RB (RBA) - 2024 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1: Condensed Consolidated Financial Statements This section presents RB Global, Inc's unaudited condensed consolidated financial statements for Q1 2024 Condensed Consolidated Income Statements | Metric | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 1,064.7 | 512.4 | 108% | | Service Revenue | 849.1 | 343.6 | 147% | | Inventory Sales Revenue | 215.6 | 168.8 | 28% | | Operating Income (Loss) | 198.9 | (24.9) | 899% | | Net Income (Loss) | 107.4 | (28.2) | 481% | | Net Income (Loss) available to common stockholders | 97.1 | (34.2) | 384% | | Basic EPS | 0.53 | (0.28) | 289% | | Diluted EPS | 0.53 | (0.28) | 289% | Condensed Consolidated Statements of Comprehensive Income | Metric | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Net income (loss) | 107.4 | (28.2) | 481% | | Foreign currency translation adjustment | (25.0) | 15.1 | (265.6%) | | Total comprehensive income (loss) | 82.4 | (13.1) | 730.5% | Condensed Consolidated Balance Sheets | Metric | March 31, 2024 (Millions USD) | December 31, 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | 12,045.2 | 12,037.4 | 0.1% | | Cash and cash equivalents | 462.8 | 576.2 | (19.7%) | | Trade and other receivables, net | 944.6 | 731.5 | 29.1% | | Total Current Assets | 1,884.8 | 1,814.0 | 3.9% | | Goodwill | 4,528.8 | 4,537.0 | (0.2%) | | Total Liabilities | 6,486.2 | 6,528.0 | (0.6%) | | Total Stockholders' Equity | 5,068.6 | 5,019.0 | 1.0% | Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity | Metric | Balance, Dec 31, 2023 (Millions USD) | Net Income (Millions USD) | Other Comprehensive Loss (Millions USD) | Dividends Paid (Millions USD) | Balance, Mar 31, 2024 (Millions USD) | | :--- | :--- | :--- | :--- | :--- | :--- | | Retained Earnings | 918.5 | 107.4 | — | (57.8) | 967.7 | | Accumulated Other Comprehensive Loss | (44.0) | — | (25.0) | — | (69.0) | | Total Stockholders' Equity | 5,019.0 | 107.4 | (25.0) | (57.8) | 5,068.6 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 124.8 | (57.3) | 318% | | Net cash used in investing activities | (77.5) | (2,823.0) | (97%) | | Net cash (used in) provided by financing activities | (190.9) | 2,958.5 | (106%) | | Net (Decrease) Increase in cash, cash equivalents, and restricted cash | (150.5) | 81.1 | (286%) | | Cash and cash equivalents, and restricted cash, end of period | 597.4 | 707.0 | (15.5%) | Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures and explanations for the condensed consolidated financial statements - RB Global is a leading omnichannel marketplace for commercial assets and vehicles worldwide, operating in 13 countries with a digital platform serving over 170 countries[18] - Key brands include Ritchie Bros., IAA, Rouse Services, SmartEquip, and VeriTread[19] - The unaudited condensed consolidated interim financial statements are prepared in accordance with US GAAP, following the same accounting policies as the 2023 annual audited consolidated financial statements[21][22] - The company is evaluating the impact of new FASB ASUs 2023-09 (Income Taxes) and 2023-07 (Segment Reporting), effective for fiscal years beginning after December 15, 2024, and December 15, 2023 (interim periods after Dec 15, 2024) respectively[24][25] 1. Description of Business and Basis of Preparation - RB Global is a leading omnichannel marketplace for commercial assets and vehicles worldwide, with auction sites in 13 countries and a digital platform serving over 170 countries[18] - Key brands include Ritchie Bros., IAA, Rouse Services, SmartEquip, and VeriTread[19] - The unaudited condensed consolidated interim financial statements are prepared in accordance with US GAAP, consistent with the Company's audited consolidated financial statements for the year ended December 31, 2023[21][22] 2. Recent Accounting Pronouncements - ASU 2023-09 (Income Taxes) requires enhanced annual disclosures for rate reconciliations and income taxes paid, effective for fiscal years beginning after December 15, 2024[24] - ASU 2023-07 (Segment Reporting) requires enhanced disclosure of significant segment expenses, effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024[25] 3. Business Combinations - The company completed its acquisition of IAA, Inc ('IAA') on March 20, 2023, for a total purchase price of approximately $6.6 billion, aiming to create a leading omnichannel marketplace[26] - The