RB Global, Inc. Price & Performance (RBA)

The following discussions will include forward looking statements, including projections future earnings business and market trends. These statements should be considered in conjunction with our cautionary statements contained in our earnings release and in our periodic SEC reports. On this call, we will also discuss certain non GAAP financial measures. For the identification of non GAAP financial measures, the most directly comparable GAAP financial measures and the applicable reconciliation of the see our earnings release and periodic SEC reports. At this time, I'd like to turn the call over to Jim Kessler. [indiscernible] Thanks, Sameer, and good afternoon to everyone joining the call. I want to start by thanking our teammates for their hard work and dedication as we continue over delivering for our partners and customers. RB Global's fourth quarter highlights our commitment to discipline and execution and we finished the year strong. With fourth quarter adjusted EBITDA increasing 13% on a 2% increase in gross transactional value. I want to provide an update on the strategic review we conducted and share how the new leadership team is shaping the vision for RB Global's future. At the heart of our company, we are defined by our commitments to our partners, and customers and more importantly, our ability to execute those commitments We recognize that the world around us is constantly evolving.

As are our partners' needs and expectations. However, what remains unchanged is their desire to work with a trusted partner one who listens, understands their challenges, and takes a proactive approach to delivering solutions that drives superior business outcomes. This is the foundation of our growth strategy put our partners first and over deliver on our commitments. By consistently doing this, we will solidify our position as their trusted global partner for insights, services and transaction solutions. And of course, we will do this with an eye toward our operational efficiency and excellence. We see significant opportunities to drive transactions and grow our market share by creating a seamless and trusted experience for our sellers and buyers. We have three key areas of strategic focus. First, we aim for premium price performance for the assets transacted across our omni channel marketplace while effectively accommodating our partners' liquidity preferences. This is about managing supply and creating deep liquidity pools by expanding the global buyer base. We are doing this by harnessing technology to merchandise assets that [indiscernible] and providing a diverse and thoughtful selective range of assets to meet each buyer's unique needs. Second, we are focused on growing our enterprise partner base This includes insurance companies in our automotive sector, and large fleet owners in our CC and T sector.

Our partners increasingly rely on our expertise to enhance their profitability by optimizing the lifecycle of assets they transact through us. The more effectively we can communicate and demonstrate our value of stream from the transaction, the stronger our position will be in earning more transactions from partners and gaining market share. This means helping insurance partners with the first notice of loss shorten total cycle times [indiscernible] In CC and T, this involves supporting partners with insights, minimizing maintenance costs with SmartEquip and streamlining asset transportation with Vertret. At the end of the day, it's about driving a quantifiable value to their P and L. Lastly, we remain focused on driving growth with our regional CC and T customers. Comprised of small and mid sized businesses that highly value personalized engagement and relationships with our territory managers. By leveraging the expertise of our sales team as trusted advisors, we are confident in our ability to strengthen existing relationships and build new ones.

As we optimize and expand our sales coverage, we are well positioned to capture additional market share and deliver sustained growth. We will enable all this by continuing to focus on modernizing our technology capabilities investing in the development of our teammates, strategically deploying M and A to expand our capabilities and market reach. Looking back at 2024, we made significant progress on all of these enablers to accelerate growth. I am proud of the advancements of our technology capabilities with the launch of rbauction.com on a modern technology stack This will be the cornerstone for efficient and scalable growth in the CC and T sector. We invested in our team and welcomed several talented senior leaders to our organization, including Eric, our CFO Steve Lewis, our COO and Nancy King, our CTO. Lastly, we enhanced our omnichannel marketplace by acquiring a new channel. Bloom and Bucket, a technology enabled fixed price marketplace. Now let's move to the business trends we have been seeing recently. Although we are hearing more confidence and optimism from our partners and customers in CC and T, they continue to evaluate business conditions in the face of continued uncertainty in '25, Much like last quarter, we would continue to describe the environment as wait and see.

