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A global leader in used equipment salesInvestor overview presentation
March 2016 – Q4 and 2015 annual information
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Forward looking statements
This presentation contains forward-looking statements.
Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions. Actual results may differ materially from those expressed herein. Additional information concerning factors that could affect the Company’s actual results is included in the Company’s filings with securities regulators. The Company undertakes no obligation to update publicly any forward-looking statements except as required by securities legislation.
All figures are in US dollars, unless otherwise noted.
While rounding may occur in performance numbers for presentation purposes, percent change figures are calculated using full, unrounded numbers.
Reconciliations of non-GAAP measures are available at the end of the presentation.
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Ritchie Bros. overview
The trusted source for buying and selling industrial equipment• Global leader for industrial auctions; unreserved process
– No minimum bid/reserved price. No buy-backs. – Ensures the sale of goods on the day of the auction at global market price
• Cater to the needs of heavy equipment owners– Customers are from the construction, trucking, agricultural & resource sectors
• 345 auctions; $4.25 billion in Gross Auction Proceeds during 2015– Industry leader by wide margin; Enormous growth opportunity, with a highly
fragmented market
• Provide multichannel sales solutions to expand the breadth of services available to equipment sellers:– EquipmentOne launched in 2013– Mascus (equipment sales listing service) acquired in 2016
Strong financial performance • $515.9 million of revenue during fiscal 2015• $121.1 million of adjusted net income¹ during fiscal 2015
Publicly listed on the NYSE and TSX (as RBA)• Market cap of approx. US$2.6 billion
RBA Auction - Circa 1958
RBA Auction - Now
Ritchie Bros. has a strong heritage –selling used equipment since 1958
3 ¹ Net Income attributable to stockholders
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32%
50%
10%7%
Canada
United States
Europe
Other
Global reach44 auction sites in 14 countries worldwide• More than half of auction purchases are made by bidders from
outside the region of the auction
• Allows RBA to effectively transfer equipment between regions experiencing different economic cycles
• Consignors benefit from global market pricing for their equipment, generated by international demand
• Buyers benefit from a global supply, with an ability to purchase and ship equipment from weak economic regions to areas with stronger growth
32%
47%
12%9%
CanadaUnited StatesEuropeOther
2015 Regional breakdown of revenue(Revenue breakdown - % of 2015 total)
Ritchie Bros.’ online bidding allows customers from around the world to bid on equipment at any of our auctions.
• Real-time information from live auctions available online to registered bidders
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$481 Mil
2014 Revenue breakdown - % of 2014 total
$516 Mil
US comprised a great proportion of revenue in 2015 relative to 2014.
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Global equipment market size is $360 billion
Ritchie Bros. is a global leader in used equipment sales, with $4.2 billion of equipment sold in 2014However, this represents only 1.2% of a highly fragmented global used equipment exchange market
The US market alone represents over $50 billion, 7x Canada – a key market for growth
Mining
Oil & Gas
Transportation
Agriculture
Construction
Source: Internal estimates; based on historical OEM unit sales, estimates of fleet turnover, and average selling prices at RB auctions. Allocation by geography based on sector GDP.
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Mining
Oil & Gas
Transportation
Agriculture
Construction
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0
100,000
200,000
300,000
400,000
500,000
600,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Registrants
Lots
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Consignors
Buyers
Growing seller and buyer base
5.0% CAGR in consignments over last 10 years
6.4% CAGR in buyers over last 10 years
8.2% CAGR in registrants over last 10 years
5.2% CAGR in Lots over last 10 years
Consignments & buyer base (Metrics are for industrial auctions only)
Auction registrants & lots(Metrics are for industrial auctions only)
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Growth of Gross Auction Proceeds (GAP)
US$4.25 billion of GAP produced during fiscal 2015
GAP:The aggregate dollar amount sold through our multiple solutions
7 Includes transactions of AssetNation and EquipmentOne online marketplaces in 2012 - 2015
Gross Auction Proceeds (US$ millions)
4,245
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
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1993
1994
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1997
1998
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2003
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2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
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Four external influences on GAP
The pricing environment• A strong pricing environment will enhance market values of equipment sold at auctions• Stable or increasing pricing environment provides consignors with more confidence to
sell equipment through unreserved auctions
The mix of categories of assets sold • RBA sells a wide variety of industrial and agricultural equipment and other products.
