september 20, 2021 ritchie bros. auctioneers inc

September 20, 2021

Ritchie Bros. Auctioneers Inc.Holding our bid: Initiating with a Sector Performrating, $65 targetOur view: We are initiating coverage on Ritchie Bros. Auctioneers ("RitchieBros.") with a Sector Perform rating and a $65 price target. The companyhas made significant progress towards transitioning from an "auctioneer"to a "marketplace", which positions it well to service a broader set ofcustomers outside of its traditional auctions channel.

Key points:Positioning itself for growth across multiple channels – Ritchie Bros. hasundergone a significant transition over the last decade as it has increasinglyevolved from an auctioneer of heavy equipment to a technology-ledmarketplace. The auctions channel only accounts for ~10% of the ~$300Bglobal annual used equipment market. Transforming from an auctioneerto a marketplace should help the company make further inroads intothe remaining ~90% of the used equipment market, which is comprisedof the Midstream (private sales/brokerage) and Upstream (dealer/rental)channels, while also improving its competitive positioning in the auctionschannel. This transition has been driven by investments in technology and anumber of acquisitions, with the May 2017 acquisition of IronPlanet beingthe most significant inflection point in the company's digital evolution.Our Sector Perform rating reflects the challenging supply environmentimpacting the industry, difficult prior year comparables over the upcomingquarters, and our view that it could take longer than the market anticipatesto generate "critical mass" for Ritchie Bros.' omni-channel platform. Wereflect this caution in our valuation multiple (at a ~1.5x discount to thecompany's current trading multiple) and our 2022 and 2023 EPS forecasts,which are below consensus. We see upside to our forecasts and valuationmultiple if: 1) the supply environment improves earlier-than-anticipated;2) the company is able to generate stronger-than-expected traction for itsecosystem; and, 3) the company is able to realize higher-than-expectedrevenue/cost synergies from the pending Euro Auctions acquisition.

Initiating coverage with a Sector Perform rating; $65 price target – Ourprice target is based on ~31.0x our blended 2022/2023 Adjusted EPSforecast of $2.07. We believe our target multiple fairly reflects the currentoperating backdrop (strong demand environment, but tight equipmentsupply), Ritchie Bros.’ organic growth outlook within the context of thisbackdrop, its Free Cash Flow profile, and potential for further smaller-sizedM&A over the coming years.

What is included in this report? – In this report we include: 1) an in-depth review of Ritchie Bros.' operating history and the evolution ofits business model; 2) our thoughts on the Euro Auctions acquisitionfollowing discussions with a number of industry participants (customers,competitors, former employees, etc.); 3) a review of current supply anddemand indicators to better understand the operating backdrop; and, 4)our thoughts on the company's strategy to increase penetration in theMidstream and Upstream channels of the global used equipment market.

RBC Dominion Securities Inc.Sabahat Khan (Analyst)(416) 842-7880, [email protected]

Sector PerformNYSE: RBA; USD 61.57; TSX: RBAPrice Target USD 65.00Scenario Analysis*

DownsideScenario

45.0025%

CurrentPrice

61.57

PriceTarget

65.007%

UpsideScenario

81.0033%

*Implied Total Returns

Key StatisticsShares O/S (MM): 111.3Dividend: 1.00

Market Cap (MM): 6,853Yield: 1.6%Enterprise Val. (MM): 8,330Avg. Daily Volume: 585,302

Enterprise value shown on a pro-forma basis, reflecting the pendingacquisition of Euro Auctions.

RBC EstimatesFY Dec 2020A 2021E 2022E 2023ERevenue 1,377.3 1,444.1 1,827.3 1,892.4EBITDA, Adj 353.5 366.0 453.0 488.6EPS, Adj Diluted 1.68 1.66 1.89 2.13P/AEPS 36.6x 37.1x 32.6x 28.9x

Revenue Q1 Q2 Q3 Q42020 273.3A 389.1A 331.5A 383.4A2021 331.6A 396.4A 313.3E 402.9E2022 422.7E 489.9E 411.3E 503.5EEPS, Adj Diluted2020 0.21A 0.54A 0.44A 0.49A2021 0.25A 0.55A 0.30E 0.56E2022 0.28E 0.62E 0.35E 0.64EAll values in USD unless otherwise noted.Priced as of prior trading day's market close, EST (unless otherwise noted).

Disseminated: Sep 20, 2021 00:15EDT; Produced: Sep 20, 2021 00:15EDTFor Required Non-U.S. Analyst and Conflicts Disclosures, see page 61

For the exclusive use of Stanislav Lopata ([email protected]) at Mawer Investment Management Limited

Downloaded from Capital IQ by Stanislav Lopata ([email protected]) at Mawer Investment Management Limited on Friday Sep 24 2021 11:45:22 AM,Sessionid:c3nxlmuwyxcm2ntxoolucbxw

Ritchie Bros. Auctioneers Inc.

Key fundamental questionsOur view

Is Ritchie Bros. an industrial companyor a technology company?

While its core business is impacted by the supply/demand for industrial equipment,the channels through which Ritchie Bros. conducts its business are increasinglyreliant on technology. It is possible to argue that Ritchie Bros. was never anIndustrial company, and it instead offers platforms that allow buyers/sellers of usedequipment to transact (which partly explains its "premium" multiple relative toEquipment Dealers). Historically speaking, these platforms were more "brick andmortar" in nature; however, the company is increasingly facilitating transactions"digitally" (e.g., shift to 100% online bidding since the onset of the pandemic). Asof 2020, the company's online platforms accounted for ~24% of GTV (vs. ~3% in2015). The onset of the pandemic highlighted the company's digital capabilities asRitchie Bros. was able to shift seamlessly to 100% online bidding, which allowed it totake advantage of the increase in equipment supply during the early months of thepandemic. We believe Ritchie Bros. will increasingly rely on its technology-enabledplatforms to increase penetration in the Midstream and Upstream channels, whichcombined account for ~90% of the global used equipment market.

What are the company’s "Evergreen"targets and are they achievable?

At its 2020 investor day, management shared updated long-term targets in the formof its refreshed "Evergreen" model. This included: 1) GTV growth in the high singledigits to low teens range; 2) Service revenue growth in the low double digits tohigh teens range; 3) EBIT growth “greater than Service revenue growth”; and, 4)Operating Free Cash Flow conversion >100% of Adjusted Net Income. This modelreflects a target average annual performance over a 5-to-7 year time horizon (i.e.,these are not annual targets). While we believe that the targets related to Servicerevenue growth, EBIT growth, and Operating FCF conversion are achievable, we viewthe GTV growth target as the most difficult to achieve. This view is reflected in ourforecasts as our 2022 and 2023 EPS forecasts are below consensus.

What could lead Ritchie Bros. tooutperform/underperform relative toexpectations over the next 1-2 years?

Potential factors that could drive upside to our forecasts/outlook include anearlier-than-anticipated improvement in the supply environment, which would drivebetter-than-expected GTV growth, and ultimately better-than-expected revenueand Adjusted EBITDA margins (the opportunity to drive operating leverage). Over thelong run, stronger-than-expected "uptake" of the company's marketplace solutionscould also lead to better-than-expected revenue/earnings growth. Conversely, ifthe supply of used equipment remains constrained for longer-than-expected, thecompany is likely to generate lower GTV than what is currently reflected in ourestimates. Furthermore, challenges with the (potential) integration of Euro Auctionscould also negatively impact the company's results in 2022 onwards.

Ritchie Bros. has been active withM&A over the recent years. What isthe outlook for further acquisitions?

Following the recently announced acquisition of Euro Auctions (for $1,075 million;expected to close in late-2021/early-2022), we expect management's focus over thenear- to medium-term to be on the successful integration of this sizable transaction(largest in its history), and potentially other smaller- to medium-sized transactions.With a solid online platform and the pending acquisition of Euro Auctions (whichprovides a sizable footprint in Europe), we believe the company will likely focuson complementary acquisitions that provide specific capabilities (e.g., technologyfocused transactions such as Rouse) and/or provide the company with an increasedfootprint in specific regions/markets.

September 20, 2021 Sabahat Khan (416) 842-7880; [email protected] 2




Key ESG questionsThis section is intended to highlight key ESG discussion points relevant to this company, as well as our views on the outlook. Both the questionswe highlight and our responses will evolve over time as the dialogue between management, analysts and investors continues to advance. Wewelcome any feedback on the topics.

Our view

What are the most material ESGissues facing this company?

After a materiality assessment conducted in 2018, the company identified 6 materialESG issues: 1) human capital (attraction, retention, engagement, parity, training,diversity); 2) health and safety (sites, employees, clients); 3) culture and ethics(anti-corruption, bribery, money laundering); 4) data security; 5) data privacy; and,6) climate change and the transition to a low carbon economy. Furthermore, byfacilitating transactions for used heavy equipment, the company is supporting acircular economy.

Does the company integrate ESGconsiderations into its strategy?

Ritchie Bros.’ ESG journey is at a relatively early stage. We note that although formalmetrics/objectives have not yet been established, the very nature of the company’sbusiness is ESG-friendly and supportive of sustainability (i.e., the company enablesthe “recycling” of heavy equipment).

What is diversity like at the board /management level?

The Ritchie Bros. management team consists of 11 individuals, 4 of whom arewomen. Notably, the roles of CEO, CFO, Chief Revenue Officer, and Chief PeopleOfficer are all held by women. The board consists of 4 women and 5 men, all ofwhom are independent except for CEO Ann Fandozzi.

How does the company addressclimate-related issues specifically?

By providing services that result in the re-use and recycling of previously ownedassets, the company directly contributes to a reduction in the amount of older/used equipment that ends up in landfills/waste yards. Furthermore, the transitiontowards online channels is likely to reduce the volume of equipment that needs tobe shipped (i.e., consignors shipping equipment to the company's auction sites) andthe number of buyers that need to travel to attend in-person auctions. Both of thesefactors will help reduce the company's environmental footprint.

As an increasingly technology-oriented company, how does thecompany protect and secure itscustomers’ data?

As Ritchie Bros. increasingly leverages technology to drive growth, data privacy andsecurity have become important issues for the company. Accordingly, all eligibleemployees complete mandatory privacy and information-security training courses,and the company actively monitors and mitigates security risks through ongoingemployee training, enterprise-wide programs, and vulnerability assessments. Someexamples of security measures include: 1) secure firewalls to prevent access tointernal systems; 2) a dedicated and certified in-house cybersecurity team; and, 3)enterprise grade security tools to combat phishing, digital fraud, and malware.




