Q2 2025 RB Global Inc Earnings Call

Ladies and gentlemen, thank you for standing by. My name is Jim and I'll be your conference operator. Today at this time, I am pleased to welcome you all to the RB Global second quarter 2025 earnings conference call. As a reminder, all lines have been placed in a listen-only mode but later you will have the opportunity to ask questions during our question and answer session. Today's session is also being recorded and now to get us started with opening remarks and introductions, I am pleased to turn the floor over to vice president of investor relations Mr. Samir R thought please go ahead sir.

Hello and good afternoon. Thank you for joining us today to discuss our second quarter results. Jim Kesler, our chief executive officer and Eric Aaron. Our Chief Financial Officer are with me on the call today, the following discussion will include 4 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 FCC reports.

On this call, we will also discuss certain non-gaap Financial measures for the identification of non-gaap financial measures and the most directly comparable, gaap Financial measures and the applicable reconciliation of the 2. See our earnings release and periodic FCC reports.

At this time, I would like to turn the call over to our CEO. Jim castler. Jim

thanks, Samir and good afternoon to everyone joining the call.

I want to begin by recognizing the exceptional execution and dedication of our teammates Who Remain the foundation of our ability to consistently overd deliver on our commitments and position us for long-term growth.

As always, our approach remains unchanged. As we stay focused on the factors within our controls.

Our discipline execution was evident again in the quarter with adjusted ibida, increasing 7% on a 2%, increase in Gross transactional values.

Starting with our Automotive sector. The momentum continued as we outpaced the market for another quarter achieved in solid gains in market share.

Unit volume increased by 9% year-over-year.

With this increase in volume, I am especially proud to say that our teammates continue to perform at an exceptional level.

Consistently over, delivering against all of our service level agreements.

On the demand side, our active buyer base continues to grow reflecting the strength of our platform internationally. We are particularly pleased to Welcome 2 new alliance Partners which extends our Global footprint and enhances the buyer diversity.

We also continue to refine and optimize our multi-channel auction format to drive premium price performance.

These efforts are translated as a tangible results.

We continue to deliver strong gross returns or salvage values as a percentage of pre-accident cash value.

With us Insurance average selling prices, increasing approximately 1% year-over-year.

As we enter the peak season for cat events.

Speed and coordination remains Mission critical for our partners.

This ensures we can respond seamlessly when the time comes.

Our dedicated cat capacity continues to grow, and we have built in additional agility and flexibility through our partnership with NASCAR and our ability to leverage Richie Brothers yards as needed.

Last year, we demonstrated our unique ability to leverage the full strength of RB Global and manage the volume surge we experienced. Our teammates stand ready to respond again this year.

All of this directly translates into Superior execution, enabling us to consistently overdeliver, in our commitments to our partners.

We have a proven and scalable model for responding to cat events which provides a sustainable competitive advantage.

We are also excited to announce a new joint venture in the UK with LKQ Corporation, a global leader in alternative and Specialty parts.

As a result, our synetic automotive parts. And dismantling business will be jointly operated with LKQ and rebranded as LKQ, synetic.

RB Global will retain 100% of the Salvage Auction part of the business, which has been rebranded and will operate as IAA.

This is a win-win where both organizations will bring their respective areas of expertise to the joint venture.

Our regional partners are excited about the vision and value, we bring to the industry.

The joint venture will streamline the distribution of green Parts into the repair Network and Elevate the customer experience.

Moving to the commercial construction and transportation sector. I am pleased to share that we have successfully closed. The acquisition of JM wood

This transaction represents a strategic enhancement of a footprint in Alabama and the broader southeast United States.

We are proud to welcome a high-performance team with deep regional expertise to our organization.

They have built their business much like ours, by cultivating long-standing relationships. Founded on trust and exceptional service.

By combining their strong brand, customer focus, and regional presence with our global reach, digital platform, and value-added services, we are well positioned to deliver even greater value to our customers and drive continued growth.

