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Ritchie Bros Auctioneers Inc TSX: RBA-T

Today's Change
Volume
Real-Time Last Update TSX Last Sale

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Ritchie Bros. reports third quarter 2020 results

PR Newswire - Thu Nov 5, 4:30PM CST

VANCOUVER, BC , Nov. 5, 2020 /PRNewswire/ - Ritchie Bros. Auctioneers Incorporated (NYSE: RBA) (TSX: RBA) (the "Company", " Ritchie Bros .", "we", "us", or "our") reported the following results for the three months ended September 30, 2020 :

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

Net income attributable to stockholders increased 80% to $45.4 million , compared to $25.3 million in Q3 2019. Diluted earnings per share ("EPS") attributable to stockholders increased 78% to $0.41 per share in Q3 2020 as compared to Q3 2019. Diluted adjusted EPS attributable to stockholders* which excludes $4.3 million of severance costs ( $3.2 million net of tax), increased 91% to $0.44 per share at Q3 2020 as compared to Q3 2019.

"We saw a strong contribution to GTV growth across all geographic regions and channels and are pleased by the growth demonstrated in the third quarter. Ritchie Bros .' omnichannel platform continues to drive best in class customer experiences and solid price performance. While 100% of transactions have moved online, we continue to leverage all the tools in our digital and technology tool box as well as our physical sites for care, custody and control," said Ann Fandozzi , Chief Executive Officer of Ritchie Bros

Fandozzi continued, "Our priorities have not changed, we continue to focus on the health and safety of our employees and customers and preserving our strong financial position to benefit our shareholders, customers and employees as the pandemic continues to unfold."

Consolidated results:

  • Total revenue in Q3 2020 increased 14% to $331.5 million as compared to Q3 2019
    • Service revenue in Q3 2020 increased 25% to $222.7 million as compared to Q3 2019
    • Inventory sales revenue in Q3 2020 decreased 2% to $108.9 million as compared to Q3 2019
  • Total selling, general and administrative expenses ("SG&A") in Q3 2020 increased 18% to $110.2 million as compared to Q3 2019
  • Operating income in Q3 2020 increased 68% to $67.4 million as compared to Q3 2019
  • Net income in Q3 2020 increased 80% to $45.5 million as compared to Q3 2019
  • Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization* ("EBITDA") (non-GAAP measure) in Q3 2020 increased 55% to $91.9 million as compared to Q3 2019
  • Cash provided by operating activities was $265.6 million for the first nine months of 2020
  • Cash on hand at Q3 2020 was $590.3 million , of which $470.3 million was unrestricted

Auctions & Marketplaces segment results:

  • GTV 1 in Q3 2020 increased 22% to $1.3 billion as compared to Q3 2019
  • A&M total revenue in Q3 2020 increased 14% to $297.8 million as compared to Q3 2019
    • Service revenue in Q3 2020 increased 26% to $188.9 million as compared to Q3 2019
    • Inventory sales revenue in Q3 2020 decreased 2% to $108.9 million as compared to Q3 2019

Other Services segment results:

  • Other Services total revenue in Q3 2020 increased 18% to $33.7 million as compared to Q3 2019
  • RBFS revenue in Q3 2020 increased 19% to $7.3 million as compared to Q3 2019

_____________________________________________

1 Gross Transaction Value ("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 the Company's consolidated financial statements.



The Company presents both GAAP and non-GAAP measures to provide investors with additional information. 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 news release are labeled as "non-GAAP measure" or designated as such with an asterisk (*). Please see page 9-11 for explanations of why the Company uses these non-GAAP measures and the reconciliation to the most comparable GAAP financial measures.

Other Company developments:

  • In Q3 2020, our Board of Directors authorized a share repurchase program for the repurchase of up to $100 million of our common shares over the next 12 months, which was approved by the Toronto Stock Exchange
  • On August 10, 2020 , the Company announced the appointment of Kevin Geisner as Chief Strategy Officer
  • On August 14, 2020 , the Company amended and extended its credit facilities totaling US$630.0 million with a syndicate of lenders
  • On October 28, 2020 , the Company entered into a definitive agreement to acquire Rouse Services, a privately held company that provides data intelligence and performance benchmarking for approximately $275 million . Completion of the acquisition is subject to customary closing conditions, including, among other conditions, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Financial Overview