IAA acquisition resulted in $3,546.6 million in goodwill, attributed to expected synergies and IAA's assembled workforce[31][32] - On January 3, 2023, the company acquired 75% control of VeriTread for $25.1 million cash consideration, with $25.2 million in goodwill recognized, expected to accelerate the company's marketplace strategy[33][36] IAA Acquisition - Acquisition of IAA, Inc completed on March 20, 2023, for approximately $6.6 billion[26] - Consideration included $1,714.2 million cash, $3,712.9 million fair value of common shares issued, and repayment of $1,157.1 million of IAA's net debt[27][29] - Goodwill acquired on acquisition was $3,546.6 million, related to expected synergies and IAA's assembled workforce[31][32] VeriTread Acquisition - Acquired 75% control of VeriTread on January 18, 2023, for $25.1 million cash consideration[33] - Goodwill acquired on acquisition was $25.2 million, expected to accelerate the company's marketplace strategy[36] - A redeemable non-controlling interest of 21% is classified in temporary equity due to a probable put/call agreement[34] 4. Segment Information - The company operates as a single operating and reportable segment, with the CEO (CODM) reviewing performance and allocating resources at the consolidated level[37] | Region | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | | :--- | :--- | :--- | | United States | 791.2 | 360.1 | | Canada | 142.4 | 68.3 | | Europe | 87.1 | 50.7 | | Australia | 27.6 | 19.1 | | Other | 16.4 | 14.2 | | Consolidated | 1,064.7 | 512.4 | 5. Revenue - Revenue sources include commissions from consignors, buyer fees from purchasers, and marketplace services revenue (e.g, refurbishing, parts procurement, data, transportation, financing)[39] - Approximately 23% of consolidated revenues in Q1 2024 were associated with vehicles supplied by the company's three largest provider customers[40] | Revenue Type | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Commissions | 227.4 | 130.6 | 74% | | Buyer fees | 502.7 | 140.7 | 257% | | Marketplace services revenue | 119.0 | 72.3 | 65% | | Total service revenue | 849.1 | 343.6 | 147% | | Inventory sales revenue | 215.6 | 168.8 | 28% | | Total revenue | 1,064.7 | 512.4 | 108% | 6. Operating Expenses | Expense Type | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Costs of services | 353.0 | 76.4 | 362% | | Cost of inventory sold | 196.6 | 151.5 | 30% | | Selling, general and administrative | 198.1 | 148.2 | 34% | | Acquisition-related and integration costs | 12.8 | 126.2 | (90%) | | Depreciation and amortization | 107.7 | 36.2 | 198% | | Total operating expenses | 868.2 | 538.5 | 61% | Acquisition-Related and Integration Costs - The significant decrease is due to the non-recurrence of substantial financing, investment banking, and legal costs associated with the IAA acquisition in the prior year[134] | Cost Type (IAA) | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Financing | — | 30.0 | (100%) | | Severance | 5.2 | 14.0 | (62.9%) | | Integration | 5.4 | 5.1 | 5.9% | | Investment banking, consulting and other acquisition-related costs | 1.1 | 61.6 | (98.2%) | | Total acquisition-related and integration costs | 12.8 | 126.2 | (90%) | Depreciation and Amortization - The increase is primarily driven by higher amortization costs, reflecting the impact of recent business combinations[136] | Expense Type | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Depreciation | 24.9 | 11.5 | 116.5% | | Amortization | 82.8 | 24.7 | 235.2% | | Total | 107.7 | 36.2 | 198.0% | 7. Income Taxes - Income tax expense for Q1 2024 was $32.5 million, compared to a benefit of $9.3 million in Q1 2023, with an effective tax rate of 23.2%[9][139] - The effective tax rate variance from the Canadian statutory rate (27.0%) is primarily due to estimated income taxed in jurisdictions with lower tax rates, deductions for share-based payments, and a benefit related to Foreign-Derived Intangible Income (FDII)[46] - The Canada Revenue Agency (CRA) has issued a proposal letter asserting a Luxembourg subsidiary was resident in Canada from 2010-2015, potentially leading to $26.0 million - $30.0 million in additional Canadian income tax, exclusive of interest and penalties[49] 8. Earnings (Loss) Per Share Available to Common Stockholders - Potentially dilutive securities include unvested performance-based restricted share units (PSUs), unvested restricted