Why customers and partners in our commercial construction and transportation and markets continue to navigate macroeconomic uncertainty, we remain focused on factors within our control.

We continue to invest in driving, sustainable growth and enhance and operational efficiency.

This includes ongoing optimization of our territory manager Network and deployment of targeted productivity initiatives across the organization.

Our discipline approach is designed to position us as the partner of choice.

Ensuring we remain top of mind when customers are ready to engage and transact.

Before I hand, the call over to Eric to review our financial performance and Outlook.

I would like to thank our incredible team worldwide for their hard work, discipline and perseverance.

You power our momentum.

We have the right strategy, the right people, in the right foundation in place. And I'm excited about the opportunities ahead as we continue to deliver long-term value for our customers partners and shareholders, Eric,

Thanks Jim total GTV increased by 2%.

Automotive, GTV increased by 8%.

driven by a 9% 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 a year-over-year increase in market share across Salvage and remarketed vehicles.

As Jim noted, our insurance ASP increased 1%.

However, the average price per lot, sold declined, primarily due to a higher proportion of remarketed, vehicles compared to insurance vehicles relative to the prior year.

Second quarter, Salvage industry volumes benefited from ongoing secular growth in loss ratios.

Fueled by the favorable spread between repair cost inflation and used vehicle inflation.

CCC, intelligent solutions, estimated that the total loss ratio increased by nearly 70 basis points in the second quarter to approximately 22.2% compared to 21.5% in the same period last year.

GTV and the commercial construction and transportation sector decreased by 6% driven by an 18% decline in lot volumes.

Partially offset by an increase in average selling price.

Today's environment compared to that of 2024, it's essential to consider several key dynamics.

Last year, our performance benefited from a significant release of age. Fleet from our rental Partners, a byproduct of Prior Co related supply chain, disruptions

As well as the unique impact of the yellow Corporation bankruptcy, the largest in its category.

Today we are navigating a more complex macro backdrop characterized by higher interest rates involving trade policy, uncertainty, and are more cautious posture from customers and partners, amid growing optimism around Mega projects.

Excluding the impact of the yellow Corporation. Bankruptcy unit volumes will declined. Approximately 2% year-over-year.

average, price per lot, sold increased primarily due to an improvement in the asset mix

Asset mix Tailwind. Stemmed. The decline in lot volume from the rental and transportation Industries for asset values are intrinsically at lower asps.

Excluding the impact of the yellow Corporation. Bankruptcy from the prior period. The decline in GTV for the commercial construction and transportation sector would have been approximately 1%.

Moving to service Revenue.

Service Revenue increased 3% on a higher level of GTV.

And a higher service Revenue take rate.

The service Revenue take rate increased approximately 20 basis points year-over-year to 21.1%.

driven by a higher average buyer fee rate structure partially offset by a lower average commission rate and a decline in our Marketplace Services businesses

moving to adjusted even up.

Adjusted Eva increased 7% on GTV growth and expansion in the service Revenue. Take rate

Our dedication to efficiency and disciplined execution was evident again in the second quarter, as adjusted EVA as a percentage of DTV increased to 8.7%, compared to 8.3% the prior year.

Adjusted earnings per share, increased by 14%.

Driven by a higher operating income.

A lower net. Interest expense.

And an adjusted lower tax rate before. Moving on to the outlook, I would like to highlight the financial implications of the LKQ joint venture that Jim just discussed.

Given the relative size of the Auto Parts dismantling business. We do not expect any material impact on our Topline or profitability for the remainder of 2025, as a result of this transaction.

Going forward, we will account for this JV using the equity method with our portion of the results included within other income.

In connection with the JV, we revalued the assets, which resulted in a 1-time loss on Deck, consolidation of 15.5 million.

And incurred an additional charge of 4.2 million associated with the deal for a total loss of 19.7 million.

That said, we are raising and tightening our adjusted IBA guidance range to 1.34 to 1.37 billion dollars.

