RB Global Q1 2025 Earnings Call Transcript

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May 7, 2025
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Operator

Good day, everyone, and welcome to the RB Global First Quarter twenty twenty five Earnings Call. This call is being recorded. At this time, I would like to hand the call over to Mr. Samir Rapid. Please go ahead, sir.

Sameer Rathod
Vice President of Investor Relations & Market Intelligence at Ritchie Bros. Auctioneers

Hello, and good afternoon. Thank you for joining us today to discuss our first quarter results. Jim Kessler, our Chief Executive Officer and Eric Gerrin, our Chief Financial Officer are with me on the call today. The following discussion will include forward looking statements, including projections of future earnings, business and market trends. These statements should be considered in conjunction with the cautionary statements contained in our earnings release and periodic SEC reports.

Sameer Rathod
Vice President of Investor Relations & Market Intelligence at Ritchie Bros. Auctioneers

On this call, we will also discuss certain non GAAP financial measures. For the identification of non GAAP financial measures, the most directly comparable GAAP financial measures and the applicable reconciliation of the two, see our earnings release and periodic SEC reports. At this time, I'd like to turn the call over to our CEO, Jim Kessler. Jim?

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Thanks, Sameer, and good afternoon to everyone joining the call. I want to recognize our teammates' dedication to our partners and customers, particularly in this rapidly evolving macroeconomic environment. The recently announced tariffs have introduced a new level of uncertainty, and we are actively monitoring the impacts to help our partners navigate their environment and make the best business decisions. As always, we have not changed our approach and are focused on factors we control to ensure we can consistently over deliver on our commitments. Our disciplined execution was evident again in this quarter with adjusted EBITDA declining 1% on a 6% decline in gross transactional value.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Recall that we highlighted on last quarter's call that we anticipated the decline in GTV in the first quarter due to year over year comparison issues. To start, we are thrilled to announce the acquisition of J. M. Wood for approximately $235,000,000 Our shared values and culture align naturally, particularly in our commitment to putting our partners and customers first. This move enhances our geographical coverage in Alabama and adjacent states and brings a talented team of sales professionals with deep local relationships on board.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

They primarily focus on commercial construction and transportation assets and have a strong footprint with municipal customers. We expect to close this acquisition in the second or third quarter subject to regulatory approvals and customary closing conditions. Moving to the CC and T end markets, while our customers and enterprise partners exercise caution amid ongoing uncertainty, we continue proactively investing in our future by focusing on controllable factors that drive growth while improving operational efficiencies. This includes having the most comprehensive network of territory managers while continuously implementing new programs to improve productivity. This strategic approach will ensure we stay top of mind with our customers and partners when they want to or need to transact.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Regarding our enterprise partners, our strategy remains focused on delivering solutions that optimize their total cost of ownership and deliver premium price performance based on our liquidity preferences. We leverage our data and insights, products and parts procurement technology to solidify our position as the natural choice for fleet realignment. This integrated approach ensures we are deeply embedded in their operational workflows, driving long term value and partnerships. From an operational standpoint, since joining last year, Steve Lewis, our COO, has made excellent strides in implementing a metric driven framework for our Ritchie Brothers branded yards to help us accelerate efficiency and elevate the experience of our partners and customers. As part of these efforts, we have increased the number of planned sales events in North America by approximately 15% this year.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

We are also strategically adjusting the timing of all of our events to balance supply through the quarter and better position us to support premium price performance for our consignors. The new schedule is expected to improve loadout times of assets for our buyers, enhancing their experience, enabling us to manage our cost structure more efficiently by smoothing out peaks and valleys of activities. Turning to the automotive sector, we hosted IAA's twenty second industry leadership summit, which again shattered attendance records. This premier event is a key platform for engaging North American insurance fleet and remarketing partners and reinforces our commitment to exceeding customers' expectations through robust and consistent performance. We welcomed seven prospective partners who had not attended in over a decade.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Many approached me after our presentations saying they heard about the new IAA and had come to see it