(Unaudited)







































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



Three months ended September 30, 



Nine months ended September 30, 

















% Change















% Change





2020



2019



2020 over 2019



2020



2019



2020 over 2019

Service revenue:





































Commissions



$

112,762



$

90,928



24

%



$

331,711



$

317,674



4

%

Fees





109,917





87,649



25

%





308,230





267,881



15

%

Total service revenue





222,679





178,577



25

%





639,941





585,555



9

%

Inventory sales revenue





108,863





111,219



(2)

%





353,906





400,892



(12)

%

Total revenue





331,542





289,796



14

%





993,847





986,447



1

%

Service revenue as a % of total revenue





67.2

%



61.6

%

560

bps





64.4

%



59.4

%

500

bps

Inventory sales revenue as a % of total revenue





32.8

%



38.4

%

(560)

bps





35.6

%



40.6

%

(500)

bps

Costs of services





39,223





36,382



8

%





118,026





122,719



(4)

%

Cost of inventory sold





96,253





102,410



(6)

%





320,972





372,703



(14)

%

Selling, general and administrative expenses





110,186





93,691



18

%





309,203





286,589



8

%

Operating expenses





264,158





249,636



6

%





803,581





834,729



(4)

%

Cost of inventory sold as a % of operating expenses





36.4

%



41.0

%

(460)

bps





39.9

%



44.6

%

(470)

bps

Operating income





67,384





40,160



68

%





190,266





151,718



25

%

Operating income margin





20.3

%



13.9

%

640

bps





19.1

%



15.4

%

370

bps

Net income attributable to stockholders





45,387





25,266



80

%





121,239





97,466



24

%

Diluted EPS attributable to stockholders



$

0.41



$

0.23



78

%



$

1.10



$

0.89



24

%

Diluted adjusted EPS attributable to stockholders*





0.44





0.23



91

%





1.19





0.89



34

%

Effective tax rate





25.3

%



21.1

%

420

bps





28.6

%



22.8

%

580

bps

Total GTV





1,321,379





1,084,241



22

%





3,962,386





3,756,679



5

%

Service GTV





1,212,516





973,022



25

%





3,608,480





3,355,787



8

%

Service GTV as a % of total GTV - Mix





91.8

%



89.7

%

210

bps





91.1

%



89.3

%

180

bps

Service revenue as a % of total GTV- Rate





16.9

%



16.5

%

40

bps





16.2

%



15.6

%

60

bps

Inventory GTV





108,863





111,219



(2)

%





353,906





400,892



(12)

%

Inventory sales revenue as a % of total GTV- Mix





8.2

%



10.3

%

(210)

bps





8.9

%



10.7

%

(180)

bps



Segment Overview



































(in U.S $000's)



Three months ended September 30, 2020



Nine months ended September 30, 2020





A&M



Other



Consolidated



A&M



Other



Consolidated

Service revenue



$

188,949



33,730



$

222,679



$

543,340



96,601



$

639,941

Inventory sales revenue





108,863







108,863





353,906







353,906

Total revenue





297,812



33,730





331,542





897,246



96,601





993,847

Ancillary and logistical service expenses







16,550





16,550







45,368





45,368

Other costs of services





21,733



940





22,673





69,018



3,640





72,658

Cost of inventory sold





96,253







96,253





320,972







320,972

SG&A expenses





103,933



6,253





110,186





290,077



19,126





309,203

Segment profit



$

75,893



9,987



$

85,880



$

217,179



28,467



$

245,646

Total GTV





1,321,379



N/A





N/A





3,962,386



N/A





N/A

A&M service revenue as a % of total GTV- Rate





14.3

%

N/A





N/A





13.7

%

N/A





N/A

 







































(in U.S $000's)