Additionally, as a reflection of our continued confidence in the strength of our strategy and our ability to drive sustainable long-term growth.

We are increasing our quarterly dividend approximately 7%.

To 31 cents per quarter from 29 cents per quarter.

As you refine your models, for the second half of the year, please note that our guidance does not incorporate any contribution from cat-related, GTV.

Given the unknowable nature of extreme weather events.

Recall that cat volumes contributed approximately 169 million in automotive. GTV in the fourth quarter of 2024, which will affect the year-over-year growth comparison for that period.

To drive long-term profitable growth. We are investing in key technological initiatives and optimizing our sales force to improve the customer experience.

The team also remains focused on structurally, optimizing costs to help us navigate the current environment.

With that, let's open the call for questions.

Ladies and gentlemen, at this time, if you would like to ask a question, simply press star and 1 on your telephone keypad. If you find your question has been asked and you would like to remove yourself. You may also press star 1, once more to remove yourself. That is star 1. If you have a question or to remove yourself from the queue today, we'll hear first from the line of, just 1 moment, we'll hear first from the line of sabot. Khan at RBC, please go ahead. Your line is open.

Good afternoon. Let me just follow up on sort of those lost comments there around kind of H2. I just give them the performance through H1. Um, feels like there might be a bit more room potentially on the full year that uh than even the guidance up Tick suggests. So if you can maybe just give us some of the puts and takes from your perspective. In addition to the color you just shared around what might be keeping you a bit more cautious or just what are some of the things you're keeping an eye on the pros and the cons through the back half of the year, um, that may have prevented the guidance to increase from being a bit more meaningful. Just giving the performance here today. Thanks.

Yeah, thank thank you for the question. This is Eric, you know, as you look at the the back half of of the year, as I said, in my prepared remarks, we we do see still the, um, the cautious, um, or the wait and see on some of our, our partners and and a lot more focus on potential Mega projects later in the year. And I think

Uh, something that's continued. And I want to make sure we uh, take that into consideration. But if you look at the Eva at midpoint front front, half of the Year versus back half of the year. Uh, even with, with this guidance, you'll see an acceleration in growth in the second half versus the front half. So I I feel comfortable with with where I am on the guidance and and we'll obviously as we do each quarter um assess the best path. But right now, I think that the tightening of the range and then moving the midpoint uh conservatively. Here is the the best approach for us

Great. And then just for my follow-up, I guess we could just dig a little bit more into the ccnt side and I think similar commentary shared last quarter around the customers there. The the the equipment owners there being still a big cautious on certain, you know, are you as we get into sort of calendar? Q3 are you seeing any indications of, you know, the folks deciding either way, either they're keeping machines or want to bring them to Market, you know, there's obviously a lot of volatility during Q2 with the tariffs but just curious. Um, if you saw any change in Q2 versus q1 and anything into Q3 as uh we look ahead to the back half. Thank you.

Yeah, look it. It's Jim. I I think we're too close into Q3 to really give you a clear answer at this point. And look, the terrorists are a piece of it interest rates and what's going to happen with it. You go back and forth. Are they going to stay? Or they're going to come down, what's going on? Um, Trump and our fed chairman have an argument back and forth all the time. So for us as we think about it, you can see the progression of what happened from the first to the second. Um, we continue to feel good about progression that it should happen. But to Eric's early comments, there's still some uncertainty that's hard for us to judge, based on what's happened on the macro side of the business, um, but we feel really good that we're when it's Dan breaks, we are ready to accept the business and our partners, um, will use us like they always have in the past so we're excited to take it but right now we feel like it's better to be a little bit conservative uh when outside of our comments.

Great. Thanks very much.

Hansen at Raymond James.

