Authorization

Ritchie Bros. reports fourth quarter and 2018 annual results

VANCOUVER, Feb. 28, 2019 /CNW/ - Ritchie Bros. Auctioneers Incorporated (NYSE & TSX: RBA, the "Company" or "Ritchie Bros.") reports results for the fourth quarter and full year ended December 31, 2018.A 

(All figures are presented in U.S. dollars)

Fourth quarter highlightsOperating income of $56.3 million increased 41% compared to $40.0 million in the fourth quarter of 2017. Net income attributable to stockholders of $35.5 million decreased 3% compared to $36.8 million in the fourth quarter of 2017, mainly due to the non-repeating tax benefit resulting from the U.S. tax reform in the prior year. Diluted earnings per share ("EPS") attributable to stockholders decreased 6% to $0.32 in the fourth quarter of 2018, versus $0.34 in the fourth quarter of 2017, while diluted adjusted EPS attributable to stockholders (non-GAAP measure) increased 23% to $0.32 versus $0.26 in the fourth quarter of 2017. Other key fourth quarter highlights included:Consolidated results:

Total revenues of $356.0 million increased 22% over the fourth quarter of 2017



Total Company Agency Proceeds (non-GAAP measure) of $193.1 million increased 8% from $178.8 in the fourth quarter of 2017



Total selling, general and administrative expenses ("SG&A") of $95.6 million increased 3% from $93.0 million in the fourth quarter of 2017

Auctions & Marketplaces ("A&M") segment results:

Gross Transaction Value1 ("GTV") of $1.34 billion increased 3% compared to $1.29 billion in the fourth quarter of 2017



Total revenues of $321.1 million increased 22% compared to $262.6 million in the fourth quarter of 2017



A&M agency proceeds (non-GAAP measure) of $178.6 million increased 9% from $163.7 million in 2017



A&M revenue rate of 24.0% increased 370 bps from 20.3% in 2017, and A&M agency proceeds rate (non-GAAP measure) of 13.4% increased 80 bps from 12.6% in 2017

Full year highlightsNet income attributable to stockholders of $121.5 million increased 62% compared to $75.0 million in 2017. Diluted earnings per share ("EPS") attributable to stockholders increased 61% to $1.11 versus $0.69 in 2017, while diluted adjusted EPS attributable to stockholders (non-GAAP measure) increased 33% to $1.08 from $0.81 in 2017. Other key highlights included: Consolidated results:

Total revenues of $1.17 billion; increased 20% compared to $971.2 million in 2017



Total Company agency proceeds (non-GAAP measure) of $729.1 million increased 19% from $610.5 million in 2017



Cash provided by operating activities of $144.3 million for the year ended December 31, 2018



Declared quarterly dividends aggregating to $0.70 per common share in 2018

Auctions & Marketplaces segment results:

GTV of $4.96 billion up 11% compared to $4.47 billion in 2017



A&M total revenues of $1.05 billion increased 20% compared to $870.8 million in 2017



A&M agency proceeds (non-GAAP measure) of $672.2 million increased 19% from $564.3 million in 2017



A&M revenue rate of 21.1% increased 160 bps from 19.5% in 2017, and A&M agency



proceeds rate (non-GAAP measure) of 13.5% increased 90 bps from 12.6% in 2017

"We delivered strong fourth quarter performance with good revenue growth of 22% and Agency Proceeds growth of 8% coupled with operating income growth of 41% versus prior year. It was a fitting end to an excellent year in 2018 in which we achieved full-year revenue growth of 20% with Agency Proceeds growth of 19% and both diluted and diluted adjusted Earnings Per Share growth improving 61% and 33% respectively. Significantly contributing to our growth were our live and online auction channels, US Strategic Accounts, the US West region, Canada and International as well as RBFS and Mascus. We are proud that the combined Ritchie Bros. delivered $829 million in online full-year GTV, significantly surpassing what IronPlanet achieved in pure online as a standalone company, excluding live events in its peak year of 2016. We are delighted with the strength of our balance sheet as we systematically paid down debt and significantly reduced our leverage ratio well below our target ceiling." said Ravi Saligram, Chief Executive Officer of Ritchie Bros. Continued Saligram, "The record sale in Orlando last week is indicative that supply and demand are harmonizing and we are encouraged to see supply loosening. We're enthusiastic about our growth prospects in 2019 as our technology and operational initiatives take hold, our multi-channel sales execution improves and both Marketplace-E and RB Asset Solutions start to build momentum."