Three months ended September 30, 2019



Nine months ended September 30, 2019





A&M



Other



Consolidated



A&M



Other



Consolidated

Service revenue



$

150,093



$

28,484



$

178,577



$

494,580



$

90,975



$

585,555

Inventory sales revenue





111,219









111,219





400,892









400,892

Total revenue





261,312





28,484





289,796





895,472





90,975





986,447

Ancillary and logistical service expenses









13,285





13,285









43,516





43,516

Other costs of services





21,431





1,666





23,097





74,799





4,404





79,203

Cost of inventory sold





102,410









102,410





372,703









372,703

SG&A expenses





88,138





5,553





93,691





268,786





17,803





286,589

Segment profit



$

49,333



$

7,980



$

57,313





179,184





25,252





204,436

Total GTV





1,084,241





N/A





N/A





3,756,679





N/A





N/A

A&M service revenue as a % of total GTV- Rate





13.8

%



N/A





N/A





13.2

%



N/A





N/A

Q3 2020 Consolidated Performance Overview

In response to COVID-19 pandemic, beginning in March 2020 , the Company transitioned all our traditional live on site auctions to online bidding utilizing our existing online bidding technology and simultaneously ceased all public attendance at our live action theaters. Our core online auction channels (IronPlanet.com, GovPlanet.com, Marketplace-E) continued to operate as usual. 

GTV increased 22% to $1.3 billion in Q3 2020 with total GTV increasing across all our regions. The increase was primarily in the US due to strong execution of the strategic accounts and regional sales teams driving year-over-year positive growth at both our live and online auctions. The International sales team also delivered higher GTV results as earlier lockdown measures lifted and border restrictions eased in Europe , as well as a higher level of private treaty deals in Australia . Total GTV increased in Canada mainly due to positive year-over-year live auction performance, and auction calendar shifts.

Total revenue  increased 14% to $331.5 million in Q3 2020.

Service revenue  increased 25% with commissions revenue increasing 24% and fees revenue increasing 25%. Fees revenue was up 25% driven by higher fees from total GTV which was up 22%. We also had positive performance in Ancillary as we earned more fees from refurbishing and transporting sellers' equipment driven by greater GTV activity in the US. Fees also grew due to RBFS as well as higher buyer fees on more favorable mix. Commissions revenue increased 24%, primarily in line with the increase in Service GTV.

Inventory sales revenue decreased 2% representing lower inventory sales volume. The lower sales volume was offset by strong year-over-year improvement in the inventory sales margin rate performance in the US and Canada. The decrease in the inventory volume was attributable to lower government surplus contracts in the US due to COVID-19 related government shutdowns and the shift of the Canadian Grand Prairie auction to Q4 2020. Partially offsetting these decreases was positive volume growth in International as border restrictions eased in Europe during Q3 2020 together with large private treaty deals in Australia. 

Costs of services  increased 8% to $39.2 million primarily driven by the 25% increase in Service GTV, offset by significant cost reductions in employee compensation, and travel, advertising and promotion as a result of our response to the COVID-19 pandemic. Our response included transitioning our live on site auctions to online bidding, utilizing TAL solutions for selected International and on-the-farm agricultural events, and implementing travel restrictions. We also incurred higher ancillary and logistical service expenses, in line with the increase in ancillary fees earned from refurbishing and transporting sellers' equipment driven by higher GTV volume in the US. 

Cost of inventory  decreased 6% to $96.3 million , primarily in line with lower activity in inventory sales revenue. Cost of inventory sold decreased at a higher rate than the decrease of inventory sales revenue, indicating an increase in the revenue margin. The margin improved due to rate improvement in US and Canada .

Selling, general and administrative ("SG&A") expenses increased 18% to $110.2 million primarily due to $8.8 million higher short-term and long-term incentive expenses driven by strong performance, higher headcount to support our growth initiatives, and a one-time $4.3 million severance costs related to the realignment of leadership to support the new global operations organization, in line with strategic growth priorities led by the new CEO. These increases were partially offset by lower SG&A expenses related to lower travel, advertising, and promotion costs as we implemented travel restrictions.

Foreign exchange had a favourable impact on total revenue and an unfavourable impact on expenses. These impacts were primarily due to the fluctuations in the Euro and Australian dollar exchange rates relative to the U.S. dollar.

Net income attributable to stockholders increased 80% to $45.4 million , primarily related to the higher operating income, lower interest expense, and partially offset by the increase in the effective tax rate.

Primarily for the same reasons noted above, diluted EPS attributable to stockholders increased 78% to $0.41 per share for Q3 2020 from $0.23 per share in Q3 2019. Diluted adjusted EPS attributable to stockholders* increased 91% to $0.44 per share in Q3 2020, after excluding $4.3 million of severance costs ( $3.2 million net of tax).