share units (RSUs), outstanding stock options, and stock committed under the Employee Stock Purchase Plan[52] | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income (loss) available to common stockholders | $97.1 million | $(34.2) million | | Basic weighted average share outstanding | 183,059,321 | 120,487,251 | | Diluted average shares outstanding | 184,581,054 | 120,487,251 | | Basic EPS | $0.53 | $(0.28) | | Diluted EPS | $0.53 | $(0.28) | 9. Supplemental Cash Flow Information Net Changes in Operating Assets and Liabilities | Item | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | | :--- | :--- | :--- | | Trade and other receivables | (220.0) | (104.3) | | Prepaid consigned vehicle charges | 6.4 | (14.2) | | Inventory | (13.0) | (46.4) | | Auction proceeds payable | 165.0 | 118.2 | | Trade and other liabilities | (62.1) | 38.9 | | Net changes in operating assets and liabilities | (141.8) | (86.8) | Interest and Tax Payments | Item | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | | :--- | :--- | :--- | | Interest paid, net of interest capitalized | 85.6 | 20.4 | | Interest received | 6.6 | 6.3 | | Net income taxes paid | 23.0 | 50.9 | 10. Fair Value Measurement - The fair value of derivative financial assets (forward currency contracts) is determined using observable Level 2 inputs, including foreign currency spot exchange rates and forward pricing curves[57] - A contingent consideration liability of $5.3 million (March 31, 2024) related to a previous acquisition is recorded at fair value[59] | Instrument | Carrying Amount (Millions USD) | Fair Value (Millions USD) | Valuation Level | | :--- | :--- | :--- | :--- | | Loans receivable | 41.4 | 41.3 | Level 2 | | Derivative financial assets | 0.1 | 0.1 | Level 2 | | 2023 Secured Notes | 543.6 | 560.0 | Level 1 | | 2023 Unsecured Notes | 789.8 | 837.0 | Level 1 | | Term loans | 1,592.8 | 1,605.1 | Level 2 | 11. Derivative Financial Instruments - The company uses forward currency contracts to manage exposure to foreign currency exchange rate fluctuations on monetary loan receivables and significant intercompany balances[60] - The gross total notional amount of forward currency contracts was $38.9 million as of March 31, 2024[60] - An unrealized loss of $0.3 million was recognized within foreign exchange loss in the condensed consolidated income statement for Q1 2024[60] 12. Trade and Other Receivables - The allowance for expected credit losses increased from $6.4 million at December 31, 2023, to $8.4 million at March 31, 2024, with a current period provision of $3.2 million[62] - Loans receivable totaled $41.4 million at March 31, 2024, are fully collateralized by equipment, and have terms of one to four years[63] | Item | March 31, 2024 (Millions USD) | December 31, 2023 (Millions USD) | | :--- | :--- | :--- | | Advanced charges receivable | 354.5 | 374.7 | | Trade accounts receivable | 559.7 | 315.8 | | Loans receivable | 22.4 | 21.8 | | Trade and other receivables, gross | 953.0 | 737.9 | | Less: allowance for credit losses | (8.4) | (6.4) | | Trade and other receivables, net | 944.6 | 731.5 | 13. Trade and Other Liabilities | Item | March 31, 2024 (Millions USD) | December 31, 2023 (Millions USD) | | :--- | :--- | :--- | | Accrued liabilities | 210.3 | 294.5 | | Trade payables | 138.8 | 138.9 | | Book overdrafts | 134.2 | 129.1 | | Deferred revenue | 21.2 | 17.5 | | Taxes payable | 70.1 | 63.7 | | Total | 618.6 | 685.8 | 14. Debt - The company repaid $150.0 million of principal on the USD TLA Facility during Q1 2024, with no mandatory principal repayments remaining until maturity in September 2026[69][161] - At March 31, 2024, the company had $712.8 million in unused committed revolving credit facilities and was in compliance with all financial and other covenants[66][166] | Debt Type | March 31, 2024 (Millions USD) | December 31, 2023 (Millions USD) | | :--- | :--- | :--- | | Short-term debt | 24.8 | 13.7 | | Long-term debt | 2,926.2 | 3,075.8 | | Total debt | 2,951.0 | 3,089.5 | 15. Temporary Equity, Equity and Dividends - The company has unlimited common shares (no par value) and 485,000,000 Series A Senior Preferred Shares authorized, issued, and outstanding[72][73] - Series A Senior Preferred Shares are convertible into common stock at $71.58 per share (as of March 31, 2024), carry a 5.5% preferential dividend, and participate in common share dividends[74] - Redeemable