Table of contents

Investment highlights ........................................................................................................... 5

Valuation and price target derivation ................................................................................... 7 Price target derivation ............................................................................................................... 7 Comparables table: EV/EBITDA and P/E trading multiples ...................................................... 10 Risks to rating and price target ................................................................................................ 11

Evergreen targets + Forecasts ............................................................................................. 12 “Evergreen” targets.................................................................................................................. 12 Income statement forecasts .................................................................................................... 13 Balance sheet forecasts ........................................................................................................... 14

Free Cash Flow outlook ...................................................................................................... 15 A review of Free Cash Flow drivers .......................................................................................... 15 Framing the Free Cash Flow outlook ........................................................................................ 16 Capital allocation ...................................................................................................................... 17

A little bit of history ........................................................................................................... 19 The transformational acquisition of IronPlanet ....................................................................... 25 Annotated stock chart .............................................................................................................. 30

Acquisition of Euro Auctions .............................................................................................. 31 Feedback from channel checks ................................................................................................ 31 Our thoughts on the transaction.............................................................................................. 31 Business/transaction overview ................................................................................................ 33

Market opportunity + Supply & demand setup .................................................................. 35 Large used equipment market provides runway ..................................................................... 35 Supply of used equipment likely to remain tight in the near-term .......................................... 36 Equipment demand outlook is supportive ............................................................................... 40

From an auctioneer to marketplace: Driving midstream/upstream penetration ................ 45 The journey from an auctioneer to digitally-enabled marketplace ......................................... 45 RB Asset Solutions (“RBAS”) provides a new way to go-to-market ......................................... 48 Increasing penetration in the Midstream channel ................................................................... 50 Increasing penetration in the Upstream channel .................................................................... 51

Company Description ......................................................................................................... 53

Appendix I – Interactive map of Ritchie Bros.’ and Euro Auctions’ global auction sites ...... 59

Priced as of market close on September 17, 2021 unless otherwise noted.


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Investment highlights Initiating coverage with a Sector Perform rating and a $65 price target Our $65 price target is based on ~31.0x our blended 2022/2023 Adjusted EPS forecast of $2.07. We believe our target multiple fairly reflects the current operating backdrop (strong demand environment, but tight equipment supply), Ritchie Bros.’ organic growth outlook within the context of this backdrop, its Free Cash Flow profile, and potential for further smaller-sized M&A over the coming years. Our valuation multiple is above the company’s 3-year average trading multiple of 29.1x; however, it is below its current trading multiple of 32.6x our 2022 EPS estimate (pro-forma Ritchie Bros. reflecting the pending acquisition of Euro Auctions). In our view, Ritchie Bros.’ industry-leading position as an auctioneer, its large and global footprint, strong margins, significant digital capabilities, and an increasingly capital light business model have historically supported a premium multiple relative to other Auctioneers/Online Marketplaces.

Looking ahead, we see the potential for upside to our valuation multiple if Ritchie Bros. is able to generate stronger-than-expected GTV growth, higher-than-expected margins (high proportion of fixed costs should help drive operating leverage during periods of steady top-line growth), and/or if the company is able to generate higher-than-expected synergies from the Euro Auctions acquisition (i.e., increased penetration for the combined platform in markets outside North America). If most/all of these growth drivers materialize, we see the potential for Ritchie Bros. to trade at multiple that is in line with our upside scenario (~37x P/E). For context, Copart, an omni-channel operator that is involved with online auctions/sales of vehicles, has traded at an average NTM P/E multiple of ~36.2x over the last year. Please see the section entitled Valuation and price target derivation for details on our valuation methodology to derive our price target and upside/downside scenarios.

Transitioning from an auctioneer to a marketplace Over the past decade, the company has undertaken a strategic shift from being an auctioneer towards becoming a multi-channel, full service marketplace for customers looking to buy, sell, and manage their used equipment. We note that the auctions channel accounts for only ~10% of the global ~$300 billion used equipment market. Transforming from an auctioneer to a marketplace should help the company make further inroads into the remaining ~90% of the used equipment market, which comprises of the Midstream (private sales/brokerage) and Upstream (dealer/retail/rental) channels, while also growing its competitive positioning in the auctions channel. To support this evolution, the company has leveraged investments in its technology platforms and capabilities (i.e., introduction of new channels and ancillary services), and has undertaken a number of acquisitions. While the acquisitions of AssetNation (which provided foundational infrastructure for EquipmentOne), Xcira (which strengthened the company’s online presence in the core auctions business), and Mascus (an additional foothold for non-auctions business) provided Ritchie Bros. with enhanced technological capabilities and provided its customers with access to new channels/options, the May 2017 acquisition of IronPlanet was the most significant inflection point in the company’s digital evolution.

The company’s Inventory Management System (“IMS”) serves as a gateway to RB Asset Solutions (“RBAS”), which is intended to be a one-stop shop for asset owners to manage their fleets. If the company is successful in driving significant adoption for this platform (i.e., by having a significant number of potential customers upload their fleets to the IMS), Ritchie Bros. should benefit from accelerated GTV and revenue growth, which should ultimately support improved Adjusted EBITDA margins. For a more detailed discussion of the company’s omni-channel platform and the opportunity in the Midstream and Upstream channels, please see the section entitled From an auctioneer to marketplace: Driving midstream/upstream penetration.


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Driving adoption of IMS & RBAS will be key The company has established an omni-channel platform that offers customers significant flexibility in how and where they transact, and it also offers a number of tools to help them optimize the pricing they realize for their assets. The challenge for the company moving forward, in our view, will be to drive increased adoption of its online platform/ecosystem. This would entail convincing customers to “upload” their fleets to the company’s IMS and to leverage RBAS as their one-stop shop to manage their fleets. For smaller customers, the company will have to convince them to potentially transition away from the manual processes they have historically relied on (think spreadsheets), and for larger/strategic customers, they may have to utilize Ritchie Bros.’ platform in conjunction with systems/platforms they may already be using internally. The other obvious consideration is competition – there are large-scale platforms (such as Machinery Trader) that some customers may already be using.

Demand is strong … Ritchie Bros. generates ~75%-80% of its GTV from the Construction and Transportation end-markets, and the demand outlook in both of these markets is supportive. The significant public infrastructure investment across North America (and in a number of major global markets), combined with improving private sector demand, is driving significant activity in the Construction end-market. With regards to the Transportation end-market, strong demand for commercial trucks, combined with significant pressure on the freight hauling industry to get more trucks into service, provides a favorable demand backdrop for this end-market as well.

… however, supply of used equipment is likely to be constrained for some time GTV is driven by product availability and mix, equipment pricing, equipment age, and number of lots (pieces of equipment) sold. Over the recent quarters, concerns related to new equipment supply have led consignors to take a “wait and see” approach (i.e., they are holding on to their used equipment for longer). The used equipment industry has also faced supply challenges driven by significant demand from a number of end-markets, heightened uncertainty surrounding new variants of COVID-19 (which has impacted supply chains), the widespread chip shortage, and the broader concerns around new equipment availability from OEMs. These factors are likely to result in a “tight” equipment supply environment and could impact Ritchie Bros.’ GTV growth over the near- and (potentially) medium-term. The combination of low supply and strong demand has resulted in a favorable pricing environment, which is a directional positive for Ritchie Bros. However, as noted at the company’s Orlando Auction earlier this year (the company’s largest auction), the higher pricing was not enough to offset the decline in lot counts (volume of equipment sold), and this resulted in a lower GTV YoY at the auction. Please see the section entitled Market opportunity + Supply & demand setup for a detailed discussion of the current supply and demand backdrop.

We expect deleveraging ahead of management guidance On August 8, 2021, Ritchie Bros. announced the acquisition of Euro Auctions for $1,075 million, representing a purchase multiple of ~15.3x 2021E Adjusted EBITDA (including ~$13 million of run-rate annual synergies). The transaction is expected to close in late-2021 or early-2022. Following the expected closing of the transaction, we estimate that leverage will increase to 3.8x TTM Adjusted EBITDA (3.4x on a pro-forma basis). The company is guiding to a leverage ratio <2.5x by year-end 2025, which we believe is a conservative target and likely reflects the assumption of further small- to medium-sized M&A over the next few years. Absent any further M&A, we estimate that leverage will decrease to 2.5x by year-end 2023. Please see the section entitled Acquisition of Euro Auctions for our thoughts on the transaction following discussions with a number of industry participants (customers, competitors, etc.). Additionally, please see our Interactive map of Ritchie Bros.’ global auction sites for the company’s pro-forma global auction site network (Ritchie Bros. + Euro Auctions).


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Valuation and price target derivation Price target derivation Sector Perform rating, $65 price target Our $65 price target is based on ~31.0x our blended 2022/2023 Adjusted EPS forecast of $2.07. We believe our target multiple fairly reflects the current operating backdrop (strong demand, but tight equipment supply), Ritchie Bros.’ organic growth outlook within the context of this backdrop, its Free Cash Flow profile, and potential for further smaller-sized M&A over the coming years. Our price target supports our Sector Perform rating.

Our valuation multiple is above the company’s 3-year average trading multiple of 29.1x; however, it is below its current trading multiple of 32.6x our 2022E EPS (pro-forma Ritchie Bros. reflecting the pending acquisition of Euro Auctions). In our view, Ritchie Bros.’ industry-leading position as an auctioneer, its large and global footprint, strong margins, significant digital capabilities, and an increasingly capital light business model have historically supported a premium multiple relative to other Auctioneers/Online Marketplaces (which currently trade at an average multiple of 23.6x consensus 2022E EPS).

The Auctioneers/Online Marketplaces peer group we have noted in the comparison tables (Exhibits 1 and 2) include automotive auctioneers (CarMax, Copart, and KAR Auction Services) and a pure-play online marketplace (eBay). The closest peer within this group, in our view, is Copart, an omni-channel operator that is involved with online auctions/sales of vehicles (currently trades at 35.0x 2022E consensus EPS; 1-year average NTM P/E multiple of ~36.2x). Copart generates significantly higher Adjusted EBITDA margins (consensus estimates of ~47% for 2021 and 2022 vs. our estimates for Ritchie Bros. of ~25% for 2021 and 2022) and is expected to generate stronger organic growth over the next 2 years (larger proportion of Ritchie Bros.’ growth in 2022 will likely be driven by the Euro Auctions acquisition). However, we believe these factors are partly offset by the highly competitive nature of the automotive resale market. In our view, these factors help explain Copart’s higher trading multiple relative to Ritchie Bros.

Looking ahead, we see the potential for upside to our valuation multiple if Ritchie Bros. is able to generate stronger-than-expected GTV growth, higher-than-expected margins (high proportion of fixed costs should help drive operating leverage during periods of steady top-line growth), and/or if the company is able to generate higher-than-expected synergies from the Euro Auctions acquisition (i.e., increased penetration for the combined platform in markets outside North America). If most/all of these growth drivers materialize, we see the potential for Ritchie Bros. to trade at multiple that is in line with our upside scenario (~37.0x P/E).

