Q3 2015 Earnings Review and Update November 6, 2015 1 Forward - - PowerPoint PPT Presentation

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Q3 2015 Earnings Review and Update

November 6, 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 Q3 2014 Versus Q3 2014

GAP 1% 9% Revenue 7% 16% Operating Income 47% 51% Diluted Adjusted EPS

(Q3 2014 adjusting items)

41% n/a Diluted EPS 118% n/a Operating Free Cash Flow

(12 month rolling)

75% n/a RONA

(12 month rolling, excluding term loan reclass)

826 bps n/a

Q3 2015 financial highlights

Strong growth compared to Q3 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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Q3 2015 auction highlights

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Edmonton, Alberta: September 9 – 11, 2015

• CA$101+ million of GAP (US$76+ million) LARGEST SEPT. AUCTION EVER
• 17% sold to buyers from the US

LARGEST % OF US BUYER PARTICIPATION IN EDMONTON EVER

• 80% sold to buyers in Canada
• 7,300+ lots sold; 9,850+ registered bidders

Houston, Texas: August 26 – 27, 2015

• US$45+ million of GAP
• US$24+ million sold to buyers outside of Texas (53% of sales)

Dubai, UAE: September 8 – 9, 2015

• US$42+ million of GAP

Fort Worth, Texas: July 22 – 23, 2015

• US$53+ million of GAP
• New site record for number of lots sold (4,250+ lots)

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Q3 2015 auction highlights (cont.)

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Salt Lake City, Utah: September 29 – 30, 2015

• 3,650+ lots sold from offsite location on Day 2, demonstrating

strength of our logistical capabilities

Fort Worth, Texas: September 23 – 24, 2015

• US$70+ million of GAP LARGEST TEXAS AUCTION EVER
• Approx. 70% sold to buyers outside of Texas
• 3,775+ lots sold
• St. Aubin sur Gaillon, France: September 29, 2015
• €13+ million (US$15 million) of GAP LARGEST THIRD QUARTER AUCTION IN FRANCE
• Also set new third quarter records for number of bidders and lots at

the auction site

Polotitlan, Mexico: September 11, 2015

• US$19+ million of GAP LARGEST THIRD QUARTER AUCTION IN MEXICO IN RBA HISTORY

Donington Park, UK: July 14, 2015

• £10+ million (US$17+ million) of GAP LARGEST SALE EVER HELD AT THIS AUCTION SITE

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Q3 auction volume increase driven by construction

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Q3 Auction volumes (Lot count) Q3 2015 Incremental Lots per Customer sector

Total lots sold per quarter Lot growth per customer (seller) sector, compared to Q3 2014¹

16% increase in auction volume (lots sold) compared to Q3 last year;

Increase largely due to more assets from customers in the heavy construction sector

Number of Lots Lot growth per customer sector Growth of lots from customer sector Growth from prior Q2 ¹ Selected customer sectors. Does not include all sectors equipment came from.

56,000 68,000 69,000 73,000 85,000 21% 1% 6% 16% 0% 25% Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 214 66 241 2,284 1,196 5,082 15% 6% 86% 15% 32% 37% 0% 100%

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Average GAP per lot

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• Due largely to FX translation of GAP (caused 8.4% decline in Avg. GAP per lot);
• Also an increase in the proportion of small value lots sold due to complete dispersals

Due to pricing and fee structures, RBA generates a higher revenue rate on the sale of small value items

• 24% increase in small value lots (less than $2500); generate a 10% buyers premium
• 20% increase in lots sold under $40,000; items under $38,000 generate higher proportion
• f fee revenue

Average GAP per lot declined 13% in Q3 2015 compared to Q3 2014

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Equipment pricing has remained off from Q1 peak

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Pricing trends are asset/sector dependent; Some categories/regions performing far better than others

• Forestry equipment: Late model and low hour, has shown strong demand from both

regional & national buyers in Canada and the US

• Oil & Gas specific equipment: Assets directly related to oil & gas such as tank trucks,

bed trucks and specialty assets continue on same erosion factor as witnessed throughout Q2

• Pricing down ~10% to 25% from end of Q2
• Some heavy construction assets have shown small pricing declines
• Other assets such as motor graders and wheel loaders have seen erratic market pricing,

differing with the quarter/region.

• Lower hour units still continue to perform well in most areas >5,000 hours

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11.5% 9.6% 4.2% 3.6% 8.7% 10.4% 13.1% 12.1% 11.0% 5.0% 4.8% 8.7% 11.2% 12.1% 12.2% 10.3% 5.1% 4.6% 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.