Dividend Information

Quarterly dividend

On November 4, 2020 , the Company declared a quarterly cash dividend of $0.22 per common share payable on December 16, 2020 to shareholders of record on November 25, 2020 .

Q3 2020 Earnings Conference Call

Ritchie Bros . is hosting a conference call to discuss its financial results for the quarter ended September 30, 2020 at 8am Pacific time / 11 am Eastern time / 3pm GMT on November 6, 2020 . The replay of the webcast will be available through December 6, 2020 .

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 number 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 offers live auction events with online bidding; IronPlanet, an online marketplace with featured weekly auctions and providing the exclusive IronClad Assurance® 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, and Kruse Energy Auctioneers, plus equipment financing and leasing through Ritchie Bros . Financial 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 future auctions and estimated GTV thereof, growth prospects and payment of dividends, and the ability of the Company to satisfy the Rouse acquisition agreement conditions and consummate the transaction. 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 duration and impact of the COVID-19 pandemic on the Company's operations, the operations of customers, and general economic conditions; 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 IronPlanet acquisition; and the risks and uncertainties set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and the Company's Form 10-Q for the quarter ended September 30, 2020 , which are 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 Selected Condensed Consolidated Financial Information

GTV and Condensed Consolidated Income Statements – Third Quarter

(Expressed in thousands of United States dollars, except share, per share amounts and percentages)

(Unaudited)







































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



Three months ended September 30, 



Nine months ended September 30, 

















% Change















% Change







2020





2019



2020 over 2019





2020





2019



2020 over 2019

GTV



$

1,321,379



$

1,084,241



22

%



$

3,962,386



$

3,756,679



5

%

Revenues:





































Service revenues



$

222,679



$

178,577



25

%



$

639,941



$

585,555



9

%

Inventory sales revenue





108,863





111,219



(2)

%





353,906





400,892



(12)

%

Total revenues





331,542





289,796



14

%





993,847





986,447



1

%

Operating expenses:





































Costs of services





39,223





36,382



8

%





118,026





122,719



(4)

%

Cost of inventory sold





96,253





102,410



(6)

%





320,972





372,703



(14)

%

Selling, general and administration expenses





110,186





93,691



18

%





309,203





286,589



8

%

Acquisition-related costs









45



(100)

%









752



(100)

%

Depreciation and amortization expenses





18,436





17,692



4

%





55,586





51,919



7

%

Gain on disposition of property, plant and equipment





(276)





(821)



(66)

%





(1,536)





(1,071)



43

%

Foreign exchange loss





336





237



42

%





1,330





1,118



19

%

Total operating expenses





264,158





249,636



6

%





803,581





834,729



(4)

%

Operating income





67,384





40,160



68

%





190,266





151,718



25

%

Interest expense





(8,737)





(10,090)



(13)

%





(26,801)





(31,023)



(14)

%

Other income, net





2,280





1,962



16

%





6,714





5,680



18

%

Income before income taxes





60,927





32,032



90

%





170,179





126,375



35

%

Income tax expense





15,437





6,760



128

%





48,741





28,800



69

%

Net income



$

45,490



$

25,272



80

%



$

121,438



$

97,575



24

%

Net income attributable to:





































Stockholders



$

45,387



$

25,266



80

%





121,239



$

97,466



24

%

Non-controlling interests





103





6



1,617

%





199





109



83

%





$

45,490



$

25,272



80

%





121,438



$

97,575



24

%

Earnings per share attributable to stockholders:





































Basic



$

0.42



$

0.23



83

%





1.11



$

0.90



23

%

Diluted



$

0.41



$

0.23



78

%





1.10



$

0.89



24

%

Weighted average number of share outstanding:





































Basic





109,018,469





108,003,390



1

%





108,887,026





108,453,525



0

%

Diluted





110,369,718





109,381,173



1

%





110,060,712





109,634,195



0

%



Condensed Consolidated Balance Sheets

(Expressed in thousands of United States dollars, except share data)

(Unaudited)



















September 30, 2020



December 31, 2019















Assets













Cash and cash equivalents



$

470,285



$

359,671

Restricted cash





120,014





60,585

Trade and other receivables





333,110





142,627

Less: allowance for credit losses





(4,635)





(5,225)