_________________________________



We present both GAAP and non-GAAP measures to provide investors with additional information. We believe that providing these non-GAAP measures along with GAAP measures allows for increased comparability of our ongoing performance from period to period. Non-GAAP financial measures referred to in this report are labeled as "non-GAAP measure" or designated as such with an asterisk (*). Please see pages 12-15 for explanations of why we use these non-GAAP measures and the reconciliation to the most comparable GAAP financial measures.








1A GTV represents total proceeds from all items sold at the Company's 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.

Financial Overview
(Unaudited)






(in U.S. $000's, except EPS)



Three months ended December 31,








Year ended December 31,


















%Change













% Change








2018



2017



2018 over
2017













2018








2017



2018 over
2017



Service revenues



$



197,779



$



182,351



8%








$



749,515



$



624,417



20%



Revenue from inventory sales








158,193








109,399



45%













420,511








346,774



21%



Total revenues








355,972








291,750



22%













1,170,026








971,191



20%



Costs of services








46,315








39,096



18%













159,058








133,189



19%



Cost of inventory sold








142,505








98,895



44%













374,339








306,498



22%



Selling, general and administrative expenses








95,624








92,983



3%













382,676








323,270



18%



Acquisition-related costs








54








3,110



(1%)













5,093








38,272



(87%)



Operating income








56,327








40,038



41%













185,189








107,454



72%



Operating income margin








15.8%








13.7%



210 bps













15.8%








11.1%



470 bps



Adjusted operating income (non-GAAP measure)








56,327








42,204



33%













186,690








133,793



40%



Adjusted operating income margin (non-GAAP measure)








15.8%








14.5%



130 bps













16.0%








13.8%



220 bps



Net income attributable to stockholders








35,486








36,754



(3%)













121,479








75,027



62%



Adjusted net income attributable to stockholders (non-GAAP measure)








35,486








28,298



25%













117,669








87,662



34%



Diluted earnings per share attributable to stockholders



$



0.32



$



0.34



(6%)








$



1.11



$



0.69



61%



Diluted adjusted EPS attributable to stockholders (non-GAAP measure)



$



0.32



$



0.26



23%








$



1.08



$



0.81



33%



GTV



$



1,337,614



$



1,294,932



3%








$



4,964,165



$



4,467,982



11%



Agency proceeds (non-GAAP measure)



$



193,133



$



178,785



8%








$



729,111



$



610,517



19%



A&M revenue



$



321,124



$



262,628



22%








$



1,046,518



$



870,797



20%



A&M revenue rate








24.0%








20.3%



370 bps













21.1%








19.5%



160 bps



A&M agency proceeds (non-GAAP measure)



$



178,619



$



163,733



9%








$



672,179



$



564,299



19%



A&M agency proceeds rate (non-GAAP measure)