Yeah, good afternoon guys. Thanks for the time, um, with the GM would equities are now closed. I'm just curious. How about how you're thinking about the broader m&a pipeline out there. You the assets. You've acquired thus far, have been pretty desperate to GM wood and then, boom, bucket. Come to mind. I mean, what, what's in, the what are you on the hunt for now? And how does that pipeline look going forward? What are you looking to augment the platform with

Yeah, so look, I don't think we're going to get into specifics of, you know, um, our strategy. But we believe there are a lot of opportunities in the m&a side, um, that stay core to our business. Um, on the Sabbath side, we believe in organic growth that we can expand internationally inside of whole car. We already do that today, we believe there's big upside there. Um, we see a lot of tuck in that can happen. Especially when you think about the global footprint that we have. Um, so similar things that we've done with j and would we see a whole pipe pipeline there? Um, but we're going to really stay focused on the things that really complement our business. That really do what we're good at which is process and transactions and provided services to our buyers and sellers. And we think we have a ton of opportunity and a ton of ton of upside in the verticals that I mentioned.

Good very helpful. And and just as a follow-up this year, you announced a fairly new Marquee win in the UK with a prominent customer. There, there's been some merger activity in the UK with large carriers. Just curious that that presents any opportunity to point a risk. Because you think about that new set of business that you're going to be going after here?

Yeah, no great question. I we see it more as an opportunity than a risk. Um, we currently already do business with boats, um 1, we do exclusive 1, we have a, a smaller percentage of the business, but we think as it as an opportunity of gaining more market share, um, in that market,

Okay, very good. Thank you.

Our next question will come from Christa Friesen at CIBC.

Hey, thanks for taking my question. Uh, maybe just a follow on. On the IIA side of the business, can you give us an update on on how Australia is going and and the build out there and uh, just how that's progressing?

No, thank you for your question. So something that we're really excited about and we spend a lot of work getting ready um to get Australia up and running and I am so proud of the team. We are going to process our first set of cars for sale in the next 10 days.

So all the work to get our sites ready to get the process, the systems up and running the integration and with suncorp, and we're really excited to see that all that work. Come to fruition. And not only, you know, coming in a person with Suncor, but what it means for future market, share for us, once we have, um, the infrastructure set up, so we're really excited, but in the next 10 days, we'll be processing our first cars.

Okay, that's that's great. And then maybe just um,

Just here in, in North America. Uh, obviously still gaining market share, can, can you speak to the, um, to the competitive dynamics that you're seeing right now in the market?

Look.

It's always hard. When you talk about competitive Dynamics, what we really stay focused on is, what's in our control, and what's in, our control is delivering the best operational performance against the slas, that our partners value, and we're laser focused on being industry-leading in that. And with the cat season coming up to make sure we're able to provide the best service for that. Um, so we can continue with our transparency program where we're issuing our slas and our numbers to each and every insurance carrier. If they do business with us or not. So they know how how we're performing and I am so pleased with our continued high low performance that we have. Um I think it's only going to become um a good thing for us and an opportunity that we're going to have as we think

Out the next 5 years and as people think who they want their partner to be, I think we are going to be 1 of the ones they want to partner with.

That's great. Thank you. I'll jump back in the queue.

Our next question will come from the line of Craig Kennison with beard.

Yeah. Hey good afternoon. Thanks for taking my question on the IAA side. I'm curious. If you can give us an update on your perspective, on the trend, and uninsured or underinsured motorists, and the extent to which it's impacting your volume.

We haven't really seen a dramatic impact on our side of the business. It's something that we look at its conversations that we have with our partners. Um, but I do think that's more of a repairable, um, thing, but it's something that we look at and but we haven't seen any significant impact on our side of the business.

Thanks and and on the ccnt side, I'm wondering if you look at the tax law, that was just passed.

whether there's anything in there that maybe over the next, let's say 4 or 5 years gives you optimism about some, you know, Mega projects or just more construction activity that would be

You know, undeniably good for your business if you once you get past this hesitancy moment.