Inventory





62,101





64,956

Other current assets





26,279





50,160

Income taxes receivable





5,619





6,810

Total current assets





1,012,773





679,584















Property, plant and equipment





481,047





484,482

Other non-current assets





134,973





145,679

Intangible assets





220,791





233,380

Goodwill





672,746





672,310

Deferred tax assets





15,659





13,995

Total assets



$

2,537,989



$

2,229,430















Liabilities and Equity













Auction proceeds payable



$

496,936



$

276,188

Trade and other payables





215,110





194,279

Income taxes payable





11,241





7,809

Short-term debt





20,285





4,705

Current portion of long-term debt





9,926





18,277

Total current liabilities





753,498





501,258















Long-term debt





622,635





627,204

Other non-current liabilities





144,677





151,238

Deferred tax liabilities





52,312





42,743

Total liabilities





1,573,122





1,322,443















Commitments and Contingencies













Stockholders' equity:













Share capital:













Common stock; no par value, unlimited shares













authorized, issued and outstanding shares:













108,630,537 (December 31, 2019: 109,337,781)





195,727





194,771

Additional paid-in capital





48,253





52,110

Retained earnings





767,188





714,051

Accumulated other comprehensive loss





(51,684)





(59,099)

Stockholders' equity





959,484





901,833

Non-controlling interest





5,383





5,154

Total stockholders' equity





964,867





906,987

Total liabilities and equity



$

2,537,989



$

2,229,430



Condensed Consolidated Statements of Cash Flows

(Expressed in thousands of United States dollars)

(Unaudited) 















Nine months ended September 30,



2020



2019

Cash provided by (used in):













Operating activities:













Net income



$

121,438



$

97,575

Adjustments for items not affecting cash:













Depreciation and amortization expenses





55,586





51,919

Stock option compensation expense





4,401





4,852

Equity-classified share unit expense





9,155





8,754

Deferred income tax expense





8,250





(4,760)

Unrealized foreign exchange (gain) loss





2,049





(129)

Gain on disposition of property, plant and equipment





(1,536)





(1,071)

Amortization of debt issuance costs





2,375





2,701

Amortization of right-of-use assets





9,194





Gain on contingent consideration from equity investment





(1,700)





Other, net





2,427





9,892

Net changes in operating assets and liabilities





53,912





139,372

Net cash provided by operating activities





265,551





309,105

Investing activities:













Property, plant and equipment additions





(9,865)





(6,915)

Intangible asset additions





(19,886)





(18,377)

Proceeds on disposition of property, plant and equipment





16,277





5,610

Distribution from equity investment





4,212





Proceeds on contingent consideration from equity investment





1,700





Other, net





(2,630)





(1,000)

Net cash used in investing activities





(10,192)





(20,682)

Financing activities:













Share repurchase





(53,170)





(42,012)

Dividends paid to stockholders





(67,639)





(60,791)

Issuances of share capital





40,194





12,440

Payment of withholding taxes on issuance of shares





(3,870)





(5,260)

Proceeds from short-term debt





35,799





10,519

Repayment of short-term debt





(22,357)





(24,979)

Repayment of long-term debt





(11,134)





(29,022)

Debt issue costs





(2,038)





Repayment of finance lease obligations





(6,927)





(4,848)

Net cash used in financing activities





(91,142)





(143,953)

Effect of changes in foreign currency rates on cash, cash equivalents, and restricted cash





5,826





1,350

Increase





170,043





145,820

Beginning of period





420,256





305,567

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



$

590,299



$

451,387

Selected Data

(Unaudited)

Industrial live on site auction metrics



































Three months ended September 30, 



Nine months ended September 30, 













% Change











% Change





2020



2019



2020 over 2019



2020



2019



2020 over 2019

Number of auctions



42



46



(9)

%



123



140



(12)

%

Bidder registrations



231,500



165,500



40

%



677,100



508,750



33

%

Consignors



15,100



14,000



8

%



40,450



43,000



(6)

%

Buyers



40,000



34,800



15

%



114,250



109,050



5

%

Lots



115,350



98,400



17

%



312,450



305,150



2

%

Non-GAAP Measures

This news release references to non-GAAP measures. Non-GAAP 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.