Jim Kessler
CEO at Ritchie Bros. Auctioneers

for

Jim Kessler
CEO at Ritchie Bros. Auctioneers

themselves. I can confidently say we delivered. We are energized by the positive momentum in our automotive business. And in the first quarter, we are excited to announce that a new partner in The U. K.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Has selected us, Direct Line Group, as their sole salvage provider. We have signed a multiyear contract and will start supporting them in the third quarter of this year. I am also very pleased to say that we have gained market share globally in salvage in the first quarter on a year over year basis. In conjunction with the summit, we also hosted the IEA Advisory Council. This is an open and collaborative forum where key insurance partners share insights and we work together to identify opportunities to drive value to their P and L.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

One area continues to be top priority for them is advanced charges. Costs such as towing and storage that are incurred before a vehicle reaches our facilities. In response, we've launched several initiatives to improve predictability and cost management, including developed data driven models to forecast storage expenses and optimize asset routing. We believe there is significant opportunity to reduce advanced charges by routing vehicles more efficiently from the accident scene to their final destination. We recently launched IAA Total Loss Predictor, a new AI driven tool that helps our partners better classify vehicles that should go directly to our yard versus repair shop.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

We are also actively exploring the best venue concept to support our insurance partners better. While most of the assets they supply are automotive salvage, there is also a meaningful volume of construction and transportation assets that RB Global is uniquely positioned to help with. The opportunity is sizable. Over the past twelve months, our insurance partners have provided over 100,000 CC and T assets. We believe we can unlock premium price performance by cross syndicating these assets to Ritchie Bros.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Branded properties. Our early pilots have shown promising results reinforcing our belief in the potential of this approach. Overall, we continue to drive strong gross returns or salvage values as a percent of actual cash value for our partners. This stems from our continuous improvement in process and investment in technology. From an operational standpoint, we had another robust quarter with the team over delivering against our service level agreements.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Our transparency program continues to be industry leading and I am very proud of the results we are driving for our partners. We also continue to make excellent strides in attracting new international automotive buyers to our marketplace, with the percentage of vehicles sold to international buyers hitting all time highs. That said, we are cycling over significant product enhancements and process changes from the previous year, exposing ASPs to broad macro forces. I would also note that at the margin, we saw some buyer hesitancy in the first quarter due to the threat of tariffs. This combined with year over year mix headwinds drove U.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

S. Insurance ASPs down approximately 3%. I will now pass the call to Eric to review our financial performance and outlook.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

Thanks, Jim. Total GTV decreased by 6%. Automotive GTV increased by 2%, driven by a 7% increase in unit volumes, partially offset by a decline in the average price per vehicle sold. Unit volume growth was driven by strong organic growth from existing partners and year over year increase in salvage market share. First quarter salvage industry volumes benefited from ongoing secular growth in loss ratios fueled by favorable spread between repair cost inflation and used vehicle inflation.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

PCC Intelligent Solutions estimated that the total loss ratio increased nearly 100 basis points in the first quarter to approximately 22.8% compared to 21.8% in the same period last year. GTV in the commercial construction and transportation sector decreased by 18% driven by a 19% decline in lot volumes partially offset by an increase in average selling price. In combination with shifting trade policies, uncertainty in the end markets is causing customers and partners to take a wait and see approach to disposition. Excluding the impact of the Yellow Corporation bankruptcy, lot volumes would have declined approximately 6% year over year. The average price per lot sold increased primarily due to an improvement in asset mix, partially offset by continued deflation in asset values.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

Asset mix tailwinds stemmed the decline in lot volume from the rental and transportation industries, where asset values are intrinsically at lower ASPs. Excluding the impact of the Yellow Corporation bankruptcy from the prior period, the GTV decline in the commercial construction and transportation sector would have been approximately 14%. Moving to service revenue. Service revenue was broadly flat on a higher service revenue take rate offset by a lower level of GTV. The service revenue take rate increased approximately 150 basis points year over year to 22.3% driven by a higher average buyer fee rate offset by a lower average commission rate and a decline in our marketplace services businesses.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

Moving to adjusted EBITDA. Adjusted EBITDA declined 1% on lower levels of GTV and a higher operating expense level, partially offset by an expansion in our service revenue take rate and a higher contribution from inventory returns. Our dedication to efficiency and disciplined execution was evident again in the first quarter as adjusted EBITDA as a percentage of DTV increased to 8.6% compared to 8.1% the prior year. Adjusted earnings per share declined 1%, which is in line with the decline in adjusted EBITDA. Before we move to the outlook, I want to note that on April 3, we repriced our Term Loan A and revolver.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