2015: Age of equipment continues to trend better

Age of Equipment sold at Ritchie Bros. Auctions¹

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3-5 yrs old: 23.7% of GAP¹

6+ Yrs Old New to 1 yr Old

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Record quarterly revenue achieved in Q3 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

$92 $117 $102 $128 $106 $131 $99 $142 $102 $138 $116 $155 $109 11.5% 12.2% 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 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

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9% 7% 16% ‐9% 7%

0% 5% 10% 15% 20%

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

Q3 2015 revenue compared to Q3 2014 revenue

~56% of the organic revenue growth was driven by increases in auction volumes ~44% was driven by revenue rate improvement

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

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Using our underwritten business is a strategic tool

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

transactions when good opportunities arise

• Smaller transactions are receiving more scrutiny
• Not a vehicle to ‘buy’ GAP

Proactively encourage use of underwritten deals to drive revenues

• Focus on packages that act as magnets to fill the auction
• Making smart decisions about when and how to use underwritten deals; not chasing

uneconomical deals

• Balance sheet strength is unmatched

Underwritten revenue rate is showing resilience; Continued YoY improvement in third quarter of 2015 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 Q3 revenue

$US revenue

Q3 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.

14 53% 25% 12% 10%

US Canada Europe Other 28%

• 6%
• 18%
• 9%

7% 28% 12%

• 6%

17%

• 20%

35% US Canada Europe Other RBA - All Reported growth

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$10 $22 $14 $30 $16 $30 $14 $39 $14 $33 $24 $46 $20 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Q3 2015 earnings increased 40% from Q3 2014

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

Tax rate relatively consistent with adjusted Q3 2014 rate

2012 2013 2014 2015

Quarterly Adjusted Net Earnings¹

($US millions)

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40% growth from adjusted net earnings in year ago quarter

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

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EquipmentOne – Continuing to show improvement

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E1 achieved 18% revenue growth compared to Q3 last year

EquipmentOne Revenue and EBITDA

($US millions)

EBITDA growth continues on a 4-quarter trailing basis EquipmentOne Revenue and EBITDA

($US millions)

$3.9 $0.5 ‐$2 ‐$1 $0 $1 $2 $3 $4 $5

E1 Revenue E1 EBITDA 4 per. Mov. Avg. (E1 Revenue) 4 per. Mov. Avg. (E1 EBITDA)

Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Revenue 4 quarter average $ 3.2 $ 3.3 $ 3.4 $ 3.6 $ 3.7 Trailing 12 months $ 12.7 $ 13.2 $ 13.7 $ 14.2 $ 14.8 EBITDA 4 quarter average $ (0.6) $ (0.4) $ (0.0) $ 0.2 $ 0.5 Trailing 12 months $ (2.4) $ (1.6) $ (0.2) $ 0.8 $ 2.0

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Q3 EquipmentOne updates

US sales team training now complete

• All US teams have now been trained on go-to-market

approaches for EquipmentOne

• Continuing to reinforce dual solution sales behavior

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Operational Results:

• Gross Transaction Value (GTV) from E1 in Q3 2015 up 31% from Q3 last year
• GTV of $118.8 million twelve months trailing Sept. 30, 2015;
• up 23% from same period last year
• Website traffic up 21% in Q3 2015 (average monthly user, three months trailing Sept. 30, compared to Q3 2014)

Recent Initiatives: Website enhancements generating results

• Average length of time spent on the site per visit up 13%

since January; number of mobile visits up 47%

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$0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 Q3 2014 Q3 2015

Ritchie Bros. Financial Services

RBFS has as extended their suite of services to now include unsecured Working Capital Loans to US Customers

• A rapidly growing market in the US
• Allows customers to obtain an unsecured loan to

use for non-equipment purchases, such as marketing, repairs and maintenance etc. RBFS funded loans

($US millions)

LOANS • LEASING • STRUCTURED FINANCE • DEALER SOLUTIONS

42% growth

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Investment in Xcira; acquiring majority stake

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• Xcira provides market leading online auction software solutions to auction companies
• Ritchie Bros. has been an anchor customer of Xcira for 14+ years
• The business will continue to operate with the Xcira brand, under the existing leadership team
• Financial terms: US$12.4 million for a 75% equity stake

– Related to this acquisition, we are also obligated to pay an additional amount not exceeding $4.7 million over a three-year period upon achievement of certain conditions

• Expected to be marginally accretive to RBA’s performance immediately
• Performance of Xcira will be fully consolidated into RBA’s financial reports, with minority interest noted

A strategically important acquisition; Allows RBA to build upon our existing online bidding technology

Ritchie Bros. group of companies:

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Xcira caters to a diverse, global customer base

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During 2014, OnLine Ringman was used in the following sector events:

Wholesale whole car Construction Industrial Collectibles Fine Art Auto Auto Salvage Livestock Real Estate Other

During 2014, Auction Events in 26 countries used OnLine Ringman, including:

Australia, Canada, China, France, Finland, Hong Kong, Ireland, India, Japan, Mexico, Panama, Spain, Switzerland, the UK, the USA and the United Arab Emirates.

