Ritchie Bros. reported that Q2/20 net income attributable to stockholders decreased 2% to $53 million compared with $54 million in Q2/19. Diluted earnings per share (EPS) attributable to stockholders was flat at $0.49 per share in Q2/20 compared with Q2/19. Diluted adjusted EPS, which excludes a $6.2 million income tax expense in Q2/20 related to an unfavourable adjustment to reflect final regulations published regarding hybrid financing arrangements, increased 10% to $0.54 per share in Q2/20 compared with $0.49 per share in Q2/19.

“I am proud to see the resilience, creativity and resolve demonstrated by our employees and customers. It is their perseverance and professionalism that has driven our strong second quarter results as we pivoted to 100% online auctions,” Ann Fandozzi, CEO of Ritchie Bros., said. “We are encouraged by the strength of our business performance and the momentum we have exiting the second quarter. Our leading platform, global reach and the investments we’ve made in digital have served us well through these uncertain times. Market conditions continue to be strong and we remain focused on our priorities of maintaining the health and safety of our employees and customers, providing our customer with exceptional service, and preserving our strong financial position to the benefit of our shareholders.”

Ritchie Bros. also reported:

• Total revenue in Q2/20 decreased 1% to $389.1 million compared with Q2/19
• Service revenue in Q2/20 was $234.1 million, flat compared with Q2/19
• Inventory sales revenue in Q2/20 decreased 2% to $154.9 million compared with Q2/19
• Total selling, general and administrative expenses in Q2/20 increased 3% to $100.6 million compared with Q2/19
• Operating income in Q2/20 increased 14% to $88.8 million compared with Q2/19
• Net income in Q2/20 decreased 2% to $53.1 million compared with Q2/19
• Adjusted EBITDA in Q2/20 increased 12% to $107.1 million compared with Q2/19
• Cash provided by operating activities was $198.3 million for the first half of 2020
• Cash on hand at Q2/20 was $538.0 million, of which $389.7 million was unrestricted

Auctions and Marketplaces (A&M) Segment Results

• GTV in Q2/20 was flat at $1.5 billion compared with Q2/19
• A&M total revenue in Q220 decreased 1% to $354.6 million compared with Q2/19
• Service revenue in Q2/20 decreased 1% to $199.6 million compared with Q2/19
• Inventory sales revenue in Q2/20 decreased 2% to $154.9 million compared with Q2/19

Other Services Segment Results

• Other services total revenue in Q2/20 increased 3% to $34.5 million compared with Q2/19
• RBFS revenue in Q2/20 increased 5% to $8.5 million compared with Q2/19

Other Company Developments

• On May 4, Ritchie Bros. appointed Jim Kessler Chief Operating Officer
• Ritchie Bros. increased the quarterly cash dividend by 10% to $0.22 per share

Q2/20 Consolidated Performance Overview

GTV remained flat at $1.5 billion in Q2/20 with variability by region, as the U.S. and Canada had higher activity, but international activity was lower due to the severe impact of the COVID-19 pandemic. Total GTV increased due to online performance driven from execution by the U.S. region and the U.S. strategic accounts sales teams, year-over-year growth performance at Ritchie Bros.’ Fort Worth, TX auction, and auction calendar shifts in response to COVID-19. These shifts included the addition of Montreal and Los Angeles auctions from Q1/20 to Q2/20, which were partially offset by the postponement of the Polotitlan, Mexico, and Ocana, Spain, auctions from Q2/20 to Q3/20. This increase was offset by the non-repeat of a dispersal of pipeline equipment as part of the $94 million Columbus, OH, auction held in June 2019, and lower international performance mainly due to the severe impact of the COVID-19 pandemic. In addition, GTV related to government surplus contracts were lower due to government shutdowns in response to COVID-19.

Total revenue decreased 1% to $389 million in Q2/20. Service revenue was flat year over year at $234.1 million with commissions revenue lower by 7% on flat service GTV primarily due to softer commission rate performance from a higher proportion of GTV sourced from strategic accounts and lower rates from government operations. Total fees were up 9% on flat total GTV driven primarily by the mix of small values lots, the harmonization of buyer fees and higher fees from services within U.S. operations, which was partially offset by fees waived for Canadian on-the-farm auctions as part of Ritchie Bros.’ COVID-19 pandemic response.

Inventory sales revenue decreased 2% primarily related to a non-recurring dispersal of pipeline equipment as part of the $94 million Columbus, OH, auction in June 2019, and selling through certain non-repeating inventory deals from Europe and Asia in Q2/19. Ritchie Bros. also earned lower inventory revenue through its government surplus contracts due to government shutdowns in response to COVID-19. This decrease was partially offset by strong year-over-year performance in the U.S. and Canada regions.

Costs of services decreased 22% to $39.4 million. In response to the COVID-19 pandemic, Ritchie Bros. transitioned its on-site auctions to online bidding, utilized TAL solutions for selected international and on-the-farm agricultural events, and implemented travel restrictions. These operational changes resulted in temporary cost reductions in employee compensation and travel, advertising and promotion expenses. In addition, the company incurred lower net fees related to referral payments.

Cost of inventory decreased 4% to $143.1 million, primarily in line with lower activity in inventory sales revenue. Cost of inventory sold decreased at a higher rate than the decrease of inventory sales revenue, indicating an increase in the revenue margin. The margin also improved as a result of equipment sold at a lower price performance in the prior year within the international region, which was not repeated in Q2/20.

Selling, general and administrative (SG&A) expenses increased 3% to $100.6 million primarily due to higher incentive expense, including a one-time incentive accrual to certain employees. These increases were partially offset by lower SG&A expenses related to lower travel, advertising and promotion costs as Ritchie Bros. implemented travel restrictions.

Foreign exchange had an unfavorable impact on total revenue and a favorable impact on expenses. These impacts were primarily due to the fluctuations in the Euro, Canadian dollar and Australian dollar exchange rates relative to the U.S. dollar.