Historical valuation multiples Ritchie Bros. currently trades at 32.6x our 2022 EPS estimate (pro-forma Ritchie Bros. reflecting the pending acquisition of Euro Auctions) relative to its 3-year average NTM P/E of 29.1x and its long-term average of 26.0x (see Exhibit 1). This compares to an average current NTM P/E multiple for Auctioneers/Online Marketplace peers of 21.6x. Ritchie Bros.’ trading multiple trended higher over the last ~4 years following the acquisition of IronPlanet, which provided the company with a strong technology-led platform and meaningful runway for growth outside of the traditional live on-site auction channel. The acquisition added significant technological capabilities and accelerated the company’s journey towards becoming a marketplace (relative to its historical positioning as an auctioneer).

The company’s trading multiple trended even higher over the last 12-18 months as it benefitted from strong used equipment supply and a seamless transition to 100% online


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bidding for all of its auctions amidst the pandemic, which likely allowed the company to capture some share from smaller, less technology-enabled competitors.

Exhibit 1 - Ritchie Bros.’ current NTM P/E multiple of 32.4x (consensus) is above its 3-year historical average of 29.1x

Source: FactSet consensus estimates, RBC Capital Markets

On a NTM EV/EBITDA basis, Ritchie Bros. currently trades at 17.5x, which is above its 3-year average of 16.3x and long-term average of 14.0x. The company’s current trading multiple is modestly above the average for its Auctioneer/Online Marketplaces peers that trade at 17.1x 2022E EBITDA (reflecting a high of 23.6x for Copart and a low of 10.3x for KAR Auction Services).

Exhibit 2 - Ritchie Bros.’ current NTM EV/EBITDA multiple of 17.5x is above its 3-year historical average of 16.3x


Historical valuation multiples relative to Equipment Dealers While we do not believe that Finning and Toromont’s business models are directly comparable to Ritchie Bros., we provide a historical comparison of their trading multiples and some factors that may be driving the relative valuation gap. When compared to Finning and Toromont, Ritchie Bros. generates a higher Adjusted EBITDA margin (25.7% in 2020 for Ritchie Bros. vs.

10.0x

15.0x

20.0x

25.0x

30.0x

35.0x

40.0x

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

RBA Auctioneers/Online Marketplaces

RBA Long-Term Average: 26.0x

RBA 3-Year Average: 29.1x

6.0x

9.0x

12.0x

15.0x

18.0x

21.0x

24.0x

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

RBA Auctioneers/Online Marketplaces




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11.0% and 15.5% for Finning and Toromont, respectively), has a lower capex intensity (which helps drive higher FCF conversion), and has countercyclical characteristics. In our view, these factors have contributed to a higher multiple for Ritchie Bros. over the long run. Ritchie Bros. currently trades at 32.6x our 2022 EPS estimate for pro-forma Ritchie Bros., which compares to 15.1x and 24.3x for Finning and Toromont, respectively.

Exhibit 3 - Ritchie Bros. trades at 32.6x our 2022E Adjusted EPS, vs. 15.1x and 24.3x for Finning and Toromont, respectively


Upside scenario: $81 price target In our upside scenario, we assume Ritchie Bros. delivers better-than-expected top-line growth over our forecast horizon, driven by stronger-than-expected GTV growth and stronger penetration into the midstream/upstream markets. We also assume that ongoing industry supply tightness is alleviated earlier-than-anticipated, which would be supportive of GTV growth. Applying a 37.0x multiple to a higher blended 2022/2023 Adjusted EPS forecast drives our upside value of $81.

Downside scenario: $45 price target In our downside scenario, we assume that the “tight” equipment supply environment persists for longer-than-anticipated, which negatively impacts GTV growth and Adjusted EBITDA margins. We also assume slower traction with the adoption of the RBAS platform, limiting upside in online channels and slowing penetration in the midstream/upstream market segments. Applying a 25.0x multiple to a lower blended 2022/2023 Adjusted EPS forecast drives our downside value of $45.

0.0x

10.0x

20.0x

30.0x

40.0x

50.0x

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

RBA FTT TIH




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Comparables table: EV/EBITDA and P/E trading multiples

Exhibit 4 - Ritchie Bros. (on a pro-forma basis) trades at 32.6x our 2022 Adjusted EPS estimate, above the Auctioneers/Online Marketplaces peer average of 23.6x

Note: Enterprise value, 2022 Adjusted EBITDA estimate, 2022 Adjusted EPS estimate, and Net debt / Adjusted EBITDA for Ritchie Bros. are shown on a pro-forma basis (reflecting the pending acquisition of Euro Auctions). Source: RBC Capital Markets estimates for RBA, FTT, and TIH, FactSet consensus estimates for peers

17-Sep-21 Market Cap EV EV/EBITDA EBITDA Growth (%) P/E EPS Growth Net Debt/ Dividend

Company Ticker Price ($) ($MM) ($MM) 20A 21E 22E 20A - 21E 21E - 22E 20A 21E 22E 20A - 21E 21E - 22E EBITDA Yield

Auctioneers/Online Marketplaces

Ritchie Bros. Auctioneers Inc. RBA-US US$61.57 US$6,853 US$8,330 23.6x 22.8x 18.4x 3.5% 23.8% 36.6x 37.1x 32.6x (1.2%) 13.9% 3.4x 1.6%

CarMax, Inc. KMX-USA US$140.22 US$23,318 US$38,674 30.3x 20.5x 20.7x 47.9% (1.2%) 31.0x 19.5x 19.4x 58.8% 0.6% 8.5x 0.0%

Copart, Inc. CPRT-USA US$143.95 US$34,651 US$34,060 37.5x 27.1x 23.6x 38.6% 14.7% n.m. 38.9x 35.0x 44.0% 11.0% n.m. 0.0%

eBay Inc. EBAY-USA US$74.11 US$50,765 US$53,246 13.9x 13.5x 12.7x 3.1% 6.5% 21.7x 18.8x 16.5x 15.6% 13.9% 0.6x 1.0%

KAR Auction Services, Inc. KAR-USA US$16.12 US$1,986 US$5,411 14.4x 11.3x 10.3x 27.5% 9.7% 31.6x 17.1x 14.4x 85.3% 18.3% 6.4x 0.0%

Average 23.9x 19.0x 17.1x 24.1% 10.7% 30.3x 26.3x 23.6x 40.5% 11.5% 4.7x 0.5%

Equipment Dealers

Finning International Inc. FTT-CA C$31.54 C$5,132 C$6,381 10.0x 8.0x 7.5x 25.6% 6.7% 27.7x 16.4x 15.1x 69.3% 8.2% 1.4x 2.9%

Toromont Industries Ltd. TIH-CA C$105.21 C$8,785 C$8,786 16.3x 14.1x 12.9x 15.5% 9.2% 34.1x 27.3x 24.3x 24.9% 12.4% 0.0x 1.3%

Wajax Corporation WJX-CA C$23.22 C$512 C$873 7.2x 5.8x 5.6x 24.2% 3.1% 13.6x 9.5x 9.4x 42.4% 1.1% 2.6x 4.3%

Titan Machinery Inc. TITN-US C$25.96 C$578 C$848 13.1x 9.9x 8.6x 32.7% 14.8% 20.6x 12.1x 10.6x 70.6% 14.0% 3.3x 0.0%

Cervus Equipment Corporation CERV-CA C$19.40 C$307 C$482 7.4x 6.9x 6.6x 7.0% 4.4% 14.9x 10.9x 10.7x 37.4% 1.3% 2.3x 2.3%

Average 10.8x 8.9x 8.2x 21.0% 7.7% 22.2x 15.2x 14.0x 48.9% 7.4% 1.9x 2.2%

Global OEM

Caterpillar Inc. CAT-USA US$199.75 US$110,282 US$136,847 20.4x 14.7x 12.6x 38.8% 16.4% 30.4x 19.6x 16.0x 55.7% 22.0% 3.3x 2.2%

Deere & Company DE-USA US$349.09 US$109,405 US$149,465 31.0x 17.9x 15.4x 73.3% 16.5% 40.2x 18.4x 15.5x 118.3% 18.4% 5.4x 1.2%

Terex Corporation TEX-USA US$44.88 US$3,182 US$3,534 30.9x 9.2x 7.2x n.m. 27.7% n.m. 14.5x 10.1x n.m. 44.4% 1.2x 1.1%

Komatsu Ltd. 6301-TKS ¥2,868.00 ¥2,708,664 ¥3,536,977 11.8x 8.7x 7.6x 34.8% 14.6% 25.5x 15.5x 12.6x 64.1% 23.1% n.m. 2.2%

Hitachi,Ltd. 6501-TKS ¥6,599.00 ¥6,384,971 ¥8,664,079 9.0x 6.9x 6.8x 31.3% 1.5% 12.7x 10.8x 11.8x 17.5% (8.0%) n.m. 1.6%

Average 20.6x 11.5x 9.9x 44.5% 15.3% 27.2x 15.8x 13.2x 63.9% 20.0% 3.3x 1.6%

Equipment Rentals

United Rentals, Inc. URI-USA US$341.46 US$24,830 US$35,476 9.0x 8.2x 7.5x 9.7% 9.7% 19.6x 15.9x 13.7x 23.2% 16.2% 2.7x 0.0%

Ashtead Group plc AHT-GB US$59.88 US$26,868 US$30,972 13.9x 12.2x 10.9x 13.8% 11.5% 36.1x 29.6x 25.0x 21.8% 18.6% n.m. 0.7%

H&E Equipment Services, Inc. HEES-USA US$34.12 US$1,243 US$2,459 6.2x 6.1x 5.4x 2.4% 12.0% n.m. 21.9x 14.9x n.m. 47.2% 3.2x 3.2%

Herc Holdings, Inc. HRI-USA US$128.91 US$3,919 US$5,852 8.5x 6.8x 6.1x 24.6% 11.2% 42.8x 18.3x 15.0x 133.7% 22.3% 2.5x 0.0%

Average 9.4x 8.3x 7.5x 12.6% 11.1% 32.8x 21.4x 17.1x 59.5% 26.1% 2.8x 1.0%


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Risks to rating and price target Equipment demand and supply conditions can lead to variability Demand for high-value used equipment trends largely with the construction cycle (company’s largest end-market). However, to offset the impacts of this variability, the company has focused on diversifying into the Transportation, Agriculture and Resource end-markets. Supply, on the other hand, is driven by a number of factors including OEM production levels and the average age of used equipment, which can affect GTV growth and pricing.

Exposure to the business cycle (has countercyclical characteristics) Expenditures for capital goods/industrial equipment and services have historically been cyclical. Ritchie Bros.’ customers are impacted by changes in the economic environment, including business sentiment, which in turn impacts their capital spending plans (including investment in equipment). During periods of economic slowdown across its territories, Ritchie Bros. initially outperforms as consignors come to the auction channel to dispose of their assets, but over the medium-term, is likely to see reduced demand for its offerings.

