A global leader in used equipment sales Investor overview presentation August 2016
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A global leader in used equipment salesInvestor overview presentation
August 2016
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Forward looking statements and non-GAAP measures
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.
This presentation contains non-GAAP financial measures.
For a discussion of non-GAAP measures and the most directly comparable GAAP financial measures, see the Appendix to this presentation as well as our earnings releases, our Form 10-Q interim report and 10-K annual report, which are available at: investor.ritchiebros.com
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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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 & resource sectors
• 345 auctions; $4.25 billion in Gross Auction Proceeds during 2015– Industry leader by wide margin; Enormous growth opportunity, with a highly
fragmented market
• Provide multichannel sales solutions to expand the breadth of services available to equipment sellers:– EquipmentOne launched in 2013– Mascus (equipment sales listing service) acquired in 2016
Strong financial performance • $515.9 million of revenue during fiscal 2015• $121.1 million of adjusted net income¹ during fiscal 2015
Publicly listed on the NYSE and TSX (as RBA)• Market cap of approx. US$3.8 billion
RBA Auction - Circa 1958
RBA Auction - Now
Ritchie Bros. has a strong heritage –selling used equipment since 1958
3 ¹ Net Income attributable to stockholders
4
32%
50%
10%7%
Canada
United States
Europe
Other
Global reach44 auction sites in 14 countries worldwide• More than half 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
• Consignors benefit from global market pricing for their equipment, generated by international demand
• Buyers benefit from a global supply, with an ability to purchase and ship equipment from weak economic regions to areas with stronger growth
32%
47%
12%9%
CanadaUnited StatesEuropeOther
2015 Regional breakdown of revenue(Revenue breakdown - % of 2015 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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$481 Mil
2014 Revenue breakdown - % of 2014 total
$516 Mil
US comprised a greater proportion of revenue in 2015 relative to 2014.
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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 2014However, 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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0
100,000
200,000
300,000
400,000
500,000
600,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Registrants
Lots
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Consignors
Buyers
Growing seller and buyer base
5.0% CAGR in consignments over last 10 years
6.4% CAGR in buyers over last 10 years
8.2% CAGR in registrants over last 10 years
5.2% CAGR in Lots over 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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Growth of Gross Auction Proceeds (GAP)
US$4.25 billion of GAP produced during fiscal 2015
GAP:The aggregate dollar amount transacted through Ritchie Bros. Auctioneers and EquipmentOne
7 Includes transactions of AssetNation and EquipmentOne online marketplaces in 2012 - 2015
Gross Auction Proceeds (US$ millions)
4,245
$-
$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
2015
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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
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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 outright, 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.
9 Revenue from other business lines supplement our revenue: EquipmentOne buyer and seller fees; Xcira revenue; Mascus revenue
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54%
46%
0%
10%
20%
30%
40%
50%
60%
70%
Q1 2012 Q 2 Q 3 Q 4 Q1 2013 Q 2 Q 3 Q 4 Q1 2014 Q 2 Q 3 Q 4 Q1 2015 Q 2 Q 3 Q 4 Q1 2016 Q2
Online
Onsite
Q2 2016: First time more than half of GAP sold online
Online purchases comprised 51% of GAP in Q2 2016, the first time more than half of GAP was generated by online buyers.• Online transactions growing due to changing customer preferences, greater participation from non-
local bidders, the introduction of the Ritchie Bros. app, and growth of E1 • Sold approx. $650 million of assets through online transactions (incl. E1) during Q2 2016, an increase
of 11% from Q2 2015 • 54% of buyers during Q2 2016 participated in our auctions online
*Industrial auction data10
Percent of buyers: # of buyers, on site or online
54% of total # of buyers were online(51% of total GAP was sold online)
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Investing in our digital capabilities
Public launch of Ritchie Bros. App has been highly successful• Officially launched in App stores July 11, 2016• Early reviews in App stores are all 5-stars, demonstrating strong user endorsement• Including the beta testing period in Q1 and Q2 (prior to public launch), the app has
accumulated:• 68 successful winning bids• US$1.35 million of GAP
• Increased promotion of the App (and smartphone enabled bidding) will occur in coming months
Creation of Enterprise Sales Solution direct user portals for key EquipmentOne accounts launched earlier this year• Flexible, end-to-end solution that allows companies to better control asset management • Product includes data integrations, automated process workflows, remarketing solutions,
public and private (e.g. dealer to dealer networks, internal corporate redeployment sites) disposition channels, and detailed reporting capabilities.
