Q2 2015 Earnings Review and Update August 7, 2015 1 Forward - - PowerPoint PPT Presentation

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Q2 2015 Earnings Review and Update

August 7, 2015

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Forward looking statements

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. 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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Update from Ravi Saligram

Chief Executive Officer

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Reported - % Growth Organic - % Growth

Versus Q2 2014 Versus Q2 2014

GAP 3% 11% Revenue 10% 19% Operating Profit 21% 30% Diluted EPS 21% n/a Operating Free Cash Flow

(12 month rolling)

91% n/a RONA

(12 month rolling)

738 bps

n/a RONA excluding effects of

term loan reclassification

495 bps

n/a

Q2 2015 financial highlights

Strong growth compared to Q2 2014, both on a constant currency (organic) basis and a reported basis

Foreign exchange had an impact on some operating lines

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Q2 auction volumes bolstered by many sectors

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Q2 Auction volumes (Lot count) Q2 2015 Incremental Lots per Customer sector

Total lots sold per quarter Lot growth per customer (seller) sector, compared to Q2 2014¹

15% increase in auction volume (lots sold) compared to Q2 last year Increase largely due to more assets from customers in the heavy and light construction sectors.

Number of Lots Lot growth per customer sector Growth of lots from customer sector Growth from prior Q2

81,000 84,500 85,500 83,500 96,000 4% 1% ‐2% 15% ‐5% 20% 520 998 618 732 1,023 3,823 31% 69% 113% 16% 15% 24% 0% 120%

¹ Selected customer sectors. Does not include all sectors equipment came from.

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Average GAP per lot

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• Due largely to FX translation of GAP (7% decline in Avg. GAP per lot) and an increase in small value lots
• 21% increase in small value lots (less than $2500)
• Corresponding change in proportion of low and high value assets sold

Due to pricing and fee structures, RBA generates a higher revenue rate on the sale of small value items Equipment pricing has softened from the peak in Q1 2015

• Pricing trends are asset/sector dependent; some categories/regions performing far better than others
• Late model small to mid-size construction assets continue to perform well
• Strong demand for equipment supporting non-res construction activity (ie. dumptrucks)
• Oil & Gas assets pricing has declined

Average GAP per lot declined 11% in Q2 2015 compared to Q2 2014

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11.5% 9.6% 4.2% 3.6% 8.7% 10.2% 13.1% 12.1% 11.0% 5.0% 4.8% 8.8% 11.2% 12.1% 12.2% 10.3% 5.0% 4.7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2011 2012 2013 2014 YTD July 27 2015

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

3-5 yrs old: 23.7% of GAP¹ 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.

New to 1 yr Old 6+ Yrs Old

Equipment sold in 3-5 year age range is growing

Age of Equipment sold¹

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Record quarterly revenue achieved in Q2 2015

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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2012 2013 2014

Revenue Rate Revenue

11-12% annual revenue rate range

2015

$127 $92 $117 $102 $128 $106 $131 $99 $142 $102 $138 $116 $156 10.7% 12.0% 11.5% 12.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 25 50 75 100 125 150 175 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

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11% 8% 19% ‐9% 10%

0% 5% 10% 15% 20% 25%

Total Volume Rate Total Organic Growth FX Impact Total Growth

Revenue growth bolstered from both volume and rate

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Breakdown of revenue growth, % attributable to item

Q2 2015 revenue compared to Q2 2014 revenue

~60% of the organic revenue growth was driven by increases in auction volumes ~40% was driven by revenue rate improvement

Changes in foreign exchange had a negative impact on reported revenue growth

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Focus on underwritten business showing results

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• Strategic use of the strength of our balance sheet allows us to pursue larger

underwritten transactions

• Smaller transactions are receiving more scrutiny
• Not a vehicle to ‘buy’ GAP
• Focus on improving the performance of underwritten business

RESULTS TO DATE: (First half of 2015)

• Improvement in underwritten commission rate of 225 bps compared to

underwritten commission rate in first half of 2014

Disciplined approach to underwritten business is resulting in more consistent performance

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Strong revenue growth from Canada and US

Geographic breakdown of Q2 revenue

$US revenue

Q2 Revenue growth rates

$US reported growth; local currency

Strong revenue growth in the US and Canada in local currency; FX translation muted reported growth in Canada and Europe.

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19% 6% ‐14% 13% 10% 19% 19% 7% 17%

‐15% 30%

US Canada Europe Other RBA - All

Reported growth Local currency growth

41% 41%

8% 10%

US Canada Europe Other

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$32 $10 $22 $14 $30 $16 $30 $14 $39 $14 $33 $24 $46 5 10 15 20 25 30 35 40 45 50 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Q2 2015 earnings increased 20% from Q2 2014

Record quarterly earnings driven by auction volumes, strong revenue rate, and revenues growth exceeding expense growth

Tax rate consistent with Q2 2014

2012 2013 2014 2015

Quarterly Adjusted Net Earnings¹

($US millions)

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20% growth from year ago quarter

¹ Earnings attributable to Ritchie Bros. Incorporated. Excludes minority interest of Ritchie Bros. Financial Services.