Risks associated with guarantee and inventory contracts In 2020, ~20% of Ritchie Bros.’ GTV was underwritten or “at-risk,” driven by the company’s guarantee and inventory contracts. For guarantee contracts, the company guarantees a minimum level of sale proceeds to the consignor, while the final sale price of the equipment is variable (which creates an element of risk). In an inventory deal, Ritchie Bros. purchases the equipment outright from the consignor, and sells it through one of its channels (as opposed to providing a platform for a consignor to transact through and avoid taking on any risk, as it does for the other ~80% of its GTV). The inherent risk also reflects exposure to potential changes in the demand environment once Ritchie Bros. takes ownership of the assets, which would impact the price the equipment can be sold for (thus creating the potential for higher-than-expected gains/losses), or the company potentially overpaying for an asset (or guaranteeing too high of a price) during periods of limited supply.

Equipment age impacts pricing GTV is a function of both used equipment supply and pricing. A lower average age of used equipment for sale can drive greater value and positively impacts GTV and revenue. With OEM production moderating through the pandemic, and owners and dealers utilizing and/or holding onto their equipment for longer, the average age of equipment coming to market is expected to increase (which could negatively impact prices, on average). In the current cycle, however, the strong demand and limited supply are supporting prices.

Foreign exchange risks Ritchie Bros. reports results in USD but generates ~40%-45% of its GTV in Canada, Europe, and other regions, which transact in their respective local currencies. As a result, the reported GTV is impacted by changes in the value of these currencies relative to the USD (partly offset by the “natural hedging” resulting from incurring costs in local currencies. The company does not undertake hedging activity to mitigate its foreign exchange exposure.

Upside risks to our rating and price target Key upside risks to our rating and price target include: 1) an earlier-than-anticipated improvement in the current tight supply environment, which would drive better-than-expected GTV/revenue/Adjusted EBITDA margins; 2) stronger-than-expected "uptake" of the company's marketplace solutions (which should be supportive of results); and, 3) higher-than-expected revenue/cost synergies from the pending Euro Auctions transaction.


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Evergreen targets + Forecasts “Evergreen” targets Ritchie Bros. introduced its Evergreen financial model at its 2015 Investor Day, which outlined long-term targets for KPIs including GTV, Service revenue, Adjusted EPS and Operating FCF; however, the model was adjusted to account for the transformational acquisition of IronPlanet in 2017 and the Topic 606 accounting changes in 2018. Below, we highlight how Ritchie Bros. performed relative to its initial Evergreen targets, and we also outline the company’s “refreshed” Evergreen model introduced at its December 2020 Investor Day. We note that these targets are longer-term in nature (“over a 5-7 year period” according to management), and reflect the targeted average annual performance over this period.

Performance vs. post-IronPlanet targets Post-IronPlanet, management updated their initial (2015) Evergreen model to include: 1) GTV and Service revenue growth in the high-single digit to low-teens range; 2) Adjusted EPS growth in the low teens to high teens range; 3) Operating FCF being >100% of Net Income; and, 4) ROIC returning to “current” levels by 2020 (15.2% as of Q2 2016 TTM). Other targets included a dividend payout ratio of 55%-60%, net capex intensity of less than 8.5%, and a Net Debt / EBITDA ratio of less than 2.5x. While GTV performance, on average, did not meet management’s guidance range (see Exhibit 5 [LHS]), the Service revenue growth has been largely in line with the post-IronPlanet Evergreen targets. This was in part driven by strong growth in fee-based revenue streams, driven in part by the fee harmonization that was rolled out in 2018-2019. See Exhibit 5 [RHS].

Exhibit 5 - Longer-term performance was below to in line the post-IronPlanet Evergreen targets

GTV growth vs. post-IronPlanet Evergreen model target

Service revenue growth vs. post-IronPlanet Evergreen model target

Source: Company reports, RBC Capital Markets

Refreshed “Evergreen” targets At its 2020 investor day, the company shared refreshed Evergreen metrics, which include: 1) GTV growth in the high single digits to low teens range (in line with the prior range); 2) Service revenue growth in the low double digits to high teens range (prior range was “high single digits to low teens” range); 3) targeting EBIT growth “greater than Service revenue growth”; and, 4) Operating FCF >100% of Adjusted Net Income. The targets noted in this model reflect average annual performance over a 5-to-7 year time horizon (similar verbiage as the initial targets introduced in 2015, which implies that these metrics should not be viewed as annual targets), and uses 2019 as a “base” year. Exhibit 6 below outlines the refreshed Evergreen targets.

0.8%

2.1% 3.1%

11.1%

3.6%

5.3%

0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

2015 2016 2017 2018 2019 2020

Avg: 4.3%

Post-IronPlanet Evergreen model range

7.2%

9.8% 10.2%

20.0%

7.3% 8.4%

0.0%

6.0%

12.0%

18.0%

24.0%

2015 2016 2017 2018 2019 2020

Avg: 10.5%

Post-IronPlanet Evergreen model range


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As noted in Exhibit 5 above, the company’s average GTV growth from 2015-2020 was 4.3% (inclusive of the IronPlanet acquisition), which was below the targeted range. Looking ahead, the company has reiterated its goal to grow GTV in the “high-single-digits to low-teens” range, and we view this as the most difficult target to achieve within the Evergreen model.

Exhibit 6 - Refreshed Evergreen model now focuses on four key targets

Source: Company report, RBC Capital Markets

Income statement forecasts The major assumptions underlying our forecasts include: 1) the Euro Auctions transaction closing at year-end 2021, which leads to a full year of contribution in 2022; 2) organic Service GTV growth of 2.5% and 3.4% in 2022 and 2023, respectively; 3) organic Inventory GTV growth of 3% in each of 2022 and 2023; and, 4) Adjusted EBITDA margin moderation of 55 bps in 2022. These factors combined drive our 2022 and 2023 Adjusted EPS forecast of $1.89 and $2.13, respectively, which are below consensus of $2.02 and $2.36 (per FactSet). See Exhibit 7 for details.

Exhibit 7 - Income statement summary ($MM)

Source: Company reports, RBC Capital Markets estimates

Metric Refreshed Target

Gross Transaction Value ("GTV") growth High single digits to low teens

Service revenue growth Low double digits to high teens

EBIT growth > Service revenue growth

Operating FCF as a % of Adj. Net Income > 100% of Adjusted Net Income

INCOME STATEMENT

Year ended December ($MM) 2020 Q1/21 Q2/21 Q3/21E Q4/21E 2021E Q1/22E Q2/22E Q3/22E Q4/22E 2022E 2023E

Gross Transactional Value ("GTV") $5,411 $1,275 $1,528 $1,208 $1,544 $5,554 $1,489 $1,749 $1,421 $1,766 $6,424 $6,641

Growth % 5.3% 11.1% 2.3% -8.6% 6.6% 2.6% 16.8% 14.5% 17.6% 14.3% 15.7% 3.4%

A&M revenue $1,246 $296 $355 $286 $368 $1,306 $390 $452 $380 $465 $1,687 $1,748

Growth% 4.4% 21.0% 0.1% -4.0% 5.7% 4.8% 31.7% 27.2% 33.0% 26.3% 29.2% 3.6%

Other Services revenue $132 $35 $41 $27 $35 $139 $32 $38 $31 $38 $140 $145

Growth % 5.1% 24.3% 19.7% -19.1% -0.7% 5.3% -8.4% -7.1% 13.0% 10.8% 1.0% 3.4%

Consolidated Revenue $1,377 $332 $396 $313 $403 $1,444 $423 $490 $411 $503 $1,827 $1,892

Growth % 4.4% 21.3% 1.9% -5.5% 5.1% 4.8% 27.5% 23.6% 31.3% 25.0% 26.5% 3.6%

Gross Profit $762 $185 $226 $181 $225 $817 $213 $255 $214 $259 $942 $986

Growth % 13.2% 21.3% 9.6% -7.9% 9.0% 7.3% 15.4% 12.8% 18.6% 15.0% 15.3% 4.7%

Margin % 55.3% 55.7% 57.1% 57.7% 56.0% 56.6% 50.4% 52.1% 52.1% 51.5% 51.5% 52.1%

Change bp 428 bp -1 bp 402 bp -147 bp 203 bp 129 bp -528 bp -501 bp -559 bp -447 bp -505 bp 56 bp

Adjusted EBITDA $354 $66 $112 $75 $113 $366 $85 $135 $96 $138 $453 $489

Growth % 20.0% 18.2% 4.8% -18.5% 14.3% 3.5% 27.6% 19.9% 27.7% 22.9% 23.8% 7.8%

Margin % 25.7% 20.0% 28.3% 23.9% 27.9% 25.3% 20.0% 27.5% 23.2% 27.5% 24.8% 25.8%

Change bp 332 bp -53 bp 80 bp -382 bp 225 bp -33 bp 2 bp -85 bp -65 bp -47 bp -55 bp 103 bp

Adjusted Net Income $185 $28 $61 $33 $62 $184 $31 $69 $39 $72 $211 $238

Growth % 27.0% 23.6% 2.5% -31.1% 14.1% -0.3% 9.3% 13.4% 17.1% 15.7% 14.2% 12.8%

Adjusted Diluted EPS $1.68 $0.25 $0.55 $0.30 $0.56 $1.66 $0.28 $0.62 $0.35 $0.64 $1.89 $2.13

Diluted WASO (MM's) 110.3 111.3 111.3 111.3 111.3 111.3 111.3 111.3 111.3 111.3 111.3 111.3


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Balance sheet forecasts We estimate leverage decreases to ~2.5x by year-end 2023 Following the Q2 2017 acquisition of IronPlanet for $776.5 million, Ritchie Bros.’ leverage increased to ~3.0x, and by year-end 2018, the company had reduced its leverage to 1.9x. See Exhibit 8. As of Q2 2021, Ritchie Bros.’ leverage stood at 1.0x TTM Adjusted EBITDA; however, following the recently announced acquisition of Euro Auctions, we estimate that leverage will increase to 3.8x (3.4x on a pro-forma basis). The company expects its leverage ratio to be <2.5x by year-end 2025, which we believe is a conservative target and likely reflects the assumption of further small- to medium-sized M&A over the next few years. Absent any further M&A, we estimate that leverage will decrease to ~2.5x by year-end 2023.

