Ritchie Bros. reports first quarter 2018 results
Ritchie Bros. reports first quarter 2018 results
VANCOUVER, May 10, 2018 /PRNewswire/ - Ritchie Bros. Auctioneers Incorporated (NYSE & TSX: RBA, the "Company" or "Ritchie Bros.") reported the following results for the three months ended March 31, 2018:
(All figures are presented in U.S. dollars)
Net income attributable to stockholders of $17.1 million improved 65% compared to $10.4 million for the same quarter in 2017. Diluted earnings per share ("EPS") attributable to stockholders increased 60% to $0.16 versus $0.10 in the first quarter of 2017. Other key first quarter highlights included:
Consolidated results:
-- Total revenues, as presented under the new revenue standard, were $260.2
million; a 30% increase over the first quarter of 2017
-- Total Company agency proceeds(1 )(non-GAAP measure) of $169.8 million
increased 36% from $124.5 million in the first quarter of 2017
-- Cash provided by operating activities of $67.2 million
-- Repayment of $29.2 million in long-term debt in the first quarter of
2018
-- Declared quarterly dividend of $0.17 per common share
Auctions & Marketplaces ("A&M") segment:
-- Gross Transaction Value ("GTV")(2) of $1.2 billion increased 29% from
$0.9 billion in the first quarter of 2017
-- Total revenues of $232.6 million increased 30% from $179.1 million in
the first quarter of 2017
-- A&M agency proceeds(3) (non-GAAP measure) of $156.8 million increased
36% from $115.7 million in the first quarter of 2017
-- A&M revenue rate improved 10 basis points ("bps") over the first quarter
of 2017; and A&M agency proceeds rate(4) (non-GAAP measure) improved 60
bps over the first quarter of 2017
"We achieved strong revenue and agency proceeds growth in the first quarter as our teams leveraged the capabilities of the combined company to win new business, tap into existing customers and drive multi-channel offerings despite supply constraints and fewer auctions and selling days. In the quarter, over 70% of our live industrial auctions posted strong year-on-year growth comps across major geographies through excellent price realization and improvement in rate," said Ravi Saligram, Chief Executive Officer.
Saligram continued, "we are encouraged to see early signs of recovery starting in Canada and growth momentum internationally but continue to navigate very tight supply conditions in the US market. RBFS, Mascus and the Government business performed extremely well and we are beginning to experience the benefits of the Caterpillar Alliance. Overall, we're off to a good start in the year and will continue to be focused on executing against our multi-channel initiatives."
Effective January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers ("Topic 606"). Revenues on inventory sales and ancillary and logistical services are presented gross of the related expenses rather than net. Accordingly, in addition to total revenues, the Company has added a new metric to our disclosures called agency proceeds (non-GAAP measure), which presents revenues as previously reported and is calculated as total revenues under Topic 606 less the cost of inventory sold and ancillary and logistical service expenses.
_____________________________
(1) Agency proceeds is a non-GAAP financial measure calculated by
subtracting the cost of inventory sold and ancillary and logistical
service expenses from total revenues. Agency proceeds is an element
of the performance criteria for certain annual short-term incentive
awards we grant to our employees and officers. Agency proceeds is
reconciled to the most directly comparable GAAP measure from the
Company's consolidated financial statements under "Non-GAAP
Measures".
(2) GTV represents total proceeds from all items sold at our live on site
auctions and online marketplaces. GTV is not a measure of financial
performance, liquidity, or revenue, and is not presented in our
consolidated financial statements.
(3) A&M agency proceeds is a non-GAAP financial measure that provides
useful information about the performance of our A&M contracts for
different financial periods. A&M agency proceeds is calculated as A&M
total revenues less cost of inventory sold and is reconciled to the
most directly comparable GAAP measures in our consolidated financial
statements under "Non-GAAP Measures".
4 A&M agency proceeds rate is a non-GAAP financial measure that
provides useful information about the performance of our operations
by comparing the margins we earn on our contracts for different
financial periods. A&M agency proceeds rate is calculated by dividing
A&M agency proceeds (non-GAAP measure) by GTV. A&M agency proceeds
rate is reconciled to the most directly comparable GAAP measures in
our consolidated financial statements under "Non-GAAP Measures".