There is no consistency to the mix of assets sold, as it varies at each auction held due to regional, seasonal and cyclical factors.
• The proportion of higher-valued items sold at each auction relative to smaller goods impacts the auction proceeds generated
The mix of equipment age• Newer equipment generally has a higher market value compared to older machinery
The number of Lots consigned• Each sale generates proceeds. Increasing the number of Lots sold can bolster gross
auction proceeds
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Unreserved auction revenue model
Four main revenue streams support Ritchie Bros.’ unreserved auction business:
Unreserved Auction
Straight Commission
Guaranteed Proceeds (underwritten transaction)
Inventory (underwritten transaction)
Consignors contract to sell their equipment through one of Ritchie Bros. unreserved auctions. A pre-determined percentage of the selling price is provided to RBA as commission.
Consignors are guaranteed to receive a pre-determined amount for their equipment, regardless of the final selling price at the auction. A stepped commission fee is negotiated, accounting for the additional risk being assumed by RBA. (Also known as an ‘at risk’ transaction)
On rare occasions, Ritchie Bros. may choose to purchase equipment outright, obtaining title of the piece to sell at an upcoming auction.
TRANSACTION TYPE REVENUE
Straight Commission fee (% of auction proceeds)
Stepped commission fee (x% of guaranteed proceeds; x+y% for proceeds above guaranteed amount)
Gains on sale
Sellers (Consignors)
Buyers Admin Fees & Value-added Services (VAS) Admin fees and fees from value-added service activities
RBA provides many services to assist with the purchase of equipment, including financing , inspection services, painting etc.
9 Revenue from other business lines supplement our revenue: EquipmentOne buyer and seller fees; Xcira revenue; Mascus revenue
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Focus on underwritten business
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• Better leveraging our skills, expertise and market knowledge to drive stronger performance
• Transferring best practices to underperforming regions
• Equipment valuations team is more involved
• Implemented a more rigorous underwritten deal approvals process
• Smaller transactions are receiving more scrutiny
• Not a vehicle to ‘buy’ GAP; no market pressures to pursue underwritten contracts
See significant opportunity to drive earnings growth by improving the performance of our underwritten business
Casper, WY auction
Completed more than $10 billion worth of underwritten transactions over the last 11 years.
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We are fast becoming a multichannel, digital powerhouse
Ritchie Bros. now offers four main sales channels to equipment ownersBusiness units are supported through Ritchie Bros. ownership of Xcira (online auction technology provider) and Ritchie Bros. Financial Services (financial solutions partner for equipment buyers).
75% ownership
51% ownership
RITCHIE BROS. GROUP OF COMPANIES:
Integrated technology platform
Financial intermediary capitalizing on captive customer base to provide an alternative source of capital
Integrated onsite/online unreserved auction network
Online marketplace
Online listing service
Brokerage channel for highly specialized assets
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Multichannel solutions:
• Offers sellers more control over the sales price, time and purchaser; opens up opportunities for RBA to bid on RFPs
• During 2015, EquipmentOne contributed approx. $120 million of GTV (Gross Transaction Value) to GAP; up 13% from 2014
• Operates primarily in the United States; expanded into Canada in Q1 2016
• Website traffic up 11% in 2015, compared to 2014 (average monthly user)
Commercially launched in 2013
Customers of EquipmentOne value having control over the process and price, more than the guarantee of sale. They prefer a negotiated price, over global market value.