• New customers include one of the world’s largest transportation OEM’s and a leading energy companies; interest in the product is aggressively growing
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Growing our breadth of services through acquisitions
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Since November 2015 we have deployed $90 million of capital to grow our sales channels and bolster our core business• During Q3 2016 (to date) we have announced the acquisition of the remaining 49% stake of Ritchie
Bros. Financial Services, a minority investment in Machinio, and the purchase of Petrowsky Auctioneers
• Continue to evaluate M&A opportunities that could be strategically important and/or accretive to GAP and earnings
Q4 2015 Q1 2016 Q3 2016 (to date)
(75% stake)
(Minority interest)
Recent M&A Activity:
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Growing our sales platform
Ritchie Bros. offers four main sales channels to equipment ownersBusiness units are supported through Ritchie Bros. ownership of Xcira (online auction technology provider) and Ritchie Bros. Financial Services (financial solutions partner for equipment buyers).
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75% ownership
100% ownershipIntegrated technology platform
Financial intermediary capitalizing on captive customer base to provide an alternative source of capital
Integrated onsite/online auction network¹
Online marketplace
Online listing service
Brokerage channel for highly specialized assets
¹ Includes Petrowsky Auctioneers
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Multichannel solutions:
• Offers sellers more control over the sales price, time and purchaser; opens up opportunities for RBA to bid on RFPs
• During 2015, EquipmentOne contributed approx. $120 million of GTV (Gross Transaction Value) to GAP; up 13% from 2014
• Operates primarily in the United States; expanded into Canada in Q1 2016
• Website traffic up 11% in 2015, compared to 2014 (average monthly user)
Commercially launched in 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.
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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 controlOur vision is to position appropriate solutions at each point of seller journey and connect them
High
Cont
rol t
o Se
ller
LowEffort for Seller
Control over:PriceTime
LocationBuyer
Low
High
Uncertain CertainSome Certainty of Sale
Result: Transacting anyhow, anytime, anywhere
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Multichannel solutions:
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• Acquired during Q1 2016• Provides equipment sellers with a turn-key suite of business tools
and software solutions catering to the needs of OEMs, dealers and large equipment fleet owners– Generates sticky customer relationships
• Mascus generates 3.2 million monthly website visits• Business currently has 360,000+ listings of equipment and other assets for sale• Financial terms: €24.0 million (US$26.6 million)
– Additional cash consideration, totaling no more that €3.4 million (US$3.8 million) may be paid contingent upon certain operating performance targets being achieved over the next 3 years
• Expected to be marginally accretive to RBA’s performance immediately• Performance of Mascus is fully consolidated into RBA’s financial reports
Mascus is a leading global online equipment sales listing serviceGrows our service offering, to offer additional sales solutions to equipment sellers.Expands our buyer audience. Established a large presence in Europe.