Financial Overview
(Unaudited)
Three months ended March 31,
----------------------------
$ Change % Change
-------- --------
(in U.S. $000's, except EPS) 2018 2017 2018 over 2017 2018 over 2017
--------------------------- ---- ---- -------------- --------------
Service revenues $176,016 $123,379 $52,637 43%
Revenue from inventory sales 84,162 76,048 8,114 11%
---------------------------- ------ ------ ----- ---
Total revenues 260,178 199,427 60,751 30%
Costs of services 36,657 24,340 12,317 51%
Cost of inventory sold 75,791 63,401 12,390 20%
Selling, general and administrative expenses 97,470 70,575 26,895 38%
Acquisition-related costs 1,633 8,627 (6,994) (81%)
Operating income 32,873 23,597 9,276 39%
Net income attributable to stockholders 17,138 10,377 6,761 65%
$0.16 $0.10 $0.06 60%
Diluted earnings per share
attributable to stockholders
$0.16 $0.12 $0.04 33%
Diluted adjusted EPS attributable to
stockholders (non-GAAP measure)
------------------------------
GTV $1,160,712 $899,410 $261,302 29%
Agency proceeds (non-GAAP measure) $169,807 $124,499 $45,308 36%
A&M revenue $232,567 $179,078 $53,489 30%
A&M revenue rate 20.0% 19.9% n/a 10 bps
A&M agency proceeds (non-GAAP measure) $156,776 $115,677 $41,099 36%
A&M agency proceeds rate (non-GAAP measure) 13.5% 12.9% n/a 60 bps
========================================== ==== ==== === ======
Results of operations - first quarter update
For the three months ended March 31, 2018
Consolidated Performance Highlights
Total revenues increased 30% to $260.2 million in the first quarter. Total revenue growth driven by incremental volume from the acquisition of IronPlanet Holdings, Inc. (the "Acquisition"), live auction performance, an increase in the volume of inventory contracts in Canada and Europe and the partial fee harmonization implemented in the first quarter. Foreign exchange had a positive impact on total revenues in the first quarter of 2018.
Agency proceeds (non-GAAP measure) improved 36% to $169.8 million versus $124.5 million in the first quarter of 2017 driven by GTV and service revenues growth and higher fee revenues.
Cost of services increased 51% to $36.7 million in the first quarter. The increase was primarily due to the Acquisition and the costs associated with the inspection and appraisal activities that support our online channels. The increase is also due to an increase in GTV at our live on site auctions over the comparative period and the growth of our ancillary business.
Selling, general and administrative ("SG&A") expenses increased $26.9 million, or 38% in the first quarter of 2018 compared to the first quarter of 2017. This increase is primarily due to the Acquisition, investment in talent to support new businesses and initiatives, and $4.6 million in share unit expenses in the first quarter of 2018 compared to $0.6 million in the first quarter of 2017. The $4.0 million increase in share unit expenses was primarily due to mark-to-market costs driven by a growth in the Company's share price, as well as incremental compensation costs resulting from a performance share unit modification on March 1, 2018.
Operating income increased 39% during the first quarter of 2018 to $32.9 million, compared to the first quarter of 2017. This increase is primarily driven from higher total revenues and lower acquisition-related costs, partially offset by higher costs of services and SG&A expenses. There were no adjusting items impacting operating income results in the first quarter of 2018.
Net income attributable to stockholders increased $6.8 million, or 65%, in the first quarter of 2018 compared to the first quarter of 2017. This improvement is primarily due to operating income growth and lower income taxes partially offset by the increases in interest expense due to the increased indebtedness to fund the Acquisition.
Primarily for the same reasons noted above, diluted EPS attributable to stockholders improved 60% to $0.16 in the first quarter of 2018 compared to diluted EPS attributable to stockholders of $0.10 in the first quarter of 2017.
Auctions & Marketplaces Performance Highlights
GTV increased 29% to $1.2 billion in the first quarter compared to $0.9 billion in the first quarter of 2017. The increase is primarily attributable to the incremental volume from the Acquisition, together with the significant year over year growth from the Orlando auction in the quarter. The increase was partially offset by the continuing equipment supply constraints, as well as the reduction of live on site auctions and sale days over the comparative period.