Exhibit 8 - We estimate reported leverage of 3.8x following the Euro Auctions acquisition (3.4x on a pro-forma basis)


Exhibit 9 - Balance sheet summary ($MM)


0.0x

2.9x3.2x

2.9x

2.5x 2.5x2.2x

1.9x1.7x 1.8x

1.4x

1.0x1.3x

0.9x0.5x

1.1x 1.0x 1.0x1.2x 1.1x

3.8x 3.8x3.4x

3.1x

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2017 2018 2019 2020 2021E 2022E

Sequential decrease in leverage as management prioritized debt

repayment post-acquisition

Rouse acquisition

IronPlanetacquisition

We forecast the Euro Auctions acquisition will

close at the end of Q4 2021

BALANCE SHEET


Current assets

Cash and cash equivalents $279 $294 $302 $258 $253 $253 $275 $198 $305 $362 $362 $521

Trade and other receivables $135 $294 $272 $273 $237 $237 $273 $402 $331 $300 $300 $311

Inventory $86 $72 $86 $92 $93 $93 $75 $109 $129 $121 $121 $124

Total current assets $557 $844 $834 $798 $757 $757 $797 $882 $939 $957 $957 $1,130

Non-current assets

Property, plant and equipment $492 $484 $483 $464 $446 $446 $1,501 $1,481 $1,461 $1,441 $1,441 $1,361

Total non-current assets $1,795 $1,783 $1,773 $1,763 $1,753 $1,753 $2,816 $2,804 $2,792 $2,780 $2,780 $2,732

Total assets $2,352 $2,627 $2,607 $2,561 $2,511 $2,511 $3,613 $3,687 $3,731 $3,738 $3,738 $3,863

Current liabilities

Auction proceeds payable $214 $518 $445 $374 $304 $304 $332 $361 $391 $352 $352 $364

Trade and other payables $244 $228 $222 $241 $226 $226 $223 $226 $232 $236 $236 $240

Total current liabilities $515 $785 $717 $665 $580 $580 $605 $637 $673 $638 $638 $654

Non-current liabilities

Long-term debt $626 $626 $626 $626 $626 $626 $1,701 $1,701 $1,701 $1,701 $1,701 $1,701

Total non-current liabilities $825 $831 $829 $829 $829 $829 $1,904 $1,904 $1,904 $1,904 $1,904 $1,904

Total liabilities $1,339 $1,616 $1,546 $1,494 $1,409 $1,409 $2,509 $2,541 $2,577 $2,542 $2,542 $2,557

Shareholders' equity

Retained earnings $792 $796 $832 $838 $872 $872 $875 $916 $925 $966 $966 $1,076

Total shareholders’ equity $1,007 $1,006 $1,056 $1,062 $1,096 $1,096 $1,100 $1,141 $1,150 $1,191 $1,191 $1,300

Total liabilities and equity $2,352 $2,627 $2,607 $2,561 $2,511 $2,511 $3,613 $3,687 $3,731 $3,738 $3,738 $3,863


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Free Cash Flow outlook Ritchie Bros. has a capital light business model, which we believe has contributed to its strong FCF profile over the recent years. We estimate that between 2011-2020, the company generated ~$1.5 billion of Operating Free Cash Flow (FCF = CFO – net capex), invested ~$362 million in net capital expenditures and returned ~$845 million to investors in the form of dividends and share buybacks. In this section, we discuss the FCF drivers, and the outlook for FCF and return of capital.

A review of Free Cash Flow drivers High proportion of fixed costs drives operating leverage Ritchie Bros.’ cost structure is largely “fixed” in nature, with two line items (Employee Compensation and Buildings, Facilities and Technology) accounting for the majority of its expenses (~71% and ~66% in 2020 and 2019, respectively). We exclude the cost of inventory sold in our calculation. The high proportion of fixed costs leads to a strong degree of operating leverage (and the reverse during challenging periods). Historically, with GTV growing at a CAGR of 5.1% from 2010-2020, operating leverage has benefitted the company’s margin profile.

Exhibit 10 - ~70% of operating expenses (excl. cost of inventory sold) are fixed

2019 operating expenses breakdown

2020 operating expenses breakdown


Strong track record of FCF generation The company has generated a significant amount of FCF over the last decade and its ratio of Operating FCF as a % of Net Income has also been well above 100% for a majority of that period. We estimate that Ritchie Bros. has generated cumulative Operating FCF of ~$1.5 billion over the last 10 years. Over this period, the company’s Operating FCF to Adjusted Net Income conversion has averaged 125%, above its current target of >100%. We forecast Operating FCF to Adjusted Net Income conversion of 107% for both 2021 and 2022.

While FCF conversion has been strong, the absolute annual FCF amount has been volatile over the last 5 years, ranging from a low of $112 million in 2018 to a high of $298 million in 2019. This variability has been driven by changing fundamentals in the used equipment market (tightening of used equipment supply, softness in the Oil & Gas end-market), and changes in Working Capital, among other factors. For instance, Operating FCF of $298 million in 2019 (204% of Net Income) was driven primarily by a Net Working capital “benefit” of $77 million vs. a Working Capital “drag” of $66 million in 2018 (which drove ~$143 million of the YoY variance).

Employee compensation,

54%

Buildings, facilities and

technology, 12%

Ancillary and logistical

service, 11%

Travel, advertising and promotion, 13%

Other variable costs, 10%

Employee compensation,

58%Buildings, facilities and technology,

13%

Ancillary and logistical

service, 11%

Travel, advertising and promotion, 8%

Other variable costs, 10%


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Exhibit 11 - Operating FCF to Adjusted Net Income conversion has averaged 125% over the last 10 years

EBITDA-to-FCF conversion

Net Income-to-FCF conversion


Framing the Free Cash Flow outlook Days of “heavy” capex are largely behind the company Capex was elevated in the 2000s and early 2010s while the company was adding physical sites and expanding its footprint. Following that initial investment period, the focus shifted to site optimization and growth in alternative go-to-market channels, with the 2017 acquisition of IronPlanet only accelerating that transition. As a result, Net Capex as a % of Service Revenue has declined from ~15% in 2010 to ~3% in 2020. Looking ahead, we expect investments in intangibles (e.g., software), satellite sites, etc. to account for a larger proportion of capital spending (as compared to a larger proportion of its investments being directed towards PP&E historically). Pro-forma the closing of the Euro Auctions transaction, we estimate run-rate Net Capex as a % of Service Revenue to be in the ~3.0%-4.0% range going forward.

Exhibit 12 - Expecting Net Capex as a % of Service Revenue to be ~3.0%-4.0% going forward


FCF forecasts for 2021 and 2022 Looking ahead, we estimate FCF of $196 million in 2021 and $225 million in 2022. Our 2021 forecast reflects modestly higher Net Income YoY, a higher Working Capital drag YoY, and capex of $45 million. Our 2022 forecast reflects ~14% YoY Net Income growth, capex of $48 million, and a lower YoY Working Capital drag. We note that these forecasts do not reflect the cash outflow associated with the Euro Auctions acquisition. We also expect that the company

0%

40%

80%

120%

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

Long-Term Average: 75%

0%

40%

80%

120%

160%

200%

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

Long-Term Target: >100%


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3%

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9%

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15%

18%

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10

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14

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20

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21E

20

22E



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will continue to direct FCF towards the return of capital to shareholders in the form of dividends and occasional share repurchases, while also looking for further M&A opportunities. Following the recently announced acquisition of Euro Auctions, we believe the company will likely focus on smaller- and medium-sized targets over the near- to medium-term.

Exhibit 13 - We forecast 2021 and 2022 FCF of $196 million and $225 million, respectively ($MM)

Source: Company reports; RBC Capital Markets estimates

Capital allocation As noted in Exhibit 14 below, Ritchie Bros. has returned ~$845 million to shareholders over the last 10 years. A majority of this total (~80%) was in the form of dividends, while the remaining ~20% was through share buybacks.

Exhibit 14 - Ritchie Bros. has returned ~$845 million of capital to shareholders since 2011

Source: Company reports, RBC Capital markets

Continuing to grow the dividend directionally in line with earnings Between 2011-2020, Ritchie Bros.’ dividend has increased at a CAGR of ~7.5%. See Exhibit 15. At its 2020 Investor Day, management reaffirmed the company’s commitment to growing its dividend in tandem with growing earnings (while not explicitly reinstating its 55-60% payout target). Management also noted that they would consider share repurchases and further debt repayments, “but only when near-term prospects to fund growth priorities have been exhausted or the financial case is compelling to do so”.

$74.2 $78.1

$109.6$119.4

$182.3

$147.8

$113.2 $111.9

$297.7

$231.1

$196.4

$225.2

$0

$50

$100

$150

$200

$250

$300

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E

$46.2 $50.0 $53.9 $57.9 $64.3 $70.5 $72.8 $75.7 $82.5 $91.7

$47.5 $36.7

$42.0

$53.2

$46.2 $50.0 $53.9 $57.9

$111.8 $107.2

$72.8 $75.7

$124.5

$144.9

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Dividends ($MM) Share repurchases ($MM)


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Given the strong FCF profile and modest capex requirements (even after taking the Euro Auctions acquisition into account), we forecast a ~12% increase in the quarterly dividend in 2022 to ~$0.28/share. Recall that in conjunction with Q2 2021 reporting, Ritchie Bros. announced a 14% increase in its quarterly dividend to $0.25/share from $0.22/share.

Exhibit 15 - We forecast Ritchie Bros. will grow its dividend by ~12% in 2022


Exhibit 16 - Cash flow statement summary ($MM)


$0.30 $0.34 $0.38

$0.41 $0.44

$0.47 $0.51 $0.54

$0.60 $0.66 $0.68 $0.70

$0.76

$0.84

$0.94

$1.05

44% 42% 44%

67% 64% 61% 60% 58% 53% 57%

84%

65% 57%

50% 57% 56%

0%

50%

100%

150%

200%

$0.00

$0.25

$0.50

$0.75

$1.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E

Pay

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t R

atio

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iden

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har

e (a

nn

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ized

)

CASH FLOW STATEMENT


Operating activities

Net income $170 $28 $61 $33 $62 $184 $31 $69 $39 $72 $211 $238

Adjustments:

Deprec. and amortization $75 $21 $22 $22 $22 $86 $24 $24 $24 $24 $96 $96

Net changes op. assets/liab.:

Trade and other receivables $22 ($160) $26 ($1) $36 ($100) ($36) ($128) $70 $31 ($63) ($11)

Inventory ($18) $12 ($15) ($6) ($1) ($9) $18 ($34) ($20) $8 ($28) ($3)

Auctions proceeds payable ($74) $304 ($74) ($71) ($70) $90 $28 $29 $30 ($39) $48 $12

Trade and other payables $38 ($17) ($4) $19 ($15) ($16) ($3) $3 $6 $4 $10 $3

Net changes op. assets/liab.: ($29) $118 ($65) ($59) ($49) ($56) $6 ($130) $86 $4 ($33) $1