non-controlling interest relates to a 21% interest in VeriTread, classified as temporary equity due to a probable put/call agreement[78] - Common stock dividends paid in Q1 2024 totaled $49.3 million ($0.27 per share), while preferred stock dividends totaled $8.5 million ($6.7 million preferential, $1.8 million participating)[79][80][81] 16. Share-based Payments - In March 2024, 276,276 equity-settled PSUs were granted to executives and senior employees, vesting over three years based on performance and market conditions[88] - During Q1 2024, 263,930 equity-settled RSUs were granted, not subject to market vesting conditions[93] | Expense Type | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | | :--- | :--- | :--- | | Selling, general and administrative | 14.0 | 6.7 | | Acquisition-related and integration costs | 1.1 | 6.0 | | Total | 15.1 | 12.7 | 17. Leases - The company enters into commercial leases for various properties (auction sites, offices) and operating leases for equipment (computers, motor vehicles)[94] | Lease Cost Type | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | | :--- | :--- | :--- | | Operating lease cost | 60.8 | 13.1 | | Finance lease cost (Amortization + Interest) | 3.1 | 5.7 | | Short-term lease cost | 5.4 | 3.4 | | Sublease income | (0.2) | (0.1) | | Total | 69.1 | 22.1 | 18. Contingencies - The company is in a dispute with its former CEO, Ann Fandozzi, regarding her resignation and compensation; an expense of $1.3 million was recorded in Q1 2024 for changes to estimated share-based payment awards, and the final settlement could be material[97][98] - At March 31, 2024, $79.7 million of assets were guaranteed under contract to consignors, with 98% expected to be sold prior to June 30, 2024[101] ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a comprehensive analysis of RB Global's financial condition and results of operations for Q1 2024 Overview of Business, Macroeconomic Conditions and Service Offerings - RB Global is a leading global marketplace for commercial assets and vehicles, primarily serving the automotive, construction, and commercial transportation sectors through an omnichannel platform[108][110] - The business is impacted by macroeconomic conditions, including inflationary pressures on operating costs and interest rate volatility on variable rate long-term debt[111] - The company offers various contract options (straight commission, fixed commission, guarantee commission, and inventory contracts) and value-added services such as refurbishment, parts procurement, data intelligence, and financial services[113][114] Performance Overview and Consolidated Results - Net income available to common stockholders increased 384% to $97.1 million in Q1 2024 from a $34.2 million loss in Q1 2023[118] - Total GTV increased 115% to $4.1 billion, including $2.3 billion from IAA, and total revenue increased 108% to $1.1 billion, including $588.6 million from IAA[119] - Adjusted EBITDA increased 150% to $331.0 million, and diluted adjusted EPS available to common stockholders increased 58% to $0.90 per share[118][119] Results of Operations Analysis - IAA contributed 90% of the increase in Total GTV and 92% of the increase in Total Revenue, significantly impacting year-over-year comparisons due to its full-quarter inclusion in Q1 2024[122][123] - Operating income increased 899% to $198.9 million, primarily driven by the decrease in significant acquisition-related and integration costs and the inclusion of IAA's operating income[135][136] | Metric | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 1,064.7 | 512.4 | 108% | | Service Revenue | 849.1 | 343.6 | 147% | | Inventory Sales Revenue | 215.6 | 168.8 | 28% | | Total Operating Expenses | 868.2 | 538.5 | 61% | | Operating Income (Loss) | 198.9 | (24.9) | 899% | | Net Income (Loss) | 107.4 | (28.2) | 481% | | Total GTV | 4,077.4 | 1,899.2 | 115% | | Effective Tax Rate | 23.2% | 24.8% | (160)bps | Total GTV - Total GTV increased 115% to $4.1 billion in Q1 2024, with IAA accounting for 90% ($2.0 billion) of this increase due to its full-quarter inclusion[122] - Excluding IAA, total GTV increased 13% to $1.8 billion, driven by higher lot volumes from strategic accounts, particularly in the United States[122] | Region | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | United States | 3,261.8 | 1,400.9 | 133% | | Canada | 553.5 | 291.9 | 90% | | International | 262.1 | 206.4 | 27% | | Total GTV | 4,077.4 | 1,899.2 | 115% | Total Revenue - Total revenue increased 108% to $1.1 billion in Q1 2024, with IAA contributing $508.7 million (92%) of the increase[123] - Service revenue increased 147%, and inventory sales revenue increased 28%[123] - Excluding IAA, total revenue increased 10% to $476.1 million[123] Service Revenue - Buyer fees increased 257%, primarily due to IAA's full-quarter inclusion, contributing $340.4 million (94%) of the increase, and changes in buyer fee structure[127] - Commissions revenue increased 74%, with IAA contributing $77.8 million (80%) of the increase, despite IAA earning lower commission rates[128] | Revenue Type | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Commissions | 227.4 | 130.6 | 74% | | Buyer fees | 502.7 | 140.7 | 257% | | Marketplace services revenue | 119.0 | 72.3 | 65% | | Total service revenue | 849.1 | 343.6 | 147% | Inventory Sales Revenue - Inventory sales revenue increased 28% in Q1 2024, primarily due to the inclusion of IAA for a full quarter, which contributed 126% of the increase[130] - Excluding IAA, inventory sales revenue decreased due to a lower mix of inventory contracts in the United States, partially offset by an increase in Canada[130] Costs of Services - Costs of services increased 362% to $353.0 million in Q1 2024, with IAA's full-quarter inclusion accounting for 95% of the increase[131] - The increase also reflects higher costs for transportation services and profit-sharing arrangements related to a large consignor contract in the United States[131] Cost of Inventory Sold - Cost of inventory sold increased 30% to $196.6 million in Q1 2024, generally in line with the 28% increase in inventory sales revenue[132] - The increase rate was slightly higher than sales revenue due to softer performance on North American inventory contracts, partially offset by higher inventory rates on assets sold through the GovPlanet business[132] Selling, General and Administrative - Selling, general and administrative (SG&A) expenses increased 34% to $198.1 million in Q1 2024, with IAA's inclusion contributing 75% of this rise[133] - The remaining increase was driven by higher employee compensation (including share-based payments and benefits), investments in sales coverage teams, and technology modernization[133] - These increases were partially offset by lower travel, advertising, and promotion costs[133] Acquisition-related and Integration Costs - Acquisition-related and integration costs decreased 90% to $12.8 million in Q1 2024, down from $126.2 million in Q1 2023[134] - This significant reduction is due to the non-recurrence of substantial acquisition-related costs (investment banking, consulting, financing, legal) incurred for the IAA acquisition in the prior year, and lower severance costs[134] Operating Income (Loss) - Operating income increased 899% to $198.9 million in Q1 2024, reversing a $24.9 million loss in Q1 2023[135] - This improvement was primarily driven by the decrease in significant acquisition-related and integration costs and the full-quarter inclusion of operating income from IAA[135][136] - The increase was partially offset by higher depreciation and amortization driven by the acquisition of IAA[136] Income Tax Expense (Benefit) and Effective Tax Rate - Income tax expense for Q1 2024 was $32.5 million, compared to a benefit of $9.3 million in Q1 2023[139] - The effective tax rate for Q1 2024 was 23.2%, favorably impacted by estimated income taxed in lower tax rate jurisdictions, higher benefit related to Foreign-Derived Intangible Income (FDII), and lower estimated non-deductible expenses[138] Net Income (Loss) Attributable to Controlling Interests - Net income attributable to controlling interests increased 481% to $107.4 million in Q1 2024, from a $28.1 million loss in Q1 2023[140] - This increase was primarily driven by higher operating income, partially offset by higher interest expense (due to debt financing for IAA acquisition and rising rates) and higher income tax expense[140] Diluted EPS - Diluted EPS available to common stockholders increased 289% to $0.53 per share for Q1 2024, compared to a $0.28 loss per share for Q1 2023[141] - The increase was primarily due to the increase in net income attributable to controlling interests, partially offset by an increase in the number of shares issued for the acquisition