Total revenues increased 30% to $232.6 million in the first quarter compared to $179.1 million in the first quarter of 2017. Total revenue growth driven by incremental volume from the Acquisition, live auction performance, an increase in the volume of inventory contracts in Canada and Europe and the partial fee harmonization implemented in the first quarter. A&M revenue rate, which the Company calculates as A&M total revenues divided by GTV, for first quarter was 20.0%, a 10-basis point increase over the same quarter last year.
A&M agency proceeds (non-GAAP measure) improved 36% to $156.8 million versus $115.7 million in the first quarter of 2017 driven by GTV and service revenues growth and higher fee revenues. The overall A&M agency proceeds rate (non-GAAP measure) improved 60 basis points to 13.5% from 12.9% in the first quarter of 2017.
New Accounting Standard
The Company adopted the new accounting standard related to revenue recognition effective January 1,2018. The prior periods presented here have been restated to reflect adoption of this new standard.
Dividend Information
Quarterly dividend
The Company declared on May 10, 2018, a quarterly cash dividend of $0.17 per common share payable on June 20, 2018 to shareholders of record on May 30, 2018.
Q1 2018 Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended March 31, 2018, at 8am Pacific time / 11 am Eastern time / 4 pm GMT on May 11, 2018. The replay of the webcast will be available through June 11, 2018.
Conference call and webcast details are available at the following link:
https://investor.ritchiebros.com
About Ritchie Bros.
Established in 1958, Ritchie Bros. (NYSE and TSX: RBA) is a global asset management and disposition company, offering customers end-to-end solutions for buying and selling used heavy equipment, trucks and other assets. Operating in a multitude of sectors, including construction, transportation, agriculture, energy, oil and gas, mining, and forestry, the Company's selling channels include: Ritchie Bros. Auctioneers, the world's largest industrial auctioneer offering live on site auction events with online bidding; IronPlanet, an online marketplace with featured weekly auctions and providing its exclusive IronClad Assurance® equipment condition certification program; Marketplace-E, an online auction marketplace; Mascus, a leading European online equipment listing service; and Ritchie Bros. Private Treaty, offering privately negotiated sales. The Company also offers sector-specific solutions including GovPlanet, TruckPlanet, and Kruse Energy Auctioneers, plus equipment financing and leasing through Ritchie Bros. Financial Services. For more information about the unprecedented choice provided by Ritchie Bros., visit RitchieBros.com.
Forward-looking Statements
This news release contains forward-looking statements and forward-looking information within the meaning of applicable U.S. and Canadian securities legislation (collectively, "forward-looking statements"), including, in particular, statements regarding future financial and operational results, including growth prospects and payment of dividends. Forward-looking statements are statements that are not historical facts and are generally, although not always, identified by words such as "expect", "plan", "anticipate", "project", "target", "potential", "schedule", "forecast", "budget", "estimate", "intend" or "believe" and similar expressions or their negative connotations, or statements that events or conditions "will", "would", "may", "could", "should" or "might" occur. All such forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Forward-looking statements necessarily involve assumptions, risks and uncertainties, certain of which are beyond the Company's control, including the numerous factors that influence the supply of and demand for used equipment; economic and other conditions in local, regional and global sectors; the Company's ability to successfully integrate IronPlanet, and to receive the anticipated benefits of the Acquisition; and the risks and uncertainties set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 and which is available on the SEC, SEDAR, and Company websites. The foregoing list is not exhaustive of the factors that may affect the Company's forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate, and actual results may differ materially from those expressed in, or implied by, these forward-looking statements. Forward looking statements are made as of the date of this news release and the Company does not undertake any obligation to update the information contained herein unless required by applicable securities legislation. For the reasons set forth above, you should not place undue reliance on forward looking statements.
Forward-looking statements are made as of the date of this news release and the Company does not undertake any obligation to update the information contained herein unless required by applicable securities legislation. For the reasons set forth above, you should not place undue reliance on forward-looking statements.
