RB (RBA) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents RB Global's unaudited financial statements for the first quarter of 2025, Management's Discussion and Analysis (MD&A) of the results, and disclosures on market risk and internal controls Condensed Consolidated Financial Statements Presents the unaudited financial statements for the quarter ended March 31, 2025, showing a 4% revenue increase to $1.11 billion, a 5% operating income decline to $189.5 million, and a 5% net income growth to $113.3 million Condensed Consolidated Income Statements Condensed Consolidated Income Statement (Q1 2025 vs Q1 2024) | Metric | Three months ended March 31, 2025 (in millions) | Three months ended March 31, 2024 (in millions) | | :--- | :--- | :--- | | Total revenue | $1,108.6 | $1,064.7 | | Service revenue | $852.5 | $849.1 | | Inventory sales revenue | $256.1 | $215.6 | | Total operating expenses | $919.5 | $868.2 | | Operating income | $189.5 | $198.9 | | Net income | $113.3 | $107.4 | | Net income available to common stockholders | $102.9 | $97.1 | | Diluted EPS available to common stockholders | $0.55 | $0.53 | Condensed Consolidated Statements of Comprehensive Income - Comprehensive income increased to $123.8 million for the three months ended March 31, 2025, up from $82.4 million in the same period of 2024, primarily due to a positive foreign currency translation adjustment of $10.5 million compared to a $25.0 million loss in the prior year[9] Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $578.1 | $533.9 | | Total current assets | $1,782.6 | $1,714.8 | | Goodwill | $4,515.2 | $4,511.8 | | Total assets | $11,887.3 | $11,807.0 | | Total current liabilities | $1,363.1 | $1,331.3 | | Long-term debt | $2,622.6 | $2,622.1 | | Total liabilities | $6,111.4 | $6,090.6 | | Total stockholders' equity | $5,285.9 | $5,226.3 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statement of Cash Flows (Q1 2025 vs Q1 2024) | Cash Flow Activity | Three months ended March 31, 2025 (in millions) | Three months ended March 31, 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $156.8 | $124.8 | | Net cash used in investing activities | ($101.9) | ($77.5) | | Net cash used in financing activities | ($45.0) | ($190.9) | | Net increase (decrease) in cash | $13.0 | ($150.5) | Notes to the Condensed Consolidated Financial Statements - On March 10, 2025, the company agreed to acquire J.M. Wood Auction Co., Inc. for approximately $235 million in cash, with the deal expected to close in Q2 or Q3 2025[26][27] - The company operates as a single operating and reportable segment, with performance reviewed at the consolidated level by the CEO[28] - The company is in a dispute with the Canada Revenue Agency (CRA) over a CA$79.1 million assessment for taxation years 2010-2015, having filed a Notice of Objection and paid a required deposit of CA$39.5 million in February 2025[37][38] - On April 3, 2025, the company amended its Credit Agreement, increasing its revolving credit facilities to $1.3 billion, reducing its USD Term Loan A facility, and extending the maturity to April 2030[55] - The company is in arbitration with its former CEO, Ann Fandozzi, regarding the circumstances of her departure in 2023[74] - As of March 31, 2025, the company had $125.7 million of assets under guarantee contracts, where it guarantees a minimum level of proceeds to consignors[77][78] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2025 results, highlighting a 6% decrease in Gross Transaction Value (GTV) to $3.8 billion, driven by weakness in the Commercial Construction & Transportation (CC&T) sector, while total revenue increased 4% to $1.1 billion, supported by a 19% rise in inventory sales Overview RB Global operates a global marketplace for commercial assets and vehicles, primarily in the automotive and commercial construction & transportation (CC&T) sectors, and announced a proposed acquisition of J.M. Wood Auction Co. to expand its US footprint - The company operates in two main sectors: automotive and commercial construction & transportation (CC&T)[84][86] - On March 10, 2025, the company entered an agreement to acquire J.M. Wood Auction Co., Inc. for approximately $235.0 million in cash to enhance its geographic coverage and customer base in the United States[88][89] Macroeconomic Conditions and Trends The CC&T sector is experiencing headwinds as customers delay asset dispositions due to market uncertainty, while the automotive sector benefits from a higher rate of vehicles being declared a total loss - In the CC&T sector, customers are delaying asset disposition decisions due to an uncertain macro environment, impacting unit volume growth of higher value assets[101] - In the automotive sector, a higher number of vehicles being deemed a total loss is driving industry salvage unit volume growth, though used automotive prices have remained fairly flat[102] Performance Overview and Consolidated Results In Q1 2025, RB Global saw a 6% decrease in total GTV to $3.8 billion, but a 4% increase in total revenue to $1.1 billion, with net income rising 5% to $113.3 million Q1 2025 Performance Highlights vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total GTV | $3.8 billion | $4.1 billion | (6)% | | Total revenue | $1.1 billion | $1.1 billion | 4% | | Net income | $113.3 million | $107.4 million | 5% | | Diluted EPS | $0.55 | $0.53 | 4% | | Adjusted EBITDA | $327.9 million | $331.0 million | (1)% | Results of Operations The analysis details a 6% year-over-year decrease in GTV, primarily from an 18% drop in the CC&T sector, partially offset by 2% growth in the automotive sector, while total revenue increased 4% Total GTV GTV by Sector (Q1 2025 vs Q1 2024) | Sector | Q1 2025 GTV (in