RB Global, Inc.

Good day everyone and welcome to the RB Global First Quarter 2025 earnings call. This call is being recorded. At this time I would like to hand the call over to Mr. Samir Rapid. Please go

ahead sir. Hello and good afternoon. Thank you for joining us today to discuss our first quarter results. Jim Kessler, our Chief Executive Officer and Eric Guerin, our Chief Financial Officer, are with me on the call today. The following discussion will include forward-looking statements, including projections of future earnings, business and market trends. These statements should be considered in conjunction with the cautionary statements contained in our earnings release and periodic SEC reports. On this call, we will also discuss certain non-GAAP financial measures. With identification of non-GAAP financial measures, the most directly comparable GAAP financial measures, and the applicable reconciliation of the two, see our earnings release and periodic SEC reports. At this time, I would like to turn the call over to our CEO, Jim Kessler.

Jim? Thanks Samir, and good afternoon to everyone joining the call. I want to recognize our teammates' dedication to our partners and customers, particularly in this rapidly evolving macroeconomic environment. The recently announced tariffs have introduced a new level of uncertainty, and we are actively monitoring the impacts to help our partners navigate their environment and make the best business decisions. As always, we have not changed our approach and are focused on factors we control to ensure we can consistently over-deliver on our commitments. Our disciplined execution was evident again in this quarter, with adjusted EBITDA decline in 1% on a 6% decline in gross transactional value. Recall that we highlighted in the last quarter's call that we anticipated the decline in GTV in the first quarter due to -over-year comparison issues. To start, we are thrilled to announce the acquisition of JM Wood for approximately $235 million. Our shared values and culture align naturally, particularly in our commitment to put in our partners and customers first. This move enhances our geographical coverage in Alabama and adjacent states and brings a talented team of sales professionals with deep local relationships on board. They primarily focus on commercial, construction, and transportation assets and have a strong footprint with municipal customers. We expect to close this acquisition in the second or third quarter, subject to regulatory approvals and customary closing conditions. Moving to the CC&T end markets, while our customers and enterprise partners exercise caution amid ongoing uncertainty, we continue proactively investing in our future by focusing on controllable factors that drive growth by improving operational efficiencies. This includes having the most comprehensive network of territory managers while continuously implementing new programs to improve productivity. This strategic approach will ensure we stay top of mind with our customers and partners when they want to or need to transact. Regarding our enterprise partners, our strategy remains focused on delivering solutions that optimize their total cost of ownership and deliver premium price performance based on our liquidity preferences. We leverage our data and insights, products, and parts procurement technology to solidify our position as the natural choice for fleet realignment. This integrated approach ensures we are deeply embedded in their operational workflows, driving long-term value and partnerships. From an operational standpoint, since joining last year, Steve Lewis, our COO, has made excellent strides in implementing a metric-driven framework for our Ritchie Brothers branded yards to help us accelerate efficiency and elevate the experience of our partners and customers. As part of these efforts, we have increased the number of planned sales events in North America by approximately 15% this year. We are also strategically adjusting the timing of all of our events to balance supply through the quarter and better position us to support premium price performance for our consignors. The new schedule is expected to improve loadout times of assets for our buyers, enhancing their experience, enabling us to manage our cost structure more efficiently by smoothing out peaks and valleys of activity. Turning to the automotive sector, we hosted IAEA's 22nd Industry Leadership Summit, which again shattered attendance records. This premier event is a key platform for engaging North American insurance fleet and remarketing in partners and reinforces our commitment to exceeding customers' expectations through robust and consistent performance. We welcomed several prospective partners who had not attended in over a decade. Many approached me after our presentations, saying they had heard about the new IAEA and had come to see it for themselves. I can confidently say we delivered. We are energized by the positive momentum in our automotive business, and in the first quarter we are excited to announce that a new partner in the UK has selected us, Direct Line Group, as their sole salvage provider. We have signed a multi-year contract and will start supporting them in the third quarter of this year. I am also very pleased to say that we have gained market share globally in salvage in the first quarter on a -over-year basis. In conjunction with the summit, we also hosted the IAEA Advisory Council. This is an open and collaborative forum where key insurance partners share insights and we work together to identify opportunities to drive value to their P&L. One area that continues to be top priority for them is advanced charges. Costs such as towing and storage that are incurred before a vehicle reaches our facilities. In response, we have launched several initiatives to improve predictability and cost management, including developed data-driven models to forecast storage, expenses, and optimize asset routing. We believe there is significant opportunity to reduce advanced charges by routing vehicles more efficiently from the accident scene to their final destination. We recently launched IAEA Total Loss Predictor, a new AI-driven tool that helps our partners better classify vehicles that should go directly to our yard versus repair shop. We are also actively exploring the best venue concept to support our insurance partners better. While most of the assets they supply are automotive salvage, there is also a meaningful volume of construction and transportation assets that RB Global is uniquely positioned to help with. The opportunity is sizable. Over the past 12 months, our insurance partners have provided over 100,000 CC&T assets. We believe we can unlock premium price performance by cross-syndicating these assets to Ritchie Brothers branded properties. Our early pilots have shown promising results reinforcing our belief in the potential of this approach. Overall, we continue to drive strong gross returns for salvage values as a percent of actual cash value for our partners. This stems from our continuous improvement in process and investment in technology. From an operational standpoint, we had another robust quarter with the team over-delivering against our service level agreements. Our transparency program continues to be industry-leading. I am very proud of the results we are driving for our partners. We also continue to make excellent strides in attracting new international automotive buyers to our marketplace. With the percentage of vehicles sold, the international buyers hit an all-time prize. That said, we are cycling over significant product enhancements and process changes from the previous year, exposing ASPs to broad macro forces. I would also note that at the margin, we saw some buyer hesitancy in the first quarter due to the threat of tariffs. This combined with -over-year mixed headwinds drove U.S. insurance ASPs down approximately 3%. I will now pass the call to Eric to review our financial performance and outlook.