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Strategic Roadmap
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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.17
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Performance Metric Avg. Annual Growth Targets 2015 performance
• GAP Growth (%) High Single Digit to Low Double Digits +8% (organic)
• Revenue Growth (%) (1) Mid Single Digit to High Single Digit +16% (organic)
• SG&A Growth (%) Will grow slower than revenues +12% (organic, excl. D&A)
• Operating Income Margin 50 bps + +360 bps
• EPS Growth (%) (2) High Single Digit to Low Double Digits +22% (adjusted)
• Net Capex Intensity (3) <10% 2.8% (abnormally low)
• OFCF (4) % of Net Earnings >100% 150%
• RONA (5) Increase 50 bps + +910 bps (excl. current portion of long term debt)
• Dividend Payout Ratio 55% to 60% * 53%(*announced 6.3% increase to dividend Aug 8, 2016)
• Net Debt / EBITDA <2.5X 0.5x
RBA’s evergreen financial model
Above model reflects our aspiration on how the model should work in the next 5 to 7 years
(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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19
0.10
50 0.11
25
0.11
25
0.11
25
0.11
25
0.12
25
0.12
25
0.12
25
0.12
25 0.13
00
0.13
00
0.13
00
0.13
00
0.14
00
0.14
00
0.14
00
0.14
00
0.16
00
0.16
00
0.16
00
0.16
00
0.17
00
0.1000
0.1100
0.1200
0.1300
0.1400
0.1500
0.1600
0.1700
0.1800
Q1/1
1
Q2/1
1
Q3/1
1
Q4/1
1
Q1/1
2
Q2/1
2
Q3/1
2
Q4/1
2
Q1/1
3
Q2/1
3
Q3/1
3
Q4/1
3
Q1/1
4
Q2/1
4
Q3/1
4
Q4/1
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Q1/1
5
Q2/1
5
Q3/1
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Q4/1
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Q1/1
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Q2/1
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Declared 6.3% increase in quarterly cash dividend
Growing our dividend alongside earnings; announced a 1 cent increase to quarterly cash dividend on August 8, 2016Committed to 55-60% dividend payout, based on earnings trailing 12 months
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Dividends declared ($US cash dividends)
7.1% increase
8.9% increase
6.1% increase
7.7% increase
6.3% increase
14.0% increase
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Allocating Cash to growth initiatives & shareholder returns
Use of Cash – H1 2016(US$ mil)
$71 million spent on returning cash to shareholders
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$28 million spent on growth initiatives
$210.8
$166.5
$37.6$1.4
$77.9$18.1 $0.3 $28.3
$36.7
$34,2
$70.8
$15.0 $6.0
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Cash balanceDec. 31, 2015
Cashgenerated
fromoperatingactivities
Cash fromnon-operating
activities(sale of land)
Proceeds fromborrowings
Issuance ofshare capital
Otherfinancingactivities
Acquisitions Sharerepurchases
Dividendspaid to
shareholders
Repayment ofdebt
Other capitalexpendituresand financing
costs
Effect ofchanges in
foreigncurrency
Cash balance- June 30,
2016
H1 and Q2 2016 financial performance
For six and three months ended June 30, 2016.
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Reported - % Growth Constant Currency - % GrowthVersus H1 2015 Versus H1 2015
GAP 4% 6%
Revenue 7% 10%
Operating Income (3)% (2)%
Diluted EPS 2% n/a
Operating Free Cash Flow (12 month rolling)
(63)% n/a
RONA excl. term loan reclass(12 month rolling)
260 bps n/a
ROIC(12 month rolling)
60 bpsn/a
H1 2016 financial highlights
While Q1 generated solid results, first half results for 2016 were proportionately impacted by larger Q2 Foreign exchange continues to have an impact on quarterly comparators
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attributable to stockholders
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Reported - % Growth Constant Currency - % GrowthVersus Q2 2015 Versus Q2 2015
GAP 1% 3%
Revenue 2% 4%
Operating Income (15)% (13)%
Diluted EPS (12)% n/a
Operating Free Cash Flow (12 month rolling)
(63)% n/a
RONA excl. term loan reclass(12 month rolling)
260 bps n/a
ROIC(12 month rolling)
60 bpsn/a
Q2 2016 financial highlightsRevenue grew modestly on a tough comp versus prior year; maintained strong revenue rate• Costs of Services and SG&A increased disproportionately on account of new businesses, headcount investment in
strategic initiatives, and increased auction volumes; • Cash flow declined due to timing issues, but company remains a strong cash generator
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attributable to stockholders
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Income statement scorecard – Q2 2016
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3 months trailing ($US Millions except for EPS, %)
June 30, 2016 June 30, 2015 Better / (Worse)
GAP $1,275.7 $1,262.2 1%
Revenues $158.8 $155.5 2%
Revenue Rate 12.45% 12.32% 13 bps
Operating Income $53.6 $62.8 (15)%