CFO $258 $181 $31 ($4) $34 $241 $61 ($37) $149 $100 $273 $335

Investing activities

Acquisitions, net of cash ($250) $0 $1 $0 $0 $1 ($1,075) $0 $0 $0 ($1,075) $0

PP&E additions ($14) ($2) ($3) ($3) ($3) ($11) ($4) ($4) ($4) ($4) ($16) ($16)

Intangible asset additions ($29) ($9) ($9) ($9) ($9) ($34) ($8) ($8) ($8) ($8) ($32) ($32)

CFI ($277) ($10) ($13) ($12) ($12) ($46) ($1,087) ($12) ($12) ($12) ($1,123) ($48)

Financing activities

Dividends paid to stockholders ($92) ($24) ($24) ($28) ($28) ($104) ($28) ($28) ($30) ($30) ($116) ($128)

Proceeds from long-term debt $0 $0 $0 $0 $0 $0 $1,075 $0 $0 $0 $1,075 $0

CFF ($111) ($33) ($18) ($28) ($28) ($106) $1,047 ($28) ($30) ($30) $959 ($128)

Change in cash ($113) $135 $1 ($44) ($5) $87 $22 ($77) $107 $57 $109 $159

Cash - end of period $307 $442 $443 $399 $394 $394 $416 $339 $446 $503 $503 $662


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A little bit of history Given Ritchie Bros.’ long history as a public company and its evolution from an auctioneer to a global leader in asset management and commercial asset disposition, we thought it would be useful to provide investors with a brief snapshot of the company’s long-term history and operating performance. We begin with a summary of the company’s two key revenue drivers, Gross Transaction Value (“GTV”) and the Auction Rate (i.e., GTV-to-revenue conversion rate, defined as Service Revenue/GTV), and then we discuss the company’s historical revenue and Adjusted EBITDA growth profile. We also summarize the evolution of the company’s geographic exposure and capital allocation priorities. Finally, we provide an overview of the IronPlanet acquisition in 2017. We estimate that between 2005 and 2020, Ritchie Bros. generated a revenue CAGR of ~13%, driven by a GTV CAGR of ~7%, an increase in the Auction Rate from 10.1% to 16.1%, and the adoption of ASU 2014-09 – Revenue from Contracts with Customers (“Topic 606”, discussed in the following section). Over this period, we also estimate that Ritchie Bros. has generated an Adjusted EBITDA CAGR of ~10%.

Ritchie Bros. was founded in 1958 (Kelowna, British Columbia), and its operating history began in 1963 with its first major industrial auction in Radium, British Columbia. During the 1960s-1980s, Ritchie Bros. expanded its operations eastwards in Canada and into the U.S. (first U.S. auction was held in 1970). Soon after, the company expanded into Europe (1987), Australia, Asia (1990), Mexico (1995), and the Middle East (1997). In March 1998, the company's stock was listed on the NYSE and the TSX under the ticker symbol RBA. In the 2000s, Ritchie Bros. primarily allocated capital towards growing its global base of auction sites from 21 in 2000 to 43 in 2010. However, following the Global Financial Crisis (“GFC”), the company increasingly focused on transitioning from an “auctioneer” to a “multi-channel asset disposition company.” This was accomplished through a series of acquisitions, including AssetNation (2012), Mascus (2016), IronPlanet (2017), Rouse (2020), and Euro Auctions (expected to close in late 2021 to early 2022), as well as the launch of new channels/services, including Marketplace-E (2018), RB Financial Services (2011), and RBAS (2018).

Exhibit 17 - Some notable developments over the company’s history


Date Development Transaction value ($MM)

1958 Ritchie Bros. is founded n.a.

1998 Initial Public Offering of RBA common shares on the NYSE and TSX n.a.

May 2012 Acquisition of AssetNation, U.S.-based online surplus/salvage asset marketplace $64

Apr. 2013 EquipmentOne launches, serving as the initial platform for building the online channel n.a.

Nov. 2015 Acquisition of 75% stake in Xcira, a simulcast technology provider $12

Feb. 2016 Acquisition of Mascus, a leading online listing service $27

Jul. 2016 Acquisition of the remaining 49% stake of Ritchie Bros. Financial Services (RBFS) $41

Nov. 2016 Acquisition of Kramer Auctions, a leading Canadian agricultural auction company $11

May 2017 Transformational acquisition of IronPlanet, a multi-channel, digital-driven disposition firm $777

Jan. 2018 Launch of Marketplace-E n.a.

Jan. 2018 Adoption of Topic 606, a significant accounting change to revenue recognition n.a.

2019 Completion of fee structure harmonization between RBA and IP platforms n.a.

May 2020 Temporary transition to 100% online live auction bidding amidst the COVID-19 pandemic n.a.

Dec. 2020 Acquisition of Rouse Services, a data-as-a-service firm $275

Aug. 2021 Announced the acquisition of Euro Auctions, a global unreserved auction operator $1,075


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




Revenue driven by growth in GTV and Auction Rate + selective M&A Between 2005 and 2020, Ritchie Bros. generated a revenue CAGR of ~13%, driven by a combination of organic growth initiatives (i.e., growing GTV by entering new regions, launching new services/channels, growing the Auction Rate, etc.), complemented by selective acquisitions. Three of the more noteworthy acquisitions in the company’s history include: 1) AssetNation Inc. in 2012; 2) IronPlanet in 2017; and, 3) Rouse Services LLC (“Rouse”) in 2020. More recently, Ritchie Bros. announced the acquisition of Euro Auctions for ~$1.08 billion, its largest acquisition to-date (expected to close in late-2021/early-2022). We discuss the strategic implications of this transaction in the section entitled Acquisition of Euro Auctions.

From 2005-2009, Ritchie Bros. generated a revenue CAGR of ~16%, driven by GTV growth in most end-markets, as well as an increasing Auction Rate. Shortly after the GFC, Ritchie Bros. benefitted from consignors seeking liquidity and selling idle machines. However, the company faced headwinds in 2010, particularly in the U.S. market. Low interest rates, a low degree of optimism from end-users, and low OEM production resulted in a slower-than-expected recovery in the used equipment market, driving many owners to park their idle equipment rather than sell it. In 2011, the lack of used equipment supply led to higher pricing across many categories, but also drove heightened competition for underwritten or “at-risk” contracts, which increased to ~36% of GTV (from ~24% in 2010). We note that the proportion of “at-risk” contracts has ranged from ~17%-36% of GTV, and this metric typically trends higher during periods of tight equipment supply (as the company competes more aggressively for used equipment supply).

In 2012, the company took a major step in its journey to grow beyond its core unreserved auction business with the acquisition of AssetNation, an online marketplace and solutions provider for surplus/salvage assets. The company used that platform to launch EquipmentOne, their reserved online marketplace, effectively doubling their potential addressable market (it would operate in the private sales/brokerages channel of the used equipment market). As noted in Exhibit 18, the significant revenue growth in 2015 reflects Ritchie Bros.’ adoption of Topic 606 (which was adopted in January 1, 2018 using the full retrospective method). The 2015-2017 revenue figures represent pro-forma revenue impact. The primary impact was the change in presentation of revenue earned from inventory sales and ancillary and logistical services to a “gross” basis from “net” previously.

Exhibit 18 - Ritchie Bros. has generated a 15-year revenue CAGR of ~13%, or ~10% excluding the Topic 606 adoption ($MM)


$212 $258 $312 $355 $377 $357 $396 $438 $467 $481

$1,080 $1,127

$971

$1,170 $1,319 $1,377

$1,444

$1,827

$0

$500

$1,000

$1,500

$2,000

$2,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E

Pro-formaTopic 606 adoption

2005-2014: 10% CAGR

2005-2020: 13% CAGR (10% CAGR excl. Topic 606 adoption)

AcquiredIronPlanet

for $777MM

Full-year of IronPlanet

contribution

Reflects expected contribution of Euro Auctions


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From 2015-2018, Ritchie Bros.’ revenue growth was primarily driven by the acquisition of IronPlanet (2017), a series of smaller acquisitions (Mascus, Kramer Auctions, and Petrowsky Auctioneers in 2016) and strong growth in “Other Services”, offset by equipment pricing volatility, a shortage in equipment supply, and softness in Alberta’s oil patch. In March 2020, Ritchie Bros. transitioned its live, on-site industrial auctions to 100% online bidding and realized strong GTV growth across most regions as consignors looked for liquidity. The growth from the early part of the year moderated through late-2020 due to uncertainty caused by renewed COVID related shutdowns and the U.S. elections (which led some asset owners to take a “wait and see” approach).

Gross Transaction Value (“GTV”): 2005-2020 CAGR of ~7% GTV represents total proceeds from all items sold at Ritchie Bros.’ auctions and online marketplaces, and is the key driver of commissions and fees. GTV is driven by used equipment pricing, category mix, equipment age, and number of lots sold. From 2005-2008, GTV grew from $2.1 billion to $3.6 billion, supported by strong growth in most operating regions. In 2009, GTV declines in the U.S. and Europe more than offset GTV growth in Canada and the Middle East. Broad-based uncertainty around equipment values and construction spending, as well as a drop in the new equipment production impacted used equipment supply and GTV growth in the years following the GFC. From 2010-2015, GTV grew at a ~5% CAGR, driven by strong GTV growth in Canada’s Oil & Gas end-market and a modest rebound in the U.S., as well as increasing contribution from EquipmentOne (now operating as Marketplace-E).

GTV grew from $4.3 billion in 2016 to $5.0 billion in 2018, reflecting IronPlanet’s partial-year (7 months) contribution in 2017 and full-year contribution in 2018. We note, however, that at the time of the acquisition, Ritchie Bros.’ and IronPlanet’s standalone TTM GTV as of June 30, 2016 was ~$4.3 billion and ~$1.0 billion, respectively, implying that organic GTV declined during this time period (GTV only surpassed the combined total in 2020). In 2017, unprecedented demand for infrastructure projects led to high equipment utilization and an overall shortage of used equipment. In 2019, Ritchie Bros. experienced ~4% YoY GTV growth, driven by a moderate improvement in U.S. used equipment supply. In early- to mid-2020, GTV benefited from the company’s counter-cyclical positioning as consignors prioritized liquidity; however, the momentum faded modestly in Q4 as end-users adopted a wait-and-see approach (as it related to their fleets). Ritchie Bros.’ GTV growth from online marketplaces (includes Marketplace-E, IronPlanet weekly featured auctions, etc.) has consistently outpaced its live, on-site GTV, and accounted for ~24% of GTV in 2020 (vs. ~3% in 2015). Looking ahead, we expect this trend to continue as the company leverages its omni-channel capabilities and increasingly penetrates the brokerage channel.