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The launch of EquipmentOne provided customers with another sales solution – an online equipment marketplace
The seller journey: sellers choose methods based upon needed degree of controlOur vision is to position appropriate solutions at each point of seller journey and connect them
High
Cont
rol t
o Se
ller
LowEffort for Seller
Control over:PriceTime
LocationBuyer
Low
High
Uncertain CertainSome Certainty of Sale
Result: Transacting anyhow, anytime, anywhere
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EquipmentOne – Continuing to show improvement
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E1 achieved 15% revenue growth in 2015 compared to 2014
EquipmentOne Revenue and EBITDA - Quarterly($US millions, quarterly data)
2015 first full year of positive EBITDA
EquipmentOne Revenue and EBITDA - Annual($US millions, annual data)
2013 2014 2015
Revenue $13.4 $13.2 $15.1
Direct expenses(excl. Dep’ & Amt) $(16.3) $(14.8) $(13.7)
EBITDA $(2.9) $(1.6) $1.4
$4.4
$0.8
-$2
-$1
$0
$1
$2
$3
$4
$5
$6
E1 Revenue E1 EBITDA 4 per. Mov. Avg. (E1 Revenue) 4 per. Mov. Avg. (E1 EBITDA)
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Multichannel solutions:
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• Acquired during Q1 2016• Provides equipment sellers with a turn-key suite of business tools
and software solutions catering to the needs of OEMs, dealers and large equipment fleet owners– Generates sticky customer relationships
• Mascus generates 3.2 million monthly website visits• Business currently has 360,000+ listings of equipment and other assets for sale• Financial terms: €24.0 million (US$26.6 million)
– Additional cash consideration, totaling no more that €3.4 million (US$3.8 million) may be paid contingent upon certain operating performance targets being achieved over the next 3 years
• Expected to be marginally accretive to RBA’s performance immediately• Performance of Mascus will be fully consolidated into RBA’s financial reports
Mascus is a leading global online equipment sales listing serviceGrows our service offering, to offer additional sales solutions to equipment sellers.Expands our buyer audience. Established a large presence in Europe.
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Strategic RoadmapObjective: grow revenue & earnings, drive cash flow, improve RONA
Q4 and 2015financial performance
All figures for three and twelve months ended December 31, 2015.
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Very strong results in 2015Performance during 2015 demonstrates our commitment to execution, our strategy is gaining traction, and our agility in leveraging market opportunitiesForeign exchange remains a headwind
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2015 Reported - % Growth 2015 Organic - % GrowthVersus 2014 Versus 2014
GAP 1% 8%
Revenue 7% 16%
Adjusted Operating Income 20% 46%
Diluted Adjusted EPS 22% n/a
Operating Free Cash Flow (12 month rolling)
28% n/a
RONA (12 month rolling)
1100 bps n/a
RONA excluding effects of term loan reclassification
910 bps n/a
attributable to stockholders
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Income statement scorecard – 2015
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12 months trailing ($US Millions except for EPS, %)
Dec. 31, 2015 Dec. 31, 2014 Better / (Worse)
GAP $4,247.6 $4,212.6 1%
Revenues $515.9 $481.1 7%
Revenue Rate 12.14% 11.42% 72 bps
Adjusted Operating Income $166.5 $138.2 20%
Adjusted Operating Income Margin 32.3% 28.7% 360 bps
Diluted EPS $1.27 $0.85 50%
Diluted Adjusted EPS $1.13 $0.93 22%
Full year 2015 Income statement scorecard
Increased Diluted EPS by 50% versus last year – through GAP growth, revenue rate improvement, expense control, excess land sales and tax planning strategies