Adjusted Net Income Attributable to Stockholders* and Diluted Adjusted EPS Attributable to Stockholders* Reconciliation

The Company believes that adjusted net income attributable to stockholders* provides useful information about the growth or decline of the 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 the normal operating results. Diluted Adjusted EPS attributable to stockholders* eliminates the financial impact of adjusting items which are after-tax effects of significant non-recurring items that the Company does not consider to be part of the normal operating results, such as acquisition-related costs, management reorganization costs, and certain other items, which the Company refers to as 'adjusting items'.

The following table reconciles adjusted net income attributable to stockholders* and diluted adjusted EPS attributable to stockholders* to net income attributable to stockholders and diluted EPS attributable to stockholders, which are the most directly comparable GAAP measures in the consolidated income statements.









































(in U.S. $000's, except share and per share data, and percentages)



Three months ended September 30, 



Nine months ended September 30, 



















% Change















% Change







2020



2019



2020 over 2019



2020



2019



2020 over 2019



Net income attributable to stockholders



$

45,387



$

25,266



80

%



$

121,239



$

97,466



24

%



Pre-tax adjusting items:







































Severance





4,283







100

%





4,283







100

%



Current income tax effect of adjusting items:







































Severance





(1,065)







(100)

%





(1,065)







(100)

%



Current income tax adjusting item:







































Change in uncertain tax provision











%





766







100

%



Deferred tax adjusting item:







































Change in uncertain tax provision











%





5,462







100

%



Adjusted net income attributable to stockholders*



$

48,605



$

25,266



92

%



$

130,685



$

97,466



34

%



Weighted average number of dilutive shares outstanding





110,369,718





109,381,173



1

%





110,060,712





109,634,195



0

%



Diluted earnings per share attributable to stockholders



$

0.41



$

0.23



78

%



$

1.10



$

0.89



24

%



Diluted adjusted EPS attributable to Stockholders*



$

0.44



$

0.23



91

%



$

1.19



$

0.89



34

%







(1)

Please refer to page 11 for a summary of adjusting items for the three and nine months ended September 30, 2020 and September 30, 2019.

(2)

Adjusted net income attributable to stockholders* represents net income attributable to stockholders excluding the effects of adjusting items.

(3)

Diluted adjusted EPS attributable to stockholders* is calculated by dividing adjusted net income attributable to stockholders*, net of the effect of dilutive securities, by the weighted average number of dilutive shares outstanding.

Adjusted EBITDA*

The Company believes that adjusted EBITDA* provides useful information about the growth or decline of our net income when compared between different financial periods.

The following table reconciles adjusted EBITDA* to net income, which is the most directly comparable GAAP measures in, or calculated from, our consolidated income statements:









































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



Three months ended September 30, 





Nine months ended September 30, 





















% Change















% Change







2020



2019



2020 over 2019



2020



2019



2020 over 2019



Net income



$

45,490



$

25,272



80

%



$

121,438



$

97,575



24

%



Add: depreciation and amortization expenses





18,436





17,692



4

%





55,586





51,919



7

%



Add: interest expense





8,737





10,090



(13)

%





26,801





31,023



(14)

%



Less: interest income





(510)





(517)



(1)

%





(1,775)





(2,435)



(27)

%



Add: income tax expense





15,437





6,760



128

%





48,741





28,800



69

%



Pre-tax adjusting items:







































Severance





4,283







100

%





4,283







100

%



Adjusted EBITDA*



$

91,873



$

59,297



55

%



$

255,074



$

206,882



23

%







(1)

Please refer to page 11 for a summary of adjusting items during the three and nine months ended September 30, 2020 and September 30, 2019.

(2)

Adjusted EBITDA* is calculated by adding back depreciation and amortization expenses, interest expense, and income tax expense, and subtracting interest income from net income excluding the pre-tax effects of adjusting items.

Adjusted Net Debt* and Adjusted Net Debt/Adjusted EBITDA* Reconciliation

The Company believes that comparing adjusted net debt/adjusted EBITDA* on a trailing 12-month basis for different financial periods provides useful information about the performance of the Company's operations as an indicator of the amount of time it would take the Company to settle both the short and long-term debt. The Company does not consider this to be a measure of liquidity, which is the ability to settle only short-term obligations, but rather a measure of how well the Company funds liquidity.

The following table reconciles adjusted net debt* to debt, adjusted EBITDA* to net income, and adjusted net debt*/adjusted EBITDA* to debt/ net income, respectively, which are the most directly comparable GAAP measures in, or calculated from, our consolidated financial statements.





















