RB Global Inc - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 was mixed: revenue grew 4% to $1.109B while GTV fell 6% amid CC&T softness; adjusted EPS of $0.89 and revenue both beat S&P Global consensus, driven by a 150 bps take-rate expansion and strong inventory returns, offset by CC&T volume declines. EPS (adjusted) $0.89 vs $0.82 cons.; revenue $1.109B vs $1.024B cons. (S&P Global)*.
• Management reaffirmed FY25 guidance (GTV growth 0–3%, adj. EBITDA $1.32–$1.38B, tax 25–28%, capex $350–$400M) and guided to a back-half weighted year; term loan repricing lowers spreads by ~85 bps, adding flexibility.
• Auto remained a relative bright spot (GTV +2%; units +7%), with market share gains and a new U.K. win (Direct Line Group), though U.S. insurance ASPs fell ~3% on tariff-related buyer hesitancy and mix.
• CC&T was the drag (GTV -18%) due to lapping large enterprise contracts and cautious customer behavior; take-rate strength and inventory return limited the adj. EBITDA decline to 1% YoY and lifted adj. EBITDA/GTV to 8.6% (from 8.1%).
• Potential stock catalysts: sustained take-rate expansion, auto share wins (U.K. Direct Line), tuck-in M&A (J.M. Wood), and de-risked balance sheet (1.6x TTM net debt/adj. EBITDA) against macro/tariff uncertainty.

What Went Well and What Went Wrong

• What Went Well

  • Take-rate expansion and efficiency: Service revenue take rate rose 150 bps to 22.3%, offsetting lower GTV; adj. EBITDA/GTV improved to 8.6% vs 8.1% YoY. “Our disciplined execution was evident… adjusted EBITDA declining 1% on a 6% decline in GTV”.
  • Auto momentum and share gains: Auto GTV +2% with +7% unit growth; “we have gained market share globally in salvage” and won Direct Line Group in the U.K. (exclusive, multiyear).
  • Capital structure tailwinds: Repriced Term Loan A/revolver (-85 bps spread; extended to 2030) and TTM net debt/adj. EBITDA at 1.6x, enhancing flexibility.

• What Went Wrong

  • CC&T softness: CC&T GTV -18% YoY, -19% lots, as enterprise volumes lapped prior-year large contracts and customers adopted a wait-and-see stance; marketplace services revenue declined.
  • ASP pressure in Auto: U.S. insurance ASPs down ~3% on tariff-related buyer hesitancy and mix, partially offset by international buyer strength and tech/process gains.
  • Adjusted EPS slightly down YoY: Diluted adjusted EPS $0.89 vs $0.90, reflecting lower GTV and higher opex, partially offset by take-rate gains and inventory returns.

Transcript

Operator (participant)

Good day, everyone, and welcome to the RB Global First Quarter twenty twenty five Earnings Call. This call is being recorded. At this time, I would like to hand the call over to Mr. Samir Rapid. Please go ahead, sir.

Sameer Rathod (VP of Investor Relations & Market Intelligence)

Hello, and good afternoon. Thank you for joining us today to discuss our first quarter results. Jim Kessler, our Chief Executive Officer and Eric Gerran, 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 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 two, see our earnings release and periodic SEC reports. At this time, I'd like to turn the call over to our CEO, Jim Kessler. Jim?

Jim Kessler (CEO)

Thanks, Sameer, and good afternoon to everyone joining the call. I want to recognize our teammates' dedication to our partners and customers, particularly in this rapidly evolving macroeconomic environment. The recently announced tariffs have introduced a new level of uncertainty, and we are actively monitoring the impacts to help our partners navigate their environment and make the best business decisions. As always, we have not changed our approach and are focused on factors we control to ensure we can consistently over deliver on our commitments. Our disciplined execution was evident again in this quarter with adjusted EBITDA declining 1% on a 6% decline in gross transactional value.

Recall that we highlighted on last quarter's call that we anticipated the decline in GTV in the first quarter due to year over year comparison issues. To start, we are thrilled to announce the acquisition of J. M. Wood for approximately $235,000,000 Our shared values and culture align naturally, particularly in our commitment to putting our partners and customers first. This move enhances our geographical coverage in Alabama and adjacent states and brings a talented team of sales professionals with deep local relationships on board.

