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 Raad. 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 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 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 in the applicable reconciliation of the 2, see our earnings release in periodic reports.

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

Thanks, Samir. 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 over 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 control.

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

Starting with our automotive sector, the momentum continued as we outpaced the market for another quarter, achieving 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.

1 of the demand, side are 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 fire diversity.

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

These efforts are translated into tangible results.

We continue to deliver strong growth returns or Salvage values as the 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.

Across real estate operations, logistics, and merchandising.

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 managing the volume surge we experience and our teammates stand, ready to respond again this year.

All of this directly translates into Superior execution. Enable 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 IA.

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 up 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.

While customers and partners in our commercial construction and transportation 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, and 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 us Insurance, ASP increased 1%.

However, the average price per lot, sold to climb the 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.

Offset by an increase in average selling price.

Compare today's environment 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 now 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 decline, 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. Where 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 ibida.

Adjusted ibida 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 incomes.

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.

Now, moving to the outlook for GTB growth. We are now expecting to be at the lower end of our guidance range.

That said, we are raising and tightening our adjusted Eva. 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 by 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.

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 Sabbat Khan at RBC. Please go ahead. Your line is open.

Good afternoon, maybe just following up on sort of those lost comments there around, kind of H2. I just given 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 suggest. So if you can maybe just give us some of the puts and takes from your perspective and addition to the colors 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 increase from being a bit more meaningful. Just giving the performance here today. Thanks.

Of the year. As I said, 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 that's something that's continued. And I want to make sure we, uh, take that into consideration. But if you look at the evida 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 equipment owners there being still a bit cautious on certain, 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.

Okay, 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,

Feel really good that we're when it's day and breaks, we are ready to accept the business and our partners. Um we'll 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 on that side of our comments.

alright, thanks very

And our next question will come from Stephen Hansen at Raymond James?

Yeah, good afternoon guys, thanks for the time. Um, with the GM would Echoes 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 this 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 at the 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-ins 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 it, which is

Process and transactions and provided services to our buyers and sellers, and we think we have a a ton of opportunity and a ton of ton of upside in the verticals that I mentioned.

Risk. As 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-up on the uh, 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. Um, so all the work to get our sites ready to get the process, the systems up and running and 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 the friction 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 great. And then maybe just, um,

Just here, in, in North America, I 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 SLA, 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 about 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.

Yeah no great question. Look the way I look at this in in terms of a total I I think that question definitely has more of an impact on repairable type of claims than it does on total. Um, for us, 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 and 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 CC and T 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, it's undeniably good for your business if you can 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 calls to go for me, I believe in an intrinsic value of our business and for me like these Mega projects, it's just time and of 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. Thank you, Sam.

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. Uh, 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 we are, um,

Optimistic 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 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, uh, 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,

Via, um, you know, a tough Q4 compared to the previous quarters. Hopefully, we don't have, uh, as big a, you know, a cap season for, for, uh, people to be impacted, but we'll be prepared to obviously, um, react and help our partners. But that's the, uh, impact 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 and 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.

Thank you.

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, it is star in 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 book end 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 moment for the book ending in 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

The hurricane and the 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 um,

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

Call out that you're working on today. Do you think you're 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 all auction channels but there's a whole 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 net 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?

Hi, Captain gentleman.

Um I just had a quick 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.

For 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 Baron tread 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 add additional value. So we 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, and would it 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, I a does have a, 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 I know that you don't like to specifically guide on sort of the 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 you you said it I don't guide specifically to the take rate but I would say we we feel good about the take rate as I I said in my prepared 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 do 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.

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