of IAA[141] U.S. Dollar Exchange Rate Comparison - Foreign exchange fluctuations had an unfavorable impact on total revenue and a favorable impact on expenses in Q1 2024 compared to Q1 2023[142] - These impacts were primarily due to fluctuations in the British pound sterling, Canadian dollar, Euro, and Australian dollar exchange rates relative to the U.S dollar[142] | Currency | 2024 Average | 2023 Average | % Change (2024 over 2023) | | :--- | :--- | :--- | :--- | | Canadian dollar | 0.7419 | 0.7397 | — % | | Euro | 1.0861 | 1.0732 | 1 % | | British pound sterling | 1.2683 | 1.2146 | 4 % | | Australian dollar | 0.6579 | 0.6841 | (4)% | Non-GAAP Measures and Key Operating Metrics - Adjusted net income available to common stockholders increased 139% to $165.5 million, diluted adjusted EPS increased 58% to $0.90 per share, and adjusted EBITDA increased 150% to $331.0 million in Q1 2024[145][146][147] | Sector | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Automotive | 2,113.7 | 331.7 | 537% | | Commercial construction and transportation | 1,562.8 | 1,190.0 | 31% | | Other | 400.9 | 377.5 | 6% | | Total GTV | 4,077.4 | 1,899.2 | 115% | | Sector | Q1 2024 (Thousands of lots) | Q1 2023 (Thousands of lots) | Change (%) | | :--- | :--- | :--- | :--- | | Automotive | 585.3 | 87.5 | 569% | | Commercial construction and transportation | 108.8 | 56.6 | 92% | | Other | 112.5 | 105.2 | 7% | | Total Lots Sold | 806.6 | 249.3 | 224% | Key Operating Metrics Definitions - Gross transaction value (GTV) represents total proceeds from all items sold at the company's auctions and online marketplaces[150] - Total service revenue take rate is total service revenue divided by total GTV[151] - Inventory return is inventory sales revenue less cost of inventory sold, and inventory rate is inventory return divided by inventory sales revenue[152][153] GTV by Sector - The 537% increase in the automotive sector's GTV was primarily due to the inclusion of IAA for a full quarter[155] - Commercial construction and transportation GTV increased 31%, mainly driven by higher lot volumes from strategic accounts in the United States[155] | Sector | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Automotive | 2,113.7 | 331.7 | 537% | | Commercial construction and transportation | 1,562.8 | 1,190.0 | 31% | | Other | 400.9 | 377.5 | 6% | | Total GTV | 4,077.4 | 1,899.2 | 115% | Total Lots Sold by Sector - The 569% increase in automotive lots sold was due to the inclusion of IAA for a full quarter[159] - Commercial construction and transportation lots sold increased 92%, mainly driven by a higher proportion of low-value lots in the United States and the inclusion of IAA[159] | Sector | Q1 2024 (Thousands of lots) | Q1 2023 (Thousands of lots) | Change (%) | | :--- | :--- | :--- | :--- | | Automotive | 585.3 | 87.5 | 569% | | Commercial construction and transportation | 108.8 | 56.6 | 92% | | Other | 112.5 | 105.2 | 7% | | Total Lots Sold | 806.6 | 249.3 | 224% | Financial Condition: Debt, Liquidity and Capital Resources - Total debt decreased to $2,951.0 million at March 31, 2024, from $3,089.5 million at December 31, 2023, following a $150.0 million repayment on the USD TLA Facility[65][161] - The company maintains strong liquidity with $717.8 million in unused revolving credit facilities and was in compliance with all debt covenants at March 31, 2024[162][166][171] - Net cash provided by operating activities significantly improved to $124.8 million in Q1 2024 from a $57.3 million outflow in Q1 2023[173] - The Debt/Net Income ratio improved to 8.6x at March 31, 2024, from 28.6x at March 31, 2023, due to higher net income and slightly lower debt levels[177] Debt Structure and Covenants - The company's credit agreement, including multicurrency revolving facilities and the Term Loan A facility (USD and CAD), matures on September 21, 2026[160] - A $150.0 million principal repayment was made on the USD TLA Facility during Q1 2024, with no mandatory principal repayments remaining until maturity[161] - At March 31, 2024, the company had $712.8 million in unused committed revolving credit facilities and was in compliance with all financial and other covenants[66][166] Liquidity and Capital Resources Management - The company believes its existing working capital and $717.8 million in unused revolving credit facilities are sufficient to satisfy present operating requirements and