We are the ideal partner to help the industry navigate a fleet management needs in either a slowdown where the customers execute a deep leading strategy or a reacceleration where customers start purchasing new equipment and driving decisions on aged equipment. We are focused on driving sustainable growth and continue to invest in our North American sales organization. Now let's move to the automotive sector. I am proud of the team and pleased that we consistently delivered exceptional performance to all of our partners in the fourth quarter. All key SLA metrics remain strong at a very high level. Fourth quarter salvage industry volumes benefited from cat events. And the homegoing secular growth and loss ratios. Fueled by the favorable spread between repair cost inflation and used vehicle inflation. In the fourth quarter, CCC Intelligent Solutions estimated that the total loss ratio increased nearly two thirty basis points approximately 23.8% compared to 21.5% in the same period last year. We continue to attract new international buyers to our marketplace, achieving a record high percentage of vehicles sold to international buyers in our automotive sector.

That said, we're starting to cycle over some of the significant process and technology improvements from last year and are therefore more exposed to the weakness in the broader macro environment. Average selling prices of salvage U. S. Insurance vehicles declined less than 1% and when excluding the impacts from cat declined approximately 2% year over year. I will now pass the call to Eric to review our financial performance and outlook.

Thank you, Jim.

As I conclude my first full year as CFO, I am proud of the financial discipline we've instilled as a team. This past year, we have maintained a strong focus on operational efficiency strategically investing in long term growth opportunities and substantially reducing our leverage. Total GTV increased by 2% automotive GTV increased by 4%, driven by a 7% increase in unit volumes partially offset by a decline in the average price per vehicle sold. Our automotive sector GTV would have declined by approximately 4% while unit volumes would have increased by approximately 1%. Unit volume growth excluding the impact of the cat in the quarter was driven by strong organic growth from existing partners partially offset by the previously announced customer loss. We expect to completely lap the volume loss associated with this customer in the second quarter of twenty twenty five. GTV in the commercial construction and transportation sector decreased by 1% driven by a decline in the average price per lot sold partially offset by an 18% increase in lot volumes The average price per lot sold declined due to both asset mix and continued deflation in asset values. Asset mix headwinds stemmed from lot volume growth from rental and transfer [indiscernible] where asset values are intrinsically at lower ASPs.

Excluding the impact of the Yellow Corporation bankruptcy, the GTV decline in the commercial construction and transportation sector would have been approximately 2% By the end of the fourth quarter, most of the unit volumes related to yellow had been sold. Moving to service revenue. Service revenue increased by 8% due to a higher service revenue take rate and higher GTV. The service take rate increased approximately 110 basis points year over year to 21.3% driven by a higher average buyer fee rate and growth in our marketplace services. Moving to adjusted EBITDA. Adjusted EBITDA increased 13% on the expansion in our service revenue take rate a higher level of GTV, and a higher contribution from inventory returns. Our dedication to efficiency and disciplined execution was evident again in the fourth quarter. As adjusted EBITDA as a percentage of GTV increased to 8.4% compared to 7.7% the prior year. Adjusted earnings per share increased by 16% on higher operating income and lower net interest expense, partially offset by a slightly higher adjusted tax rate. Our solid operational performance and continued debt pay down drove a one tenth of a turn decline in our adjusted net debt to trailing twelve months adjusted EBITDA to approximately 1.6 times compared to the third quarter of twenty twenty four. [indiscernible] Moving to the outlook, we wanted to provide our initial thoughts for 2025.

We expect full year gross transaction value to grow between 03% year over year as we continue to gain market share in 2025. Note that we will face the most challenging and expect consolidating GTV to decline mid single digits year over year. We remain dedicated to our operational excellence program, while prudently investing in growth initiatives we expect full year adjusted EBITDA between $1,320,000,000 dollars and $1,380,000,000 or approximately 16% year over year growth. We also expect our full year 2025 GAAP and adjusted tax rate to be consistent with 2024 and be between 2528%. Moving to CapEx. We currently expect full year capital expenditures which include PP and E net of proceeds on disposals, and additions to intangible assets to be between $350 and $400,000,000 This is a step up compared to 2024, mainly due to our investment to support our greenfield expansion in Australia, selectively acquiring property to optimize our portfolio supporting volume growth and continued investment in technology. With that, let's open the call for questions. Your first question comes from Stephen Hansen with Raymond James.

Your line is open.

Good afternoon, guys. Thanks for the time. Appreciate it. The results look great.

Just a quick question on the market share gains that you described. I mean, how do you feel about progressing that through the balance of 25? You've spoken to some wins already that are under your belt. Do you expect additional wins through the balance of this year? Anything large and material or is it going to be small incremental wins as you go?

Hey, Stephen, it's Jim. Great question.

I'm just going to stick to what's in our control. We're going to be very focused on providing the highest level of service to our partners And more specifically, the team is very focused on, especially in this environment, how do we add value to our partners so they can see in their P and L. And that's what the team is really focused on. And we believe by staying focused on that, that's going to produce the outcome, which we want is additional market share. But to fully answer your question, the one part of the equation is not in my control of when someone says yes.

What we're going to stay focused on is what is in our control and make sure we keep delivering value to our partners.

Okay, that's fair. Thanks. And I'll just ask one more here and then jump back in the queue. But just curious, Jimmy, I think you mentioned a couple of different items in terms of capital allocation priorities and one of them was M and A. I mean, where does that land in sort of the collective priority list for you? Is this It sounds like you've got a bunch of things you want to invest in. Just curious if M and A overrides the potential for buybacks at some point in the future as well? And Eric, do you want to take that one?

Yes. As we laid out a couple of quarters, ago, our capital allocation framework We've always had M and A listed on there. My focus for most of 'twenty four was to get within our net debt to adjusted EBITDA range of articulated on this call, we're at 1.6 times. So we're in a good place there. So it's part of our strategy It always has been as we laid out earlier in 'twenty four. So we continue to look at M and A opportunities, but it's it's an end statement, not an or. We'll continue to look at paying down debt. We'll look at M and A. And we'll look at reinvesting in the business in organic opportunities like I described on the capital allocation side. So we'll look at technology, and continue to look at properties Appreciate the color. Thanks guys.

Yes. The next question comes from Michael Feniger with Bank of America.

Yes. Thanks for taking my questions. Just on the GTV growth outlook, you mentioned obviously Q1 a tough comp.

Is there any help you can kind of give us between the split of auto, which seems like you guys are gaining share versus the commercial transportation. Clearly, you guys have a tough comp. You're cycling through the yellow. Still a good performance in Q4. Just curious, I know you guys have Orlando in a few days, you're seeing how that builds. I'm just curious what you're kind of expecting with some of the puts and takes how we should kind of think of that GTV makeup right there?

Yes. I'll start and Michael then I'll pass it over to Eric to add any more color, if you would like. Let me just start with automotive first. Just as a reminder, the carrier loss that we announced a little bit over a year ago This is the last quarter that we have to deal with that conversation. And then all the other gains that we talked about start to kick in. So I think we feel really good about the trajectory of automotive of where it is. When you get into CC and T, along with yellow, just want to remind the group and this really goes back to when COVID created very erratic supply chain and equipment wasn't getting produced and then a couple of years later, new equipment got produced and then there was a lot of disposal. And with the very large strategic accounts we have, we got the benefit over a year ago of that disposal. Now we're going against it. And I don't consider that I think about it like yellow. It was really the COVID was a one time event that happened. We got the benefit. So to me, when you really look over two years, you kind of get a normalized growth rate that you would expect for this sector.

And that's what you will see. So that's why we're just calling it out because they're very unique things that have happened over that time period. Then when we start looking into the back half, it kind of starts to look normal without those things. We still have yellow that we have to deal with for the whole year. But that starts to become less as you go out the year. Eric, is there anything you would like to add? I think Jim, you covered it. Okay. Thank you. And Jim, Jim, if I could just squeeze one more in. I'd love to get your sense of what you're hearing on the auto side. Obviously, you guys are gaining share which is what you can control. There's just a lot of headlines around tariffs and what that might mean for the auto side? Just Is there any impact how that would flow through to the salvage side? Are you hearing that come up with buyers or sellers How the knock on in fact of what tariffs might mean to the new trucks out new automobile side and how that might flow through the salvage. Or maybe there really isn't an impact.

I just love to get that sense.

Thanks.

Yes.

Look, first, we'll just start with as we think about the tariffs first between Mexico and Canada, everything got delayed, right? So of course, we're still working through with our customers and our partners what would that mean if something happens I think the great thing about our marketplace, no matter if it's the CC and T or the automotive side, is a need for these assets and it's really up to our team with insights and data how do we help them navigate this world because there is a need for these assets, as we go through it. So we're going to be very focused on what's really going to happen, how do we navigate it, how do we use all the data and insights. And again, what we want to get back to is making sure we're adding value to our partners no matter what environment we have. The one benefit we do have with RV Global is being a global company. We have access to a lot of liquidity in a lot of markets and a lot of different things that we can help our partners navigate through this time. I think the one thing that we're hearing the most apprehension about from the automotive side of our partners is really automotive parts.

Is really what we hear more of the concern of what's going to happen to the supply chain if tariffs get enacted versus the salvage car itself. But Eric, Samir, anything from either of you that you would add? Okay. I think that is Thank you. You got it.

The next question comes from Craig Kennison with Baird. Your line is open.

Hey, good afternoon.

Jim, you mentioned in the CC and T business kind of a wait and see market and I think that was in appropriate description last quarter as well. Wondering what you see as a potential trigger to change the nature of this market so that transactions start to flow a little better.

Yes. Look, for us, we're constantly in communication with our partners. And I think interest rates not really coming down farther where I think everyone would have hoped there would have been some more cuts, which whether than attracted, okay, do I invest in new equipment, going through it, waiting to see with tariffs, I think some of our partners are waiting to see these mega projects, do they come to fruition, what's going happen with the new administration? I think everyone has hope of what's going to happen but like all of us, we have to manage our balance sheets and our cash flow and great thing for our business, we realize we're not going to to control their decision of when they make the decision to do dispositions. But again, we're going to add value no matter if it's data insights, if it's transportation services, inspections, appraisals, everything we can do to help them optimize their P and L when they're ready for dispositions. And I think we showed it when COVID happened and all that new equipment came in and they had a dispose of equipment, I don't think there was anyone else with our scale that could have helped them.

In that time to manage premium price to get this through the auction channels that we have. So I think we've showed when [indiscernible] and to be able to help them with it. So that's what we stay focused on.

Yes, thanks. And maybe as a follow-up, it looks like the federal government is taking a harder look at efficiency through Doge and I'm curious if you're seeing any uptick in activity on your platform as it relates to potential RFPs or projects associated with assets that just may not be needed anymore. Look, it's a hard question, right? Because when you think about the categories on large scale, we definitely see surplus items and and different brands that we serve that fit that. But I wouldn't call it anything abnormal, right, at this point yet.

Okay. Thank you.

Thank you.

Your next question comes from Gary Presto Pino with Barrington. Your line is open. Hi, good afternoon, Jim and Eric. Hey, Jim, since we're almost over a year into this with the IA IAA transaction. Can you give us some idea of how much you've reduced the cycle times and how much you've increased the salvage returns for your customers on average? Yes, we're not going to go to specific metrics. We actually issue a quarterly KPI report to all insurers partners that explain this.

What I would just say to this group is we are very confident that we are going to consistently over perform to the SLAs that we've committed to, to our partners. And then we're going to be relentless. We are not going to stop. We're going continue to drive up those numbers and we're going to innovate and look for ways to do it. But I just want to share our confidence. We're about a year into ish issuing to the global insurance space, no matter if you do business with us, If you don't, we issue it to all the leaders of the insurance companies. And just to create transparency and to show our confidence of our performance over the last eighteen months that I'm very proud of for the Okay, that's helpful.

And then just in terms of your international buyers, the salvage how will these tariffs that are being float around or whatever they're put in place, Would that be much of an impact to them? I guess what I'm getting at with the reciprocal tariffs there was a lot of noise about the differential on the tariff from an American car imported into Europe versus a European car imported in The United States, meaning new cars. But [indiscernible] Are there really is there really a potential for onerous tariffs on salvage that's exported out of this country?

Look, it's a hard question for us to navigate since I don't think anyone has been really clear about what assets and what things are part of the tower. So it's very hard Ritchie give you a detailed answer. Again, our belief is these assets are needed And what we worry more about is probably the short term impact in the long we probably think of these as a tailwind as you think about price and ASP of what it means to it. But again, what we want to make sure we do with our partners is we need to show value for them and their and we know we can navigate this environment from a global base with the footprint that we have. We're one of few that are truly global no matter if it's Europe, Mexico, Canada, to navigate this with our partners. So I think it's more short term and long term. I think there could be a tailwind as we think about what happens to price. Okay. Thank you. The next question comes from Maxim Sytchev with NBF. I was hoping to very good. I was wondering if you don't mind going back to the first point of the strategy [indiscernible] desire to achieve premium price performance across channels Do you mind maybe building a little bit in terms of what exactly you're going to be from an operational perspective in order to achieve that? [indiscernible] The one thing that we take very serious from all of our partners how do we continue to innovate and drive what we call premium price, but also if you're a buyer in our marketplace, we want to make sure you have all the information and data you need to make a true decision to have confidence in what you're purchasing.

