Mr. Ravi Saligram reports

RITCHIE BROS. REPORTS FOURTH QUARTER AND 2017 ANNUAL RESULTS

Ritchie Bros. Auctioneers Inc. has released results for the three months and full year ended Dec. 31, 2017.

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

Fourth quarter highlights

The company generated $178.8-million of revenues, an increase of 22 per cent compared with the same quarter last year. Net income attributable to stockholders was $36.8-million compared with $27.9-million for the same quarter in 2016. Diluted earnings per share (EPS) attributable to stockholders were 34 cents in the fourth quarter of 2017, which included a $10.1-million favourable impact of the recent U.S. tax reform and $3.1-million of acquisition-related costs. This compares with diluted EPS attributable to stockholders of 26 cents in the fourth quarter of 2016. Diluted adjusted EPS attributable to stockholders (1) (non-generally accepted accounting principle measure), which excludes the $10.1-million impact of the U.S. tax reform and certain acquisition-related costs, decreased 13 per cent to 26 cents in the fourth quarter of 2017 from 30 cents in the fourth quarter of 2016. Other key fourth quarter highlights included:

• Consolidated revenue rate (2) was 13.81 per cent compared with 14.11 per cent in the fourth quarter of 2016.
• Auctions and marketplaces (A&M) segment revenues increased 20 per cent. Segment revenue rate (2) decreased 49 basis points to 12.64 per cent from 13.13 per cent in the fourth quarter of 2016.
• Revenue from other services was $15.1-million, an increase of 48 per cent compared with the fourth quarter of 2016.
• Gross transaction value (GTV) (2) of $1.3-billion, a 24-per-cent increase compared with the fourth quarter of 2016.

Full-year highlights

Full-year results were influenced by broad-based effects of unprecedented demand for infrastructure projects, high equipment utilization rates, and an overall equipment shortage principally in the United States and Canada, resulting in lower-than-expected full-year GTV and revenue performance. On May 31, 2017, the company acquired IronPlanet for $776.5-million and undertook the complex integration work, which resulted in some temporary sales productivity decline.

The company generated $610.5-million of revenues in 2017, an increase of 8 per cent compared with $566.4-million in 2016, and $75.0-million of net income attributable to stockholders. Diluted EPS attributable to stockholders was 69 cents, which included $38.3-million of acquisition-related costs and $38.3-million of interest expense. This compares with diluted EPS attributable to stockholders of 85 cents in 2016. Diluted adjusted EPS attributable to stockholders (non-GAAP measure) decreased 30 per cent to 81 cents in 2017 from $1.15 in 2016. Other key 2017 highlights included:

• Consolidated revenue rate of 13.66 per cent compared with 13.07 per cent in 2016;
• A&M segment revenues increased 6 per cent; segment revenue rate increased 36 basis points to 12.63 per cent from 12.27 per cent in 2016;
• Revenues from other services of $46.2-million, an increase of 34 per cent compared with 2016;
• Cash provided by operating activities of $146.3-million;
• Declared quarterly dividends aggregating to 68 cents per common share in 2017;
• GTV of $4.5-billion, a 3-per-cent increase compared with 2016.

(1) Diluted adjusted EPS attributable to stockholders is a non-GAAP financial measure. The company believes that comparing diluted adjusted EPS attributable to stockholders for different financial periods provides useful information about the growth or decline of its diluted EPS attributable to stockholders for the relevant financial period, and eliminates the financial impact of adjusting items it does not consider to be part of its normal operating results. Diluted adjusted EPS attributable to stockholders is calculated by dividing adjusted net income attributable to stockholders (non-GAAP measure), net of the effect of dilutive securities, by the weighted-average number of dilutive shares outstanding. Diluted adjusted EPS attributable to stockholders is reconciled to the most directly comparable GAAP measures in the company's consolidated financial statements.

(2) Gross transaction value represents the total proceeds from all items sold at the company's auctions and on-line marketplaces. It is not a measure of financial performance, liquidity or revenue, and is not presented in the company's consolidated financial statements. Auctions and marketplaces segment revenue rate is calculated as segment revenues divided by GTV. Consolidated revenue rate is calculated as total, consolidated revenues divided by GTV.

"In the fourth quarter, despite a continuation of supply constraints, we delivered GTV and revenue growth both on a reported and combined-company basis as our integration efforts started taking hold, the sales force stabilized and our go-to-market execution improved," said Ravi Saligram, chief executive officer of Ritchie Bros.

Mr. Saligram continued: "Two thousand seventeen as a whole was a historic year for Ritchie Bros. as we reshaped our future through the transformational acquisition of IronPlanet, a pivotal step in our evolution to become a truly diversified asset management and disposition company. Our full-year financial results are a reflection of the unprecedented shortage of equipment supply, softness in Alberta's oil patch and uncertainty caused by a significant delay in regulatory approvals that led to some sales force turnover. However, we made meaningful progress on several fronts, including solid revenue rate expansion over prior year, strong operating free cash flow, and excellent growth in EMEA [Europe, the Middle East and Africa], RBFS and Mascus. We are pleased to have completed our 2017 integration milestones and are on track to achieve our stated synergy targets.

