The Global Leader in Used Equipment Sales 2015 Investor & Analyst Day New York | January 12, 2015
Forward looking statements This presentation contains forward-looking statements (as such term is defined in Section 21E of the U.S. Securities Exchange Act of 1934, as amended), which reflect management's current views with respect to certain future events, company strategy and performance. All statements included in or accompanying this presentation, other than statements of historical fact, are 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. Please refer to our website at www.rbauction.com for a description and, as applicable, reconciliation of non-GAAP financial measures such as GAP, EBIT and Adjusted EBIT, ROI and ROIC, RONA, OFCF and OFCF as % net earnings, EBITDA and EBITDA margin rate, Contribution and Profit Margin, Sales Force Productivity, QOWC, Other Working Capital, Capital Intensity, Capex Intensity and Net Capex Intensity, Debt / EBITDA and Net Debt / EBITDA, ARR, OI Margin and Adjusted OI Margin, and Adjusted EPS. All figures are in US dollars, unless otherwise noted. 2 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
Agenda Estimated Topics Presenter time 10:00 am ET Welcome Remarks Ravi Saligram Historical Performance and Influences On Our Business Rob McLeod 10:20 am Strategic Overview and M&A Ravi Saligram 10:55 am Pillar 1: Reinvigorate Growth Strategies by Geography Rob McLeod, Randy Wall, Jeroen Rijk EquipmentOne and New Channels Jim Barr Ritchie Bros. Financial Services Jim Barr 11:35 am Pillar 2: Efficiencies and Effectiveness Systems and Processes Jim Barr Organizational Structure, Key Enablers and SG&A Todd Wohler Sales Productivity Ravi Saligram 12:05 pm -- Lunch -- 12:50 pm Pillar 3: Optimize Balance Sheet Capital Structure and Capital Allocation Art Winkleblack Existing Site Returns Rob McLeod Performance Scorecard and Implications for Exec Comp Rob McLeod Business Model & Outlook 1:30 pm Ravi Saligram 1:45 pm Q&A Session Management Team End of Event 2:30 ET
Taking RBA to the next level: Strategic Roadmap Summary • Reinvigorating strong top-line growth • Driving operating efficiency and effectiveness • Utilizing cash flow and potential incremental leverage to fuel growth • Enhancing returns on capital and generating Economic Value • Establishing capital allocation priorities • Including the initiation of a share buyback program Taking RBA to the next level of execution and delivery of shareholder value
Key Enablers of Plan Delivery • Upgrading our talent – both from inside and outside • A decentralized, fully empowered and accountable regional organization structure • An integrated Management Scorecard focused on the key drivers of shareholder value • An incentive compensation program based on the few key metrics which best align management with shareholder interests • Data capture, systems and analytic capabilities to identify opportunities and optimize execution Establishing the foundation for sustainable, long term success at RBA
Key Drivers of Growth 1. Winning in the US 2. Penetrating Transportation & Agriculture 3. Growing Strategic Accounts & Global Accounts 4. M&A 5. Driving multichannel Key Enabler: Building People Capacity & Capability
Historical Performance Rob McLeod, Chief Financial Officer
GAP Growth Since 2009 • GAP growth since 2009 has been inconsistent • Rate has been less than 1/3 of growth rate to 2009 GAP 2004–2014 ($mm) CAGR 2009–2014 = 3.8% 4500 CAGR 2004–2009 = 14.3% 4000 $4,212 $3,908 $3,817 $3,714 3500 $3,568 $3,491 $3,278 $3,186 3000 $2,721 2500 2000 $2,093 $1,789 1500 1000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Revenue Rate 10.2% 10.1% 9.5% 9.8% 9.9% 10.8% 10.9% 10.7% 11.2% 12.2% 8 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
Revenue drivers – mix has evolved • Since 2009, our mix of revenues has changed • Fees have increased as a percentage of total Revenue by Type – 2009 ($mm) Revenue by Type – 2013 ($mm) Total Revenue: Total Revenue: 8% 20% $377 mm $467 mm Commission Commission Revenue – $349 Revenue – $374 Fee Revenue – $28 Fee Revenue – $83 $93 92% 80% 9 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
