Ritchie Bros. Auctioneers Incorporated, announces net earnings of $38.6 million, or $0.36 per diluted share1, for the three months ended June 30, 2014. This is a 30% increase compared to net earnings of $29.8 million, or $0.28 per diluted share, generated in the same quarter last year. The company's revenues for the second quarter of 2014 increased 11% to $141.8 million compared to $128.3 million for the same period in 2013, primarily as a result of an increase in gross auction proceeds ("GAP")2. Selling, general and administrative expenses, excluding depreciation and amortization, for the second quarter of 2014 increased 2% compared to the same period in 2013. Net earnings for the quarter also benefited from the effects of a favorable tax rate.
For the six months ended June 30, 2014, net earnings were $52.9 million, or $0.49 per diluted share. This compares to net earnings of $43.8 million, or $0.41 per diluted share, for the six months ended June 30, 2013, representing a 21% increase in net earnings. The company's revenues during the first half of 2014 grew 4% to $240.4 million compared to $230.4 million in the first half of 2013.
"Revenue and earnings growth was strong in the quarter and we fully demonstrated the leverage in the business model with our continued expense control," said Rob McLeod, chief financial officer. "Our record second quarter revenue was bolstered by strong auction activity across North America - especially in Canada. The mix and age of equipment sold at our auctions also continued to improve, enhancing the average price per lot."
Ravi Saligram, chief executive officer, added: "We're pleased to see the level of growth in our auction business, which we believe continues to have significant growth prospects. Over the next several quarters, I look forward to focusing on how we can grow the Ritchie Bros. business and expand our market share by further penetrating our existing markets, with particular focus on the U.S. and Europe. I am also excited by our newly developed EquipmentOne solution, and plan to put a significant focus on evolving our strategy to achieve its full potential."
During the second quarter of 2014, the Company conducted 68 unreserved industrial auctions in 14 countries throughout North America, Central America, Europe, the Middle East, Australia and Asia.
Quarterly dividend
Ritchie Bros. also announces a 7.7% increase in its quarterly cash dividend. The quarterly cash dividend declared increases to $0.14 per common share, payable on September 12, 2014 to shareholders of record on August 22, 2014.
Gross Auction Proceeds and revenues
GAP was $1.2 billion for the second quarter of 2014, a quarterly record for the company and a 15% increase compared to the same quarter of 2013.
EquipmentOne, the company's online equipment marketplace, contributed $29.6 million of gross transaction value ("GTV")2 to GAP in the second quarter of 2014 compared to $29.1 million3 in the second quarter of 2013. GTV is comprised of the value of the items sold on EquipmentOne and the fees earned through EquipmentOne's buyers' premiums.
For the six months ended June 30, 2014, GAP was $2.1 billion, which is 9% higher than in the first half of 2013. EquipmentOne contributed $48.0 million in the first half of 2014 compared to $49.5 million4 in the first half of 2013.
Revenues grew in the three- and six-month periods ended June 30, 2014 compared to the same periods in 2013 as a result of an increase in GAP. Revenue rates (revenues as a percentage of GAP) declined due to the performance of the company's underwritten business. The company's revenue rate during the second quarter of 2014 was 11.54%, which is consistent with the company's historical average, but a decrease from the 11.96% revenue rate achieved in the same quarter of 2013. The Company's revenue rate during the six months ended June 30, 2014 was 11.53% compared to 12.01% during the same period in 2013.
The company's underwritten business, which is comprised of guarantee and inventory contracts, represented 32% of GAP in the second quarter of 2014, compared to 27% in the second quarter of 2013, and 29% of GAP in the first half of 2014 compared to 24% in the first half of 2013.
Online bidding statistics
Ritchie Bros. sold approximately $840 million of equipment, trucks and other assets to online buyers during the first half of 2014, a 17% increase compared to the same period of 2013. Online buyers represented 40% of GAP during the first half of 2014. Internet bidders comprised over 60% of the total bidder registrations at Ritchie Bros. industrial auctions in the first half of 2014.
Upcoming auctions
There are currently 70 unreserved auctions on the 2014 Ritchie Bros. auction calendar at rbauction.com, including auctions in North America, Central America, Europe, the Middle East and Australia.
Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended June 30, 2014, at 8:00 am Pacific Time / 11:00 am Eastern Time on August 5, 2014.
To listen to the conference call, please access the webcast at the call link.
A replay will be available on the website shortly after the call.
Non-GAAP measures
The term gross auction proceeds represents the total proceeds from all items sold by Ritchie Bros, including auction proceeds and EquipmentOne's gross transaction value. The term gross transaction value represents the total value of items sold on EquipmentOne and the fees earned by the company through EquipmentOne's buyers' premiums. The company's definitions of GAP and GTV may differ from those used by other participants in its industry. GAP and GTV are important measures the company uses in comparing and assessing its operating performance.
The company believes that revenues, which is the most directly comparable measure in its consolidated income statements, and certain other line items, are best understood by considering their relationship to GAP.
Revenues are earned by Ritchie Bros. in the course of conducting its auctions and online marketplace transactions, and consist primarily of commissions earned on consigned equipment and net profit on the sale of equipment purchased by the company and sold in the same manner as consigned equipment.
Forward-looking Statements
The discussion in this press release relating to future events or operating periods contains forward-looking statements that involve risks and uncertainties, including, in particular, statements regarding future results, including growth prospects and potential. These risks and uncertainties include: the numerous factors that influence the supply of and demand for used equipment; fluctuations in the market conditions and values of used equipment; seasonal and periodic variations in operating results; actions of competitors; the market acceptance of the company's recent initiatives including Ritchie Bros. EquipmentOne; economic and other conditions in local, regional and global markets; and other risks and uncertainties as detailed from time to time in the Company's SEC and Canadian securities filings, including the company's Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2013, available on the SEC, SEDAR and the Company's websites. Actual results may differ materially from those forward-looking statements. Forward-looking statements are made as of the date of this press release and the company does not undertake any obligation to update the information contained herein unless required by applicable securities legislation.