Operating Income Margin 33.8% 40.4% (660) bps
EBITDA $64.7 $74.7 (13)%
Diluted EPS $0.37 $0.42 (12)%
Q2 2016 Income statement scorecard
GAP and Revenue Rate increased modestly; Op income and EPS impacted by lower margins than in Q2 2015
attributable to stockholders
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Balance sheet scorecard – Q2 2016
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12 months trailing ($US Millions except for percent figures)
June 30, 2016 June 30, 2015 Better / (Worse)
Operating Free Cash Flow $81.6 $218.1 (63)%
Working Capital Intensity -19.8% -23.9% (410) bps
Capex Intensity 3.6% 3.2% (40) bps
ROIC (Return on Invested Capital) 15.1% 14.5% 60 bps
RONA (Return on Net Assets) 25.4% 25.3% 10 bps
RONA excluding term loan reclassification 25.4% 22.8% 260 bps
Debt / Adjusted EBITDA 0.6x 0.6x no change
Q2 2016 Balance sheet scorecard
2015 financial performance
All figures for twelve months ended December 31, 2015
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Very strong results in 2015
Performance during 2015 demonstrates our commitment to execution, our strategy is gaining traction, and our agility in leveraging market opportunitiesForeign exchange remains a headwind
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2015 Reported - % Growth 2015 Organic - % GrowthVersus 2014 Versus 2014
GAP 1% 8%
Revenue 7% 16%
Adjusted Operating Income 20% 46%
Diluted Adjusted EPS 22% n/a
Operating Free Cash Flow (12 month rolling)
28% n/a
RONA (12 month rolling)
1100 bps n/a
RONA excluding effects of term loan reclassification
910 bps n/a
attributable to stockholders
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Income statement scorecard – 2015
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12 months trailing ($US Millions except for EPS, %)
Dec. 31, 2015 Dec. 31, 2014 Better / (Worse)
GAP $4,247.6 $4,212.6 1%
Revenues $515.9 $481.1 7%
Revenue Rate 12.14% 11.42% 72 bps
Adjusted Operating Income $166.5 $138.2 20%
Adjusted Operating Income Margin 32.3% 28.7% 360 bps
Diluted EPS $1.27 $0.85 50%
Diluted Adjusted EPS $1.13 $0.93 22%
Full year 2015 Income statement scorecard
Increased Diluted EPS by 50% versus last year – through GAP growth, revenue rate improvement, expense control, excess land sales and tax planning strategies
attributable to stockholders
attributable to stockholders
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Balance sheet scorecard – 2015
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12 months trailing ($US Millions except for percent figures)
Dec. 31, 2015 Dec. 31, 2014 Better / (Worse)
Operating free cash flow $182.2 $141.8 28%
Working Capital Intensity -3.2% -2.3% 90 bps
Capex Intensity 2.8% 6.2% 340 bps
ROIC (Return on Invested Capital) 15.1% 12.0% 310 bps
RONA (Return on Net Assets) 25.7% 14.7% 1100 bps
RONA excluding term loan reclassification 23.8% 14.7% 910 bps
Debt / Adjusted EBITDA 0.5x 0.6x 0.1x
2015 Balance sheet scorecard
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Focused on generating long-term shareholder value through continued earnings and dividend growth.
A global leader in industrial auctions• Substantial growth opportunity• Focused on growth in the US and in key sectors
Diversifying services to meet broader customer needs• Sales solutions: Ritchie Bros. Auctioneers, EquipmentOne, Mascus• Complementary services: Ritchie Bros. Financial Services, Logistical Services• Supportive business unit: Xcira (online auction technology solutions)
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
AppendicesAge of equipment sold trendsGlobal auction site network
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11.5%
9.6%
4.2%
3.6%
8.7%
10.9%
8.6%
13.1%
12.1%
11.0%
5.0%
4.8%
8.7%
10.6%
11.2%
12.1%
12.2%
10.3%
5.0%
4.6%
9.7%
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.
Age of equipment sold improving from past years
Age of Equipment sold at Ritchie Bros. Auctions¹
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3-5 yrs old: 28.9% of GAP¹
6+ Yrs Old
New to 1 yr Old
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Auction sites
33
US GAAP Reconciliation of Non-GAAP measures
Non- GAAP Measures
The following tables reconcile non-GAAP measures referred to in this presentation to the most directly comparable GAAP measure reflected in the Company’s financial statements
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36 36
Reconciliation of Non-GAAP Measures
37 37
Reconciliation of Non-GAAP Measures
38 38
Reconciliation of Non-GAAP Measures
39 39
Reconciliation of Non-GAAP Measures
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Reconciliation of Non-GAAP Measures
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Reconciliation of Non-GAAP Measures
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Reconciliation of Non-GAAP Measures
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Reconciliation of Non-GAAP Measures