millions) | Q1 2024 GTV (in millions) | % Change | | :--- | :--- | :--- | :--- | | Automotive | $2,144.7 | $2,105.0 | 2% | | Commercial construction and transportation | $1,276.7 | $1,561.2 | (18)% | | Other | $407.5 | $411.2 | (1)% | | Total GTV | $3,828.9 | $4,077.4 | (6)% | - The decrease in total GTV was primarily driven by lower GTV in the CC&T sector in the United States and Canada due to lower lot volumes as consignors adopted a cautious stance amid market uncertainty[112] Total Revenue - Total revenue increased 4% to $1.1 billion, primarily due to a 19% increase in inventory sales revenue, while total service revenue remained flat[113] Service Revenue Breakdown (Q1 2025 vs Q1 2024) | Revenue Type | Q1 2025 (in millions) | Q1 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Transactional seller revenue | $216.8 | $238.6 | (9)% | | Transactional buyer revenue | $556.7 | $525.4 | 6% | | Marketplace services revenue | $79.0 | $85.1 | (7)% | | Total service revenue | $852.5 | $849.1 | — % | - Transactional buyer revenue increased 6%, primarily from higher buyer fee rates in the automotive sector implemented in late 2024 and early 2025[117] Costs and Expenses - Costs of services increased 3% to $361.9 million, driven by higher tow costs in the automotive sector and increased employee compensation expenses[121] - Selling, general and administrative (SG&A) expenses rose 3% to $205.0 million, mainly due to higher technology costs for new systems and increased legal fees related to the ex-CEO's departure and the CRA matter[123] - Acquisition-related and integration costs decreased 76% to $3.1 million, primarily due to lower severance and integration costs related to the IAA acquisition[124] Liquidity and Capital Resources The company believes its existing working capital and credit facilities are sufficient for current needs, with net cash from operations increasing by $32.0 million year-over-year to $156.8 million - On April 3, 2025, the company amended its Credit Agreement to increase revolving facilities from $750.0 million to $1.3 billion and extend the maturity to April 2030[136][137] - In February 2025, the company paid a required deposit of CA$39.5 million (approx. $27.4 million) to the CRA as part of its appeal process against a tax assessment[145] Cash Flow Summary (Q1 2025 vs Q1 2024) | Cash Flow Activity | Q1 2025 (in millions) | Q1 2024 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Operating activities | $156.8 | $124.8 | $32.0 | | Investing activities | ($101.9) | ($77.5) | ($24.4) | | Financing activities | ($45.0) | ($190.9) | $145.9 | Non-GAAP Measures This section provides definitions and reconciliations for non-GAAP financial measures, including Adjusted Net Income, Diluted Adjusted EPS, and Adjusted EBITDA, which decreased 1% to $327.9 million for Q1 2025 Reconciliation of Net Income to Adjusted EBITDA | Metric | Three months ended March 31, 2025 (in millions) | Three months ended March 31, 2024 (in millions) | | :--- | :--- | :--- | | Net income | $113.3 | $107.4 | | Add: Depreciation & Amortization | $114.5 | $107.7 | | Add: Interest expense | $49.9 | $63.9 | | Less: Interest income | ($3.0) | ($6.6) | | Add: Income tax expense | $29.6 | $32.5 | | EBITDA | $304.3 | $304.9 | | Add: Adjusting Items | $23.6 | $26.1 | | Adjusted EBITDA | $327.9 | $331.0 | Reconciliation to Adjusted Net Income and Diluted Adjusted EPS | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net income available to common stockholders | $102.9 M | $97.1 M | | Adjusted net income available to common stockholders | $165.2 M | $165.5 M | | Diluted EPS available to common stockholders | $0.55 | $0.53 | | Diluted adjusted EPS available to common stockholders | $0.89 | $0.90 | Quantitative and Qualitative Disclosures About Market Risk The company reports that there have been no material changes to its market risk exposures during the first quarter of 2025 compared to those disclosed in its 2024 Annual Report on Form 10-K - There have been no material changes to the company's market risk during the three months ended March 31, 2025, from those disclosed in the Annual Report for the year ended December 31, 2024[175] Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[177] - There were no changes in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the controls[179] PART II – OTHER INFORMATION This section covers other required disclosures, including legal proceedings, risk factors, and other information, reporting no material legal proceedings or changes to risk factors, and the adoption of Rule 10b5-1 trading plans by three insiders Legal Proceedings The company states that it has no material legal proceedings pending, other than ordinary routine litigation incidental to its business - The company has no material legal proceedings pending, other than ordinary routine litigation incidental to the business[182] Risk Factors The company confirms that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - 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, 2024[183] Other Information Discloses that during the first quarter of 2025, director Adam DeWitt, Chief Legal Officer Darren Watt, and CEO James Kessler each adopted new Rule 10b5-1 trading arrangements for the potential sale of company stock - In March 2025, director Adam DeWitt, Chief Legal Officer Darren Watt, and CEO James Kessler each adopted new Rule 10b5-1 trading arrangements[187] Exhibits Lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including the Equity Purchase Agreement for J.M. Wood Auction Co., Inc., and CEO/CFO certifications - Key exhibits filed with the report include the Equity Purchase Agreement for J.M. Wood Auction Co., Inc. and certifications by the CEO and CFO[189]