They primarily focus on commercial construction and transportation assets and have a strong footprint with municipal customers. We expect to close this acquisition in the second or third quarter subject to regulatory approvals and customary closing conditions. Moving to the CC and T end markets, while our customers and enterprise partners exercise caution amid ongoing uncertainty, we continue proactively investing in our future by focusing on controllable factors that drive growth while improving operational efficiencies. This includes having the most comprehensive network of territory managers while continuously implementing new programs to improve productivity. This strategic approach will ensure we stay top of mind with our customers and partners when they want to or need to transact.

Regarding our enterprise partners, our strategy remains focused on delivering solutions that optimize their total cost of ownership and deliver premium price performance based on our liquidity preferences. We leverage our data and insights, products and parts procurement technology to solidify our position as the natural choice for fleet realignment. This integrated approach ensures we are deeply embedded in their operational workflows, driving long term value and partnerships. From an operational standpoint, since joining last year, Steve Lewis, our COO, has made excellent strides in implementing a metric driven framework for our Ritchie Brothers branded yards to help us accelerate efficiency and elevate the experience of our partners and customers. As part of these efforts, we have increased the number of planned sales events in North America by approximately 15% this year.

We are also strategically adjusting the timing of all of our events to balance supply through the quarter and better position us to support premium price performance for our consignors. The new schedule is expected to improve loadout times of assets for our buyers, enhancing their experience, enabling us to manage our cost structure more efficiently by smoothing out peaks and valleys of activities. Turning to the automotive sector, we hosted IAA's twenty second Industry Leadership Summit, which again shattered attendance records. This premier event is a key platform for engaging North American insurance fleet and remarketing partners and reinforces our commitment to exceeding customers' expectations through robust and consistent performance. We welcomed seven prospective partners who had not attended in over a decade.

Many approached me after our presentations saying they heard about the new IAA and had come to see it for themselves. I can confidently say we delivered. We are energized by the positive momentum in our automotive business. And in the first quarter, we are excited to announce that a new partner in The U. K.

Has selected us, Direct Line Group, as their sole salvage provider. We have signed a multiyear contract and will start supporting them in the third quarter of this year. I am also very pleased to say that we have gained market share globally in salvage in the first quarter on a year over year basis. In conjunction with the summit, we also hosted the IEA Advisory Council. This is an open and collaborative forum where key insurance partners share insights and we work together to identify opportunities to drive value to their P and L.

One area continues to be top priority for them is advanced charges. Costs such as towing and storage that are incurred before a vehicle reaches our facilities. In response, we've launched several initiatives to improve predictability and cost management, including developed data driven models to forecast storage expenses and optimize asset routing. We believe there is significant opportunity to reduce advanced charges by routing vehicles more efficiently from the accident scene to the final destination. We recently launched IAA Total Loss Predictor, a new AI driven tool that helps our partners better classify vehicles that should go directly to our yard versus a repair shop.

We are also actively exploring the best venue concept to support our insurance partners better. While most of the assets they supply are automotive salvage, there is also a meaningful volume of construction and transportation assets that RB Global is uniquely positioned to help with. The opportunity is sizable. Over the past twelve months, our insurance partners have provided over 100,000 CC and T assets. We believe we can unlock premium price performance by cross syndicating these assets to Ritchie Bros.

Branded properties. Our early pilots have shown promising results reinforcing our belief in the potential of this approach. Overall, we continue to drive strong gross returns or salvage values as a percent of actual cash value for our partners. This stems from our continuous improvement in process and investment in technology. From an operational standpoint, we had another robust quarter with the team over delivering against our service level agreements.

Our transparency program continues to be industry leading. I am very proud of the results we are driving for our partners. We also continue to make excellent strides in attracting new international automotive buyers to our marketplace, with the percentage of vehicles sold to international buyers hitting all time highs. That said, we are cycling over significant product enhancements and process changes from the previous year, exposing ASPs to broad macro forces. I would also note that at the margin, we saw some buyer hesitancy in the first quarter due to the threat of tariffs.

This combined with year over year mix headwinds drove U. S. Insurance ASPs down approximately 3%. I will now pass the call to Eric to review our financial performance and outlook.

Eric Guerin (CFO)

Thanks, Jim. Total GTV decreased by 6%. Automotive GTV increased by 2%, driven by a 7% 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 year over year increase in salvage market share. First quarter salvage industry volumes benefited from ongoing secular growth in loss ratios fueled by favorable spread between repair cost inflation and used vehicle inflation.