contractual obligations[169][171] - Short-term cash requirements include dividends, consignor settlements, personnel, income taxes, debt payments, IT architecture, lease obligations, capital expenditures, working capital, and advances[168] - Long-term cash requirements include scheduled principal repayments of $1.6 billion on the TLA Facility and $1.4 billion on the 2023 Notes, as well as operating and finance lease obligations[170] Cash Flows Analysis - Net cash provided by operating activities increased $182.1 million, mainly due to higher net income from IAA's full-quarter inclusion and lower acquisition-related costs[173] - Net cash used in investing activities decreased significantly due to the non-recurrence of cash used for the IAA and VeriTread acquisitions in the prior quarter[174] | Cash Flow Activity | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Operating activities | 124.8 | (57.3) | 318% | | Investing activities | (77.5) | (2,823.0) | (97%) | | Financing activities | (190.9) | 2,958.5 | (106%) | | Effect of changes in foreign currency rates | (6.9) | 2.9 | (338%) | | Net decrease in cash, cash equivalents, and restricted cash | (150.5) | 81.1 | (286%) | Dividend Information - The company declared a quarterly dividend of $0.27 per common share for the quarter ended March 31, 2024, consistent with previous quarters[176] - A special dividend of $1.08 per common share was paid in Q1 2023 in connection with the IAA acquisition[79][175] Debt over Net Income - The Debt/Net Income ratio significantly improved to 8.6x at March 31, 2024, from 28.6x at March 31, 2023, a 70% decrease[177][191] - The Adjusted Net Debt/Adjusted EBITDA ratio decreased to 2.0x at March 31, 2024, from 5.4x at March 31, 2023, a 63% decrease[177][191] - This improvement is attributed to higher net income from IAA's inclusion and slightly lower debt levels due to TLA Facility repayments[177] Critical Accounting Policies and Non-GAAP Reconciliations - No material changes to critical accounting policies, judgments, estimates, and assumptions were reported from the prior annual report[178] - Beginning Q1 2024, the company no longer reports non-GAAP adjusted operating income and non-GAAP operating free cash flow[180] - Adjusted net income available to common stockholders increased 139% to $165.5 million, diluted adjusted EPS increased 58% to $0.90 per share, and adjusted EBITDA increased 150% to $331.0 million in Q1 2024[145][146][147] - Adjusted ROIC significantly improved to 9.7% for the trailing twelve months ended March 31, 2024, from 5.9% in the prior year[195] Critical Accounting Policies, Judgments, Estimates and Assumptions - There were no material changes in critical accounting policies, judgments, estimates, and assumptions from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[178] Adjusted Net Income Available to Common Stockholders and Diluted Adjusted EPS Available to Common Stockholders Reconciliation - Adjusted net income excludes effects of share-based payments expense, acquisition-related and integration costs, amortization of acquired intangible assets, executive transition costs, and certain other items[183] | Metric | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Net income (loss) available to common stockholders | 97.1 | (34.2) | 384% | | Adjusting items (net of tax and allocation) | 68.4 | 103.4 | (33.9%) | | Adjusted net income available to common stockholders | 165.5 | 69.2 | 139% | | Diluted EPS available to common stockholders | $0.53 | $(0.28) | 289% | | Diluted adjusted EPS available to common stockholders | $0.90 | $0.57 | 58% | Adjusted EBITDA Reconciliation - Adjusted EBITDA is calculated by adding back depreciation and amortization, interest expense, income tax expense (benefit), and subtracting interest income from net income (loss), as well as adding back specific adjusting items[188] | Metric | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Net income (loss) | 107.4 | (28.2) | 481% | | EBITDA | 304.9 | 13.3 | 2192% | | Adjusting items (total) | 26.1 | 119.3 | (78.1%) | | Adjusted EBITDA | 331.0 | 132.6 | 150% | Adjusted Net Debt and Adjusted Net Debt/Adjusted EBITDA Reconciliation - The decrease in the Adjusted Net Debt/Adjusted EBITDA multiplier was due to higher net income from the inclusion of IAA's net income and slightly lower levels of debt driven by repayments[177] | Metric | TTM Mar 31, 2024 (Millions USD) | TTM