Yeah, look, I'll start. And and if Eric wants to jump in and with anything, look, bonus, depreciation and things in the bill. We feel optimistic about. But I made this comment on a couple of calls ago, for me, I believe in an intrinsic value of our business. And for me like these Mega projects are, it's just time and when asset gets disposed of and gets back into the, um, auction cycle and everything else. So I don't get tied up into when it happens, of course, I would like to happen sooner and often as you go through all that, but we look at it, very optimistically of of what the future holds, but we try not to get into exactly when it's going to happen.

Great. Thanks. Jim.

Our next question will come from Michael Fenger at Bank of America?

Yep. Thanks for uh thanks gentlemen. For taking my my questions just

GTV I think the guidance is now at the lower end of the range verse your your initial assessment. But Q2 was was better than I think everyone had expected. Just on the commercial construction side x yellow down. 1%, is there anything you want to flag that of of why? That was so much better. That maybe doesn't repeat in Q3 Q4, or gives you hesitancy of that sustainable Improvement. Is it with the mix? Is there anything? You would want to highlight there? And just the second question, um, you know, service Revenue Up 3, IBA up 7's, really good flow through. Is there anything? We should be aware of on the second half in terms of, you know, um, Investments, uh, inflationary costs. Uh, so some of the investment you might be making on customer experience. Just that that maybe tempers, maybe some flow through in the back half relative to to what we saw with with a strong second quarter. Thanks gentlemen.

Yeah. Thanks for the question. Maybe starting on on GTV. And, and the the, the guidance there and, and I think Jim, uh, commented on this look, we are, um,

Istic based on the performance Improvement. I, I agree with your comments, the q1 to to Q2 X yellow being down in this, you know, 1% range. And, again, um, not forecasting or, or giving specific guidance on the next quarter. But we, we think that Trend, uh, will continue. So, we're again, cautiously optimistic about where we're going here with the improvement from q1 to Q2 and and, and, and seeing that continue into, uh, Q3 uh, the, the thing, on the on, the overall GTV. And I mentioned it in my prepared comments that we had about 170 million last year in Q4 related to, uh, cat events, right? And and I don't include that in my, in my, my guide, um, because I, I can't forecast it, I don't know what that number is going to be. So so that's part of, um, the the hesitation in in moving that range too much because we just don't know what that impact is. And that'll be a

Um, you know, a tough compared in the fourth quarter. If hopefully we don't have, uh, as big a, you know, a cat season for, for, uh, people to be impacted, but we'll be prepared to obviously, um, react and and help our partners. But but that's, that's the, uh, impact on on GTV

On your second 1 on, on IBA. I think I commented.

To the earlier question, our expectation is that our our IBA uh, rate growth year over year will increase in the back half of the year. Um, so we don't have any uh, significant changes. What I would note even though we had a little bit of a headwind related to Australia in Q2, um, you know, we'll start to see some improvement in that, as Jim mentioned. We'll have some, um, volume going through there in in Q3, and then we have dlg coming online. So I think it's just making sure uh, how those new agreements perform as as we get into the third quarter.

You're welcome.

And a reminder to our phone audience: If you would like to ask a question or if you have a follow-up, please press star 1. We'll return to the line of Stephen Hansen with Raymond James.

Yeah, thanks guys. I understand the reluctance to guide on on the cat events that makes sense. But is it possible to maybe just bookend it for us a little bit around? What the the range of outcomes have been over the last 5 years? As you look back, um, through sort of the performance just to give us a sense for what it could be. I mean, it could be zero, I suppose but just give us a rough day for the book, The Last 5 Years. Yeah. And and and Stephen look, I I I think you just hit it, right? If you look at the last 5, you had years where it's been zero. And, and I want to say exactly zero. So you have some hail and some other things that aren't because of a hurricane, and a flood event. And so it's really hard for us, you know, last year was 1 of the largest years in the last um 5 years. So it it's such a hard thing, this thing could be zero, it could be what it was last year, it could be more or something happened. So it's such a hard thing for us to

be able to guide to. So I think the way Eric described it is the right way and to do it and that's why we gave you the last year number to give you something of, okay? What did it do last year and knowing that there's nothing in our guidance for this year? Makes the most sense to us

