VANCOUVER, Nov. 9, 2017 /PRNewswire/ - Ritchie Bros. Auctioneers Incorporated (NYSE & TSX: RBA, the "Company" or "Ritchie Bros.") reports results for the three and nine months ended September 30, 2017. 

The Company also announced today a new reportable segment and a resulting change to its segmented information. The changes are due to a shift in how the Company manages and evaluates its business operations after its merger with IronPlanet (the "Merger"), which closed on May 31, 2017. The Company now distinguishes between revenues generated from transactional asset disposition services and those from other non-transactional services.  The following table illustrates the placement of key channels and services:

Third Quarter 2017 Highlights:
(All figures are presented in U.S. dollars)

During the quarter, the Company generated $141.0 million of revenues, an increase of 9% versus the same quarter last year with $10.3 million of net income attributable to stockholders versus a net loss of $5.1 million in the third quarter of 2016.  Diluted EPS attributable to stockholders was $0.09 including $3.6 million of acquisition-related costs and $10.6 million of interest expense compared to diluted loss per share attributable to stockholders of $0.05 in the third quarter of 2016.

• Consolidated Revenues up 9% to $141.0 million versus third quarter 2016
• Consolidated Revenue Rate[1] was 13.84%, a 94-basis point increase from the third quarter of 2016
• Auctions and Marketplaces segment revenues up 8% with segment Revenue Rate¹ up 66 basis points ("bps") to 12.78% versus third quarter 2016
• Revenue from other services of $10.8 million; an increase of 39% compared to the third quarter of 2016
• $97.2 million of net cash provided by operating activities through the first nine months of 2017
• Declared quarterly dividend of $0.17 per common share
• Gross Transaction Value ("GTV")¹ of $1,019.3 million, a 2% increase compared to the third quarter of 2016

"Our third quarter revenues declined on a like-for-like basis versus prior year, which is primarily related to the significant equipment supply shortage especially in the U.S., as dealers and end users continue to experience high equipment utilization rates.  We faced a tough comparable quarter due to the massive Columbus auction last year as well as growing pains of sales force integration and execution, as our legacy RB and IP teams learn to sell each others' offerings. On a positive note, the combination of RB and IP continued to deliver sequential revenue rate improvement. We achieved strong double-digit growth in our International business, particularly Europe, and in RBFS, Mascus and ancillary services.  We remain optimistic about the long-term value creation prospects of the combination with IronPlanet and are laser-focused on regaining growth momentum" said Ravi Saligram, Chief Executive Officer of Ritchie Bros.

Saligram continued, "our multi-channel live on site and online portfolio and technology platform afford us a unique ability to optimize our use of capital and to scale our business efficiently.  As we evolve our integration efforts, we are launching a comprehensive initiative to transform our auction operations to align and enable our multi-channel go-to-market sales approach and achieve structural cost efficiencies.  A first step in this process is to optimize our live auction network by rationalizing sites with marginal returns and focusing resources on our high volume sites, while increasing the usage of our weekly featured online auction throughout the year; specifically we plan to cease operations at five live auction sites in North America by year end. Our sales coverage will remain unchanged and our sales teams will continue to serve customers in these regions through both our closest live auction site and our online solutions."

Financial Overview
(Unaudited)

Results of operations – third quarter and year-to-date update
For the three and nine months ended September 30, 2017

Gross Transaction Value ("GTV") increased $20.5 million, or 2%, compared to the third quarter of 2016. The increase is primarily due to the Merger and the resulting increase in online marketplace GTV, as well as a positive impact of foreign exchange rates over the comparative period. Increases in GTV from the Merger were offset by overall lower equipment supply in the market and higher equipment utilization rates in key industry sectors leading to a decrease in the number of auction lots, as well as some lower sales productivity as the Company completes the integration of its sales teams post-Merger. On a year-to-date basis, GTV decreased $121.4 million, or 4% versus the same period last year.