"Looking ahead, we are very excited about the future of Ritchie Bros., and our results in our record-breaking auction last week in Orlando are testimony to the power of the combined company's capabilities. We are encouraged by the results in the fourth quarter and our progress to date in 2018 but remain balanced as we navigate continued tight supply in 2018."

                                       FINANCIAL OVERVIEW
                     (in millions of U.S. dollars, except earnings per share)

                                               Three months ended Dec. 31,         Year ended Dec. 31,    
                                                       2017          2016          2017          2016

Revenues                                             $178.8        $146.8        $610.5        $566.4
Selling, general and administrative expenses           93.0          74.1         323.3         283.5
Acquisition-related costs                               3.1           4.6          38.3          11.8
Impairment loss                                           -             -           8.9          28.2
Operating income                                       40.0          40.6         107.5         135.7
Adjusted operating income (non-GAAP
measure) (3)                                           42.2          40.6         133.8         164.0
Operating income margin                                22.4%         27.7%         17.6%         24.0%
Adjusted operating income margin
(non-GAAP measure) (4)                                 23.6%         27.7%         21.9%         28.9%
Net income attributable to
stockholders                                           36.8          27.9          75.0          91.8
Adjusted net income attributable to
stockholders (non-GAAP measure) (5)                    28.3          32.9          87.7         123.3
Diluted EPS attributable to
stockholders                                           0.34          0.26          0.69          0.85
Diluted adjusted EPS attributable to
stockholders (non-GAAP measure)                        0.26          0.30          0.81          1.15
                                                    -------       -------       -------       -------
GTV                                                 1,294.9       1,040.4       4,468.0       4,334.8
A&M segment
Revenues                                              163.7         136.6         564.3         531.8
Revenue rate                                          12.64%        13.13%        12.63%        12.27%
                                                    =======       =======       =======       =======

Adjusted (non-GAAP) figures for the three months and year ended Dec. 31, 2017, in the attached table have not adjusted for the impact of $1.4-million and $21.3-million of pretax acquisition-related costs, respectively.

(3) Adjusted operating income is a non-GAAP measure. The company uses income statement and balance sheet performance scorecards to align the company's operations with its strategic priorities. The company concentrates on a limited number of metrics to ensure focus and to facilitate quarterly performance discussions. The income statement scorecard includes the performance metric, adjusted operating income. The company believes that comparing adjusted operating income for different financial periods provides useful information about the growth or decline of operating income for the relevant financial period. The company calculates adjusted operating income by eliminating from operating income the pretax effects of significant non-recurring items that the company does not consider to be part of its normal operating results, such as acquisition-related costs, management reorganization costs, severance, retention, gains/losses on sale of certain property, plant and equipment, impairment losses, and certain other items, which the company refers to as adjusting items. Adjusted operating income is reconciled to the most directly comparable GAAP measures in the company's consolidated financial statements under non-GAAP measures.

(4) The company's income statement scorecard includes the performance metric, adjusted operating income margin, which is a non-GAAP measure. The company believes that comparing adjusted operating income margin for different financial periods provides useful information about the growth or decline of its operating income for the relevant financial period. The company calculates adjusted operating income margin by dividing adjusted operating income (non-GAAP measure) by revenues. Adjusted operating income margin is reconciled to the most directly comparable GAAP measures in the company's consolidated financial statements under non-GAAP measures.

(5) Adjusted net income attributable to stockholders is a non-GAAP financial measure. The company believes that comparing adjusted net income attributable to stockholders for different financial periods provides useful information about the growth or decline of the company's net income attributable to stockholders for the relevant financial period, and eliminates the financial impact of adjusting items the company does not consider to be part of its normal operating results. Adjusted net income attributable to stockholders represents net income attributable to stockholders excluding the effects of adjusting items and is reconciled to the most directly comparable GAAP measures in the company's consolidated financial statements under non-GAAP measures.

Results of operations -- fourth quarter and full-year update

GTV increased 24 per cent to $1.3-billion in the fourth quarter of 2017 compared with $1.0-billion in the fourth quarter of 2016. The higher on-line marketplace GTV is primarily driven by the acquisition. The increase was partially offset by global equipment shortages particularly in the United States, some lower sales productivity as the company progresses through the integration of its sales teams postacquisition and weaknesses in the Canadian oil patches. For the full year, GTV increased 3 per cent to $4.5-billion compared with $4.3-billion in 2016.

Revenues increased 22 per cent to $178.8-million in the fourth quarter 2017 compared with $146.8-million in the fourth quarter of 2016. This increase is primarily due to the acquisition, revenue growth in Europe and strong Mascus performance, partially offset by lapping large Canadian inventory dispersals, which favourably impacted the fourth quarter of 2016. Consolidated revenue rate declined 30 basis points to 13.81 per cent versus the same period last year. This rate decline was the result of the performance of the company's underwritten business and lapping the inventory dispersals in the fourth quarter. For the full year, revenues increased $44.1-million, or 8 per cent, driven principally by the acquisition and growth of value-added services.