Thanks, Jim. Total GTV decreased by 6%. Automotive GTV increased by 2%, driven by a 7% increase in unit volumes, partially offset by a decline in the average price per vehicle sold. Unit volume growth was driven by strong organic growth from existing partners and -over-year increase in salvage market share. First quarter salvage industry volumes benefited from ongoing secular growth and loss ratios, fueled by favorable spread between repair cost inflation and used vehicle inflation. TCC Intelligent Solutions estimated that the total loss ratio increased nearly 100 basis points in the first quarter, to approximately 22.8%, compared to .8% in the same period last year. GTV in the commercial construction and transportation sector decreased by 18%, driven by a 19% decline in lot volumes, partially offset by an increase in average selling price. In combination with shifting trade policies, uncertainty in the end markets is causing customers and partners to take a -and-see approach to disposition. Excluding the impact of the yellow corporation bankruptcy, lot volumes would have declined approximately 6% -over-year. The average price per lot sold increased primarily due to an improvement in asset mix, partially offset by continued deflation in asset values. Asset mix tailwinds stemmed the decline in lot volume from the rental and transportation industries, where asset values are intrinsically at lower ASPs. Excluding the impact of the yellow corporation bankruptcy from the prior period, the GTV decline in the commercial construction and transportation sector would have been approximately 14%. Moving to service revenue. Service revenue was broadly flat on a higher service revenue take rate offset by a lower level of GTV. The service revenue take rate increased approximately 150 basis points -over-year to 22.3%, driven by a higher average buyer fee rate offset by a lower average commission rate and a decline in our marketplace services businesses. Moving to adjusted EBITDA. Adjusted EBITDA declined 1% on lower levels of GTV and a higher operating expense level, partially offset by an expansion in our service revenue take rate and a higher contribution from inventory returns. Our dedication to efficiency and disciplined execution was evident again in the first quarter, as adjusted EBITDA as a percentage of DTV increased to .6% compared to .1% the prior year. Adjusted earnings per share declined 1%, which is in line with the decline in adjusted EBITDA. Before we move to the outlook, I want to note that on April 3rd, we repriced our return loan A and revolver. This will reduce our bank spread by approximately 85 basis points and the undrawn revolver fee by 20 basis points. We also increased the revolver capacity to $1.3 billion, improved financial covenants for more financial flexibility and extended the maturity date to April 2030. Now moving to the outlook. We are keeping our full year outlook unchanged. We are traversing an unprecedented level of market uncertainty and changes in trade policy. While the direct impact on our business is relatively small, many customers and partners are trying to assess the impact on their business. These second and third order impacts are challenging to measure and predict, increasing the range of the possible outcomes. We remain committed to advancing our long-term growth strategy by investing in key technological initiatives and expanding the sales force. We are also controlling what we can and are exercising prudent expense management while limiting discretionary spending to help us navigate the current environment. With that, let's open the call for questions.

Thank you, sir. And everyone, if you would like to ask a question today, please press star 1 on your telephone keypad. Our first question comes from Sabat Khan, RBC Capital Markets.

Okay, great. Thanks and good afternoon. I guess maybe just on the sort of the commercial segment, you know, historically the legacy business has seen some level of volume uptick during periods of macro uncertainty. And what are your customers, like it sounds like a bit of a wait and see approach, but are they unsure of the background? Kind of what's their positioning right now? Are there folks that might dispose if they get a bit more clarity? Just get a bit more, if we can get a bit more color on the CSC, CNT segment, please.