During the third quarter of 2017, the Company continued to actively pursue the use of underwritten commission contracts from a strategic perspective and when the opportunity arose, only entering into such contracts when the risk/reward profile of the terms were agreeable. The volume of underwritten commission contracts decreased to 18% of GTV in the third quarter of 2017 from 27% in the third quarter of 2016, primarily due to the pressure on used equipment market supply volume. The tight supply of used equipment resulted in less opportunity for the Company to pursue underwritten commission contracts.

Revenues increased $12.2 million, or 9%, compared to the third quarter of 2016.  This increase is primarily due to the performance of live onsite auction activities in Europe and Australia, as well as the Merger and increases in revenues from other value-added services, including Ritchie Bros. Financial Services ("RBFS"). Consolidated Revenue Rate increased 94 basis points to 13.84% versus the same period last year due to the Merger and the growth in non-GTV related services. On a year-to-date basis, revenues increased $12.1 million, or 3%, versus the third quarter of 2016 with Consolidated Revenue Rate increasing by 87 basis points to 13.61% versus the same period last year. 

Costs of services increased $4.8 million to $19.6 million from $14.8 million in the third quarter of 2016. This increase is primarily due to costs associated with the Company's inspection and appraisal activities, which increased as a result of the Merger, as well as an increase in the number of agricultural auctions over the comparative period. On a year-to-date basis, costs of services increased $4.2 million, or 8% compared to the same period last year.

Selling, general and administrative ("SG&A") expenses increased $17.0 million, or 25%, compared to the third quarter of 2016. This increase is primarily due to the Merger, including increased headcount, travel costs, and search engine fees associated with the online marketplace channel, as well as merit increases and higher bank fees attributable to the new credit facility. On a year-to-date basis, SG&A expenses increased $20.9 million or 10% versus the same period last year.

Acquisition-related costs consist of operating expenses directly incurred as part of a business combination, due diligence, and integration planning – including those related to the IronPlanet Merger – and continuing employment costs that are recognized separately from the Company's business combinations. Third quarter 2017 and 2016 acquisition-related costs were $3.6 million and $5.4 million, respectively, and consisted primarily of costs associated with the Merger.  Year-to-date acquisition-related costs were $35.2 million versus $7.2 million during the first nine months of 2016.

Operating income increased $14.6 million, or 641%, to $16.9 million compared to $2.3 million in the third quarter of 2016. This improvement was primarily due to a $28.2 million impairment loss recognized in the third quarter of 2016 together with higher third quarter 2017 revenues, and partially offset by higher third quarter 2017 SG&A expenses, costs of services, and depreciation and amortization ("D&A") expenses. On a year-to-date basis, operating income decreased $27.7 million, or 29%, to $67.4 million compared to the first nine months of 2016.

Net income attributable to stockholders increased $15.4 million, or 300%, compared to the third quarter of 2016.  This improvement is primarily due to the increase in operating income and lower income tax expense, partially offset by higher interest expense. The lower income tax expense was primarily due to the lower estimated annual effective tax rate for the full 2017 year, which was caused by a greater proportion of earnings taxed in jurisdictions with lower tax rates, as well as the impact of revised estimates of the tax deductibility of stock option compensation expenses and acquisition-related costs. Also, the comparative period reflected the impact of a non-deductible goodwill impairment loss recorded in the third quarter of 2016.  The increases in interest expense were due to the increased indebtedness to fund the Merger. On a year-to-date basis, net income attributable to stockholders decreased $25.7 million, or 40% compared to first nine months of 2016. 

Primarily for the same reasons noted above, diluted EPS attributable to stockholders was $0.09 compared to diluted loss per share attributable to stockholders of $0.05 in the third quarter of 2016. On a year-to-date basis, diluted EPS attributable to stockholders decreased 42% to $0.35 from $0.60 in the first nine months of 2016.