Costs of services increased $8.8-million to $25.0-million compared with $16.2-million in the fourth 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 acquisition. Cost of services for 2017 was $79.0-million, which represents a $13.0-million increase from $66.1-million in 2016.

Selling, general and administrative expenses increased $18.8-million, or 25 per cent, in the fourth quarter of 2017 compared with the fourth quarter of 2016. This increase is primarily due to the acquisition, including increased head count, travel costs and search engine fees associated with the on-line marketplace channel, as well as merit increases and higher bank fees attributable to the new credit facility. For the full year, SG&A expenses of $323.3-million increased $39.7-million, or 14 per cent, compared with 2016.

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 acquisition, and continuing employment costs that are recognized separately from the company's business combinations. Fourth quarter 2017 and 2016 postacquisition-related costs were $3.1-million and $4.6-million, respectively, and consisted primarily of costs associated with the acquisition. Fiscal 2017 acquisition-related costs were $38.3-million compared with $11.8-million in 2016.

Operating income modestly declined to $40.0-million in the fourth quarter of 2017 compared with $40.6-million in the fourth quarter of 2016. This was primarily due to higher SG&A expenses, costs of services, and depreciation and amortization expenses, partially offset by the increase in revenues. For the full year, operating income decreased $28.3-million, or 21 per cent, to $107.5-million compared with $135.7-million in 2016.

Net income attributable to stockholders increased $8.9-million, or 32 per cent, in the fourth quarter of 2017 compared with the fourth quarter of 2016. This improvement is primarily due to the favourable impact from the U.S. tax reform partially offset by the increases in interest expense due to the increased indebtedness to finance the acquisition. In 2017, net income attributable to stockholders decreased $16.8-million to $75.0-million from $91.8-million in 2016.

Primarily for the same reasons noted above, diluted EPS attributable to stockholders was 34 cents in the fourth quarter of 2017 compared with diluted EPS attributable to stockholders of 26 cents in the fourth quarter of 2016. In 2017, diluted EPS attributable to stockholders decreased 19 per cent to 69 cents from 85 cents in 2016.

Results by segment

A&M segment

Revenue: Segment revenue increased 20 per cent to $163.7-million in the fourth quarter of 2017 compared with $136.6-million in the fourth quarter of 2016. This increase was primarily due to the acquisition and revenue growth in Europe, partially offset by the performance of the company's underwritten business, including the significant inventory dispersals in the fourth quarter of 2016. Segment revenue rate declined 49 basis points to 12.64 per cent in the fourth quarter of 2017 from 13.13 per cent in the fourth quarter of 2016 for the same reasons as noted above. In 2017, segment revenue increased 6 per cent to $564.3-million in fiscal 2017 compared with $531.8-million in 2016. Segment revenue rate increased 36 basis points to 12.63 per cent in 2017.

SG&A expenses: Segment SG&A expenses increased $17.8-million to $89.1-million in the fourth quarter of 2017 compared with the fourth quarter of 2016, primarily for the same reasons noted above in the consolidated SG&A expense commentary. On an annual basis, segment SG&A expenses increased $36.6-million to $308.9-million in 2017 compared with 2016.

Other services

Revenue from other services grew $4.9-million, or 48 per cent in the fourth quarter of 2017, versus the fourth quarter of 2016. This increase is primarily due to growth of the company's ancillary services, as well as increases in revenue from Mascus and RBFS. For the full year, revenue from other services grew $11.7-million, or 33.7 per cent in 2017, versus 2016.

RBFS operating segment: RBFS segment revenues were $4.6-million, a 19-per-cent increase for the fourth quarter in 2017 compared with the $3.9-million in the fourth quarter of 2016. Financed volume, which represents the amount of lending brokered by RBFS, increased 30 per cent in the fourth quarter of 2017 to $90.5-million. RBFS segment profit increased 13 per cent to $2.6-million in the fourth quarter of 2017 from $2.3-million in the fourth quarter of 2016. For the full year, RBFS segment revenues were $16.1-million, a 26-per-cent increase in 2017 compared with the $12.8-million in 2016. Financed volume increased 17 per cent from $261.4-million in 2016 to $306.4-million in 2017. RBFS segment operating profit increased 28 per cent over the same comparative period to $8.2-million from $6.4-million.

Dividend information

Quarterly dividend

The company declared on Jan. 26, 2018, a quarterly cash dividend of 17 cents per common share payable on March 9, 2018, to shareholders of record on Feb. 16, 2018.

Fourth quarter 2017 earnings conference call

Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended Dec. 31, 2017, at 8 a.m. Pacific Time/11 a.m. Eastern Time/4 p.m. GMT on Feb. 27, 2018. A replay will be available shortly after the call.

Conference call and webcast details are available at the company's website.

About Ritchie Bros. Auctioneers Inc.

Established in 1958, Ritchie Bros. 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 on-line bidding; IronPlanet, an on-line marketplace with featured weekly auctions and providing its exclusive IronClad Assurance equipment condition certification program; Marketplace, an on-line auction marketplace; Mascus, a leading European on-line 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.

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