13.4%








12.6%



80 bps













13.5%








12.6%



90 bps

Consolidated Performance HighlightsTotal Revenuesincreased 22% to $356.0 million in the fourth quarter 2018 compared to $291.8 million in the fourth quarter of 2017. This increase is primarily due to the increased inventory sales in the United States and Europe, higher fee revenues, and RBFS growth.A  For the full year, total revenues increased $198.8 million, or 20%, driven principally by the Acquisition, as well as increased fee revenue, and services growth. Agency Proceeds (non-GAAP measure)increased 8% to $193.1 million in the fourth quarter 2018 compared to $178.8 million in the fourth quarter of 2017 driven by overall GTV growth with notably strong momentum in the online channel, as well as higher fee revenue, partially offset by some inventory rate softness in the United States. For the full year, agency proceeds (non-GAAP measure) increased $118.6 million, or 19%, driven principally by the Acquisition of IronPlanet, as well as increased fee revenue, and services growth. Costs of services increased $7.2 million, or 18%, to $46.3 million compared to $39.1 million in the fourth quarter of 2017. This increase is primarily due to higher ancillary costs, as well as costs to support the Company's GovPlanet operations. Cost of services for the full year increased $25.9 million, or 19%, to $159.1 million compared to $133.2 million in 2017 primarily due to the Acquisition.Selling, general and administrative ("SG&A") expenses increased $2.6 million, or 3%, in the fourth quarter of 2018 compared to the fourth quarter of 2017. This increase is primarily due increased costs to implement the GovPlanet non rolling stock contract with the US Department of Defence, offset by reduced share unit expenses. For the full year, SG&A expenses of $382.7 million increased $59.4 million, or 18%, compared to 2017. Operating incomeA increased 41% to$56.3 million in the fourth quarter of 2018 compared to $40.0 million in the fourth quarter of 2017. This was primarily due to increased revenue, more disciplined SG&A expense management and lower acquisition-related costs. A For the full year, operating income increased 72% to $185.2 million compared to $107.5 million in 2017. Adjusted operating income(non-GAAP measure) increased 33% in the fourth quarter of 2018 compared to the fourth quarter of 2017, which excluded the impact of non-recurring acquisition related costs and severance costs in the fourth quarter of 2017.A  For the full year, adjusted operating income (non-GAAP measure) increased 40%.Net income attributable to stockholders decreased 3% to $35.5 million in the fourth quarter of 2018 compared $36.8 million in the fourth quarter of 2017. The decrease was primarily due to the year over year difference in tax rates from the favourable impact in the fourth quarter of 2017 from the US tax reform changes.A  Adjusted net income attributable to stockholders (non-GAAP measure), which removes $10.1 million of the tax benefit related to the US tax reform changes increased 25%.A  For the full year, net income attributable to stockholders increased 62% to $121.5 million compared to $75.0 million in 2017, and adjusted net income attributable to stockholders (non-GAAP measure) increased 34% to $117.7 million. Diluted EPS attributable to stockholdersA decreased 6% to $0.32 in the fourth quarter of 2018 compared to diluted EPS attributable to stockholders of $0.34 in the fourth quarter of 2017, and diluted adjusted EPS attributable to stockholdersA (non-GAAP measure) increased 23%.A For the full year, diluted EPS attributable to stockholders increased 61% to $1.11 from $0.69 in 2017 and diluted adjusted EPS attributable to shareholders (non-GAAP measure) of $1.08 increased 33% compared to $0.81 for 2017. Auctions & Marketplaces Segment Performance HighlightsGTVA increased 3% to $1.34 billion in the fourth quarter of 2018 compared to $1.29 billion in the fourth quarter of 2017. The increase was led by consecutive double digit online auction growth and positive growth in the live auction channel from stronger year over year comparable growth in live industrial auctions offset by a lower number of auctions. A For the full year, GTV increased 11% to $4.96 billion compared to $4.47 billion in 2017. A&M total revenuesA revenue increased 22% to $321.1 million in the fourth quarter of 2018 compared to $262.6 million in the fourth quarter of 2017. This increase was primarily due to GTV growth, higher inventory sales in the United States and Europe, and increased fee revenue.A  A&M revenue rate grew 370 basis points to 24.0% in the fourth quarter of 2018 from 20.3% in the fourth quarter of 2017. For the full year, A&M revenue increased 20% to $1.05 billion in fiscal 2018 compared to $870.8 million in 2017. A&M revenue rate grew 160 basis points to 21.1% in 2018 compared to 19.5% in 2017.A&M agency proceeds (non-GAAP Measure) increased 9% to $178.6 million driven by overall GTV growth with notably strong momentum in the online channel, as well as higher fee revenue, partially offset by some inventory rate softness in the United States.A  A&M agency proceeds grew 19% to $672.2 million for the full year 2018.Dividend Information
Quarterly dividend
The Company declared on January 25, 2019, a quarterly cash dividend of $0.18 per common share payable on March 8, 2019 to shareholders of record on February 15, 2019.Q4 2018 Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended December 31, 2018, at 8:00 am Pacific time / 11:00 am Eastern time / 4:00 pm GMT on March 1, 2019.A  A replay will be available shortly after the call.Conference call and webcast details are available at the following link:
https://investor.ritchiebros.comAbout 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 number of sectors, including construction, transportation, agriculture, energy, oil and gas, mining, and forestry, the company's selling channels include: Ritchie Bros.A Auctioneers, the world's largest industrial auctioneer offers live auction events with online bidding; IronPlanet, an online marketplace with featured weekly auctions and providing the exclusive IronClad AssuranceA®A equipment condition certification; Marketplace-E, a controlled marketplace offering multiple price and timing options; Mascus, a leading European online equipment listing service; and Ritchie Bros. Private Treaty, offering privately negotiated sales. The company's suite of multichannel sales solutions also includes RB Asset Solutions, a complete end-to-end asset management and disposition system. Ritchie Bros. also offers sector-specific solutions including GovPlanet, TruckPlanet,A and Kruse Energy Auctioneers, plus equipment financing and leasing through Ritchie Bros. FinancialA Services. For more information about 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, 2018, 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.GTV and Consolidated Financial InformationGTV and Consolidated Income Statements a?? Fourth Quarter
(Expressed in thousands of United States dollars, except share and per share amounts)
(Unaudited)































Three months ended December 31,








2018













2017



GTV



$



1,337,614








$



1,294,932



Revenues:




























Service revenues



$



197,779








$



182,351



Revenue from inventory sales








158,193













109,399



Total revenues








355,972













291,750



Operating expenses:




