Strategic use of at-risk business has increased At-risk business has moved from below our historic range into that range • GAP Type - 2009 GAP Type - 2013 Straight Commission At-Risk 21% 28% 79% 72% 1 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015 0
Geographic mix • US revenue has declined to 48% of total revenues (2009 vs. 2013) • Canada revenue has increased to 29% of total revenues Revenues by Geography – 2009 ($mm) Revenues by Geography – 2013 ($mm) Total Revenue: Total Revenue: 7% 9% $377 mm $467 mm 15% 14% US – $202 US – $224 48% Canada – $90 Canada – $135 54% Europe – $58 Europe – $65 24% 29% Rest of World – $27 Rest of World – $43 11 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
Flow-through of revenue gains has been limited Revenues & Earnings from Operations (EBIT, $mm) 500 $467 450 $438 400 $396 $377 350 $357 300 250 200 150 $131 $127 $120 100 $104 $92 50 0 2009 2010 2011 2012 2013 Revenues Earnings from Operations (EBIT)* Revenue CAGR 4%, EBIT CAGR 1% * EBIT adjusted for CEO Separation agreement 12 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
CAPEX has been reduced significantly since 2009 CAPEX ($mm) 180 160 $157 140 $145 120 $113 100 80 $77 60 $62 $62 $54 $51 40 $43 20 $23 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Recent CAPEX has been focused on site maintenance and IT investments 13 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
Increase in depreciation expense now moderating 2009-2014: Auction site development drove increased depreciation expense 2012 forward: Depreciation expense stabilized in line with significantly reduced site development Depreciation & Amortization 2009–2013 ($mm) 12.0% $50 10.7% 10.6% $45 9.4% 9.3% 10.0% $40 8.4% $35 8.0% $30 6.0% $25 $43 $42 $41 $38 $20 $32 4.0% $15 $10 2.0% $5 0.0% $0 2009 2010 2011 2012 2013 Depreciation expense growth Depreciation and amortization CAGR 2009–2013 = 8.0% Depreciation and amortization as percentage of revenues 14 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
ROIC performance declined due to auction site development combined with subpar growth Return on Invested Capital (ROIC)¹ 20% 17% 16% 16% 15% 14% 14% 12% 11% 11% 10% 10% 9% 8% 4% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (1) The Company calculates ROIC as adjusted net earnings divided by invested capital. Invested capital is calculated as the average equity attributable to the equity holders of the parent between the current reporting date and the comparative reporting date, plus the average non- current borrowings between the current reporting date and the comparative reporting date. 15 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
Return on net assets Return on Net Assets (RONA)¹ 30% 25% 26% 23% 22% 20% 21% 20% 16% 15% 15% 12% 12% 10% 10% 5% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (1) Trailing Twelve Months Net operating profit after tax / Net assets 16 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
RBA cash flow perspective – last four years • Cumulative Operating Free Cash Flow nearly equals cumulative net income RBA 2010–2013 (cumulative) % of Net Income 200% 180% 160% 159% 140% 120% 100% 91% 80% 68% 60% 40% 20% 0% Cash from Operations CAPEX(1) CAPEX Op Free Cash Flow (1) RBA CAPEX is net of proceeds on sales of PP&E. 17 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
Takeaways • RBA is a strong cash generator • Big Capex days are behind us • GAP growth, consistent Revenue Rate and controlling expenses are our key focus areas 18 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
Influences On Our Business Rob McLeod, Chief Financial Officer 19
Reminders about our model RBA’s revenue Our sector coverage Our global reach is generated by is broad and diverse provides a natural transaction activity hedge against • The assets we sell can, regional economic • Can be generated by and often do, transfer weakness between sectors both growth and (i.e. excavator used contraction periods • Transcends local in construction originally of economic and market conditions; could be sold for sector cycles provides better pricing work in mines) for equipment sellers 20 RITCHIE BROS. | 2015 INVESTOR & ANALYST DAY | JANUARY 12, 2015
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