Yeah, happy to do so. And again, I think Eric mentioned this in his message that we started with. When you kind of get down to lower level, you know, the chain of how to make decisions, what decision gets made, it gets really hard. But the one thing I would just point out, when you think about the environment we came out of, because a year ago, you know, on this side of the business, all that COVID equipment came in and then it all got disposed of. And then we immediately went into higher interest rate environment. And then you add the change in the presidency in the US and tariffs and that uncertainty. I think there is still some optimism out there from our partners about mega projects and other projects in general coming through. So I think where the level of interest rates are, investing in new equipment versus holding onto it and then waiting and see if these mega projects come through, I think is where their mind is at right now. And then for us, you know, with all the different services and everything we have, what we're trying to do right now is understand what their strategic priorities are and how do we add value in this environment. So we're very focused with all of our partners. And for us, the disposition is just more of a timing issue of when it comes in this environment. But we want to make sure we're adding value every day inside of their P&L.

Great. And then just for my follow up on the UK customer, when they announced, I think you indicated starts to contribute in Q3. Anything you can share on the scale in terms of units of this customer and then in terms of the IAA presence or capabilities in the UK is similar to the Australia situation where there might be some sort of a build required. Just maybe thoughts on what the setup in the UK is for IAA, the capabilities and then anything on the scale of this customer. Thanks.

No, you got it. So just to start with scale, the UK already had a presence unlike Australia, where we're building a presence. Ritchie Brothers had the presence in Australia and not salvage cars. So the UK, we already have a presence. We already have footprints. So really not any heavy investment that it takes. It's more just like in the US, how do we go out and get more market share? And really, what I'm proud of the team is this was a customer where we did no business before and now we're doing an exclusive deal. And our partner did ask us not to really talk about units specifically. So we're going to honor that. But what I would say is they're in a top tier of insurance carriers.

Up next, we'll hear from Christa Friesen, CIBC.

Hi, thanks for taking my question. Maybe just to follow on the IAA topic, you're talking about the growth and market share that you saw this past quarter. Can you elaborate a little bit more on that if you can quantify that at all?

I don't think we're going to get into the details of the quantification, but I think if you go back to past calls, we've announced a bunch of different insurance carrier changes that have taken place. And that's all starting to come through the P&L as they get fully realized each quarter.

Okay, great. And then maybe also just you're talking about some of the hesitancy that you're seeing in your customers right now. Was that, I assume that was throughout the quarter and have you seen any improvement just in the first half of Q2 here?

I think I want to separate this question in two things because I think there's a macro question and there's also an RB global kind of question. And I just want to remind everyone, you know, the one thing that RB global is going through is so unique than any past years or quarters that we've had. About a year and a half ago, a year ago, you know, we won the yellow deal, which was a big one-time bankruptcy that no one else has ever had on the rental side of the business and equipment and transportation. A couple of our big partners had all that new equipment from COVID that got delayed to come in, so it created a disposition cycle that was different than everyone else. Extremely proud of our team to be able to look at liquidity for our partners. At a very good level back then. And, but now we're in an environment where interest rates are higher for new equipment, tariffs of what's going on in the macro environment. So this is such a unique environment. When we go back and look at the history of Richard, Richard brothers, I don't think there's ever been an environment with these dynamics of what we went through because of COVID and delayed equipment, equipment coming in, then a bunch of dispositions that had to happen. And then you're in an environment where interest rates are higher than they've been in the past and people have to make decisions, you know, what projects are coming up and what do I want to do with new equipment and compared to the interest rate and buy into new equipment or dispose and hold on to. And so we're this in this environment. And I wouldn't say the macro environment has changed dramatically for someone to make a substantial decision different than they had in the past quarter.

Thanks. I really appreciate that color. I'll jump back in the queue.

Up next is Michael Finnegan, Bank of America.

Hey guys, thanks for taking my questions. Just with the GTV down 6% in Q1, you guys reaffirmed the full year of zero to 3%. Just help us understand with some of the commentary, is it, are we flattened Q2 positive in the second half? Is it, is it potentially still down a little bit because of some of this uncertainty and that it's more back half, you know, a back half inflection, just kind of just thinking about with the way the year started and some of the commentary on the hesitancy, just how we kind of flow through the rest of the year on the GTV side.