Cost of services








46,315













39,096



Cost of inventory sold








142,505













98,895



Selling, general and administrative expenses








95,624













92,983



Acquisition-related costs








54













3,110



Depreciation and amortization expenses








17,163













15,647



Gain on disposition of property, plant and equipment








(1,773)













(585)



Foreign exchange (gain) loss








(243)













2,566



Total operating expenses








299,645













251,712



Operating income








56,327













40,038



Interest expense








(11,807)













(10,980)



Other, net








2,855













1,885



Income before income taxes








47,375













30,943



Income tax expense (recovery)








11,915













(5,894)



Net income



$



35,460








$



36,837



Net income attributable to:




























Stockholders








35,486













36,754



Non-controlling interests (loss)








(26)













83








$



35,460








$



36,837



Earnings per share attributable




























to stockholders:




























Basic



$



0.33








$



0.34



Diluted



$



0.32








$



0.34



Weighted average number of share outstanding:




























Basic








108,649,637













107,198,875



Diluted








109,983,224













108,245,291

GTV and Consolidated Income Statements a?? Year-to-Date
(Expressed in thousands of United States dollars, except share and per share amounts)
(Unaudited)































Year ended December 31,








2018













2017



GTV



$



4,964,165








$



4,467,982



Revenues:




























Service revenues



$



749,515








$



624,417



Revenue from inventory sales








420,511













346,774



Total revenues








1,170,026













971,191



Operating expenses:




























Cost of services








159,058













133,189



Cost of inventory sold








374,339













306,498



Selling, general and administrative expenses








382,676













323,270



Acquisition-related costs








5,093













38,272



Depreciation and amortization expenses








66,614













52,694



Gain on disposition of property, plant and equipment








(2,731)













(1,656)



Impairment loss








-













8,911



Foreign exchange (gain) loss








(212)













2,559



Operating expenses








984,837













863,737



Operating income








185,189













107,454



Interest expense








(44,527)













(38,291)



Other, net








11,850













8,231



Income before income taxes








152,512













77,394



Income tax expense








31,006













2,088



Net income



$



121,506








$



75,306



Net income attributable to:




























Stockholders








121,479













75,027



Non-controlling interests








27













279








$



121,506








$



75,306



EPS attributable to stockholders:




























Basic



$



1.12








$



0.70



Diluted



$



1.11








$



0.69



Weighted average number of share outstanding:




























Basic








108,063,349













107,044,348



Diluted








109,388,236













108,113,151

Consolidated Balance Sheets
(Expressed in thousands of United States dollars, except share data)
(Unaudited)































As at December 31



2018








2017



Assets


























































Cash and cash equivalents



$



237,744








$



267,910



Restricted cash








67,823













63,206



Trade and other receivables








129,257













92,105



Inventory








113,294













38,238



Other current assets








49,055













27,610



Income taxes receivable








6,365













19,418



Total current assets








603,538













508,487

































Property, plant and equipment








486,599













526,581



Other non-current assets








29,395













31,554



Intangible assets








245,622













261,094



Goodwill








671,594













670,922



Deferred tax assets








15,648













18,674



Total assets



$



2,052,396








$



2,017,312

































Liabilities and Equity


























































Auction proceeds payable



$



203,503








$



199,245



Trade and other payables








201,255













164,553



Income taxes payable








2,312













732



Short-term debt








19,896













7,018



Current portion of long-term debt








13,126













16,907



Total current liabilities








440,092













388,455

































Long-term debt








698,172













795,985



Other non-current liabilities








41,980













46,773



Deferred tax liabilities








35,519













32,334



Total liabilities








1,215,763













1,263,547

































Commitments




























Contingencies




























Contingently redeemable performance




























share units








923













9,014



Stockholders' equity:




























Share capital:




























Common stock; no par value, unlimited shares




























authorized, issued and outstanding shares:




























108,682,030 (December 31, 2017: 107,269,783)








181,780













138,582



Additional paid-in capital








56,885













41,005



Retained earnings








648,255













602,609



Accumulated other comprehensive loss








(56,277)













(42,514)



Stockholders' equity








830,643













739,682



Non-controlling interest








5,067













5,069



Total stockholders' equity








835,710













744,751



Total liabilities and equity



$



2,052,396








$



2,017,312

Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
(Unaudited)






Year ended December 31,



2018













2017



Cash provided by (used in):




























Operating activities:




























Net income



$



121,506








$



75,306



Adjustments for items not affecting cash:




























Depreciation and amortization expenses








66,614













52,694



Impairment loss








-













8,911



Stock option compensation expense








8,252













13,700



Equity-classified PSU expense








11,256













3,529



Deferred income tax expense (recovery)








