RB (US:RBA)2021-11-05 19:59Financial Data and Key Metrics Changes - The company reported a 4% decrease in Gross Transaction Value (GTV) for Q3 2021 compared to the previous year, but a 17% increase compared to Q3 2019, indicating strong underlying business strength despite supply chain challenges [24][11]. - Total reported revenue declined by 1% year-on-year, while total service revenue decreased by 4%, but increased by 19% compared to 2019 [25][26]. - Non-GAAP adjusted operating income fell by 11% year-on-year but rose by 47% compared to Q3 2019, reflecting effective cost management and growth in service revenue [28][34]. Business Line Data and Key Metrics Changes - Auction and marketplace service revenue declined by 6%, while A&M service revenue as a percentage of total GTV was robust at 14% for the quarter [29]. - Inventory sales increased by 6%, driven by strength in the international region and government sector, although there was some weakness in the U.S. and Canada [30]. - Ritchie Bros. Financial Services saw a 55% increase in revenue to $11.3 million, indicating successful investments in this area [26]. Market Data and Key Metrics Changes - The company noted ongoing supply chain issues affecting new equipment production, which in turn constrains used equipment supply, leading to a tight market environment [49][50]. - The impact of the Delta variant delayed the return of customers to auction theaters, affecting overall market engagement [9][10]. Company Strategy and Development Direction - The company is transitioning from an auctioneer to a global trusted marketplace for insight services and transaction solutions, with a focus on inventory management systems and strategic M&A [13][36]. - The acquisition of SmartEquip is seen as a foundational step in facilitating parts and service transactions, enhancing the marketplace vision [14][15]. - The launch of Ritchie List is aimed at allowing customers to sell equipment independently while integrating them into the company's ecosystem [16][17]. Management's Comments on Operating Environment and Future Outlook - Management views the current supply chain challenges as a point-in-time event and is focused on long-term strategic initiatives to capitalize on future improvements [12][38]. - The outlook remains cautious for Q4 due to worsening supply chain conditions, but management is optimistic about the eventual need for equipment transactions as inventory ages [50][76]. Other Important Information - The company has opened eight new satellite yard locations, which are expected to drive organic growth and improve customer engagement [19][20]. - Cost of services plus SG&A decreased by approximately 5% compared to last year, indicating effective cost management despite revenue challenges [31]. Q&A Session Summary Question: Revenue model for Ritchie List and SmartEquip - Management explained that SmartEquip will operate as a standalone entity initially, monetizing primarily on a SaaS basis, while Ritchie List will generate revenue through listing fees and additional services [42][45]. Question: Duration of supply chain issues - Management indicated that supply chain issues are worsening and are expected to persist into next year, impacting new equipment production and used equipment supply [49][50]. Question: Engagement and transaction volume in IMS - Management noted that initial engagement in the Inventory Management System (IMS) has been strong, focusing on regional dealers and rental companies, with plans to expand as confidence grows [61][62]. Question: M&A strategy and capacity - Management confirmed a robust pipeline for both organic initiatives and M&A, emphasizing that acquisitions will be pursued if they provide a step-change in achieving the company's vision [68][104]. Question: CFO succession plan - Management is conducting an external search for a new CFO, with a focus on finding a candidate who can navigate the complexities of the company's transformation [78][80]. Question: Expansion of satellite yard model - Management expressed confidence in the satellite yard model based on positive early results and plans to continue expanding this initiative [85][86].