(in U.S. $millions, except percentages)



As at and for the 12 months ended September 30, 

















% Change







2020





2019



2020 over 2019

Short-term debt



$

20.3



$

5.8



250

%

Long-term debt





632.6





689.3



(8)

%

Debt





652.9





695.1



(6)

%

 Less: Cash and cash equivalents





(470.3)





(309.6)



52

%

Adjusted net debt*





182.6





385.5



(53)

%

Net income



$

173.0



$

133.0



30

%

Add: depreciation and amortization expenses





74.2





69.1



7

%

Add: interest expense





37.1





42.8



(13)

%

Less: interest income





(3.1)





(3.3)



(6)

%

Add: income tax expense





61.6





40.7



51

%

Pre-tax adjusting items:



















Share-based payment expense recovery





(4.1)







(100)

%

Severance





4.3







100

%

Adjusted EBITDA*



$

343.0



$

282.3



22

%

Debt/net income





3.8

x



5.2

x

(27)

%

Adjusted net debt*/adjusted EBITDA*





0.5

x



1.4

x

(64)

%





(1)

Please refer to page 11 for a summary of adjusting items for the trailing 12-months ended September 30, 2020 and September 30, 2019.

(2)

Adjusted EBITDA* is calculated by adding back depreciation and amortization expenses, interest expense, and income tax expense, and subtracting interest income from net income excluding the pre-tax effects of adjusting items.

(3)

Adjusted net debt* is calculated by subtracting cash and cash equivalents from short and long-term debt.

(4)

Adjusted net debt*/adjusted EBITDA* is calculated by dividing adjusted net debt* by adjusted EBITDA*.



Operating Free Cash Flow* ("OFCF") Reconciliation

The Company believes OFCF*, when compared on a trailing 12-month basis to different financial periods provides an effective measure of the cash generated by the business and provides useful information regarding cash flows remaining for discretionary return to stockholders, mergers and acquisitions, or debt reduction. The balance sheet scorecard includes OFCF* as a performance metric. OFCF* is also an element of the performance criteria for certain annual short-term and long-term incentive awards.

The following table reconciles OFCF* to cash provided by operating activities, which is the most directly comparable GAAP measure in, or calculated from, the consolidated statements of cash flows:





















(in U.S. $millions, except percentages)



12 months ended September 30, 

















% Change







2020





2019



2020 over 2019

Cash provided by operating activities



$

289.2



$

356.2



(19)

%

Property, plant and equipment additions





16.5





10.4



59

%

Intangible asset additions





28.9





25.1



15

%

Proceeds on disposition of property plant and equipment





(16.6)





(13.7)



21

%

Net capital spending



$

28.8



$

21.8



32

%

OFCF*



$

260.4



$

334.4



(22)

%





(1)

OFCF* is calculated by subtracting net capital spending from cash provided by operating activities.

Adjusting items during the trailing 12-months ended September 30, 2020 were:

Recognized in the third quarter of 2020

  • $4.3 million ( $3.2 million after tax, or $0.03 per diluted share) of severance costs related to the realignment of leadership to support the new global operations organization, in line with strategic growth priorities led by the new CEO.

Recognized in the second quarter of 2020

  • $6.2 million ( $0.06 per diluted share) in current and deferred income tax expense related to an unfavourable adjustment to reflect final regulations published regarding hybrid financing arrangements.

Recognized in the first quarter of 2020

  • There were no adjustment items recognized in the first quarter of 2020.

Recognized in the fourth quarter of 2019

  • $4.1 million ( $3.4 million after tax, or $0.03 per diluted share) in share-based payment expense recovery related to the departure of our former CEO.

Adjusting items during the trailing 12-months ended September 30, 2019 were:

Recognized in the third quarter of 2019

  • There were no adjustment items recognized in the third quarter of 2019.

Recognized in the second quarter of 2019

  • There were no adjustment items recognized in the second quarter of 2019.

Recognized in the first quarter of 2019

  • There were no adjustment items recognized in the first quarter of 2019.

Recognized in the fourth quarter of 2018

  • There were no adjustment items recognized in the fourth quarter of 2018.

Cision View original content: http://www.prnewswire.com/news-releases/ritchie-bros-reports-third-quarter-2020-results-301167409.html

SOURCE Ritchie Bros . Auctioneers

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