During 2014, Xcira’s live online bidding technology, OnLine Ringman, was used in more 23,750 auction events

Through these events, more than:

• 4 million items were offered for sale to online bidders through OnLine

Ringman representing more than $61.7 Billion in sales

• 7.7 million bids from online bidders were accepted by the auctioneer
• 745,000 items were sold to online bidders
• 660,000 items had the online bidder as the runner up bidder
• $6.7 billion of sales occurred as online purchases

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Importance of our online bidding platform

Q3 2015 YTD stats:

43% of GAP is from sales to online bidders

• 59% of GAP had a winning or runner-up bidder from
• ur online bidding platform. (US$1.8+ billion of GAP)

46% of lots sold are sold to online buyers

• Online bidders were the winning or runner-up bidder
• n 61% of lots sold

132,000+ assets were sold to online bidders at Ritchie Bros. auction in the first nine months of 2015

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$1.3 billion of assets sold to online buyers at Ritchie Bros. during the first nine months of 2015

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Introducing Ritchie Bros. Private Treaty

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Ritchie Bros. Private Treaty

• Softly launched during the third quarter of 2015
• A new sales channel that caters to the needs of equipment owners with unique selling needs that

cannot be met by the unreserved auction model

• Facilitate private negotiated sales between sellers and qualified buyers around the world
• Leverages Ritchie Bros.’ vast customer network, detailed used equipment sales and supply data, and

market demand intelligence

• Primarily straight commission or fee-model; Revenue from these transactions will be recognized as

and when items are sold and sales commissions are received

• Will be used very selectively with a focus on higher-value deals

Currently marketing a package from Sweden

• Specialized mining equipment, best marketed to a targeted

group of potential buyers

Q3 2015 Performance

Sharon Driscoll, Chief Financial Officer

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$673 $1,040 $865 $1,195 $849 $1,000 $845 $1,073 $790 $1,110 $855 $1,229 $887 $1,241 $956 $1,262 $895 $4,346 $4,353 $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 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Record Q3 and 12-month trailing

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12-months trailing GAP Quarterly GAP

Quarterly Gross Auction Proceeds

($US millions)

$4.35 Billion GAP on 12-month trailing basis

2011 2012 2013 2014 2015

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Income statement scorecard – Q3 2015

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3 months trailing

($US Millions except for EPS, %)

• Sept. 30, 2015
• Sept. 30, 2014

Better / (Worse) GAP $894.5 $886.9 1% Revenues $109.3 $102.2 7% Revenue Rate 12.22% 11.53% 69 bps Operating Income $29.1 $19.8 47% Operating Income Margin 26.6% 19.4% 724 bps Diluted EPS $0.19 $0.09 118% Diluted Adjusted EPS $0.19 $0.13 41% Q3 2015 Income statement scorecard

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Adjusted operating income (EBIT) and EBITDA margins On a 4-quarter moving average, RBA achieved the highest margins in years. Seasonality influences

• ur volume of business,

and therefore revenue, flow-through and margins. Our highest margins are always generated in our largest quarters (Q2 and Q4).

Continued margin improvement

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35.9% 26.6% 10% 15% 20% 25% 30% 35% 40% 45% 50% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 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 Q3 2015 performance

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* Figures rounded to the million

$83M, 9%

• $75M, -8%

$8M, 1%

25 50 75 100

Organic Growth FX effect Total Growth

in Millions

GAP and FX

$16M, 16 %

• $9M, -9%

$7M, 7%

5 10 15 20

Organic Growth FX effect Total Growth

in Millions

Revenue and FX

$6M, 8%

• $8M, -10%
• $2M, -3%

‐5 5 10 15 20

Organic Growth FX effect Total Growth

in Millions

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

$10M, 51%

• $1M, -4%

$9M, 47%

5 10 15 20

Organic Growth FX effect Total Growth

in Millions

Operating Profit and FX

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Revenue growth outpaces SG&A growth

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2015 reported revenue and SG&A growth 2015 Organic revenue and SG&A growth

Committed to keeping expense growth lower than revenue growth; Promoting the operating leverage inherent in our business model

($US millions, SG&A excluding depreciation and amortization)

24% 19% 16% 14% 15% 10% 0% 5% 10% 15% 20% 25% Q1 Q2 Q3 Revenue - Organic SG&A 'Excluding Dep'n' -Organic 17% 10% 7% 6% 6%

• 1%
• 5%

0% 5% 10% 15% 20% 25% Q1 Q2 Q3 Revenue - Reported SG&A 'Excluding Dep'n' - Reported

($US millions, SG&A excluding depreciation and amortization)