This will reduce our bank spread by approximately 85 basis points and the undrawn revolver fee by 20 basis points. We also increased the revolver capacity to $1,300,000,000 improved financial covenants for more financial flexibility and extended the maturity date to April 2030.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

Now moving to the outlook.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

We are keeping our full year outlook unchanged. We are traversing an unprecedented level of market uncertainty and changes in trade policy. While the direct impact on our business is relatively small, many customers and partners are trying to assess the impact on their business. These second and third order impacts are challenging to measure and predict, increasing the range of the possible outcomes. We remain committed to advancing our long term growth strategy by investing in key technological initiatives and expanding the sales force.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

We're also controlling what we can and are exercising prudent expense management while limiting discretionary spending to help us navigate the current environment. With that, let's open the call for questions.

Operator

Thank you, sir. Our first question comes from Sabahat Khan, RBC Capital Markets.

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Okay, great. Thanks and good afternoon. I guess maybe just on the sort of the commercial segment, historically the legacy business has seen some level of volume uptick during periods of macro uncertainty. What are your customers? It sounds like a bit of a wait and see approach, but are they unsure of the background?

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Kind of what's their positioning right now? Are there folks that might dispose if they get a bit more clarity? Get a bit more if we can get a bit more color on the the CAC and T segment,

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Yeah. Happy to do so. And and, I think Eric mentioned this in his message, that we started with. When you kind of get down to lower level, you know, the chain of how to make decisions, what decision gets made, it gets really hard. But the one thing I would just point out, when you think about the environment we came out of because a year ago, you know, on this side of the business, all that COVID equipment came in, and then it all got disposed of.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

And then we immediately went into higher interest rate environment, and then you add the change in the presidency in The US and tariffs and that uncertainty, I think there is still some optimism out there from our partners about mega projects and other projects in general coming through. So I think where the level of interest rates are, investment in new equipment versus holding onto it and then waiting and see if these major major projects come through, I think, is where their mind is at right now. And then for us, you know, with all the different services and everything we have, what we're trying to do right now is understand what their strategic priorities are and how do we add value in this environment. So we're very focused with all of our partners. And for us, the disposition is just more of a timing issue of when it comes in this environment.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

But we wanna make sure we're adding value every day inside of their p and l.

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Great. And then just for my follow-up, on The UK customer win that you announced, I think you indicated starts to contribute in Q3. Anything you can share on the scale in terms of units of this customer? And then in terms of the IAA presence or capabilities in The UK, is it similar to the Australia situation where there might be some sort of a build required? Just maybe thoughts on what the setup in The UK is for IAA, the capabilities?

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

And then anything on the scale of this customer? Thanks.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

No. You got it. So just to start with scale, The UK already had a presence unlike Australia where we're building a presence. Ritchie Brothers had the presence in Australia and not salvage cars. So The UK, we already have a presence.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

We already have footprints. So really not any heavy investment that it takes. It's more just like in The US, how do we go out and get more market share. And, really, what I'm proud of of the team is this was a customer where we did no business before, and now we're doing an exclusive deal. And our partner did ask us not to really talk about units specifically, so we're gonna honor that.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

But what I would say is they're in a top tier of insurance carriers.

Operator

Up next, we'll hear from Krista Friesen, CIBC.

Krista Friesen
Director - Equity Research at CIBC Capital Markets

Hi. Thanks for taking my question. Maybe just to follow on the IAA topic. You were talking about the growth in market share that you saw this past quarter. Can you elaborate a little bit more on that if there's if you can quantify that at all?

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Yeah. I I don't think we're gonna get into the details of the quantification, but I think if you go back to past calls, we've announced a bunch of different insurance carrier changes that have taken place, and that's all starting to come through the P and L as they get fully realized each quarter.

Krista Friesen
Director - Equity Research at CIBC Capital Markets

Okay. Great. And then maybe also just you were talking about some of the hesitancy that you're seeing in your customers right now. Was that I assume that was throughout the quarter. And have you seen any improvement just in the first half of Q2 here?

Jim Kessler
CEO at Ritchie Bros. Auctioneers

I think I I wanna separate this question in two things because I think there's a macro question and there's also an RB Global kind of question. And and I just wanna remind everyone, the one thing that RB Global is going through is so unique than any past years or quarters that we've had. About a year and a half ago, a year ago, we won the Yellow Deal, which was that no one else has ever had on the rental side of the business and equipment and transportation. A couple of our big partners had a had all that new equipment from COVID that got delayed to come in, so it created a disposition cycle that was different than everyone else. Extremely proud of our team to be able to look at liquidity for our partners at a at a very good level back then.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

And but now we're in an environment where interest rates are higher for new equipment, tariffs of what's going on, in the macro environment. So this is such a unique environment. When we go back and look at the history of Richard Ritchie Brothers, I don't think there's ever been an environment with these dynamics of, what we went through because of COVID and and delayed equipment equipment coming in, then a bunch of dispositions that had to happen. And then you're in an environment where interest rates are higher than they've been in the past, people have to make decisions, you know, what projects are coming up, and what do I wanna do with new equipment compared to the interest rate and and buy into new equipment or dispose and hold on to. So we're disin this environment.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

And I wouldn't say the macro environment has changed dramatically for someone to make a substantial decision different than they had in the past quarter.

Krista Friesen
Director - Equity Research at CIBC Capital Markets

Thanks. Really appreciate that color. I'll jump back in the queue.

Operator

Up next is Michael Feniger, Bank of America.

Michael Feniger
Michael Feniger
Analyst at Bank of America

Hey, guys. Thanks for taking my questions. Just with the GTV down 6% in q one, you guys reaffirmed the full year of 0% to 3%. Just help us understand with some of the commentary. Is it are we flat in Q2, positive in the second half?

Michael Feniger
Michael Feniger
Analyst at Bank of America

Is it potentially still down a little bit because of some of this uncertainty and that it's more back half, you know, a back half inflection? Just kind of just thinking about with the way the year started and some of the commentary on the hesitancy, just how we kind of flow through the rest of the year on the GTV side.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

Yes. Thank you for the question, Michael. This is Eric. As I said on the fourth quarter earnings call, we anticipated the mid single digit down in Q1 for some of the things that Jim described that we were lapping over a very strong prior year. So our expectation is for the full year that we're still within our range.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

I typically don't give guidance on a quarterly basis. But with that said, I would say as we progress through the year, are anticipating the back half to be a bit stronger, if that's helpful for you.

Michael Feniger
Michael Feniger
Analyst at Bank of America

That is helpful. And then maybe, Jim, just I know there's commentary on the hesitancy. Is that that sounds like it's on the commercial side. I'm just curious on the auto side. I know there's the second and third and fourth degree implications here.

Michael Feniger
Michael Feniger
Analyst at Bank of America

I'm just kind of curious what you're seeing there with potential tariffs on autos, what that means for pricing on new, which filters to use, but also repair prices. I'm just kind of curious with the loss ratio improving, how we should kind of think about these moving pieces in tariff world.

Sameer Rathod
Vice President of Investor Relations & Market Intelligence at Ritchie Bros. Auctioneers

Hey, Michael. It's Sameer. Like you said, you know, there are a lot of different kind of moving pieces that we follow them very closely. I think at a high level when you think about it, you know, the equation that we've laid out is if the repair cost inflation is greater than, used car inflation, you'd expect the loss ratio to expand. And then the the converse is to have used car pricing increases faster

Sameer Rathod
Vice President of Investor Relations & Market Intelligence at Ritchie Bros. Auctioneers

I think at this point, you know, we'd just be speculating on what's going to happen given that tariffs and things are changing by the hour. But we feel comfortable with the guidance that we provided, in terms of the GTV growth.

Operator

We'll go next to Craig Kennison, Baird.

Craig Kennison
Director of Research Operations & Senior Research Analyst at Baird

I wanted to focus on the acquisition of J. M. Wood. I'm curious, what synergies do you bring to the table on a deal like that?

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Yeah. Happy to take you through it at a high level. So one, JM Wood is in a state where we didn't have any yard presence. So we're really happy to fill in Alabama. And and just think about any large company with a global scale like ours, and when you buy a business that's been owned by, you know, a family business, technology and scale and services and attach rate, financial services, transportation services, the scale of technology.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Think about all the platforms that we have from Boom and Bucket to MPE to Iron Planet to the Ritchie Brothers live event. And and what we love about JMWood is they do certain things where we really haven't expanded, like municipalities in this c c and t space where we wanna take their expertise and take that across The US as we do it. But just think about all the back office, all the accounting, all the finance activities that a large company can help a family owned business do and and the technology component of it.

Craig Kennison
Director of Research Operations & Senior Research Analyst at Baird

Yeah. Thanks, Jim. And as a as a follow-up, to what extent is this a template for other deals like this given, you know, your opportunity to consolidate in this market?

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Yeah. Look, in general, we're we're excited about the m and a that is out there for us to go after. What we wanna stay focused on, and Eric's kind of been given this guidance for the last year, now that we got the leverage ratio where we want it, having these tuck ins ins come in, and we think we have opportunity in The US, in the international space to be able to leverage our scale. And we think there's ample enough opportunities to be able to go out there and go after acquisitions like you see with JM Wood.

Craig Kennison
Director of Research Operations & Senior Research Analyst at Baird

Great. Thank you.

Operator

Up next is Maxim Sytchev, NBF.

Maxim Sytchev
Managing Director at National Bank Financial

Hi, good afternoon gentlemen. Just a quick question around Australia and how the ramp up is going there with the relatively recently signed client there. Thanks.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Yeah. Yeah. So for Australia, just as a reminder, it really starts in the midsummer time frame us when we'll start accepting cars and think about the process of titles and everything else until you kind of see your first car for sale kind of happens after that date. But think about midsummer is the plan for us to start accepting cars at an r IAA slash RB Global lot.

Maxim Sytchev
Managing Director at National Bank Financial

Okay. Okay. That's great.

Maxim Sytchev
Managing Director at National Bank Financial

That's it. Thank you very much.

Operator

Next up is Michael Feniger, Bank of America.

Michael Feniger
Michael Feniger
Analyst at Bank of America

Hey, guys. Thanks for squeezing me back in. Just I promise just one here. Just on the service revenue take rate, it it was up a 50 basis points. Can you guys just unpack that a little bit more?

Michael Feniger
Michael Feniger
Analyst at Bank of America

Is this higher buyer fee, is that one time in nature for the quarter? Is that kind of how is a buyer fee that's kind of going to be influenced for the rest of the year? I'm just kind of curious if you could talk about that service take rate, explain 150 basis points, which kind of helps offset some of the other weakness you guys saw in other areas of the business? Thank you.

Eric Guerin
Chief Financial Officer at Ritchie Bros. Auctioneers

Thanks for the question, Michael. Yeah. We typically won't comment on the composition of the take rate. What I would say is we continue to monitor ongoing what our fees and commission rates are and adjust accordingly within the market and the dynamics. So we're really comfortable with where we ended for this quarter, but I don't give a guidance for the specific take rate.

Operator

And everyone at this time, there are no further questions. I'd like to hand the call back to Mr. Jim Kessler for any additional or closing remarks.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Thank you so much. So first, just wanted to thank all the RV Global teammates for your hard work and your continued dedication and to add in value, teaching every partner that we have, and really that consistency and dedication of making sure we're partner our partners first is utmost importance to our success in the future. So thank you so much for doing that. And everyone on the call, thank you for taking the time to listen to our story. We're looking forward to talking to everyone soon.

Jim Kessler
CEO at Ritchie Bros. Auctioneers

Thank you so much.

Operator

Once again, ladies and gentlemen, that does conclude today's conference. Thank you all for your participation today. You may now disconnect.

Analysts
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Key Takeaways

  • Adjusted EBITDA declined 1% on a 6% GTV drop in Q1, but margin improved to 8.6% from 8.1%, aided by higher service revenue take rates.
  • Announced acquisition of J.M. Wood for $235 million to expand coverage in Alabama and enhance commercial construction and transportation partnerships.
  • Automotive segment delivered 2% GTV growth with a 7% rise in units, secured a multiyear exclusive salvage deal with Direct Line Group in the UK, and gained global salvage market share.
  • Launched the AI-driven IAA Total Loss Predictor and improved routing models to reduce advanced charges and boost cost predictability for insurance partners.
  • Reaffirmed full-year 0–3% GTV growth outlook amid tariff and macro uncertainty, while repricing debt to lower funding costs and extend financial flexibility.
AI Generated. May Contain Errors.
Earnings Conference Call
RB Global Q1 2025
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