attributable to stockholders
attributable to stockholders
19
Balance sheet scorecard – 2015
19
12 months trailing ($US Millions except for percent figures)
Dec. 31, 2015 Dec. 31, 2014 Better / (Worse)
Operating free cash flow $182.2 $141.8 28%
Working Capital Intensity -3.2% -2.3% 90 bps
Capex Intensity 2.8% 6.2% 340 bps
ROIC (Return on Invested Capital) 15.1% 12.0% 310 bps
RONA (Return on Net Assets) 25.7% 14.7% 1100 bps
RONA excluding term loan reclassification 23.8% 14.7% 910 bps
Debt / Adjusted EBITDA 0.5x 0.6x 0.1x
2015 Balance sheet scorecard
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Reported - % Growth Organic - % GrowthVersus Q4 2014 Versus Q4 2014
GAP (9%) (1%)
Revenue (2%) 6%
Adjusted Operating Income (10%) 20%
Diluted Adjusted EPS (Q4 2015 & Q4 2014 adjusting items)
(12%) n/a
Diluted EPS 48% n/a
Operating Free Cash Flow (12 month rolling)
28% n/a
RONA (12 month rolling, excluding term loan reclass)
910 bps n/a
Q4 2015 financial highlights
Difficult operating comps relative to Q4 2014 Foreign exchange had an impact on some operating lines
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attributable to stockholders
attributable to stockholders
21
Auction metrics: Q4 quarterly comparison
21
• Due largely to FX translation of GAP (caused 7.4% decline in Avg. GAP per lot); on an organic basis average GAP per lot declined only 2.1%
• Pricing of certain asset categories weighed on GAP (oil and gas specific assets)
• Similar number of small value assets sold in Q4 2015 and Q4 2014
Average GAP per lot declined 9.4% in Q4 2015 compared to Q4 2014
Fewer auctions held in Q4 2015 than in same quarter last year
Q4 2015 Q4 2014
Number of Industrial Auctions 67 78
Number of Industrial sale days 80 90
Number of total auctions (including Agricultural auctions) 83 90
Number of total sale days 96 102
Compared to Q4 2014:• 11 fewer auctions in the US• 4 fewer offsite auctions (global)• 10 fewer offsite sales in the US, resulting
in $55 million less in GAP• New offsite sales held in Q4 2015 were
held in regions impacted by FX
22
$1,0
40
$865
$1,1
95
$849
$1,0
00
$845
$1,0
73
$790
$1,1
07
$855
$1,2
29
$887
$1,2
41
$956
$1,2
62
$895
$1,1
35
$4,248
$3,200
$3,400
$3,600
$3,800
$4,000
$4,200
$4,400
$4,600
$0
$250
$500
$750
$1,000
$1,250
$1,500
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Quarterly gross auction proceeds (GAP)
22
12-months trailing GAP
Quarterly GAP
Quarterly Gross Auction Proceeds($US millions)
2011 2012 2013 2014 2015
23
$23
$14
$30
$16
$30
$13
$37
$15
$36
$24
$45
$21
$31
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Lower revenue affected Q4 adjusted net income
Q4 2015 adjusted net income declined 12% relative to Q4 2014Adjusted net income does not include benefit of tax loss utilizations or the sale of excess land during Q4 2015
2012 2013 2014 2015
Quarterly Adjusted Net Income attributable to Stockholders¹($US millions)
23 ¹ Earnings attributable to Ritchie Bros. Incorporated. Excludes minority interest of Ritchie Bros. Financial Services.
24
Income statement scorecard – Q4 2015
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3 months trailing ($US Millions except for EPS, %)
Dec. 31, 2015 Dec. 31, 2014 Better / (Worse)
GAP $1,135.4 $1,241.2 (9%)
Revenues $135.5 $138.5 (2%)
Revenue Rate 11.93% 11.16% 77 bps
Adjusted Operating Income $42.0 $46.7 (10%)
Adjusted Operating Income Margin 31.0% 33.7% -270 bps
Diluted EPS $0.43 $0.29 48%
Diluted Adjusted EPS $0.29 $0.33 (12%)
Q4 2015 Income statement scorecard
Impacts from foreign exchange translation and lower GAP offset revenue rate improvements relative to Q4 last year. Sale of excess land and tax planning strategies bolstered Q4 performance on a reported basis.