GTV and Selected Condensed Consolidated Financial Information
GTV and Condensed Consolidated Income Statements - First Quarter
(Expressed in thousands of United States dollars, except share and per share amounts)
(Unaudited)
Three months ended March
31, 2018 2017
------------------------ ---- ----
GTV $1,160,712 $899,410
--- ---------- --------
Service revenues $176,016 $123,379
Revenue from inventory
sales 84,162 76,048
---------------------- ------ ------
Total revenues 260,178 199,427
-------------- ------- -------
Cost of services 36,657 24,340
Cost of inventory sold 75,791 63,401
Selling, general and
administrative expenses 97,470 70,575
Acquisition-related
costs 1,633 8,627
Depreciation and
amortization expenses 16,191 10,338
Gain on disposition of
property, plant and
equipment (345) (721)
Foreign exchange gain (92) (730)
--------------------- --- ----
Total operating expenses 227,305 175,830
------------------------ ------- -------
Operating income 32,873 23,597
---------------- ------ ------
Interest expense (11,310) (8,133)
Other, net 913 2,284
---------- --- -----
Income before income
taxes 22,476 17,748
Income tax expense 5,269 7,315
------------------ ----- -----
Net income $17,207 $10,433
========== ======= =======
Net income attributable
to:
Stockholders 17,138 10,377
Non-controlling interests 69 56
------------------------- --- ---
$17,207 $10,433
------- -------
Earnings per share
attributable
to stockholders:
Basic $0.16 $0.10
Diluted $0.16 $0.10
------- ----- -----
Weighted average number
of share outstanding:
Basic 107,355,381 106,851,595
Diluted 108,643,897 107,788,949
======= =========== ===========
Condensed Consolidated Balance Sheets
(Expressed in thousands of United States dollars, except share data)
(Unaudited)
March 31, December 31,
2018 2017
---- ----
Assets
Cash and cash equivalents $278,944 $267,910
Restricted cash 62,414 63,206
Trade and other receivables 182,157 92,105
Inventory 34,350 38,238
Other current assets 30,657 27,026
Assets held for sale 251 584
Income taxes receivable 17,515 19,418
----------------------- ------ ------
Total current assets 606,288 508,487
Property, plant and equipment 522,871 526,581
Equity-accounted investments 6,915 7,408
Other non-current assets 26,807 24,146
Intangible assets 259,052 261,094
Goodwill 674,097 670,922
Deferred tax assets 19,934 18,674
------------------- ------ ------
Total assets $2,115,964 $2,017,312
============ ========== ==========
Liabilities and Equity
Auction proceeds payable $303,416 $199,245
Trade and other payables 170,777 164,553
Income taxes payable 2,021 732
Short-term debt 5,861 7,018
Current portion of long-term debt 9,264 16,907
--------------------------------- ----- ------
Total current liabilities 491,339 388,455
Long-term debt 771,030 795,985
Other non-current liabilities 44,857 46,773
Deferred tax liabilities 34,712 32,334
------------------------ ------ ------
Total liabilities 1,341,938 1,263,547
----------------- --------- ---------
Contingencies
Contingently redeemable performance
share units 16,576 9,014
Stockholders' equity:
Share capital:
Common stock; no par value,
unlimited shares
authorized, issued and
outstanding shares:
107,471,895 (December 31, 2017:
107,269,783) 144,387 138,582
Additional paid-
in capital 44,327 41,005
Retained
earnings 601,205 602,609
Accumulated
other
comprehensive
loss (37,619) (42,514)
-------------- ------- -------
Stockholders' equity 752,300 739,682
Non-controlling interest 5,150 5,069
------------------------ ----- -----
Total shareholders' equity 757,450 744,751
-------------------------- ------- -------
Total liabilities and equity $2,115,964 $2,017,312
============================ ========== ==========
Condensed Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
(Unaudited)
Three months ended March 31, 2018 2017
---------------------------- ---- ----
Cash provided by (used in):
Operating activities:
Net income $17,207 $10,433
Adjustments for
items not
affecting cash:
Depreciation and amortization
expenses 16,191 10,338
Stock option compensation expense 2,343 1,311
Equity-classified PSU expense 3,035 1,012
Amortization of debt issuance costs 1,066 445
Other, net 2,131 (1,042)
Net changes in
operating assets
and liabilities 25,265 112,045
----------------- ------ -------
Net cash provided by operating
activities 67,238 134,542
------------------------------ ------ -------
Investing activities:
Property, plant
and equipment
additions (2,564) (1,863)
Intangible asset
