Ritchie Bros. Auctioneers Incorporated reports results for the three months ended Sept. 30, 2015. During the quarter, the company generated $109.3 million of revenue, a 7 percent increase compared to revenue of $102.2 million in the third quarter last year, and net earnings of $20.3 million, a 118 percent increase compared to $9.3 million and a 40 percent increase compared to adjusted net earnings of $14.5 million in the third quarter last year. Diluted earnings per share (“EPS”) were $0.19, a 118 percent increase compared to diluted EPS of $0.09, and a 41 percent increase compared to diluted adjusted EPS of $0.13 in the same quarter last year.
“Our teams continued to focus on driving revenue growth, as demonstrated by our third quarter results, with meaningful improvement in the performance of our underwritten business and continued growth of fee-based revenue. We achieved 28 percent revenue growth from our U.S. operations, and saw strong local currency contributions from Canada, Australia and the Middle East,” said Ravi Saligram, CEO of Ritchie Bros. “We’re also pleased to announce that we’ve acquired a 75 percent stake in Xcira LLC, a leader in simulcast auction technology. Xcira’s market leading platform and approach to online auction innovations were key factors that led to this acquisition. The strength of their systems was, and continues to be, an important contributor to Ritchie Bros.’ success. In fact, nearly $1.7 billion of equipment and other assets sold through Ritchie Bros. auctions during 2014 transacted on Xcira’s ’Online Ringman’ software platform.”
Income Statement Scorecard Analysis for the Three Months Ended September 30, 2015
Gross Auction Proceeds (“GAP”) were $894.5 million for the third quarter of 2015, a quarterly record and a 1 percent increase compared to the third quarter of 2014. EquipmentOne, the company’s online equipment marketplace, contributed $30.4 million of gross transaction value (“GTV”) to GAP in the third quarter of 2015 compared to $23.2 million in the third quarter of 2014. GAP for the third quarter of 2015 would have been $75.6 million higher, or an additional 8.4 percent increase, if foreign exchange rates had remained consistent with those in the same period last year. This adverse effect on GAP is primarily due to the declining value of the Canadian dollar and the Euro relative to the U.S. dollar.
Revenue grew 7 percent during the third quarter of 2015 to $109.3 million, compared to $102.2 million in the third quarter of 2014, as a result of the record GAP and higher revenue rate achieved in the third quarter this year. Revenue would have been $9.2 million higher, or an additional 8.4 percent increase, if foreign exchange rates had remained consistent with those in the same period last year.
The revenue rate was 12.22 percent in the third quarter of 2015, compared to 11.53 percent in the third quarter of 2014. The increase in the revenue rate is primarily due to the performance of the company’s underwritten business. As a percent of total GAP, the volume of underwritten business decreased slightly to 24 percent during the third quarter of 2015 compared to 30 percent for the same period in 2014.
Operating income grew 47 percent during the third quarter of 2015 to $29.1 million, compared to $19.8 million in the third quarter of 2014. This increase is due to revenue growth combined with a decrease in selling, general and administrative (“SG&A”) expenses. Earnings from operations would have been $0.8 million higher, or an additional 2.7 percent increase, if foreign exchange rates had remained consistent with those in the same period last year.
Operating income margin was 26.6 percent for the third quarter of 2015, 724 basis points higher than 19.4 percent for the same period last year, primarily due to revenues increasing and SG&A expenses decreasing.
Diluted adjusted EPS for the third quarter of 2015 was $0.19 per diluted share, a 41 percent increase compared to the third quarter of 2014. There were no adjusting items in the third quarter of 2015. The increase was driven by an increase in GAP and revenue combined with a decrease in SG&A expenses, partially offset by a decrease in other income items during the third quarter of 2015 compared to the same period in 2014.