attributable to stockholders
attributable to stockholders
25
Impact of FX on our Q4 2015 performance
25 * Figures rounded to the million
$9M, 6%
-$12M, -9% -$3M, -3%-5
0
5
10
15
Organic Growth FX effect Total Growth
in M
illio
ns
Revenue and FX - Q4
$-1M, -3%
-$4M, -7% $-5M, -10%
-6
-4
-2
0
Organic Growth FX effect Total Growth
in M
illio
ns
Adjusted Operating Profit and FX - Q4
-$14M, -1%
-$92M, -8% -$106M, -9%-120
-100
-80
-60
-40
-20
0
Organic Growth FX effect Total Growth
in M
illio
ns
GAP and FX - Q4
$10M, 12%
-$8M, -9%$2M, 3%
0
2
4
6
8
10
12
Organic Growth FX effect Total Growth
in M
illio
ns
Expenses (DE, SG&A, D&A) and FX - Q4
26
Annual expenses in line with targets; Q4 bonus-affected
26
2015 Quarterly revenue and SG&A growth
Committed to keeping expense growth lower than revenue growth on annual basis;Q4 2015 SG&A line increased faster than revenue growth due mostly to bonus payouts based on meeting annual targets
($US millions, SG&A excluding depreciation and amortization)
17%
10%7%
-2%
6% 6%
-1%
8%
-5%
0%
5%
10%
15%
20%
25%
Q1 Q2 Q3 Q4
Revenue - Reported
SG&A 'Excluding Dep'n' - Reported
24%
19%16%
6%
14% 15%
10%
18%
0%
5%
10%
15%
20%
25%
Q1 Q2 Q3 Q4
Revenue - Organic
SG&A 'Excluding Dep'n' -Organic
REPORTED ORGANIC
2015 Annual revenue and SG&A growth($US millions, SG&A excluding depreciation and amortization)
REPORTED ORGANIC
7%
3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2015
Revenue - Reported
SG&A 'Excluding Dep'n'- Reported
16%
12%
0%
5%
10%
15%
20%
2015
Revenue - Reported
SG&A 'ExcludingDep'n' - Reported
27
Priority Discussion
1. Grow dividends with earnings Highly valued return of cash to shareholders
2. Hold fully-diluted shares flat Offset dilution from management stock options through share buybacks
3. Acquisitions Accelerate top-line growth and leverage the model
4. Share buy-backs Growth initiatives are a higher priority at this time
5. Pay down debt Only if better economic returns are not available
Capital allocation priorities
Consistently make use of cash on our balance sheet to facilitate underwritten transactions;The strength of our balance sheet is a competitive advantage.
(1) Priorities for cash utilization after operating CAPEX needs have been met.27
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RBA evergreen financial model
Above model reflects our aspiration on how the model should work in the next 5 to 7 years
Performance Metric Avg. Annual Growth Targets
• GAP Growth (%) High Single Digit to Low Double Digits
• Revenue Growth (%) (1) Mid Single Digit to High Single Digit
• SG&A Growth (%) Will grow slower than revenues
• Operating Income Margin (& EBITDA Margin) 50 bps +
• EPS Growth (%) (2) High Single Digit to Low Double Digits
• Net Capex Intensity (3) <10%
• OFCF (4) % of Net Earnings >100%
• RONA (5) Increase 50 bps +
• Dividend Payout Ratio 55% to 60%
• Net Debt / EBITDA <2.5X
(1) Includes Tuck In and Bolt On acquisitions(2) Variances may occur in certain years based on tax rate that is influenced by geographic revenue mix(3) Net Capital Spending as % of Revenue(4) Operating Free Cash Flow(5) Return on Net Assets
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0.10
50
0.11
25
0.11
25
0.11
25
0.11
25
0.12
25
0.12
25
0.12
25
0.12
25
0.13
00
0.13
00
0.13
00
0.13
00
0.14
00
0.14
00
0.14
00
0.14
00
0.16
00
0.16
00
0.16
00
0.1000
0.1100
0.1200
0.1300
0.1400
0.1500
0.1600
0.1700
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
Sustained dividend growth
Growing our dividend alongside earnings; Committed to 55-60% dividend payout, based on earnings trailing 12 months
29
Dividends declared ($US cash dividends)
7.1% increase
8.9% increase
6.1% increase
7.7% increase
14.0% increase
30
$121
$64
$15
$48
$0
$25
$50
$75
$100
$125
$150
2015 Net Income Cash returned to shareholders
Returning cash to shareholders
93% of 2015 adjusted net income returned to shareholders via dividends and share repurchases 82% of unadjusted (US GAAP) net income (includes income from land sales and tax loss utilizations)
1.9 million shares repurchased and cancelled in 2015; pursuing share repurchases in 2016 to hold share count flat.