Exhibit 19 - Ritchie Bros. has generated a 15-year (2005-2020) GTV CAGR of ~7% ($MM)


$2,093 $2,721

$3,186 $3,567 $3,492 $3,278

$3,714 $3,908 $3,818 $4,213 $4,248 $4,335 $4,468

$4,964 $5,141 $5,411 $5,554

$6,424

$0

$2,000

$4,000

$6,000

$8,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E


2005-2020: 7% CAGR

AcquiredIronPlanet

for $777MM


contribution



617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




Auction Rate: From 10.1% in 2005 to 16.1% in 2020 The Auction Rate represents the “conversion rate” of GTV into revenue, which is defined as Service Revenue (commissions + fees revenue) as a % of consolidated GTV. In this calculation, Inventory Sales revenue is excluded because: 1) it can be volatile year-to-year depending on consignor preference; and, 2) it was only recognized as revenue after the adoption of Topic 606 in 2018. From 2005-2020, Ritchie Bros.’ Auction Rate has increased ~600bps (from 10.1% of GTV in 2005 to 16.1% of GTV in 2020) as the company expanded its multi-channel offerings.

In 2011, the company introduced a range of additional value-added services, including establishing Ritchie Bros. Financial Services (“RBFS”), enhanced shipping services, a customer insurance program, and other ancillary services. Accordingly, the company implemented a new fee structure on July 1, 2011, whereby they expanded the scope of administrative fees charged to buyers. Q3 2011 was also the first full quarter of the company operating RBFS, an entity that arranges financing options for customers through 3rd party lenders. Growth in the Auction Rate was also supported by the 2012 acquisition of AssetNation and the subsequent launch of EquipmentOne in 2013.

Ritchie Bros. further expanded its multi-channel service offering with the 2015 launch of Ritchie Bros. Private Treaty (privately negotiated sales), and enhanced customer experience for its integrated on-site and online auctions by acquiring a 75% stake in Xcira – a leader in simulcast auction technology, driving additional fee-based revenues. In 2016, the company expanded its online listing service capabilities by acquiring Mascus, a global online listing service based in Amsterdam. Unlike other Ritchie Bros. solutions, Mascus does not generate GTV, rather it earns revenue primarily through listing fees. From 2017-2020, the Auction Rate increased ~210 bps primarily as a result of the IronPlanet acquisition, which significantly increased Ritchie Bros.’ presence in the online channel. The company launched Marketplace-E (combining EquipmentOne and IronPlanet’s Daily Marketplace) in 2018 and rolled out harmonized transaction fees through 2018/2019 across its core product and channel offerings, which increased commissions by “up to 25 to 50” bps.

Exhibit 20 - Auction Rate has increased from 10.1% in 2005 to 16.1% in 2020, primarily by growth in fees


Revenue by geography Ritchie Bros.’ exposure to its four major regions has remained largely unchanged despite a number of acquisitions that the company has undertaken (see Exhibit 21). Instead, the periodic strength/weakness in regional used equipment markets has been the primary driver of year-to-year changes in the company’s geographic mix. For instance, Ritchie Bros.’ Canadian exposure increased from ~21% in 2008 to ~32% in 2015 driven by the contribution from

10.0% 9.2% 9.0% 9.8% 9.0% 9.5% 8.5% 8.8% 8.5% 8.4% 8.4%

0.9% 1.4% 2.2% 2.4%

2.4% 2.6% 4.4%

5.1% 6.6% 7.2% 7.7% 10.1%

9.5% 9.8% 9.9% 10.8% 10.9% 10.7%

11.2% 12.2%

11.4% 12.1%

12.8% 14.0%

15.1% 15.6% 16.1%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Commission rate as % of GTV Fee rate as % of GTV


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Resource end-markets in Western Canada. Similarly, while IronPlanet was primarily exposed to the U.S. (~93% of 2015 revenue was generated in the Americas), Ritchie Bros.’ consolidated exposure to the U.S. declined following the acquisition, reflecting widespread used equipment shortage in the region driven by unprecedented infrastructure demand. As of 2020, the U.S. accounted for ~55% of revenue, followed by Canada (~22%), Europe (~12%) and Other (~11%).

Exhibit 21 - Ritchie Bros.’ revenue mix by geography (2005 to 2020)


Adjusted EBITDA: 2005-2020 CAGR of ~10% Ritchie Bros. generated an Adjusted EBITDA CAGR of ~10% between 2005 and 2020, which reflected organic and M&A-driven revenue growth, as well as a consistent improvement in Adjusted EBITDA margins since the GFC. We note that the margin declined in 2015 to 19.7% from 38.9% in 2014 was driven by the pro-forma impact of the adoption of Topic 606 (which drove higher reported revenue and no change to Adjusted EBITDA). Excluding the accounting change, the primary drivers of margin improvement over this period included: 1) the shift towards multi-channel service offerings and related fee harmonization; 2) the launch of value-add services (RBFS, RBAS, etc.); and, 3) operating leverage that drives Service revenue growth above cost of services.

Exhibit 22 - Adjusted EBITDA ($MM) and EBITDA margin (2005 to 2022E)

Note: The company reported unadjusted EBITDA from 2005-2015 (Adjusted EBITDA figures over this period estimated by RBC Capital Markets) and Adjusted EBITDA from 2016 onwards. Source: Company reports, RBC Capital Markets estimates

57% 60% 56% 54% 54% 52% 49% 48% 48% 47% 50% 49% 47% 47% 56% 55%

23% 21% 23% 21% 24% 23% 25% 28% 29% 32%

32% 26%

25% 24% 19% 22%

13% 11% 12% 15% 15% 14% 13% 14% 14% 12% 9% 10% 13% 15% 13% 12%

7% 8% 9% 9% 7% 11% 12% 10% 9% 9% 8% 15% 15% 13% 12% 11%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

U.S. Canada Europe Other

$88 $100 $121

$141 $159

$129 $146

$161 $175 $187 $212 $210 $192

$257

$295

$354 $366

$453

41.7%38.7% 38.7% 39.6%

42.2%

36.2% 36.9% 36.8% 37.4% 38.9%

19.7% 18.6% 19.7%22.0% 22.3%

25.7% 25.3% 24.8%

0%

10%

20%

30%

40%

50%

60%

$0

$100

$200

$300

$400

$500

$600

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E

2005-2020: 10% CAGR


AcquiredIronPlanet

for $777MM


contribution



617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




We note that Ritchie Bros.’ live on-site auctions and online marketplaces are both scalable – in other words, the marginal cost of adding incremental “lots” (pieces of equipment) is low, as the majority of the required capital has already been invested (i.e., auction site capex or investment in the technology infrastructure for the online platforms). Another driver of margins has been the company’s focus on increasing efficiencies after the IronPlanet acquisition by moving all core auctions and marketplaces to a single operations platform, called the Multichannel Administration and Reporting System (“MARS”), which was rolled out in 2019. The investment in a unified platform helped the company simplify their technology footprint, reduce complexity, and enable more sophisticated personalization, data-driven insights and real-time data-driven marketing.

Sales Force Productivity: Solid progress since the IronPlanet acquisition Ritchie Bros.’ Sales Force Productivity (measured as GTV per revenue producer) increased from $11.7 million in 2013 to $13.4 million as of 2020. The decline in 2017 was primarily due to the unfavorable mix shift following the IronPlanet acquisition (IronPlanet had a Sales Force Productivity of $7.6 million per revenue producer for the TTM period ended May 31, 2017) and negative impact of the constrained used equipment supply, primarily in the U.S.

Exhibit 23 - Sales Force Productivity (measured in $MM; GTV per revenue producer)


ROIC has varied over the last 10 years The company calculates ROIC as follows: ROIC = Adjusted net income attributable to stockholders / (average long-term debt + average stockholders' equity). Over the past 15 years, Ritchie Bros. has generated an average annual ROIC of 12.1% (see Exhibit 24). Following the IronPlanet acquisition, Ritchie Bros. had set a ROIC target of “15% by 2021”. The average ROIC from 2018-2020 (excluding 2017 as it reflected a partial year of contribution) has been ~9.5%. The annual metric did, however, improve sequentially every year from a low of 6.2% in 2017 to 11.6% for 2020. At its December 2020 Investor Day, management noted that they were on their way to achieve the 15% ROIC target for 2021, but instead chose to preserve cash instead of repaying debt due to COVID-19 uncertainty.

Looking at the past 15 years, 2010 and 2017 reflected periods of significant declines in ROIC, with the company’s performance in both periods being impacted by low volumes of used equipment supply coming to market (which negatively impacted GTV). In 2017, the company’s higher leverage from the IronPlanet acquisition and the partial year of contribution to earnings also impacted its ROIC. Between 2017-2020, ROIC increased 540 bps as used equipment supply improved and the company benefitted from strong demand across its operating regions. In 2020, Ritchie Bros. transitioned to 100% online bidding amidst the pandemic and capitalized on demand shifting from new equipment to used equipment. The company also benefitted

$11.7 $11.6 $12.2 $12.5

$11.0

$11.6$12.3

$13.4

$0

$5

$10

$15

$20

2013 2014 2015 2016 2017 2018 2019 2020

Long-Term Sales Force Productivity Average: $12.0MM


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




from cost containment measures amidst the restrictions on in-person operations, which contributed to a 2020 ROIC of 11.6% (+220 bps YoY).

Exhibit 24 - 2005-2020 ROIC averaged ~12% over the long-term

Note: RBC estimates for ROIC from 2005-2012, as reported ROIC from 2013 onwards. Source: Company reports, RBC Capital Markets

Capital allocation: Notable change in capital allocation post 2012 Ritchie Bros.’ capital allocation strategy shifted notably from the 2005-2012 period to the 2013-2020 period. In the 2005-2012 period, the company primarily focused on growing the number of auction sites (Net PP&E accounted for ~63% of capital spend), but from 2013-2020, Net PP&E has only accounted for ~4% of capital spend as the company shifted focus towards online sales and larger auctions. Furthermore, from 2005-2012, Ritchie Bros. spent ~6% of its capital on acquisitions, and this increased to ~51% of capital spend from 2013-2020. The acquisitions were primarily focused on growing its multi-channel service offering, and more recently, on acquisitions that can help monetize its vast data repository.

Exhibit 25 - Historical composition of Ritchie Bros. capital allocation priorities

Capital allocation mix from 2005-2012

Capital allocation mix from 2013-2020


The transformational acquisition of IronPlanet Ritchie Bros. announced the acquisition of IronPlanet on August 29, 2016, with the transaction closing on May 31, 2017. The company acquired IronPlanet for $776.5 million, representing a ~13x 2017E Adjusted EBITDA multiple, after reflecting $100 million NPV of tax synergies and $20 million of annualized run-rate cost synergies. The IronPlanet acquisition was attractive for Ritchie Bros. as it: 1) strengthened the company’s digital capabilities and accelerated its

16.0% 14.7%

16.1% 16.9%

15.2%

9.3% 10.0% 10.3% 10.5%

12.0%

15.1%

11.8%

6.2% 7.6%

9.4%

11.6%

0%

4%

8%

12%

16%

20%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Long-Term ROIC Average: 12.1%

Net PP&E additions, 63%

Acquisitions, 6%

Dividends, 30%

Net Intangible asset addition, 1%

Net PP&E additions, 4%

Acquisitions, 51%Dividends, 28%

Net Intangible asset addition, 8%

Share repurchases, 9%


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




channel diversification strategy; 2) accelerated growth in new sectors and customer segments (IronPlanet’s strong transportation, energy, and government businesses supplementing Ritchie Bros.’ primary focus on construction); and, 3) strengthened the relationship with Caterpillar and its dealer network.

