Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) Q3 2019 Earnings Conference Call - Final Transcript

Nov 08, 2019 • 11:00 am ET

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Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Sharon R. Driscoll

impacts to supply will vary by geography as consignors navigate such factors as the U.S.-China trade deal Brexit the results of the federal elections in Canada and a moderating economy in the U.S. Looking ahead we remain cautiously optimistic about the used-equipment supply. And as we have said in the past we do not expect to see a slide of equipment all at once but more a general improvement as we go into Q4 in 2020. We are collectively focused on keeping the momentum going as we drive our business forward and stay focused on our long-term growth initiatives.

I will now turn to the financial highlights. Our total revenue improvements of 18% was driven by both a 32% growth in inventory sales revenue and an 11% increase in service revenue. Commission revenues increased 4% in line with GTV growth and strong guaranteed contract rate performance. Fee revenues were up 19% in the quarter as a result of higher GTV volume the impact of our fee harmonization and a higher mix of lower value lots. RBFS also contributed to fee revenue growth in the quarter with their strong performance. The 32% growth in revenue from inventory sales was primarily due to a higher level of inventory deals transacted in the U.S. region and GovPlanet inventory sales revenue from our government surplus contracts.

Our operating income on an adjusted basis excluding the onetime severance costs related to acquisition synergy actions in the third quarter of last year was up 23% driven by our total revenue growth and operating leverage with our SG&A growth -- costs growing at about half the rate of service revenue growth. Net income on an adjusted basis which excludes the nonoperating gain on the sale of an equity investment in Q3 of last year improved 31% from both higher operating income and lower interest expenses. Turning to our Auctions and Marketplaces segment. Service revenue was up 12% in the quarter. Regionally the U.S. posted 90% service revenue growth led by strong live and online GTV growth including higher volume from our strategic accounts strong growth from GovPlanet as well as higher fee revenues.

Canada was up 2% on higher fee revenue from the fee harmonization and increase in lower value lots resulting in higher per lot fee rates and a 300 basis point year-over-year improvement in our guarantee commission's rate from our industrial live auctions. This was partially offset by the significantly lower activity in the Canadian agriculture sector as mentioned earlier in my comments. Our international service revenue decreased 3% due to the Moerdijk auction shift softer performance at our Dubai auction partially offset by higher commissions earned from online GTV growth. On a rate basis we were pleased with our A&M service revenue rate performance in the second quarter coming in at 13.8% roughly 90 basis points higher than last year. The rate improvement was due to strong guarantee commission rate performance in both Canada and GovPlanet and in conjunction with fee revenue growth.

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