PCC Intelligent Solutions estimated that the total loss ratio increased nearly 100 basis points in the first quarter to approximately 22.8% compared to 21.8% in the same period last year. GTV in the commercial construction and transportation sector decreased by 18% driven by a 19% decline in lot volumes, partially offset by an increase in average selling price. In combination with shifting trade policies, uncertainty in the end markets is causing customers and partners to take a wait and see approach to disposition. Excluding the impact of the Yellow Corporation bankruptcy, lot volumes would have declined approximately 6% year over year. The average price per lot sold increased primarily due to an improvement in asset mix, partially offset by continued deflation in asset values.

Asset mix tailwinds 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 GTV decline in the commercial construction and transportation sector would have been approximately 14%. Moving to service revenue. Service revenue was broadly flat on a higher service revenue take rate offset by a lower level of GTV. The service revenue take rate increased approximately 150 basis points year over year to 22.3% driven by a higher average buyer fee rate offset by a lower average commission rate and a decline in our marketplace services businesses.

Moving to adjusted EBITDA. Adjusted EBITDA declined 1% on lower levels of GTV and a higher operating expense level, partially offset by an expansion in our service revenue take rate and a higher contribution from inventory returns. Our dedication to efficiency and disciplined execution was evident again in the first quarter as adjusted EBITDA as a percentage of DTV increased to 8.6% compared to 8.1% the prior year. Adjusted earnings per share declined 1%, which is in line with the decline in adjusted EBITDA. Before we move to the outlook, I want to note that on April 3, we repriced our Term Loan A and revolver.

This will reduce our bank spread by approximately 85 basis points and the undrawn revolver fee by 20 basis points. We also increased the revolver capacity to $1,300,000,000 improved financial covenants for more financial flexibility and extended the maturity date to April 2030. Now moving to the outlook. We are keeping our full year outlook unchanged. We are traversing an unprecedented level of market uncertainty and changes in trade policy.

While the direct impact on our business is relatively small, many customers and partners are trying to assess the impact on their business. These second and third order impacts are challenging to measure and predict, increasing the range of the possible outcomes. We remain committed to advancing our long term growth strategy by investing in key technological initiatives and expanding the sales force. We're also controlling what we can and are exercising prudent expense management while limiting discretionary spending to help us navigate the current environment. With that, let's open the call for questions.

Operator (participant)

Thank you, sir. Our first question comes from Sabahat Khan, RBC Capital Markets.

Sabahat Khan (Managing Director)

Okay, great. Thanks and good afternoon. I guess maybe just on the sort of the commercial segment, historically the legacy business has seen some level of volume uptick during periods of macro uncertainty. What are your customers? It sounds like a bit of a wait and see approach, but are they unsure of the background?

Kind of what's their positioning right now? Are there folks that might dispose if they get a bit more clarity? Just get a bit more if we can get a bit more color on the and C segment, please.

Jim Kessler (CEO)

Yeah. Happy to do so. And and, again, I think Eric mentioned this in his message, that we started with. When you kind of get down to lower level, you know, the chain of how to make decisions, what decision gets made, it gets really hard. But the one thing I would just point out, when you think about the environment we came out of because a year ago, you know, on this side of the business, all that COVID equipment came in, and then it all got disposed of.

And then we immediately went into higher interest rate environment, and then you add the change in the presidency in The US and tariffs and that uncertainty, I think there is still some optimism out there from our partners about mega projects and other projects in general coming through. So I think where the level of interest rates are, investment in new equipment versus holding onto it and then waiting and see if these mega projects come through, I think, is where their mind is at right now. And then for us, you know, with all the different services and everything we have, what we're trying to do right now is understand what their strategic priorities are and how do we add value in this environment. So we're very focused with all of our partners. And for us, the disposition is just more of a timing issue of when it comes in this environment.

But we wanna make sure we're adding value every day inside of their p and l.

Sabahat Khan (Managing Director)

Great. And then just for my follow-up, on The UK customer win that you announced, I think you indicated starts to contribute in Q3. Anything you can share on the scale in terms of units of this customer? And then in terms of the IAA presence or capabilities in The UK, is it similar to the Australia situation or there might be some sort of a build required? Just maybe thoughts on what the setup in The UK is for IAA, the capabilities?

And then anything on the scale of this customer? Thanks.