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April/May auction highlights

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Edmonton auction: April 28 – May 1, 2015

• Most revenue ever generated by a single auction in RBA history
• CA$215+ million of GAP (US$177+ million) CANADIAN RECORD
• 89% sold to buyers within Canada; 51% sold within Alberta
• 14,000+ bidders from over 55 countries; 3,200+ buyers COMPANY RECORDS
• 7,700+ lots sold CANADIAN RECORD

Houston, TX: April 15 – 16, 2015

• US$57+ million of GAP
• US$28+ million sold to online bidders (49% of sales)

Fort Worth, TX: May 6, 2015

• US$50+ million of GAP
• 3,900+ lots sold SITE RECORD

Moerdijk, Netherlands: April 23 – 24, 2015

• €16+ million of GAP (US$18 million)

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June auction highlights

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Edmonton auction: June 9 – 11, 2015

• CA$96+ million of GAP (US$78+ million)
• 90% sold to buyers within Canada; 57% sold to buyers in Alberta
• 6,950+ registered bidders; 5,800+ lots sold

Denver auction: June 11 – 12, 2015

• US$40+ million of GAP SITE RECORD
• US$17+ million sold to online bidders SITE RECORD
• 2,400 lots sold SITE RECORD

Australia auctions: Brisbane – June 23; Geelong – June 25

• AUD$52+ million of GAP combined (US$40+ million)

Dubai auction: June 2 – 3, 2015

• US$33+ million of GAP

Ocana, Spain: June 16 – 17, 2015

• €17+ million of GAP (US$19+ million)

June auctions generated over $560 million in GAP

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EquipmentOne – Better Together strategy is taking hold

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E1 achieved 15% revenue growth compared to Q2 last year

$3.8 $0.4

• $2
• $1

$0 $1 $2 $3 $4 $5 Revenue EBITDA 4 quarter moving average 4 per. Mov. Avg. (EBITDA)

EquipmentOne Revenue and EBITDA

($US millions)

Q2 2015 EBITDA was positive on a 12 month trailing and 4-quarter moving average basis for the first time

Q3 2014 Q4 2014 Q1 2015 Q2 2015 Revenue 4-quarter moving average $ 3.2 $ 3.3 $ 3.4 $ 3.6 Trailing 12 months $ 12.7 $ 13.2 $ 13.7 $ 14.2 EBITDA 4-quarter moving average $ (0.6) $ (0.4) $ (0.0) $ 0.2 Trailing 12 months $ (2.4) $ (1.6) $ (0.2) $ 0.8

EquipmentOne Revenue and EBITDA

($US millions)

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Q2 EquipmentOne updates

US sales team training: 19 of 22 complete Enhanced user experience based on customer feedback

• Accelerated the launch of E1 products through US sales

team; all US teams trained by year-end

• Learnings from initial pilots have been incorporated into

the sales process/training

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Operational Results:

• Gross Transaction Value (GTV) from E1 in Q2 up 7% from Q2 last year
• GTV of $111.6 million twelve months trailing June 2015
• Website traffic up 19% in Q2 2015 (average monthly user, three months trailing June 30)
• Updated website terminology to be more consistent with

Ritchie Bros. language, as requested by customers

• Enhanced visual design to ease site navigation

Recent Initiatives: Integrating E1 listings on rbauction.com searches

• Gives buyers a greater array of equipment in search

results

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Ritchie Bros. Financial Services

Funded volume in first half of 2015 up 37% compared to same period last year

• Growing # of RBFS sales professionals to

increase awareness of financial services with auction and E1 customers

Now offering equipment leasing through RBFS – through financing partners

• Launched in Q2
• Currently available in the US and Canada
• Several leasing options can be applied for,

including sale lease backs, traditional leases and variations of lease-to-own terms RBFS applications and funded loans

($US millions)

$444

$671

$0 $100 $200 $300 $400 $500 $600 $700 $800 H1 2014 H1 2015

Credit Applications

$92 $126

$0 $20 $40 $60 $80 $100 $120 $140 H1 2014 H1 2015

Funded Volume

LOANS • LEASING • STRUCTURED FINANCE • DEALER SOLUTIONS

51% 37%

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Capital Allocation & Dividend Increase

Sharon Driscoll, Chief Financial Officer

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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. 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

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

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 

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14% increase in quarterly dividend (additional 2 cents per quarter)

Growing our dividend alongside earnings; Committed to 55-60% dividend payout, based on earnings trailing 12 months

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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 $0.10 $0.11 $0.12 $0.13 $0.14 $0.15 $0.16 $0.17 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

Dividends declared

($US cash dividends) 7.1% increase 8.9% increase 6.1% increase 7.7% increase 14.0% increase