So we know it's important in the market place. So we look at different auction channels and we try to balance the liquidity in a time you need for cash along with, okay, ASP. So with all of our channels, if you want to be in TCC, T and B and marketplace e, where we're kind of put a buy now price and negotiate for you, And if you have a long period of time, we know that channel can produce a higher percent than if you're in a Ritchie Bros. Ritchie event and it's an unreserved auction. But the one thing with the live event, you know you're going to get liquidity, right? We look at it on a liquidity scale to price scale and we actively listen to our partners of what need do you have and how do we help you solve it.

And the Boom and Bucket transaction is a great example of an innovation of how do we help build another marketplace to drive a higher price So we're really our auction channels how we market, how we bring new buyers to the marketplaces that we serve, and then making sure for the buyers they have the most accurate information in the description for any equipment or autos in our channel. And a good example on auto, we added trim level data to all of our automobiles. I think we're over 95%. You get the right description of trend and we're the first ones to do that, which we've had seen it added to our ASP. So they're just examples of the things we constantly think about.

Okay. No, that's great color. And then just one quick question for Eric, if I may. In terms of the CapEx investments, how should we think about sort of the incremental ROI in this? Is this support future growth or is it to support already sort of one market share and you have to enable those investments to support those clients? How should we think about this?

Yes. Yes, that's I would say it's both of the above. Some of it is existing looking at opportunities where it makes sense, we would look to purchase some some properties As I articulated on the remarks, we won the Australia automotive business. We're really excited about that opportunity, but that comes with some incremental investment. But again, we're excited about that win and and that opportunity. So it's really a combination of the things above. On the tech side, we have Nancy on board now. We are continuing on our path to improve our technology and improve the experience for our customers. So we're excited about those investments and they all have a lens that we look at it with a return on investment. Analysis. And Max, I would just add to Eric's point. When you think about Australia, yes, we got our first win, but as you can imagine, investment is based on multiple wins that we expect to get over a period of time to really make this investment get down to the ROI that we want. Getting number two player to say yes was a great team effort and again very proud of the team.

Our expectation as we look five years out, we Okay. Excellent, Kyle. Thank you so much.

The next question comes from Stephen Hansen of Raymond James. Your line is open.

Hey guys. Thanks for the follow-up. Just curious, Jim, you referenced in the past a few other initiatives. One being hiring additional sales reps to broaden your territory reach. Or your Ritchie, I guess, from the origination standpoint. Just want to give an update to how that strategy has been going from a market share gains perspective?

Yes, it's going really well. We really feel Ritchie comfortable [indiscernible] Speed as quickly as possible, right? We just brought in someone new on our HR team, someone who I worked with before in my collision days. So I feel really good that's going to help our team get up to speed. But we see a great ROI in the program and what I feel really good about is as we get really efficient at bringing people in and getting them up to speed, there are areas where we know we can still add people take market share. We're going to stay focused on the program, but we feel really good about the ROI that we get. And like I said, what we have to get better at is how do you get someone up speed as quickly as possible.

Okay, that's helpful. And then just the last one for me is just I think it's I'm not sure how fair it is, but you've been criticized in the past with your cat performance It sounds like your comments here today suggest your SLAs on cap performance have been meeting or exceeding most expectations. I mean does that take away some of the hindrance you've had in the past on winning market share back? I mean, do you view that as step change forward, I guess, the question in terms of your ability to win new business and performing well on CAT? Thanks.

Great question. And kind of how I would and look, I wasn't here for some of the perceived issues that people put on IAA shoulders. But the one thing I can tell you since I've been here and when I look back at some of the data I believe IAA has [indiscernible] I know there was a partner issue in the past So for me, what I'm really focused on for that partner is to show how consistent and reliable our services for this specific season that we just pay us, the emails I got from our current partners about our performance and how well the team did, I'm very proud of it and I'm there's only two of us and I'm willing to put our performance up against everyone. And again, one thing that we did is we immediately emailed out our performance results to everyone. So everyone in the industry can see how well we performed and how we did perform and they can choose if they thought it was well or not. But I consider it that we did really well. So I don't think there's should be any doubt in anyone's mind that if it's the daily business of process and salvage or a Cat event that there should be any worry if IAA can perform or not.