Jim Kessler (CEO)

No. You got it. So just to start with scale, The UK already had a presence unlike Australia where we're building a presence. Ritchie Brothers had the presence in Australia and not salvage cars. So The UK, we already have a presence.

We already have footprints. So really not any heavy investment that it takes. It's more just like in The US, how do we go out and get more market share. And really, what I'm proud of of the team is this was a customer where we did no business before, and now we're doing an exclusive deal. And our partner did ask us not to really talk about units specifically, so we're going to honor that.

But what I would say is they're in the top tier of insurance carriers.

Operator (participant)

Up next, we'll hear from Krista Friesen, CIBC.

Krista Friesen (Director - Equity Research)

Hi, thanks for taking my question. Maybe just to follow on, the IAA topic. You're talking about the growth in market share that you saw this past quarter. Can you elaborate a little bit more on that if there's if you can quantify that at all?

Jim Kessler (CEO)

I don't think we're going to get into the details of the quantification. But I think if you go back to past calls, we've announced a bunch of different insurance carrier changes that have taken place, And that's all starting to come through the P and L as they get fully realized each quarter.

Krista Friesen (Director - Equity Research)

Okay, great. And then maybe also just you were talking about some of the hesitancy that you're seeing in your customers right now. Was that I assume that was throughout the quarter. And have you seen any improvement just in the first half of Q2 here?

Jim Kessler (CEO)

I think I want to separate this question in two things because I think there's a macro question and there's also an RB Global kind of question. And and I just wanna remind everyone, you know, the one thing that RB Global is going through is so unique than any past years or quarters that we've had. About a year and a half ago, a year ago, you know, we we won the yellow deal, which was a big onetime bankruptcy that no one else has ever had on the rental side of the business and equipment and transportation. A couple of our big partners, had a had all that new equipment from COVID that got delayed to come in, so it created a disposition cycle that was different than everyone else. Extremely proud of our team to be able to look at liquidity for our partners at a at a very good level back then.

And but now we're in an environment where interest rates are higher for new equipment, tariffs of what's going on in the macro environment. So this is such a unique environment. When we go back and look at the history of Richard Ritchie Brothers, I don't think there's ever been an environment with these dynamics of what we went through because of COVID and and delayed equipment equipment coming in, then a bunch of dispositions that had to happen. And then you're in an environment where interest rates are higher than they've been in the past, and then people have to make decisions, you know, what projects are coming up, and what do I wanna do with new equipment compared to the interest rate and and buy into new equipment or dispose and hold on to. So we're this in this environment.

And I wouldn't say the macro environment has changed dramatically for someone to make a substantial decision different than they had in the past quarter.

Krista Friesen (Director - Equity Research)

Thanks. I really appreciate that color. I'll jump back in the queue.

Operator (participant)

Up next is Michael Feniger, Bank of America.

Michael Feniger (Director of Equity Research)

Hey, guys. Thanks for taking my questions. Just with the GTV down 6% in Q1, you guys reaffirmed the full year of 0% to 3%. Just help us understand with some of the commentary. Is it probably flat in Q2, positive in the second half?

Is potentially still down a little bit because of some of this uncertainty and that it's more back half, a back half inflection? Just kind of just thinking about with the way the year started and some of the commentary on the hesitancy, just how we kind of flow through the rest of the year on the GTV side.

Eric Guerin (CFO)

Yes. Thank you for the question, Michael. This is Eric. As I said on the fourth quarter earnings call, we anticipated the mid single digit down in Q1 for some of the things that Jim described that we were lapping over a very strong prior year. So our expectation is for the full year that we're still within our range.

I typically don't give guidance on a quarterly basis. But with that said, I would say as we progress through the year, are anticipating the back half to be a bit stronger, if that's helpful for you.

Michael Feniger (Director of Equity Research)

That is helpful. And then maybe, Jim, just I know there's commentary on the hesitancy. Is that that sounds like it's on the commercial side. I'm just curious on the auto side. I know there's the second and third and fourth degree implications here.

I'm just kind of curious what you're seeing there with potential tariffs on autos, what that means for pricing on new, which filters to use, but also repair prices. I'm just kind of curious with the loss ratio improving, how we should kind of think about these moving pieces in tariff world?