Results by segment

Auctions and Marketplaces segment

Gross Transaction Value. GTV increased $20.5 million, or 2%, in the third quarter of 2017 compared to the third quarter of 2016.  The increase is primarily due to the Merger and the resulting increase in online marketplace GTV, as well as a positive impact of foreign exchange rates over the comparative period. On a year-to-date basis, GTV decreased $121.4 million, or 4%, compared to the nine months ended September 30, 2016. The decrease in GTV on a year-to-date basis is primarily due to the decrease in GTV generated by the live on site auction channel compared to the first nine months of 2016, partially offset by the Merger and a positive impact of foreign exchange rates over the comparative period. The live on site auction channel GTV decrease is primarily due to a decrease in the number of industrial and agricultural auction lots and changes in the auction calendar in the nine months ended September 30, 2017 compared to the same period in 2016.

Revenue. Segment revenue increased 8% to $130.2 million compared to $121.1 million in the third quarter of 2016 primarily for the same reasons noted above in the consolidated revenue commentary. Segment Revenue Rate improved 66 basis points to 12.78% in the third quarter of 2017, primarily due to the Merger, which resulted in higher buyer transaction and listing fees from the online marketplace channel.

On a year-to-date basis, segment revenue increased 1% to $400.6 million compared to $395.2 million in the nine months ended September 30, 2016. Segment Revenue Rate increased 62 basis points to 12.62% in the first nine months of 2017, primarily due to the Merger and improved performance on underwritten transactions. The impact of the improved Revenue Rate on segment revenues was partially offset by the impact of lower GTV.

SG&A expenses. Segment SG&A expenses increased $16.6 million, or 25%, compared to the third quarter of 2016 primarily for the same reasons noted above in the consolidated SG&A expense commentary.  On a year-to-date basis, segment SG&A expenses increased $19.6 million, or 10%, compared to the first nine months of 2016.

Other services

Revenue from other services grew $3.0 million, or 39%, compared to the third quarter of 2016. This increase is primarily due to the Merger, which added $1.4 million of Asset Appraisal Services ("AAS") revenue in the third quarter of 2017, as well as increases in revenue from RBFS and Mascus. On a year-to-date basis, revenue from other services grew $6.8 million, or 28%, compared to the first nine months of 2016. RBFS segment revenues increased $2.6 million and the Merger added $1.9 million of AAS revenue in the first nine months of 2017. 

RBFS operating segment. RBFS segment revenues were $3.4 million, a 20% increase compared to the $2.9 million in the third quarter of 2016. Funded volume, which represents the amount of lending brokered by RBFS, increased 15% from $56.3 million in the third quarter of 2016 to $65.0 million. RBFS segment profit increased 9% over the same comparative period to $1.7 million from $1.5 million.

On a year-to-date basis, RBFS segment revenues were $11.5 million, a 29% increase compared to the $8.9 million in the first nine months of 2016. Funded volume increased 13% from $191.6 million in the first nine months of 2016 to $216.2 million. RBFS segment operating profit increased 31% over the same comparative period to $6.4 million from $4.9 million.

Site Closures
The Company announced today a series of actions to streamline its auction site portfolio and intensify efforts to operationalize and enable its growing multi-channel program. The actions include closure of the following five North American auction sites by the end of 2017: Grande Prairie in Canada and Raleigh-Durham, St. Louis, Manchester, and Albuquerque in the United States.

Dividend Information
Quarterly dividend
The Company declares a quarterly cash dividend of $0.17 per common share payable on December 20, 2017 to shareholders of record on November 29, 2017.

Q3 2017 Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended September 30, 2017, at 8:00 am Pacific time / 11:00 am Eastern time / 4:00 pm GMT on November 10, 2017.  A replay will be available shortly after the call.

