Revamp sales compensation

B: Processes & Systems

• Modernize legacy systems
• Salesforce.com as unifying platform
• Focus on CRM
• Enable scaling business & leveraging

multichannel Balance Sheet Optimization Existing site returns

• High, medium and low site return

league table

• Initiatives to improve medium

and low site returns

• Dispose of excess assets

Cash Flow

• Align organization & incentivize
• Target Op FCF equal to net income

Organic Capital Spends

• Target net capital spend <10%

revenue

• Control spending on new sites
• Focus on IT systems & site

maintenance Capital Structure

• Institute policy and priorities
• Return cash via ongoing

dividends

• Address option dilution
• Invest in growth-driven M&A

A: Geographies

• Drive depth vs breadth
• Focus on the US
• Grow UK , Germany and France
• Evaluate Japan and China

strategic options B: Sectors

• Leverage construction
• Focus on transportation
• Grow agriculture
• Evaluate Oil & Gas

C: Services

• Scale RBFS
• Pilot Logistics

D: Channels

• Relaunch EquipmentOne
• Drive Multi Channel

E: Segments

• Accelerate strategic accounts
• Develop global accounts

M & A

• Tuck-ins and bolt-ons
• Scale enhancers & needle movers
• Accretive in relatively short time

frame Growth Initiatives F: Underwritten Contracts

• Utilize aggressively
• Minimize volatility

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2015 priorities – focus on execution

1.

Improve our revenue rate

– Laser focus on improving the performance of our underwritten business 2.

Spur straight commission growth across all geographies

3.

Increase our penetration in Transportation

– Targeted initiatives; building organizational capabilities and sector expertise 4.

Optimize a go-to-market strategy for EquipmentOne

– “Better Together” approach using the RBA sales force 5.

Program to target acquisition candidates

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2015: Pivoting from strategy to execution

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Recent auction activity

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Orlando auction – Feb. 16-20

• Record lots: 10,500+
• GAP of US$179 million
• Strong revenue rate
• Record revenues

Edmonton auction – Feb. 25 & 26

• Record lots for Feb/March: 4,600+
• GAP of CAD$84 million; a 46% increase

from the comparable auction last year

• Record revenue for an Edmonton sale at

this time of year

• Encouraging pricing

Q4 and 2014 financial performance

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$799 $851 $1,150 $673 $1,040 $865 $1,195 $849 $1,000 $845 $1,073 $790 $1,107 $855 $1,229 $887 $1,241 $4,212 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Record gross auction proceeds

QUARTERLY GROSS AUCTION PROCEEDS ($US millions) 18

2011 2012 2013 2014

Record annual and quarterly GAP

2010

12-months trailing GAP Quarterly GAP Quarterly GAP: Linear trend

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Thr Three mont e months hs ended ended December December 31, 31,

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

2014 2014 201 2013 $ C $ Chan ange ge % C % Chan ange ge Gross Auction Proceeds 1,241,184 1,109,834 131,350 11.8% Revenue Rate 11.16% 11.82%

• 66 bps

Revenues $ 138,457 $ 131,223 7,234 5.5% Direct expense 17,518 17,196 322 1.9% SG&A expenses 79,733 76,289 3,444 4.5% Excluding depreciation and amortization 68,179 64,863 3,316 5.1% Earnings from operations 41,206 37,738 3,468 9.2% Other income (expense) 1,892 10,687 (8,795) (82.3)% Effective tax rate 29.7% 28.0% 170 bps Net earnings attributable to equity holders $ 29,284 $ 33,745 (4,461) (13.2)% Adjusted Net Earnings attributable to equity holders 33,496 30,324 3,172 10.5% Diluted Adjusted EPS $ 0.31 $ 0.28 0.03 10.7%

Q4 performance summary

Q4 FINANCIAL OVERVIEW

20 113.4 101.3 127.2 92.3 117.1 102.1 128.3 106.0 131.0 99.0 141.8 102.2 138.5

11.8% 11.2%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0%

$0 $25 $50 $75 $100 $125 $150

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Revenue growth

Revenue fluctuates considerably between quarters due to seasonality and the number of auctions held in each period. Revenue Rate fluctuations are due primarily to the performance of the Company’s underwritten contracts.

QUARTERLY REVENUE & REVENUE RATE ($US millions)

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2011 2012 2013 2014

Revenue Rate Revenue

11-12% Guided revenue rate range

21 $27 $18 $33 $10 $22 $14 $30 $16 $30 $14 $39 $15 $34 $0 $5 $10 $15 $20 $25 $30 $35 $40

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Q4 2014 net earnings

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2011 2012 2013 2014 RECONCILIATION OF ADJUSTED TO Q4 REPORTED NET EARNINGS

attributable to equity holders

Per share Net earnings $ 29,284 $ 0.27 After-tax impact of management re-org 4,212 0.04 Adjusted net earnings $ 33,496 $ 0.31 QUARTERLY ADJUSTED NET EARNINGS ($US millions)

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12 months months ended December ended December 31, 31,

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

2014 2014 201 2013 $ C $ Chan ange ge % C % Chan ange ge Gross Auction Proceeds 4,212,641 3,817,769 394,872 10.3% Revenue Rate 11.42% 12.24%

• 82 bps

Revenues $ 481,097 $ 467,403 13,694 2.9% Direct expense 57,884 54,008 3,876 7.2% SG&A expenses 292,756 287,016 5,740 2.0% Excluding depreciation and amortization 248,220 243,736 4,484 1.8% Earnings from operations 130,457 126,376 4,081 3.2% Other income (expense) 1,636 13,102 (11,466) (87.5)% Effective tax rate 27.9% 29.8%

• 190 bps

Net earnings attributable to equity holders $ 91,490 $ 93,825 (2,335) (2.5)% Adjusted Net Earnings attributable to equity holders 100,840 89,989 10,851 12.1% Diluted Adjusted EPS $ 0.94 $ 0.84 0.10 11.0%

2014 performance summary

2014 FINANCIAL OVERVIEW

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Annual revenue growth

Revenue Rate fluctuations are due primarily to the performance of the Company’s underwritten contracts.

ANNUAL REVENUE & REVENUE RATE ($US millions)

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Revenue Rate Revenue

11-12% Guided revenue rate range

$357 $396 $438 $467 $481

12.24% 11.42%

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00

$0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 2010 2011 2012 2013 2014

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2014 net earnings

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RECONCILIATION OF ADJUSTED TO REPORTED NET EARNINGS

attributable to equity holders

Per share Net earnings $ 91,490 $ 0.85 After-tax impact of management re-org 4,212 0.04 After-tax gain on sale of property (2,946) (0.03) Impairment loss on Japan property 8,084 0.08 Adjusted net earnings $ 100,840 $ 0.94 ANNUAL ADJUSTED NET EARNINGS ($US millions)

$37 $37 $50 $56 $76 $85 $92 $65 $74 $83 $90 $101 $101 $30 $40 $50 $60 $70 $80 $90 $100 $110 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

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Capital metrics

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(Millions except for percent figures)

2014 2013 Change Working capital $ 140.4 $ 110.1 27.5% Dividends paid $ 57.9 $ 53.9 7.4%

($US Millions except for percent figures)

2014 2013 Better / (Worse) Operating free cash flow $ 119.9 $ 150.9 (21)% Working Capital Intensity

• 2.3%
• 1.4%

90 bps Capex Intensity 6.2% 7.9% 179 bps RONA (Return on Net Assets) 15.2% 15.3% (10)bps Net Debt / Adjusted EBITDA 0.7x 1.0x 30% BALANCE SHEET SCORECARD

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Generating shareholder value

Committed to building long-term shareholder value.

26 DIVIDENDS PAID PER SHARE1 ($US)

1 Adjusted for share splits. RBA share splits

• ccurred in 2008 (3-for-1) and 2004 (2-for-1).

63% payout ratio in 2014 Target payout ratio going forward: 55-60% Quarterly cash dividend of $0.14

On August 5, 2014, the Company increased its quarterly cash dividend by 7.7% to $0.14 per share $0.12 $0.19 $0.26 $0.30 $0.34 $0.38 $0.41 $0.44 $0.47 $0.51 $0.54 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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RBA evergreen financial model

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

Performance Metric

• Avg. Annual Growth Targets
• GAP Growth (%)

High Single Digit to Low Double Digits

• Revenue Growth (%) (1)

Mid Single Digit to High Single Digit

• SG&A Growth (%)

Will grow slower than revenues

• Operating Income Margin (& EBITDA Margin)

50 bps +

• EPS Growth (%) (2)

High Single Digit to Low Double Digits

• Net Capex Intensity (3)

<10%

• OFCF (4) % of Net Earnings

>100%

• RONA (5) Increase

50 bps +

• Dividend Payout Ratio

55% to 60%

• Net Debt / EBITDA

<2.5X

(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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2015 Expectations

• GAP to grow in mid single digits
• Revenue to grow in mid single digits
• Operating profit to grow low double digits
• Operating profit margin in excess of evergreen model
• EPS growth in mid to high single digit range
• Moderated due to normalized tax rate

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2015 – Organic growth expectations 2015 Variance – Potential impact of Foreign Exchange fluctuations

• Revenue growth could be nil compared to 2014
• Operating profit growth in high single digits
• EPS growth in the low single digits

Recent Dramatic FX rate swings could impact our business

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

Global leader in industrial auctions

• Substantial growth opportunity
• Focused on capturing increased market share in the US and Canada

Diversifying services to meet broader customer needs

• EquipmentOne commercially launched on April 8, 2013

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

• Leadership team – organizational structure
• CEO profile – Ravi Saligram
• Why customers choose Ritchie Bros.
• Auction sites

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New organizational structure (as of January 2015)

Executive searchers are underway for the roles of President, U.S. & Latin America and corporate CFO 31

Ravi Saligram Chief Executive Officer Rob McLeod, Chief Financial Officer Todd Wohler, Chief HR Officer Jim Barr, Group President, Emerging Businesses Steve Simpson , Chief Sales Officer, Global Key Accounts Karl Werner, Chief Operational Support & Dev. Officer; Interim MD Middle East Randy Wall, President, Canada Ravi Saligram, (Interim) President, U.S. & Latin America Jeroen Rijk, SVP, Managing Director, Europe Kieran Holm, VP, Managing Director, Asia Pacific

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CEO profile: Ravi Saligram

In July 2014, Ritchie Bros. welcomed Ravi Saligram as CEO. Ravi is a proven leader and an experienced chief executive within the business services sector.

• He has a proven track record of driving revenue and profit growth at

customer-service focused organizations

• Most recently Ravi was CEO of OfficeMax, which merged with Office Depot in

November 2013

• Prior to OfficeMax, he held executive leadership positions at Intercontinental

Hotels Group, ARAMARK, and SG Johnson Wax

Ravi is a truly global leader

• He has held leadership roles based in the United States, South Korea, Hong

Kong and the UK

• His ability to implement global process standards within distinct markets

provided his past companies with increased efficiencies and enhanced levels

• f customer service

Ravi Saligram

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Why customers choose Ritchie Bros.

• Greater global reach

= more buyers = fair market value

• Unreserved auctions = certainty of sale
• Bidder diversity
• Geographic
• End market
• End user buyers onsite and online
• Global platform allows commercial customers to

sell product into other markets

• Convenient, certain and rewarding
• Best selection of equipment
• Unreserved process is fair and transparent
• Certainty of title/ownership
• Bid onsite, online, or by proxy
• Inspect, test, compare through at auction yard
• Equipment is secure in RBA auction yards
• Ability to take immediate possession of purchased

machinery WHY SELLTHROUGH A RITCHIE BROS. UNRESERVED AUCTION? WHY BUY AT A RITCHIE BROS. UNRESERVED AUCTION? 33

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Auction sites

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