Okay. Fair enough. Uh and and just 1 other follow-up because it's around the broader, Enterprise strategy, Jim. I know you've talked about this in the past and your desire to pull more volume uh from larger Enterprise customers, you know, are there any specific initiatives? You'd want to call out that you're working on today that you think are advancing that that progress or and and where you sort of stand at that broader initiative next

Yeah, look, I think when I think about cc&t 1 of the things that we want to make sure of and was mentioned earlier, in 1 of the questions, what, boom and bucket. As we think about the auction Channel, we feel really good about where we are and what we provide, um, to our partners. But we also realize they're trying to get a better Blended net recovery, right? So they know we provide great recovery and auction Channel but there's a wholesale Channel. There's a retail Channel and our ability to get Upstream is 1 of the areas where we're really focused on with our partners and we're piloting stuff on boom and bucket we have MPE that you heard us talk about before that channel is doing really well for us this year. So it's really that Blended Network recovery for our partners and being the only person with a buyer base. Um that's able to do that. That really creates and makes us different than anyone else. And really builds a moat around our relationships um at that level so that's what we're focused on.

Our next question, today will come from Maximum situ at NBF?

Question around uh the attached rates and ccnt. Um is it possible to provide a bit of an update on? You know how our BFS is doing Etc. And how I guess you know the the more

Recurring type of Revenue is is being driven right now in in in that bucket. Thanks.

Yeah, I think uh we're not talking specifically to each 1 of these Macs. But what we, what I would say is we we feel good about our rbfs now it's a different interest rate environment and uh, you know, the attach rate may may not be as as high as it it it was in the past but we feel good about that business. We've talked in the past also about veritread look every transaction needs transportation and and we we offer that service and and that is a place where we believe there. There's growth for us and it's it's a uh helpful.

Part of the transaction for our partners, where we think we can.

Value, so we can continue to focus there as well. So those are just a couple examples between rbfs and and veritread of of areas. We we look to attach to the transaction.

And it would be fair to say that, you know, the transportation capacity will be benefiting, both the, the IIA set as well. Can you provide a bit of an update there as well? Thanks.

Yeah, hey Max, it's Jim. So, um, IA does have a transport business but it's very small and infancy. So I would kind of think about the CCC and teesside and think about the sell side and buy side where transportation both sides, need that service if it's coming to our yard. Um, so that's what makes us really excited about it that you can get both sides of the transaction.

Yeah, makes sense. And then uh Eric maybe just a quick question for you in terms of I know that you don't like to specifically guide on sort of the the take rate but anything um that we should keep in mind for for the remainder of the year, in terms of uh potential Trends there. Thanks.

yeah, that

Comments. We did see uh, some expansion in the take rate. And again, the way I look at the take rate is, is our earn rate, right? What can we, uh, additional value, added, uh, activities? Can we provide to the transaction for our partners to make it, um, more frictionless? And we'll continue to focus there. So, uh, I don't see anything in the back half of the year, uh, that I would note that would be different than, than where we are today, you know?

That would move us significantly uh, in either direction.

And ladies and gentlemen, at this time, I am pleased to turn the floor back to our CEO, Mr. Jim Kessler for any additional or closing remarks.

Thank you so much. And like, always, I want to thank all the RB Global teammates for all your hard work. Hopefully, you can hear from Samir Eric and myself, our excitement about our future and really that excitement comes from the strong Foundation, that our team has built. Um, we're really excited about what we can bring and to our partners and to the future. But I just really wanted to thank our teammates for all their hard work because without them we would not be at this point and just for everyone from an external standpoint, all of our investors and everyone who keeps an eye on the stock, thank you for your interest. And again, reiterating our excitement for the future. Thank you for your time. And we look forward to talking to

Everyone, um, over the next couple weeks. So thank you so much.

Ladies and gentlemen, this does conclude today's RB Global conference, and we thank you all for your participation. You may now disconnect.