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Balance sheet scorecard

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12 months trailing

($US Millions except for percent figures)

• Sept. 30, 2015
• Sept. 30, 2014

Better / (Worse) Operating free cash flow $250.6 $142.8 75% Working Capital Intensity

• 18.8%
• 7.1%

1166 bps Capex Intensity 4.2% 4.6% 40 bps RONA (Return on Net Assets) 26.5% 15.9% 1065 bps RONA excluding term loan reclassification 24.1% 15.9% 826 bps Debt / Adjusted EBITDA 0.5x 0.9x 0.4x Q3 2015 Balance sheet scorecard

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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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 

Final Comments

Ravi Saligram, Chief Executive Officer

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Sector exposure update

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Since 2005, the diversification of makes/types of equipment sold increased significantly:

• Transportation equipment now contributes 18% (2015 YTD) of GAP, up from 15% in all of 2014
• Ag equipment continues to contributes 10% (2015 YTD) of GAP

Construction equipment still comprises the majority of what Ritchie Bros. sells

• Construction equipment volume comes from a wide variety of makes, including: Bobcat, CAT,

Case, Deere, Kobelco, Komatsu, New Holland, Volvo, + others

• In recent years over 85% of all CAT branded equipment consigned to RBA comes from end

users, finance companies and rental companies

• In these channels, CAT branded volume and GAP grew both in Q3 and YTD in aggregate

33 More than 85% Less than 15%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Winning business by proving our value

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Ritchie Bros. works on behalf of equipment sellers; their interests are our key focus

• Value our customers’ privacy and trust
• Servicing the needs of equipment users/sellers is our core focus
• Customers like our independence

Equipment from dealers/OEMs (of all makes/models) provide less than 15% of RBA GAP

• Includes dealers from the transportation and agricultural sectors
• While an important and valued customer segment, dealers and manufacturers generally turn to their

internal sales forces to sell their product first

GAP from customer segment

% of total, 2015 YTD data Other Equipment consignors, predominantly End Users Dealers & manufacturers

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Edmonton success continues in Q4

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• Oct. 27 – 29 auction generated new Fourth quarter records
• CA$137+ million (US$104 million) of assets sold
• Largest Edmonton auction ever held during the Company’s fourth

quarter

• Attracted 10,300+ bidders, including 6,600+ online bidders

Our Edmonton auction site has sold CA$633 million of equipment so far this year – already surpassing the prior site record for all of 2014.

Alberta buyers 51% Rest of Canada 32% US buyers 13% Other foreign buyers 4%

Buyers from Oct. 27 – 30 Edmonton Auction

Location of winning bidder

$496 $569 $633 100 200 300 400 500 600 700 2014 YTD Oct. 31 2014 Total 2015 YTD Oct. 31

Edmonton site GAP

(Canadian dollars, millions)

28% growth from same period last year

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Strong growth in foundational geographies

32% 8% 28% 30% 0% 5% 10% 15% 20% 25% 30% 35% Alberta Texas 2014 Q3 YTD 2015 Q3 YTD

Regional GAP growth

(Local currency, Q3 2015 YTD growth vs. YTD 2014, Industrial auctions only)

Core sites in Alberta and Texas continue to demonstrate meaningful growth in 2015

• Alberta and Texas represent foundational

growth platforms

• Growth in these regions has been driven from

many sectors

• Edmonton has had exemplary growth the last

two years

• Texas growth has seen tremendous

improvement

Pleased with GAP growth achieved in the United States, which has been over 15% YTD

• Other States have been sending more equipment to
• ur Texas based auctions in 2015, supplementing

the GAP growth for Texas

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Growth in other geographies

Continue to be pleased with the GAP growth we’re experiencing in many regions

82% 72% 60% 54% 39% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Colorado Utah Minnesota California Ohio 229% 157% 15% 9% 9% 0% 50% 100% 150% 200% 250% France China United Arab Emirates Germany Italy 21% 33% 0% 5% 10% 15% 20% 25% 30% 35%

Select Regional GAP growth (Local currency, Q3 2015 YTD growth compared to YTD 2014)

36 US States International Canadian Provinces

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2015 YTD financial highlights

Performance in first nine months of the year demonstrates our commitment to execution and our agility in leveraging market opportunities

Foreign exchange remains a headwind

37 Reported - % Growth Organic - % Growth

Versus First 9 months, 2014 Versus First 9 months, 2014

GAP

5%

12% Revenue

11%

19% Operating Income

36%

43% Diluted Adjusted EPS

34%

n/a Operating Free Cash Flow

(12 month rolling)

75%

n/a RONA

(12 month rolling)

1065bps

n/a RONA excluding effects of

term loan reclassification

826bps

n/a

Macro environment

Ravi Saligram, Chief Executive Officer

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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