Mar 31, 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Debt | 2,951.0 | 3,244.0 | (9%) | | Less: cash and cash equivalents | (462.8) | (568.3) | (19%) | | Adjusted net debt | 2,488.2 | 2,675.7 | (7%) | | Adjusted EBITDA | 1,231.5 | 492.8 | 150% | | Adjusted net debt/adjusted EBITDA | 2.0 x | 5.4 x | (63%) | Adjusted Return and Adjusted ROIC Reconciliation - Adjusted ROIC is used by management to determine how productively the company uses its long-term capital and to gauge investment decisions[192] | Metric | TTM Mar 31, 2024 (Millions USD) | TTM Mar 31, 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Reported return | 519.6 | 147.7 | 252% | | Adjusting items (net of tax) | 305.9 | 163.8 | 86.7% | | Adjusted return | 825.5 | 311.5 | 165% | | Adjusted average invested capital | 8,543.4 | 5,238.5 | 63% | | ROIC | 6.1% | 2.6% | 350bps | | Adjusted ROIC | 9.7% | 5.9% | 380bps | Adjusting Items - Q1 2024 adjusting items include $13.3 million share-based payments expense, $12.8 million acquisition-related and integration costs, $69.6 million amortization of acquired intangible assets (primarily from IAA), and $1.7 million executive transition costs[196] - Q4 2023 adjusting items included $13.8 million share-based payments expense, $20.5 million acquisition-related and integration costs, $69.6 million amortization of acquired intangible assets, and $2.2 million executive transition costs[197] - Q3 2023 adjusting items included $12.7 million share-based payments expense, $23.1 million acquisition-related and integration costs, $63.9 million amortization of acquired intangible assets, and $9.8 million executive transition costs[198] ITEM 3: Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's market risk disclosures during Q1 2024 - No material changes to market risk disclosures in Q1 2024 from the Annual Report on Form 10-K for December 31, 2023[207] ITEM 4: Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024 - CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2024, providing reasonable assurance for timely and accurate reporting[208][209] - No material changes in internal control over financial reporting occurred during Q1 2024, apart from those related to the continued integration of IAA[211] Disclosure Controls and Procedures - The CEO and CFO evaluated and concluded that the company's disclosure controls and procedures were effective as of March 31, 2024[208][209] - These controls are designed to ensure that information required for SEC filings is accumulated, communicated, and reported within specified time periods, providing reasonable assurance[208][209] Changes in Internal Control over Financial Reporting - No material changes in the company's internal control over financial reporting occurred during Q1 2024[211] - The only exception relates to the continued integration of IAA, which was acquired on March 20, 2023[211] PART II – OTHER INFORMATION ITEM 1: Legal Proceedings The company has no material legal proceedings pending, other than routine litigation incidental to its business - No material legal proceedings pending or contemplated by governmental authorities, beyond ordinary routine litigation incidental to the business[214] ITEM 1A: Risk Factors As of the filing date, there have been no material changes to the risk factors previously disclosed - No material changes to risk factors as of the filing date, compared to the Annual Report on Form 10-K for December 31, 2023[215] - The business is subject to a number of risks and uncertainties, and past performance is no guarantee of future performance[215] ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during Q1 2024 - None[216] ITEM 3: Defaults Upon Senior Securities There were no defaults upon senior securities to report during Q1 2024 - None[217] ITEM 4: Mine Safety Disclosures This item is not applicable to the company - Not applicable[218] ITEM 5: Other Information No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during Q1 2024 - None of the company's directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during Q1 2024[219] ITEM 6: Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (pursuant to Rule 13a-14(a) and 18 U.S.C Section 1350) and Interactive Data Files (Inline XBRL) for the financial statements[222] SIGNATURES - The report is signed by Jim Kessler, Chief Executive Officer, and Eric J. Guerin, Chief Financial Officer, on May 9, 2024[226]