additions (7,034) (5,664)
Proceeds on
disposition of
property, plant
and equipment 1,066 1,505
Other, net (4,674) -
---------- ------ ---
Net cash used in investing
activities (13,206) (6,022)
-------------------------- ------- ------
Financing activities:
Dividends paid to
stockholders (18,245) (18,160)
Dividends paid to
NCI - (41)
Issuances of
share capital 4,313 3,412
Proceeds from
short-term debt 308 1,219
Repayment of
short-term debt (1,754) (1,009)
Repayment of
long-term debt (29,237) -
Repayment of
finance lease
obligations (802) (438)
Other, net - (48)
---------- --- ---
Net cash used in financing
activities (45,417) (15,065)
-------------------------- ------- -------
Effect of changes in foreign
currency rates on
cash, cash
equivalents, and
restricted cash 1,627 3,336
----------------- ----- -----
Increase 10,242 116,791
Beginning of
period 331,116 758,089
------------- ------- -------
Cash, cash equivalents, and
restricted cash, end of period $341,358 $874,880
=============================== ======== ========
Segmented Information
(Expressed in thousands of United States dollars)
Three months ended March 31, 2018
---------------------------------
A&M Other Consolidated
--- ----- ------------
Service revenues $148,405 $27,611 $176,016
Revenue from
inventory sales 84,162 - 84,162
---------------- ------ --- ------
Total revenues 232,567 27,611 260,178
-------------- ------- ------ -------
Costs of services 21,448 15,209 36,657
Cost of inventory
sold 75,791 - 75,791
Selling, general and
administrative
expenses ("SG&A") 93,002 4,468 97,470
---------------- ------ ----- ------
Segment profit $42,326 $7,934 $50,260
-------------- ------- ------ -------
Acquisition-related
costs 1,633
D&A expenses 16,191
Gain on disposition
of property, plant
and equipment ("PPE") (345)
Foreign exchange
gain (92)
---------------- ---
Operating income $32,873
---------------- -------
Interest expense (11,310)
Other income, net 913
Income tax expense (5,269)
------------------ ------
Net income $17,207
========== =======
Three months ended March 31, 2017
---------------------------------
A&M Other Consolidated
--- ----- ------------
Service revenues $103,030 $20,349 $123,379
Revenue from
inventory sales 76,048 - 76,048
---------------- ------ --- ------
Total revenues 179,078 20,349 199,427
-------------- ------- ------ -------
Costs of services 12,587 11,753 24,340
Cost of inventory
sold 63,401 - 63,401
SG&A expenses 67,111 3,464 70,575
------------- ------ ----- ------
Segment profit $35,979 $5,132 $41,111
-------------- ------- ------ -------
Acquisition-related
costs 8,627
D&A expenses 10,338
Gain on disposition
of PPE (721)
Foreign exchange
gain (730)
---------------- ----
Operating income $23,597
---------------- -------
Interest expense (8,133)
Other income, net 2,284
Income tax expense (7,315)
------------------ ------
Net income $10,433
========== =======
Selected Data
(Unaudited)
(in U.S. $000's) March 31, December 31,
2018 2017
---- ----
Current assets $606,288 $508,487
Current liabilities 491,339 388,455
------------------- ------- -------
Working capital $114,949 $120,032
--------------- -------- --------
Total assets $2,115,964 $2,017,312
Long-term debt 780,294 812,892
Stockholders' equity 752,300 739,682
==================== ======= =======
Selected operating data
As at and for the three months
ended March 31, 2018 2017
------------------------------ ---- ----
Number of consignments at
industrial auctions 10,750 11,350
Number of bidder registrations at
industrial auctions 119,000 114,500
Number of buyers at industrial
auctions 29,000 29,150
Number of lots at industrial
auctions 81,000 84,000
---------------------------- ------ ------
Number of permanent operational
sites 35 35
Number of regional operational
sites 5 5
------------------------------ --- ---
Total auction sites 40 40
------------------- --- ---
Number of industrial auctions 35 41
============================= === ===
Average industrial auction data
Three months ended March 31, 2018 2017
---------------------------- ---- ----
GTV $ 15.9 million $ 16.4 million
--- --- ------------ --- ------------
Bidder registrations 2,405 2,319
Consignors 233 231
Lots 1,576 1,680
==== ===== =====
Non-GAAP Measures
This news release makes reference to various non-GAAP measures. These measures do not have a standardized meaning and are, therefore, unlikely to be comparable to similar measures presented by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles.