Yeah. Thank you for the question, Michael. This is Eric. As I said on the fourth quarter earnings call, we anticipated the mid single digit down in Q1 for some of the things that Jim described, that we were lapping over a very strong prior year. So our expectation is for the full year that we're still within our range. I typically don't give guidance on a quarterly basis. But, but with that said, I would say as we progress through the year, we, we are anticipating the back half to be a bit, a bit stronger,

if that's helpful for you. That is helpful. And then maybe Jim, just, I know there's commentary on the hesitancy is, is that that sounds like it's on the commercial side. I'm just curious on the auto side. I know there's the second and third and fourth degree implications here. I'm just kind of curious what you're seeing there with potential tariffs on autos, what that means for pricing on new, which filters to use, but also repair prices, I'm just kind of curious with the loss ratio improving, how we should kind of think about these moving pieces in a tariff world.

Hey, Michael, it's Samir. Like you said, you know, there are a lot of different kind of moving pieces and we follow them very closely. I think at a high level, when you think about it, you know, the equation that we've laid out is if the repair cost inflation is greater than use car inflation, you expect the loss ratio to expand. And then the converse is to use car pricing increases fashion and repair costs. I think at this point, you know, we just see speculating on what's going to happen given that tariffs and things are changing by the hour, but we feel comfortable with the guidance that we provided in terms of GTB growth.

And just a reminder, everyone, it is Star One to ask a question. We'll go next to Craig Kennison Baird.

Yeah, good afternoon. Thanks for taking my question. I wanted to focus on the acquisition of JM Wood. I'm curious, what synergies do you bring to the table on a deal like that?

Yeah, happy to take you through it at a high level. So, one, JM Wood is in a state where we didn't have any yard presence. So we're really happy to fill in Alabama. And just think about any large company with a global scale like ours. And when you buy a business that's been owned by a family business, technology and scale and services and attach rate, financial services, transportation services, the scale technology, think about all the platforms that we have from Boom and Bucket to MPE to Iron Planet to the Ritchie Brothers live event. And what we love about JM Wood is they do certain things where we really haven't expanded like municipalities in this CC and T space where we want to take their expertise and take that across the US as we do it. But just think about all the back office, all the accounting, all the finance activities that a large company can help a family business do and the technology component of it.

Yeah, thanks, Jim. And as a follow up, to what extent is this a template for other deals like this, given your opportunity to consolidate in this market?

Look, in general, we're excited about the M&A that is out there for us to go after what we want to stay focused on. And Eric's kind of been given this guidance for the last year. Now that we got the leverage ratio where we want it, having these tuck ins come in and we think we have opportunity in the US, in the international space to be able to leverage our scale. And we think there's ample enough opportunities to be able to go out there and go after acquisitions like you see with JM Wood. Great, thank you.

And just a reminder, everyone, that is Star One. If you have a question today, up next is Maxim Sitchev, NBS.

Hi, good afternoon, gentlemen. Just a quick question around Australia and how the ramp up is going there with the relatively, you know, recently signed client there.

Yeah, so for Australia, just as a reminder, it really starts in the midsummer timeframe, us when we'll start accepting cars and think about the process of titles and everything else until you kind of see your first car for sale kind of happens after that date. But think about midsummer is the plan for us to start accepting cars at an IAEA slash RV global lot.

OK,

OK, that's great. Thank you very much.

Next up is Michael Fenninger, Bank of America.

Hey, guys, thanks for squeezing me back in. Just a promise, just one here, just on the service revenue take rate, it was up 150 basis points. Can you guys just unpack that a little bit more? Is this higher buyer fee? Is that one time in nature for the quarter? Is that kind of how you know, is that is that a buyer fee that's kind of going to be influenced for the for the rest of the year? Just kind of curious if you could talk about that service take rate, explain 150 basis points, which kind of helps offset some of the the other weakness you guys saw in other areas of the business. Thank you.

Thanks for the question, Michael. Yeah, we typically won't comment on the composition of the the take rate. What I what I would say is we continue to monitor ongoing what our our fees and commission rates are and adjust accordingly within the market and the dynamic. So we're really comfortable with with where we ended for this quarter, but I don't give a guidance for the specific take rate.

And everyone, at this time, there are no further questions. I'd like to hand the call back to Mr. Jim Kessler for any additional or closing remarks.

Thank you so much. So first, just wanted to thank all the R.B. Global teammates for your hard work and your continued dedication and to add in value, teaching every partner that we have and really that consistency and dedication of making sure we're part of our partners first is utmost importance to our success in the future. So thank you so much for doing that. And everyone on the call, thank you for taking the time to listen to our story. We're looking forward to talking to everyone soon. Thank you so much.

Once again, ladies and gentlemen, that does conclude today's conference. Thank you all for your participation today. You may now.