Income Statement Scorecard Analysis for the Nine Months Ended Sept. 30, 2015
GAP was $3.1 billion for the first nine months of 2015, a first nine months record and a 5 percent increase compared to the first nine months of 2014. EquipmentOne, the company’s online equipment marketplace, contributed $83.9 million of GTV to GAP in the first nine months of 2015 compared to $71.2 million in the same period in 2014. GAP for the first nine months of 2015 would have been $227.2 million higher, or an additional 7.3 percent increase, if foreign exchange rates had remained consistent with those in the same period last year. This adverse effect on GAP is primarily due to the declining value of the Canadian dollar and the Euro relative to the U.S. dollar.
Revenue grew 11 percent during the first nine months of 2015 to $380.4 million, compared to $342.6 million in the first nine months of 2014, as a result of the record GAP and higher revenue rate achieved during the same period this year. Revenue would have been $28.6 million higher, or an additional 7.5 percent increase, if foreign exchange rates had remained consistent with those in the same period last year.
The revenue rate was 12.22 percent in the first nine months of 2015, compared to 11.53 percent in the first nine months of 2014. The increase in the revenue rate is primarily due to the performance of the company’s underwritten business, which is comprised of guarantee and inventory contracts, consistent with the Company’s strategic focus on this business. The volume of underwritten business during the first nine months of 2015 remained consistent with the first nine months of 2014, at 29 percent.
Operating income grew 36 percent during the first nine months of 2015 to $121.2 million, compared to $89.3 million in the first nine months of 2014. This increase is due to revenue growth significantly outpacing the growth of SG&A expenses. Earnings from operations would have been $6.4 million higher, or an additional 5.2 percent increase, if foreign exchange rates had remained consistent with those in the same period last year.
Operating income margin was 31.9 percent for the first nine months of 2015, 581 basis points higher than 26.1 percent for the same period last year, primarily due to revenues increasing at a rate higher than SG&A expenses.
Diluted adjusted EPS for the first nine months of 2015 was $0.84 per diluted share, a 34 percent increase compared to the first nine months of 2014. There were no adjusting items in the first nine months of 2015. The increase was driven by an increase in GAP, revenue and other income items, partially offset by an increase in SG&A expenses during the first nine months of 2015 compared to the same period in 2014.
Balance Sheet Scorecard Analysis as at and for
the 12 Months Ended Sept. 30, 2015
Operating free cash flow increased 75 percent to $250.6 million during the 12 months ended Sept. 30, 2015, compared to $142.8 million during the 12 months ended Sept. 30, 2014. This increase is the result of more cash generated by operating activities and less capital spending during the 12 months ended Sept. 30, 2015, compared to the same period ended in 2014.
Working capital intensity was minus 18.8 percent for the 12 months ended Sept. 30, 2015, an improvement of 1166 basis points from minus 7.1 percent for the 12 months ended Sept. 30, 2014. This improvement in working capital intensity is the result of increased revenues and decreased quick operating working capital during the 12 months ended Sept. 30, 2015, compared to the same period ended in 2014. The decrease in quick operating working capital is primarily the result of decreases in advances against auction contracts, inventory, and trade and other receivable balances. Significant fluctuations in working capital intensity are primarily the result of the timing and size of auctions just prior to each period end. The fact that the Company’s working capital intensity is negative highlights the minimal amount of working capital required to run the business.
CAPEX intensity was 4.2 percent for the 12 months ended Sept. 30, 2015, a decrease of 40 basis points from 4.6 percent for the 12 months ended Sept. 30, 2014. This 9 percent decrease is due primarily to an increase in revenues by $45.0 million, or 9 percent, during the 12 months ended Sept. 30, 2015, compared to the same period ended in 2014. Net capital spending during the 12 months ended Sept. 30, 2015, remained consistent with the comparative period as a result of disciplined capital spending.
Return on net assets (“RONA”) for the 12 months ended Sept. 30, 2015, was 26.5 percent, an increase of 1,065 basis points compared to 15.9 percent for the 12 months ended Sept. 30, 2014. This increase was the result of an increase in net operating profit after tax combined with a decrease in adjusted net assets. The decrease in adjusted net assets was driven by an increase in cash and cash equivalents and current liabilities, as well as foreign exchange effects on non-U.S. dollar denominated assets. The increase in current liabilities is primarily due to the reclassification from non-current to current borrowings of a Canadian dollar 60 million term loan in the second quarter of 2015. Management intends to refinance this borrowing when it falls due in May 2016.
The reclassification of this borrowing had a positive effect on RONA. Excluding the effects of the reclassification, RONA for the 12 months ended Sept. 30, 2015, would have been 24.1 percent, an increase of 826 basis points compared to RONA for the 12 months ended Sept. 30, 2014.
Debt/Adjusted EBITDA decreased to 0.5x for the 12 months ended Sept. 30, 2015, compared to 0.9x for the 12 months ended Sept. 30, 2014. The company achieved a 20 percent increase in adjusted EBITDA with a lower level of borrowings as at Sept. 30, 2015, compared to Sept. 30, 2014.
Dividend Information
Quarterly dividend — The company declares a quarterly dividend of $0.16 per common share payable on Dec. 18, 2015, to shareholders of record on Nov. 27, 2015.
Operational Review
Online statistics — During the third quarter of 2015, the company attracted record third quarter online bidder registrations and sold approximately $404.5 million of equipment, trucks and other assets to online auction bidders and EquipmentOne customers. This represents a 6 percent increase over the third quarter of 2014 and a third quarter online sales record.
Auction activity — During the third quarter of 2015, Ritchie Bros. conducted 54 unreserved industrial auctions in 15 countries throughout North America, Europe, the Middle East, Australia, and Asia. Auctions during the quarter include:
• At the Sept. 29, 2015 St. Aubin sur Gaillon, France auction, the company sold more than $15 million worth of assets, making it the largest auction held by Ritchie Bros. in France during the company’s third quarter. This sale also set new third quarter records for the site for number of bidders and lots.
• At the Sept. 23 to 24, 2015, Fort Worth, Texas, auction, the company sold more than $70 million of assets; including $34 million sold to online bidders. This was the largest auction ever held by Ritchie Bros. in Texas.
• At the Sept. 22, 2015, Donington Park, U.K., auction, the company sold $17 million of assets — the largest sale ever held at the Donington Park site. The sale also included a record number of bidders and lots sold for the region.
• During September (on the 15th and 17th), Ritchie Bros. held two auctions in Australia, at the Brisbane and Geelong auction sites. Through these two auctions, the company sold $31 million of assets for consignors.
• At the Sept. 11, 2015, Polotitlan, Mexico, auction, the company sold more $19 million of assets, making it the largest auction Ritchie Bros.’ has held in Mexico during the company’s third quarter.
• On Sept. 9 to11, 2015, the company held its second largest Edmonton, Alberta auction ever, when over $76 plus million of assets were sold on behalf of consignors. The auction attracted more than 9,850 bidders from 50 plus countries, making it the second-largest number of bidders ever registered for a Ritchie Bros. auction.
• At the Sept. 8 to 9, 2015, Dubai, UAE, auction, the company sold more than $42 million of assets, and set new Dubai site records for the number of total and online bidders.
• At the Aug. 26 to 27, 2015, Houston, Texas, auction, the company sold more than $45 million of assets; including more than $24 million sold to buyers outside of Texas.
There are currently 96 unreserved auctions on the Ritchie Bros. auction calendar at www.rbauction.com, including auctions in North America, Central America, Europe, the Middle East, Australia and Asia.
EquipmentOne Activity
During the third quarter of 2015, EquipmentOne sold more than $31.7 million of equipment and other assets on behalf of customers. Highlights during the quarter include a 21 percent increase in Web site traffic for www.equipmentone.com in the third quarter of 2015 compared to the third quarter of 2014, based on average monthly users.
For more information, please visit www.rbauction.com.
Today's top stories