The following table presents the Company's adjusted net income attributable to stockholders (non-GAAP measure) and diluted adjusted EPS attributable to stockholders (non-GAAP measure) results for the three months ended March 31, 2018, and 2017, as well as reconciles those metrics to net income attributable to stockholders and diluted EPS attributable to stockholders, which are the most directly comparable GAAP measures in the Company's consolidated income statements:
(in U.S. $000's,
except share and Three months ended March 31,
----------------------------
per share data) Change
------
2018 2017 2018 over 2017
---- ---- --------------
Net income
attributable to
stockholders $17,138 $10,377 65%
Current income
tax adjusting
item:
Change in
uncertain tax
provision - 2,290 (100%)
-------------- --- ----- -----
Adjusted net
income
attributable to
stockholders
(non-GAAP
measure)
------------
$17,138 $12,667 35%
--- ------- ------- ---
Effect of
dilutive
securities $ - $27 (100%)
----------- --- --- --- -----
Weighted average
number of
dilutive shares
outstanding
---------------
108,643,897 107,788,949 1%
----------- ----------- ---
Diluted earnings
per share
attributable to
stockholders
$0.16 $0.10 60%
Diluted adjusted
EPS attributable
to
stockholders
(non-GAAP
measure)
============
$0.16 $0.12 33%
=== ===== ===== ===
There were no adjusting items for the three months ended March 31, 2018. The adjusting item for the three months ended March 31, 2017 was a $2.3 million (or $0.02 per diluted share) charge related to the change in uncertain tax provisions.
The following table presents the Company's agency proceeds (non-GAAP measure) results for the three months ended March 31, 2018 and 2017, as well as reconciles that metric to total revenues, which is the most directly comparable GAAP measures in the Company's consolidated income statements:
(in U.S. $000's) Three months ended March 31,
----------------------------
Change
------
2018 2017 2018 over 2017
---- ---- --------------
Total revenues $260,178 $199,427 30%
Less: cost of
inventory sold (75,791) (63,401) 20%
Less: ancillary
and logistical
service
expenses (14,580) (11,527) 26%
-------- ------- ------- ---
Agency proceeds (non-GAAP
measure) $169,807 $124,499 36%
========================= ======== ======== ===
The following table presents the Company's A&M agency proceeds (non-GAAP measure) and A&M agency proceeds rate (non-GAAP measure) results for the three months ended March 31, 2018, and 2017, as well as reconciles those metrics to A&M total revenues and A&M revenue rate, which are the most directly comparable GAAP measures in the Company's consolidated financial statements:
(in U.S. $000's) Three months ended March 31,
----------------------------
Change
------
2018 2017 2018 over 2017
---- ---- --------------
A&M total revenues $232,567 $179,078 30%
Less: cost of inventory
sold (75,791) (63,401) 20%
------------------------ ------- ------- ---
A&M agency proceeds
(non-GAAP measure) $156,776 $115,677 36%
------------------- -------- -------- ---
GTV 1,160,712 899,410 29%
--- --------- ------- ---
A&M revenue rate 20.0% 19.9% 10 bps
A&M agency proceeds
rate
(non-GAAP measure) 13.5% 12.9% 60 bps
================= ==== ==== ======
please contact: Zaheed Mawani, Vice President, Investor Relations, Phone: 1.778.331.5219, Email: zmawani@rbauction.com
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SOURCE Ritchie Bros. Auctioneers