Sameer Rathod (VP of Investor Relations & Market Intelligence)

Hey, Michael. It's Sameer. Like you said, you know, there are a lot of different kind of moving pieces that we follow them very closely. I think at a high level when you think about it, you know, the equation that we've laid out is if the repair cost inflation is greater than, used car inflation, you'd expect the loss ratio to expand. And then the the converse is to have used car pricing increases faster than repair costs.

I think at this point, you know, we've just been speculating on what's going to happen given that tariffs and things are changing by the hour. But we feel comfortable with the guidance that we provided, in terms of GTV growth.

Operator (participant)

We'll go next to Craig Kennison, Baird.

Craig Kennison (Director of Research Operations & Senior Research Analyst)

I wanted to focus on the acquisition of J. M. Wood. I'm curious what synergies do you bring to the table on a deal like that?

Jim Kessler (CEO)

Yeah. Happy to take you through it at a high level. So, one, JM Wood is in a state where we didn't have any yard presence, so we're really happy to fill in Alabama. And and just think about any large company with a global scale like ours, and when you buy a business that's been owned by, you know, a family business, technology and scale and services and attach rate, financial services, transportation services, the scale of technology, think about all the platforms that we have from Boom and Bucket to MPE to Iron Planet to the Ritchie Brothers live event. And and what we love about JM Wood is they do certain things where we really haven't expanded, like municipalities in this c c and t space where we wanna take their expertise and take that across The US as we do it.

But just think about all the back office, all the accounting, all the finance activities that a large company can help a family owned business do and the technology component of it.

Craig Kennison (Director of Research Operations & Senior Research Analyst)

Yeah. Thanks, Jim. And as a as a follow-up, to what extent is this a template or other deals like this, given, you know, your opportunity to consolidate in this market?

Jim Kessler (CEO)

Yeah. Look, in general, we're excited about the M and A that is out there for us to go after. What we want to stay focused on, and Eric's kind of been given this guidance for the last year, Now that we got the leverage ratio where we want it, having these tuck ins come in, and we think we have opportunity in The US, in the international space to be able to leverage our scale. And we think there's ample enough opportunities to be able to go out there and and go after acquisitions like like you see with JM Wood.

Craig Kennison (Director of Research Operations & Senior Research Analyst)

Great. Thank you.

Operator (participant)

Up next is Maxim Sytchev, NBF.

Maxim Sytchev (Managing Director)

Hi. Good afternoon, gentlemen. Just a quick question around Australia and how the ramp up is going there with the relatively recently signed client there. Thanks.

Jim Kessler (CEO)

Yes. So for Australia, just as a reminder, it really starts in the midsummer time frame us when we'll start accepting cars. And think about the process of titles and everything else until you kind of see your first car for sale kind of happens after that date. But think about midsummer, is the plan for us to start accepting cars, at an IAARB Global lot.

Maxim Sytchev (Managing Director)

Okay. Okay. That's great. That's it. Thank you very much.

Operator (participant)

Next up is Michael Feniger, Bank of America.

Michael Feniger (Director of Equity Research)

Hey, guys. Thanks for squeezing me back in. Just I promise just one here. Just on the service revenue take rate, it it was up a 50 basis points. Can you guys just unpack that a little bit more?

Is this higher buyer fee, is that one time in nature for the quarter? Is that kind of how is a buyer fee that's kind of going be implemented for the rest of the year? I'm just kind of curious if you could talk about that service take rate, expanding 150 basis points, which kind of helps offset some of the other weakness you guys saw in other areas of the business. Thank you.

Eric Guerin (CFO)

Thanks for the question, Michael. Yes, we typically won't comment on the composition of the take rate. What I would say is we continue to monitor ongoing what our fees and commission rates are and adjust accordingly within the market and the dynamics. So we're really comfortable with where we ended for this quarter, but I don't give a guidance for the specific take rate.

Operator (participant)

And everyone at this time, there are no further questions. I'd like to hand the call back to Mr. Jim Kessler for any additional or closing remarks.

Jim Kessler (CEO)

Thank you so much. So first, just wanted to thank all the RV Global teammates for your hard work and your continued dedication to adding value, teaching every partner that we have, and really that consistency and dedication of making sure we're partner our partners first is utmost importance to our success in the future. So thank you so much for doing that. And everyone on the call, you for taking the time to listen to our story. We're looking forward to talking to everyone soon. Thank you so much.

Operator (participant)

Once again, ladies and gentlemen, that does conclude today's conference. Thank you all for your participation today. You may now disconnect.