But again, some of that is up to other people to make that the [indiscernible] for this whole year and this cat event. And I believe the team did a great job this year.

Appreciate the color guys. Thanks.

The next question comes from Michael Feniger with Bank of America. Your line is open.

Hey guys, thanks for letting me jump back on. I just wanted to ask, the SG and A, I think was down year over year, at least on the reported. Number, while GTV was up. I'm just curious, I know you guys are investing back in the business. Is there anything you want to flag on the cost line that we should be aware of And just lastly, Jim, I'm just curious, obviously, great performance this year on the take rate. As we think about 2025, what are you guys kind of embedding in that outlook? Are you assuming the take rate stays where it is? Is there assumption that there will be an increase in buyer fees?

Or incremental growth from market Marketplace services, anything you guys have put into place early this year that is driving that take rate?

Just anything you kind of help us out on that part would be great. Thanks, everyone. Yes. No, let me start at a high level, then I'll pass it to Eric if he wants to add any more detail. And we have a very disciplined take rate, fee, review process it again this year.

I'm not going to get into any specifics of what do we have in our forecast or assumptions, but we we follow a very disciplined process that implement typically in the first of the year then we do evaluations as we go throughout the year to see if any adjustments need [indiscernible] So Eric, do you have any other fee or conversation? Not on G2B. Yes, I think on the SG and A, side, your first question there, As I came on board and Jim shares this philosophy right, we're going to continue to focus on managing our operating efficiency while over delivering against our partners' expectations. So I think the SG and A performance is just in line with that continuous discipline that we've instilled in the organization to make sure that we manage our costs effectively, but also make sure we invest in the business We just talked about the sales force expansion and how we're continuing that effort and are happy to do that So it's this balance of making sure we remove costs that don't need to be there, but all also continue to invest in the business. And that's going to be a discipline that we'll continue by tenure and I'm sure on divisions, Yes.

And Michael, I would just add to Eric's comment is just to remind the group the way RB Global became RV Global is through a lot of integration a lot of acquisitions that kind of happened over time. So what we're really pushing our team to Eric's point is making sure we're up we're running this business very effectively. And efficiently and we're going to be relentless with that. We're going to keep going until we feel like we really have a very effective, efficient organization with the structure of roles and responsibilities it's something we're never going to not focus on. Right? Even if we think we're the best and we're optimal, there's always going to be a push to how do we get better at what we're doing from an efficiently. But to Eric's point, the one thing we're never going to lose is we have to over deliver on our commitments to our partners. And we have to add value in their P and L. What makes me feel really good is when we go into a partner for any kind of quarterly review, and they tell me they can see what we're talking about in their P and L. Then I know that's when I know I feel really good about what the team is doing.

But we're going to be relentless to make sure we operate a very efficient business and right or wrong, some of the things in our favor is when you grow by acquisitions and you're an older company that tends to give you the ability to have some of that opportunities in front of you.

This concludes the question and answer session. I'll turn the call to CEO, Jim Pecsler for closing remarks.

Thank you so much. And just wanted to thank everyone for their participation. We really do one thing I would be remiss is the executive team is down here in Orlando. We are at the world famous Orlando auction on the construction transportation side of the business. This week is always an exciting week. We just had our customer appreciation event last night.

Probably the most well attended since I've been here probably in the history of the company. But when you have a week like this with the amount of GTV we're going to process in a very short period of time. Just wanted to thank all of our teammates. Thank you for all your hard work. It is very much a appreciated. And then the great thing is after this week, next week, we turn our attention on the automotive side.

IAA has their industry event next week where we'll see a lot of our partners and get to talk about 24 and then talk about 25 innovation and what's to come and how we're going to add value. So I just want to thank all of our teammates. Thank you for all your hard work. We really appreciate it and we're going to keep it going. So thank you so much. Everyone have a great night.

This concludes today's conference call. Thank you for joining. You may now disconnect.