Conference call and webcast details are available at the following link:
https://investor.ritchiebros.com

About Ritchie Bros.
Established in 1958, Ritchie Bros. (NYSE and TSX: RBA) is a global asset management and disposition company, offering customers end-to-end solutions for buying and selling used heavy equipment, trucks and other assets. Operating in a multitude of sectors, including construction, transportation, agriculture, energy, oil and gas, mining, and forestry, the Company's selling channels include: Ritchie Bros. Auctioneers, the world's largest industrial auctioneer offering live on site auction events with online bidding; IronPlanet, an online marketplace with featured weekly auctions and providing its exclusive IronClad Assurance® equipment condition certification program; EquipmentOne, an online auction marketplace; Mascus, a leading European online equipment listing service; and Ritchie Bros. Private Treaty, offering privately negotiated sales. The Company also offers sector-specific solutions including GovPlanet, TruckPlanet, and Kruse Energy Auctioneers, plus equipment financing and leasing through Ritchie Bros. Financial Services. For more information about the unprecedented choice provided by Ritchie Bros., visit RitchieBros.com.

Forward-looking Statements
This news release contains forward-looking statements and forward-looking information within the meaning of applicable U.S. and Canadian securities legislation (collectively, "forward-looking statements"), including, in particular, statements regarding future financial and operational results, including integration efforts with IronPlanet gaining momentum and accelerating growth, ceasing live on site auction activities at five auction sites in North America, the use or continued development of technology assets, the effects on the Company's performance of changing foreign exchange rates, 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 Merger; and the risks and uncertainties set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, which are available on the SEC, SEDAR, and the 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 Selected Condensed Consolidated Financial Information

GTV and condensed consolidated income statements – third quarter
(Expressed in thousands of United States dollars, except share and per share amounts)
(Unaudited)

GTV and condensed consolidated income statements – year-to-date
(Expressed in thousands of United States dollars, except share and per share amounts)
(Unaudited)

Condensed consolidated balance sheets
(Expressed in thousands of United States dollars, except share data)
(Unaudited)

Condensed consolidated statements of cash flows
(Expressed in thousands of United States dollars)
(Unaudited)

Segmented information
(Expressed in thousands of United States dollars)
(Unaudited)

Selected Data
(Unaudited)

Selected balance sheet data

Selected operating data

Average industrial auction data

Non-GAAP Measures
This news release makes reference to various non-GAAP measures. These measures do not have a standardized meaning and are, therefore, unlikely to be comparable to similar measures presented by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles.

The following tables present adjusted operating income (non-GAAP measure) and adjusted operating income margin (non-GAAP measure) results for the three and nine months, respectively, ended September 30, 2017 and 2016, as well as reconcile those metrics to operating income, revenues, and operating income margin, which are the most directly comparable GAAP measures in, or calculated from, the consolidated income statements:

The first nine months 2017 adjusting items were $4.8 million ($4.8 million after tax, or $0.04 per diluted share) of stock option compensation expense related to the accelerated vesting of certain IronPlanet stock options assumed as part of the Merger, $9.1 million ($6.6 million after tax, or $0.06 per diluted share) of acquisition and finance structure advisory costs, $1.4 million ($0.9 million after tax, or $0.01 per diluted share) of severance and retention costs in a corporate reorganization that followed the Merger, and an $8.9 million ($6.6 million after tax, or $0.06 per diluted share) impairment loss recognized on various technology assets.

The third quarter and first nine months 2016 adjusting item was a $28.2 million ($26.4 million after tax, or $0.25 per diluted share) impairment loss on the Company's EquipmentOne reporting unit goodwill and customer relationships.

The following tables present adjusted net income attributable to stockholders (non-GAAP measure) and diluted adjusted EPS attributable to stockholders (non-GAAP measure) results for the three and nine months ended September 30, 2017 and 2016, as well as reconciles those metrics to net income (loss) attributable to stockholders, the effect of dilutive securities, the weighted average number of dilutive shares outstanding, and diluted earnings (loss) per share attributable to stockholders, which are the most directly comparable GAAP measures in the consolidated income statements: