Q1 2025 RB Global Inc Earnings Call
Please stand by.
Speaker Change: 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. Sameer, Rathod. Please go ahead sir.
Hello and good afternoon.
Speaker Change: Thank you for joining us today to discuss our first quarter result.
Speaker Change: Jim Kessler, Archief Executive Officer, and Eric Guerin, Archief 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 in periodic FUC reports.
Speaker Change: On this call, we will also discuss certain non-GAAP financial measures, where the identification of non-GAAP financial measures, the most directly comparable GAAP financial measures, and the applicable reconciliation of the two, C.R. earnings release, and periodic FUC report.
Eric Guerin: At this time, I'd like to turn the call over to our CEO , Jim Kessler. Jim?
Jim Kessler: Thanks Sameer, 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.
Jim Kessler: The recently announced tariffs have introduced a new level of uncertainty.
Jim Kessler: We are actively monitoring the impacts to help our partners navigate their environment and make the best business decisions.
Jim Kessler: As always, we have not changed our approach and our focused on factors we control to ensure we can consistently over deliver it on our commitments [inaudible]
Jim Kessler: Our disciplined execution was evident again in this quarter, with adjusted EBITDA decline in 1% on its 6% declining gross transactional value.
Jim Kessler: Recall that we highlighted a last-quarters call that we anticipated to decline in GTV in the first quarter due to year-over-year comparison issues.
Jim Kessler: 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.
Jim Kessler: 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.
Jim Kessler: They primarily focus on commercial construction and transportation assets and have a strong footprint with municipal customers.
Jim Kessler: We expect to close this acquisition in the second or third quarter, subject to regulatory approvals and customary
Jim Kessler: Moving to the CC&T end markets, wire customers and enterprise partners exercise caution amid
Jim Kessler: We continue proactively invested in our future by focusing on controlable factors that drive growth while improve operational efficiencies. This includes having the most comprehensive network of territory managers, why continuously implement new programs to improve productivity.
Jim Kessler: This strategic approach will ensure we stay top of mind with our customers and partners when they want to or need to transact.
Jim Kessler: 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.
Jim Kessler: We leverage our data and insights products and parts procurement technology to solidify our position as the natural choice for fleet re-alignment.
Jim Kessler: From an operational standpoint since joining last year, Steve Lewis, our COO, has made excellent strides and implement in a metric-driven framework for Richie Brothers brand-aid yards to help us accelerate efficiency and elevate the experience of our partners and customers.
Jim Kessler: As part of these efforts, we have increased the number of planned sales events in North America by approximately 15% this year.
Jim Kessler: We are also strategically adjusting the time and of all of our events to balance supply through the quarter and better position us to support premium phrase performance for our designers.
Jim Kessler: The new schedule is expected to improve loadout times of assets for our buyers, enhancing their experience, enabling us to manage or cost structure more efficiently by smoothing out peaks and valleys of activities.
Turning to the automotive sector
Jim Kessler: We hosted IAA's 22nd Industry Leadership Summit, which again shattered attendance records.
Jim Kessler: This premier event is a key platform for engaging North American insurance, fleet, and remarketing partners and reinforces our commitment to exceeding customers' expectations through robust and consistent performance.
Jim Kessler: We welcomed several prospective partners who had not attended in over a decade. Many approached me after our presentations, saying they heard about the new IAA and had come to see for themselves.
I can constantly say we deliver.
Jim Kessler: 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.
Jim Kessler: We have signed a multi-year contract and we'll 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 year-over-year basis.
Jim Kessler: In conjunction with the Summit, we also hosted the IAA Advisory Council.
Jim Kessler: This is an open and collaborative form where key insurance partners share insights and we work together to identify opportunities to drive value to their P&L.
Jim Kessler: One area continues to be topped priority for them is Advanced Charges [inaudible]
Jim Kessler: Costs such as towing and storage that are incurred before a vehicle reaches our facilities. In response, we've launched several initiatives to improve predictability and cost management, including developed data-driven models to forecast storage, expenses, and optimize asset
Jim Kessler: from the accident scene to the final destination. We recently launched IAA 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.
Jim Kessler: We are also actively exploring the best venue concept to support our insurance partners better. Why 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 Sizable
Jim Kessler: Over the past 12 months, our insurance partners have provided over 100,000 CC and T assets.
Jim Kessler: We believe we can unlock premium price performance by cross-syncating these assets to Ritchie Brothers branded properties. Our early pilots have shown promising results reinforcing our belief in the potential
Jim Kessler: Overall, we continue to drive strong, gross returns for salvage values as a percent of actual cash value for our partners.
Jim Kessler: This stems from our continuous improvement in process and investment in technology.
Jim Kessler: 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.
Jim Kessler: We also continue to make excellent strides in attracting new international automotive buyers to our marketplace, with the percentage of vehicle sold to international buyers hidden all-time prize.
Jim Kessler: That said, we are cycling over significant product enhancements and process changes from the previous year, exposing ASP to broad macro forces.
Jim Kessler: I would also note that at the margin, we saw some buyer hesitancy in the first quarter due to the threat of powers
Jim Kessler: This combined with year-over-year of Nick's headwinds, wrote U.S. Insurance A, Speed Down, approximately 3%. I will now pass the call to Eric to review our financial performance and outlook.
Thanks, Jim.
Eric Guerin: Total GTV decreased by 6% or a mode of GTV increased by 2% driven by a 7% increase in unit volumes, partially offset by a decline in the average price for vehicle sold.
Eric Guerin: Unit following growth was driven by strong organic growth from existing partners and year-over-year increase in salvage market share.
Eric Guerin: First-quarter salvage industry volumes benefited from ongoing secular growth in loss ratios, fueled by favorable spread between the pair cost inflation and use-vehicle inflation.
Speaker Change: TCC Intelligence Solutions estimated that the total loss ratio increased nearly 100 basis points in the first quarter for approximately 20 to 0.8% compared to 21.8% in the same period last year.
Speaker Change: GTV and 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.
Speaker Change: In combination with shifting trade policies, uncertainty in the end markets is causing customers and partners to take a wait-and-see approach to disposition.
Speaker Change: Excluding the impact of the yellow corporation bankruptcy, lot volumes would have declined approximately 6% year-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.
Speaker Change: Asset Mixed Tailwind stemmed the decline in lot volume from the rental and transportation industries for assets values are intrinsically at lower ASPs.
Speaker Change: 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
Speaker Change: Service Revenue was broadly flat on a higher service revenue take rate offset by a lower level of GTV.
Speaker Change: The service revenue take rate increased approximately 150 basis points year over year to 22.3% driven by a higher average biography rate offset by a lower average commission rate and a decline in our marketplace services businesses.
Speaker Change: Moving to Adjusted EBITDA. Adjusted EBITDA declined 1% on lower levels of GTV and a higher operating expense level. Farsely offset by an expansion in our service revenue take rate at a higher contribution from inventory returns.
Speaker Change: Our dedication to efficiency and discipline to execution was evident again in the first quarter, as adjusted EBITDA as a percentage of DTV increased to 8.6% compared to 8.1% before our year.
Speaker Change: Adjusted earnings per share of the client 1%, which is in line with the decline in adjusted
Speaker Change: 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.
Speaker Change: We also increased the revolver capacity to $1.3 billion, improved financial covenants for more financial flexibility, and extended the maturity date to April 20, 30. Now moving to the outlook, we are keeping our full year outlook unchanged.
Speaker Change: 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.
Speaker Change: These second and third-order impacts are challenging to measure and predict, increasing the range of the possible outcomes.
Speaker Change: We remain committed to advancing our long-term growth strategy by investing in key technological initiatives at expanding the sales force.
Speaker Change: We're also controlling what we can and our exercise and proven expense management while limiting discretionary spending to help us navigate the current environment.
With that, let's open the call for questions.
Speaker Change: Thank you, sir. And everyone, if you would like to ask a question today, please press star one on your telephone keypad. Our first question comes from Sabahat Khan RBC Capital Market.
Sabat Khan: Okay, great, thanks and good afternoon, I guess maybe just on the commercial segment, historically the legacy business.
Sabat Khan: I've seen some level of volume uptick during pairs of macro uncertainty. Now, what are your customers? 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? It's got a bit more freaking got a bit more color on the CC and T segment, please.
Eric Guerin: Yeah, happy to do so. And again, I think Eric mentioned this.
in his message that we started with.
Eric Guerin: When you kind of get down to lower level, you know, the chain of how to make decisions with decision gets made, it gets real hard.
Eric Guerin: But the one thing I would just point out when you think about the environment we came out of because a year ago
Eric Guerin: You know, when this started the business, all that COVID equipment came in.
and then they all got the sposed up.
Eric Guerin: And then we immediately went into higher interest rate environment, and then you add the change in the presidency in the US and power-ups and that uncertainty.
So I think where the level of interest rates are…
Eric Guerin: Investing in new equipment versus holding on to it, and then waiting to see if these mega projects come through, I think is where their mind is at right now, and then for us.
Eric Guerin: 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. We're trying to make sure we're adding value every day inside of our P&L, but we're trying to make sure we're adding value every day inside of our P&L.
Speaker Change: Great, and then just for my follow-up, on the UK customer window you're announced, I think you indicated it starts to contribute in Q3.
Speaker Change: 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 a 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.
Speaker Change: 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 yet.
Speaker Change: and not salvage cars. So the UK, we already have a presence, we already have footprints.
Speaker Change: 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?
Speaker Change: And really when 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 and but what I would say is they're in the top tier of insurance carriers.
Up next we'll hear from Krista Friesen, C-I-B-C [inaudible]
Hi, thanks for taking my question.
Speaker Change: 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?
Speaker Change: 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...
Speaker Change: 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?
Speaker Change: 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 one.
Speaker Change: 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, [inaudible]
Speaker Change: 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.
Speaker Change: and had all that new equipment from COVID. They got the lead 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.
Speaker Change: for our partners at a very good level back then. But now we're in an environment where our interest rates are higher for new equipment.
Speaker Change: 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 Ritchie brothers, I don't think there's ever been an environment with these dynamics of...
Speaker Change: What we went through because of COVID and delayed equipment coming in, then a bunch of this positions 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,
Speaker Change: You know, what projects are coming up and what do I want to do with new equipment compared to the interest rate and buy into new equipment or dispose and hold on to and so we're this in his 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.
Speaker Change: Thanks. I really appreciate that color. I'll jump back into Q.
Up next is Michael Feniger, Bank of America Okay.
Hey guys, thanks for taking my questions. Just with-
Speaker Change: But GTV down 6% in Q1, you guys reaffirm the full year.
Speaker Change: 0-3%, just help us understand what some of the commentary is it.
Speaker Change: Are we flattened Q2 positive in the second half? Is it potentially still down a little bit because of some of this uncertainty and that it's more?
Speaker Change: 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.
Speaker Change: The mid single digit down in Q1 for some of the things that Jim described that we were laughing over a very strong prior year. Our expectation is for the full year that we're still within our range. I typically don't give guidance on a quarterly basis. The mid single digit down in Q1 for the full year that we were laughing over a very strong prior year.
Speaker Change: But with that said, as we progress through the year, we are anticipating the back half to be a bit stronger.
If that's helpful for you.
Speaker Change: That is helpful. And then maybe Jim just another commenter on the hesitancy is [inaudible]
Is that?
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Hey Michael, it's Sameer. Like you said, you know, there are a lot of different kind of moving features that you follow them.
Speaker Change: Very closely. I think on a high level when you think about it.
Speaker Change: You know, the equation that we've laid out is if the repair cost inflation is greater than use-car inflation, you would expect the loss ratio to expand, and then the converse is through a use-car pricing increase in fashion and repair cost.
Speaker Change: I think at this point, we're just speculating on what's going to happen, given that there are somethings are changing by the hour, but we feel comfortable with the guidance that we've provided in terms of GTV growth.
Speaker Change: And just a reminder everyone, it is star one to ask a question, we'll go next to Craig Kennison
Craig Kennison-Baird: Yeah, good, good afternoon, thanks for taking my question. I wanted to focus on the acquisition of J.M. Wood. I'm curious what synergies do you bring to the table on a deal like that?
Craig Kennison-Baird: Yeah, happy to take you through it at a high level. So, and one J.M. Wood is in a state where we didn't have any yard presence, and so we're really happy to fill in Alabama. And just think about any large company with a global scale like ours.
Craig Kennison-Baird: The scale of technology, think about all the platforms that we have from Boomin Bucket to MPE to Iron Planet to the Ritchie Brothers Live event.
Craig Kennison-Baird: And what we love about J.M. Wood is they do certain things.
Craig Kennison-Baird: where we really have an expanded like municipalities in this CC&T space where we want to take our expertise and take that across the US as we do it. But just think about all the back office, all the account and all the finance activities that a large company can help a family own business do and a technology component of it.
Craig Kennison-Baird: 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?
Craig Kennison-Baird: Yeah, look, in general, we're excited about the M&A that is out there for us to go after.
Craig Kennison-Baird: 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, have in these tuck ins come in and we think we have opportunity in the US in an international space.
Craig Kennison-Baird: 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 ECWJM would.
Great. Thank you.
Speaker Change: And just a reminder, everyone, that is star one. If you have a question today, up next is Maxim Sytchev and BF.
Maxim Sychev: Hi, good afternoon, gentlemen. Just a quick question around Australia and how the ramp up is going there with the relatively recently signed client there. Thanks.
Speaker Change: Yeah, yeah, so for Australia, just as a reminder, and it really starts...
Speaker Change: in the mid-summer time-primus when we'll start accepting call-hars and then think about
Speaker Change: 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 mid-summer is the plan for us to start accepting cars at an IAA slash RV global lot.
Okay. Okay. That's great. That's it. Thank you very much.
Next up is Michael Fenninger, Bank of America.
Michael Fenninger: Hey guys, thanks for squeezing me back in, you just promised just one here, just on the service revenue take rate it was up 150 pieces points.
Michael Fenninger: 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, you know, is that a buyer fee that's kind of going to be influenced for the rest of the year? Just kind of curious if we could talk about that service take rate.
Michael Fenninger: Some of the other weakness you guys saw in other areas of the business. Thank you.
Michael Fenninger: Thanks for the question, Michael. Yeah, we typically won't comment on the composition of the the take rate what I would say is we
Michael Fenninger: Continue to monitor ongoing what our fees and commission rates are and adjust accordingly within the market and the dynamics so we're really comfortable with where we ended for this quarter but I don't give a guidance for the specific take rate.
Michael Fenninger: 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.
Jim Kessler: Thank you so much. So first just wanted to thank all the RB Global teammates for your hard work and your continued dedication.
Jim Kessler: and to add in value, teaching every partner that we have.
Jim Kessler: And really that consistency and dedication of making sure we're partner partners first is the 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 look forward to talking to everyone soon. Thank you so much.
Speaker Change: Once again, ladies and gentlemen, that does conclude today's conference. Thank you all for your participation today. You may now disconnect.