Q2 2015 Performance

Rob McLeod, Chief Business Development Officer

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$1,150 $673 $1,040 $865 $1,195 $849 $1,000 $845 $1,073 $790 $1,107 $855 $1,229 $887 $1,241 $956 $1,262 $4,212 $4,313 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $0 $250 $500 $750 $1,000 $1,250 $1,500 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Record Q2 and 12-month trailing

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12-months trailing GAP Quarterly GAP

Quarterly Gross Auction Proceeds

($US millions)

$4.31 Billion GAP on 12-month trailing basis

2011 2012 2013 2014 2015

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Income statement scorecard – Q2 2015

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3 months trailing

($US Millions except for EPS, %)

June 30, 2015 June 30, 2014 Better / (Worse) GAP $1,262.2 $1,229.2 3% Revenues $155.5 $141.8 10% Revenue Rate 12.32% 11.54% 78 bps Operating Income $62.4 $51.7 21% Operating Income Margin 40.2% 36.5% 370 bps Diluted EPS $0.43 $0.36 21% Q2 2015 Income statement scorecard

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5.7% 3.8% 2%

• 10%
• 1%

0.5%

• 15%
• 10%
• 5%

0% 5% 10% 15% Other SG&A expenses Travel, advertising & promotion Building and Facilities Employee Compensation Other Bonus Share based compensation

Q2 2015 expense breakdown

Q2 2015 – SG&A growth breakdown

(Percent change from Q2 2014, as reported)

Bonus compensation Share based compensation

• Direct result of the improved

performance over Q2 2014 and achievement of key performance metric targets.

• Primarily due to an increase in the

fair value of our share units relative to share price (pricing)

• Increased grants (volume)
• Accelerated vesting of options

and share units due to executive departures (timing)

10%

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Adjusted operating income (EBIT) and EBITDA margins Q2 2015 generated the highest margins in over 4 years. Seasonality influences

• ur volume of business,

and therefore revenue, flow-through and margins.

Strong margin growth

44.2% 47.1% 36.5% 40.2%

10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2012 2013 2014 2015 EBITDA Margin EBIT Margin 4-quarter moving average 4-quarter moving average

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Impact of FX on our Q2 2015 performance

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$26M, 19 %

• $12M, -9%

$14M, 10%

5 10 15 20 25 30 35

Organic Growth FX effect Total Growth in Millions

Revenue and FX

$11M, 12% $8M, 9% $3M, 3%

5 10 15 20 25 30

Organic Growth FX effects Total Growth

in Millions

Expenses (DE, SG&A, D&A) and FX

$16M, 30%

• $5M, -10%

$11M, 21%

5 10 15 20 25 30

Organic Growth FX effect Total Growth in Millions

Operating Income and FX

$132 M, 11 %

• $99M, -8%

$33 M, 3%

20 40 60 80 100 120 140 160

Organic Growth FX effect Total Growth

in Millions

GAP and FX

* Figures rounded to the million

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Income statement scorecard – First half of 2015

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6 months trailing

($US Millions except for EPS, %)

June 30, 2015 June 30, 2014 Better / (Worse) GAP $2,217.7 $2,084.6 6% Revenues $271.1 $240.4 13% Revenue Rate 12.22% 11.53% 69 bps Operating Income $92.1 $69.4 33% Operating Income Margin 34.0% 28.9% 509 bps Diluted EPS $0.65 $0.49 33% H1 2015 Income statement scorecard

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Balance sheet scorecard

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12 months trailing

($US Millions except for percent figures)

June 30, 2015 June 30, 2014 Better / (Worse) Operating free cash flow $220.3 $115.3 91% Working Capital Intensity

• 23.9%
• 15.9%

806 bps Capex Intensity 3.2% 6.9% 369 bps RONA (Return on Net Assets) 24.9% 17.5% 738 bps RONA excluding term loan reclassification 22.5% 17.5% 495 bps Debt / Adjusted EBITDA 0.6x 0.9x 0.3x Q2 2015 Balance sheet scorecard

Final Comments

Ravi Saligram, Chief Executive Officer

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H1 2015 financial highlights

Performance in first half of the year demonstrates our commitment to execution and

• ur agility in leveraging market opportunities

Foreign exchange remains a headwind

30 Reported - % Growth Organic - % Growth

Versus H1 2014 Versus H1 2014

GAP 6% 14% Revenue 13% 21% Operating Profit 33% 41% Diluted EPS 33% n/a Operating Free Cash Flow

(12 month rolling)

91% n/a RONA

(12 month rolling)

738 bps

n/a RONA excluding effects of

term loan reclassification

495 bps

n/a

Q&A

Ravi Saligram, Chief Executive Officer Sharon Driscoll, Chief Financial Officer Rob McLeod, Chief Business Development Officer Jim Barr, Group President Terry Dolan, President – US and Latin America Randy Wall, President – Canada

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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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0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 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

2010 2011 2012 2013 2014 YTD July 27 2015

Age of Equipment improvement

The age of equipment sold continues to improve and track as we expect.

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

Age of Equipment sold¹

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