2015 Cash Returned to Shareholders, relative to Net Income ($US millions)
$112 million
Dividends
ShareRepurchases
30
$136 million (US GAAP)
$121 million (Adjusted)
31
Focused on generating long-term shareholder value through continued earnings and dividend growth.
Global leader in industrial auctions• Substantial growth opportunity• Focused on capturing increased market share in the US and Canada
Diversifying services to meet broader customer needs• Sales solutions: Ritchie Bros. Auctioneers, EquipmentOne, Mascus• Complementary services: Ritchie Bros. Financial Services, Logistical Services• Supportive business unit: Xcira (online auction technology solutions)
Focused on basics of: • EPS growth • Return on Net Assets• EBITDA margin• Operating free cash flow
Summary
Moerdijk, Netherlands auction
31
Learn more about Ritchie Bros. auctions through our online videos:
www.youtube.com/ritchiebros
Appendices
33
Transition to US GAAP as a Domestic Filer
Transition to US GAAP effective for Q4 and Full Year 2015• Full Year 2015 financial statements are now presented under US GAAP• Refiled Q1, Q2 and Q3 financial statements in accordance US GAAP• Key adjustments include:
– Accounting for Income Tax Expenses and Income Tax Assets• Deferred Tax adjustments for US GAAP that increased the 2014 Total Asset Base by $9 million• Treatment of Tax on US option exercises• Quarterly Tax rate calculations
– Operating Income presentation• Now includes Gain / Losses on disposal of Property, Asset Impairments and Foreign Exchange
which were presented below Operating Income under IFRS
– Disclosure requirements for 10K• Score card metrics of RONA and Working Capital Intensity are not included in 10K filings
– New information presented on the face of the statements• Restricted Cash of $83 M as at December 31st, 2015• Contingently redeemable Non-Controlling Interest (NCI) in RBFS of $25 million
33
34
11.5%
9.6%
4.2%
3.6%
8.7%
10.9%
13.1%
12.1%
11.0%
5.0%
4.8%
8.7%
11.2%
12.1%
12.2%
10.3%
5.0%
4.6%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2010
2011
2012
2013
2014
2015New
1 Yr Old
2 Yrs Old
3 Yrs Old
4 Yrs Old
5 Yrs Old
6 Yrs Old
7 Yrs Old
8 Yrs Old
9 Yrs Old
10 Yrs Old
18.5% of GAP¹
3-5 yrs old: 35.8% of GAP¹
¹ Industrial auctions only. Excludes equipment over 10+ years and equipment with unknown ages.
2015: Age of equipment continues to trend better
Age of Equipment sold at Ritchie Bros. Auctions¹
34
3-5 yrs old: 24.2% of GAP¹
6+ Yrs Old
New to 1 yr Old
35
Auction sites
US GAAP Reconciliation of Non-GAAP measures
Non- GAAP Measures
The following tables reconcile non-GAAP measures referred to in this presentation to the most directly comparable GAAP measure reflected in the Company’s financial statements
38 38
39 39
40 40
41 41
42 42
43 43
44 44