6,239













(17,268)



Unrealized foreign exchange loss








951













254



Gain on disposition of property, plant and equipment








(2,731)













(1,656)



Amortization of debt issuance costs








4,995













3,056



Gain on disposition of equity investment








(4,935)













-



Other, net








(2,317)













(1,237)



Net changes in operating assets and liabilities








(65,550)













10,279



Net cash provided by operating activities








144,280













147,568



Investing activities:




























Acquisition of IronPlanet, net of cash acquired








-













(675,851)



Property, plant and equipment additions








(16,860)













(10,812)



Intangible asset additions








(26,152)













(28,584)



Proceeds on disposition of property, plant and equipment








10,586













4,985



Proceeds on disposal of equity investment








6,147













-



Other, net








(4,674)













(692)



Net cash used in investing activities








(30,953)













(710,954)



Financing activities:




























Dividends paid to stockholders








(75,678)













(72,785)



Dividends paid to NCI








-













(41)



Issuances of share capital








28,524













9,936



Payment of withholding taxes on issuance of shares








(3,901)













-



Proceeds from short-term debt








19,715













6,971



Repayment of short-term debt








(6,628)













(24,479)



Proceeds from long-term debt








-













325,000



Repayment of long-term debt








(91,013)













(108,985)



Debt issue costs








-













(12,624)



Repayment of finance lease obligations








(3,950)













(2,322)



Other, net








(1,176)













(1,408)



Net cash provided by (used in) financing activities








(134,107)













119,263



Effect of changes in foreign currency rates on




























cash, cash equivalents, and restricted cash








(4,769)













17,150



Decrease








(25,549)













(426,973)



Beginning of period








331,116













758,089



Cash, cash equivalents, and restricted cash, end of period



$



305,567








$



331,116

A&M Segmented Information
(Expressed in thousands of United States dollars)






(in U.S. $000's)



Three months ended December 31,








Year ended December 31,




























% Change




























% Change








2018



2017



2018 over
2017













2018








2017



2018 over
2017



Service revenues



$



162,931



$



153,229



6%








$



626,007



$



524,023



19%



Revenue from inventory sales








158,193








109,399



45%













420,511








346,774



21%



Total revenues








321,124








262,628



22%













1,046,518








870,797



20%



Costs of services








24,542








23,739



3%













87,430








75,685



16%



Cost of inventory sold








142,505








98,895



44%













374,339








306,498



22%



SG&A expenses








91,046








89,049



2%













363,549








308,873



18%



Impairment loss








-








-



-













-








8,911



(100%)



A&M profit



$



63,031



$



50,945



24%








$



221,200



$



170,830



29%

Selected Data
(Unaudited)Live industrial auction data











Three months ended December 31,








Year ended December 31,


















% Change


















% Change








2018



2017



2018 over
2017








2018



2017



2018 over
2017



Number of consignments at industrial auctions



14,900



14,900



0%








53,950



56,850



(5%)



Number of bidder registrations at industrial auctions



171,500



171,500



0%








555,000



575,500



(4%)



Number of buyers at industrial auctions



38,500



39,250



(2%)








135,250



139,900



(3%)



Number of lots at industrial auctions



103,500



106,500



(3%)








377,000



382,500



(1%)



Number of permanent operational sites



35



39



(10%)








35



39



(10%)



Number of regional operational sites



5



6



(17%)








5



6



(17%)



Total auction sites



40



45



(11%)








40



45



(11%)



Number of industrial auctions



53



76



(30%)








183



245



(25%)

Additional Topic 606 InformationThe following table reconciles revenues as previously reported to total revenues under Topic 606:
















Prior to January 1, 2018








New Revenue Standard Adjustments








On and after January 1, 2018



(in U.S. $000's)








Revenues as previously
reported (a)








Cost of inventory sold1 (b)








Ancillary and logistical
service expenses2 (c)








Total revenues under the new
standard (a)+(b)+(c)=(d)



Quarter ended:











































December 31, 2017



$



178,785



$



98,895



$



14,070



$



291,750



September 30, 2017








141,047








72,476








13,878








227,401



June 30, 2017








166,186








71,726








14,701








252,613



March 31, 2017








124,499








63,401








11,527








199,427



Full year 2017



$



610,517



$



306,498



$



54,176



$



971,191

A The following table reconciles cost of services as previously reported to cost of services under Topic 606:
















Prior to January 1, 2018








New Revenue Standard Adjustments








On and after January 1, 2018



(in U.S. $000's)








Costs of services (a)




<
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