RB (US:RBA)2024-11-08 12:35PART I – FINANCIAL INFORMATION Condensed Consolidated Financial Statements RB Global's Q3 2024 financial performance showed increased net income despite a revenue dip, with nine-month results significantly boosted by the IAA acquisition and strong operating cash flow Condensed Consolidated Income Statements Despite a Q3 2024 revenue decrease, operating and net income improved, while nine-month results showed substantial growth in revenue and net income, largely due to the IAA acquisition Condensed Consolidated Income Statement Highlights (in millions, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $981.8 | $1,019.8 | $3,142.6 | $2,638.7 | | Operating Income | $153.4 | $145.8 | $554.2 | $300.5 | | Net Income | $76.0 | $63.2 | $294.4 | $121.8 | | Diluted EPS | $0.36 | $0.30 | $1.43 | $0.61 | Condensed Consolidated Balance Sheets As of September 30, 2024, total assets slightly decreased to $11.93 billion, while total liabilities reduced to $6.23 billion, primarily due to lower long-term debt, leading to an increase in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $650.7 | $576.2 | | Goodwill | $4,537.1 | $4,537.0 | | Total Assets | $11,932.0 | $12,037.4 | | Long-term debt | $2,724.9 | $3,061.6 | | Total Liabilities | $6,230.3 | $6,528.0 | | Total Stockholders' Equity | $5,211.5 | $5,019.0 | Condensed Consolidated Statements of Cash Flows Net cash from operations significantly increased to $747.5 million for the nine months ended September 30, 2024, with reduced investing activities and financing cash primarily used for debt repayment Cash Flow Summary (Nine Months Ended Sep 30, in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $747.5 | $206.7 | | Net cash used in investing activities | ($209.6) | ($3,002.3) | | Net cash (used in) provided by financing activities | ($491.6) | $2,728.8 | | Net increase (decrease) in cash | $42.2 | ($66.7) | Notes to the Condensed Consolidated Financial Statements Key notes detail the IAA acquisition, updated revenue presentation, and significant contingencies including a tax dispute with the CRA and arbitration with the former CEO - The company completed its acquisition of IAA, Inc. on March 20, 2023, for a total purchase price of approximately $6.6 billion, creating a leading omnichannel marketplace for vehicles21 - In Q3 2024, the company updated its presentation of disaggregated revenue to better align with how management evaluates performance, recasting prior year amounts, now broken down into transactional seller revenue, transactional buyer revenue, and marketplace services revenue3132 - The company is in a dispute with the Canada Revenue Agency (CRA) over the tax residency of a former subsidiary for years 2010-2015, with a potential tax liability estimated at $26.0 to $30.0 million, plus interest and penalties, which the company believes is unlikely to be sustained and has not recorded a liability4244 - The company is in arbitration with former CEO Ann Fandozzi regarding her departure, with an expense of $3.3 million recorded in the first nine months of 2024 related to changes in the estimated fair value of certain share-based awards7980 Management's Discussion and Analysis of Financial Condition and Results of Operations RB Global's Q3 2024 saw a decline in GTV and revenue, primarily due to CC&T sector pressures, yet net income increased due to reduced acquisition and SG&A costs, with strategic debt repayment and positive trends in the automotive sector Overview RB Global operates as a global omnichannel marketplace for commercial assets and vehicles, facing macroeconomic headwinds in the CC&T sector while benefiting from increased total losses in the automotive sector - The Commercial Construction & Transportation (CC&T) sector is experiencing headwinds as customers delay asset disposition decisions amid macro uncertainty and higher interest rates, negatively impacting unit volume growth and asset prices102 - In the automotive sector, the inflation spread between vehicle repair costs and used vehicle values is driving a higher percentage of accidents resulting in total losses, which in turn boosts industry salvage unit volume103 Q3 2024 Performance Highlights vs. Q3 2023 | Metric | Q3 2024 | Change YoY | | :--- | :--- | :--- | | Total GTV | $3.6 billion | -7% | | Total Revenue | $981.8 million | -4% | | Net Income | $76.0 million | +20% | | Diluted EPS | $0.36 | +20% | | Adjusted EBITDA | $283.7 million | -1% | Results of Operations Q3 2024 total revenue decreased 4% due to lower inventory sales and GTV decline in the CC&T sector, while operating income increased due to reduced SG&A and acquisition-related costs GTV by Sector (Q3 2024 vs Q3 2023, in millions) | Sector | Q3 2024 GTV | Change YoY | | :--- | :--- | :--- | | Automotive | $2,031.1 | -1% | | Commercial construction and transportation | $1,217.6 | -10% | | Other | $373.5 | -21% | | Total GTV | $3,622.2 | -7% | - Service revenue increased 1% in Q3 2024, driven by a 17% increase in marketplace services revenue and a 2% increase in transactional buyer revenue, which offset a 7% decrease in transactional seller revenue120 - SG&A expenses decreased 13% to $177.8 million in Q3 2024, primarily due to lower short-term performance-based incentive compensation, reduced severance costs, and strategic cost reduction initiatives132 - Acquisition-related and integration costs fell 74% to $6.0 million in Q3 2024, as significant costs related to the IAA acquisition were incurred in the prior year134 Liquidity and Capital Resources The company maintains strong liquidity with $747.5 million in operating cash flow and sufficient credit facilities, actively managing debt through repayments and remaining in compliance with all covenants Cash Flow Summary (Nine Months Ended Sep 30, in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Operating activities | $747.5 | $206.7 | | Investing activities | ($209.6) | ($3,002.3) | | Financing activities | ($491.6) | $2,728.8 | - During the nine months ended September 30, 2024, the Company repaid $350.0 million of principal on the USD TLA Facility, with no further mandatory principal repayments on this facility until maturity148 - The company was in compliance with all financial and other covenants applicable to its credit facilities at September 30, 2024152 Non-GAAP Measures Non-GAAP measures for Q3 2024 show slight decreases in Adjusted Net Income and Adjusted EBITDA, while the adjusted net debt/adjusted EBITDA ratio significantly improved to 1.7x Reconciliation of Net Income to Adjusted EBITDA (in millions) | | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net income | $76.0 | $63.2 | | Add: D&A, interest, taxes | $188.4 | $183.4 | | EBITDA | $264.4 | $246.6 | | Adjustments | $19.3 | $39.2 | | Adjusted EBITDA | $283.7 | $285.8 | Reconciliation to Diluted Adjusted EPS | | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net income available to common stockholders | $66.9M | $54.7M | | Adjustments (net of tax and allocation) | $63.9M | $78.0M | | Adjusted net income available to common stockholders | $130.8M | $132.7M | | Diluted weighted average shares outstanding | 185.5M | 183.6M | | Diluted adjusted EPS | $0.71 | $0.72 | - The adjusted net debt/adjusted EBITDA ratio for the trailing twelve months ended September 30, 2024, was 1.7x, a significant improvement from 3.2x in the prior-year period182 Quantitative and Qualitative Disclosures About Market Risk The company reports that there have been no material changes to its market risk exposures from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - There have been no material changes to the company's market risk during the three and nine months ended September 30, 2024, compared to the disclosures in the 2023 Form 10-K190 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2024, with no material changes to internal control over financial reporting aside from IAA integration - The CEO and CFO concluded that as of September 30, 2024, the company's disclosure controls and procedures were effective at a reasonable assurance level192 - No material changes to internal control over financial reporting occurred in Q3 2024, except as it relates to the continued integration of IAA194 PART II – OTHER INFORMATION Legal Proceedings The company states that it has no material legal proceedings pending, other than ordinary routine litigation incidental to its business - The company reports no material legal proceedings pending, apart from ordinary routine litigation incidental to the business195 Risk Factors The company indicates that there have been no material changes to the risk factors disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - As of the filing date, there have been no material changes to the risk factors discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2023196 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds for the period - The company reported 'None' for this item197 Other Information During the third quarter of 2024, no directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - During Q3 2024, none of the company's directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement197 Exhibits This section lists the exhibits filed with the 10-Q report, which include new employment agreements for Michael (Steve) Lewis and Nancy King, as well as the required CEO and CFO certifications under the Sarbanes-Oxley Act - Filed exhibits include employment agreements for executives Michael (Steve) Lewis and Nancy King, CEO/CFO certifications, and Interactive Data Files (Inline XBRL)198199