While there were a number of strategic benefits of this acquisition (which we detail below), the company experienced some challenges in the initial years (driven in part by the different “cultures” at the two firms). The most notable were the issues following the integration of the two sales teams, and the employee turnover during the regulatory review process and in the early days of integration. A tight equipment supply environment beginning in 2017 only added to the challenges faced by the combined organization.

A look at the combined company Following the transaction, Ritchie Bros.’ pro-forma TTM GTV as of June 30, 2016 was ~$5.3 billion (vs. ~$4.3 billion on a standalone basis) and pro-forma TTM revenue was $661 million (vs. $536 million standalone). See Exhibit 26. The combined company’s revenue as a % of GTV was 12.5%, largely in line with the 12.4% for legacy Ritchie Bros.

Exhibit 26 - TTM June 30, 2016 standalone/combined GTV [LHS]; TTM June 30, 2016 standalone/combined revenue [RHS]

Pro-forma GTV (TTM figures as of June 30, 2016)

Pro-forma revenue (TTM figures as of June 30, 2016)

Source: Company presentation, RBC Capital Markets

Prior to the acquisition, Ritchie Bros. generated ~32% and ~50% of its revenue from Canada and the U.S., respectively.

Exhibit 27 - Geographic exposure following the IronPlanet acquisition

Ritchie Bros. 2015 revenue breakdown

IronPlanet 2015 revenue breakdown

Combined entity 2015 revenue breakdown


$4,326

$956

$5,282

$0

$2,000

$4,000

$6,000

Ritchie Bros. IronPlanet Combined

GTV

(U

S$M

M)

$536

$125

$661

12.4%

13.1%

12.5%

11.5%

12.0%

12.5%

13.0%

13.5%

$0

$200

$400

$600

$800

Ritchie Bros. IronPlanet Combined

Rev

enu

e as

a %

of

GTV

Rev

enu

e (U

S$M

M)

Canada, 32%

U.S., 50%

Europe, 10%

Other, 7% Canada, 3%

Americas, 93%

Europe, 4% Canada,

27%

U.S./Americas, 57%

Europe, 9%

Other, 6%


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




Following the transaction, Ritchie Bros. increased its exposure to the U.S./Americas (given IronPlanet’s ~93% exposure to the Americas), offset by a modest reduction in its Canadian exposure. See Exhibit 27 above.

A look at IronPlanet’s operating history Founded in 1999, IronPlanet was an online marketplace for used heavy equipment focused on a number of sectors including construction, transportation, energy, and government. Over its operating history, the company grew its core weekly unreserved auctions business, but also added to its portfolio of brands through a series of acquisitions, most notably: 1) Asset Appraisal Services in 2013 (which added to its IronClad Assurance service); 2) Kruse Energy and Equipment Auctioneers (which increased its exposure to the Oil & Gas market); and, 3) the merger with CAT Auction Services in 2015 and the creation of an alliance with Caterpillar and its dealer network.

Exhibit 28 - A look at IronPlanet’s operating history


A leading online marketplace for used heavy equipment While the weekly unreserved auction was at the core of IronPlanet’s business, the company offered multiple sales formats, including a daily marketplace, private marketplace and one-owner marketplace (see Exhibit 29 for details of IronPlanet’s “reserved” and “unreserved” marketplaces).

Exhibit 29 - IronPlanet offers a variety of platforms and formats

Source: Company presentation

1999 2013 July 2014 November 2014 April 2015 2016

“Founded as Federal Sales Corp.”

“Acquired Asset Appraisal Services

(AAS), an inspection, appraisal and online

auction services company.”

“Awarded contract for U.S. Department

of Defense rolling stock surplus

contract.”

“Acquired Kruse Energy and Equipment

Auctioneers, a leader in oilfield equipment

auctions.”

“Merged with CAT Auction Services, an alliance of Caterpillar and independent CAT

dealers.”

“Agrees to be acquired by Ritchie

Bros.”


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




To transact using IronPlanet’s core platform (weekly featured auction), consignors were not required to move their equipment, an advantage relative to on-site auctions as it relates to logistics (it is not easy or cheap to ship large industrial machines to auction sites). In addition, IronPlanet offered: 1) inspection reports to buyers; and, 2) equipment pricing and market evaluation, listing services, inspection services, and funds settlement for sellers. IronPlanet’s end-user base included corporates, equipment manufacturers, dealers, and government entities (after winning the U.S. DoD rolling stock surplus contract).

Deal rationale 1: An expanded service offering that enhances customer experience IronPlanet’s online-only sales channels and 24/7 marketplace allowed Ritchie Bros. to meaningfully participate in market segments that were not being addressed through its existing live, on-site auctions. Ritchie Bros. also benefited from entry into segments such as Government Surplus and private label dealer auctions. From a customer perspective, the transaction broadened Ritchie Bros. customer base (consignors and buyers) and allowed the company to form/strengthen relationships with dealers and corporate accounts. Ultimately, the combination provided customers with multiple sales channels (online, live, etc.), multiple auction types (unreserved, reserved) and greater access to financing and sales support services (i.e., greater potential to monetize services for Ritchie Bros.). See Exhibit 30 for key brands offered by the combined entity.

Exhibit 30 - Expanded sales channels for customers (Blue: Ritchie Bros. offerings; Gold: IronPlanet offerings)

Live on-site and live simulcast

online auctions

Event-based sales of used construction

and heavy equipment

Online sales of used

construction and used trucks

and trailers

Online reserve auction and marketplace

Online sales of government

surplus rolling stock

Event-based sales of used oil

and gas equipment

Online advertising

listing service and B2B portals

Confidential, negotiated sales

Source: Company presentations

Deal rationale 2: Enhanced technology and digital capabilities The IronPlanet acquisition strengthened Ritchie Bros.’ online offering, which allowed the company to capitalize on the trend of used equipment increasingly transacting online. Management noted at the time of the acquisition that the pro-forma entity would have transacted more than $3 billion of assets online (measured as of TTM June 30, 2016). IronPlanet’s digital infrastructure combined with Ritchie Bros.’ market and customer data (combined entity with 4x as much data as IronPlanet alone) provided a strong foundation to not only grow its online auction business, but also to develop additional services to help improve the buyer/seller process (such as RBAS, which is discussed in the section RBAS provides a new way to go-to-market.

Deal rationale 3: Accelerated scale benefits and cross-selling opportunities The auctions and marketplaces business benefits from scale and volume – i.e., a higher number of bidders promotes stronger pricing, which encourages more consignors to sell through Ritchie Bros., this increases supply, which in turn attracts more buyers, and so on. The combination allowed Ritchie Bros. to expand its service offerings (such as RBFS) to existing IronPlanet customers, while IronPlanet’s reserve and online sales channels could be leveraged to support growth in Ritchie Bros.’ international markets.


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




Deal rationale 4: Strengthened relationships with OEMs and dealers As part of the transaction (via the CAT Auction Services platform), Ritchie Bros. formed an initial 5-year strategic alliance with Caterpillar to become the preferred global partner for auction/online marketplace sales services for used equipment, with auctions being held under the CAT Auction Services brand. The company would also support Caterpillar and its dealer network with data intelligence, sales information and global marketing. Management noted that prior to the acquisition of IronPlanet, only ~15% of Ritchie Bros.’ revenue was generated from OEM dealers (as of 2015).

Post-acquisition integration and expansion Since the acquisition of IronPlanet, Ritchie Bros. has worked towards integrating the various go-to-market platforms and creating a unified asset management and disposition company. The company also achieved $20 million of run-rate acquisitions synergies by the end of 2018. Exhibit 31 highlights some of the major steps taken by the company since the acquisition. Major milestones have included:

First phase of technology integration included the Sales Unification Phase, which provided the combined sales force with the ability to sell across platforms and integrate pricing and appraisal tools.

Combined the legacy marketplace solution, EquipmentOne, and IronPlanet’s Daily Marketplace and created Marketplace-E, a premium reserved service offering that offers customers more control and offers buyers a larger selection of products.

In 2018, the company introduced its new harmonized fee structure intended to make customers agnostic between the live, on site auctions and online marketplaces, which also helped to drive higher fee revenue. The fee harmonization was completed in 2019.

In 2018, the company also launched RBAS, an end-to-end asset management and disposition system to help customers optimize their disposition process.

Exhibit 31 - Key milestones in the first year post IronPlanet transaction closing

Source: Company reports and presentations, RBC Capital Markets

Post close:- Sales integration in Canada and Europe

Q3 2017:- Territory optimization/alignment- Initial customer integration

Q4 2017:- Marketplace-E launch- Customer data/sales workflow integration- Launch IronPlanet Australia- Auction site/calendar optimization

H1 2018:

- Executing on CAT Alliance

- Record-breaking 2018 Orlando auction driven by onsite and online channels

- GovPlanet awarded non-rolling stock contract

- Partial harmonization of RBA live buyer transaction fee structure. Closer in line to IP to make buyers channel agnostic

- Achieved year-one synergies; on track to deliver full commitment

Online GTV 16.0% of total GTV

2017 YoY growth in online GTV: +252%

Online GTV 9.5% of total GTV

H1 2018 YoY growth in online GTV: +162%


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Annotated stock chart Exhibit 32 - Annotated stock chart (US$) with Ritchie Bros.’ key developments since 2006


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Jan. 2006 Jan. 2007 Jan. 2008 Jan. 2009 Jan. 2010 Jan. 2011 Jan. 2012 Jan. 2013 Jan. 2014 Jan. 2015 Jan. 2016 Jan. 2017 Jan. 2018 Jan. 2019 Jan. 2020 Jan. 2021

Key Developments

May 9, 2012Announces acquisition of AssetNation, aU.S.-based online marketplace for surplus and salvage assets, for $64MM.

Dec. 31, 2009Introduced 7 new auction sites during 2009.

Nov. 15, 2016Acquires leading Canadian agricultrual auctioneer, Kramer Auctions, for $11MM.

Aug. 8, 2021Announces the acquisition of Euro Auctions, a leading global asset management, disposition, and services company, for ~$1.08B.

Oct. 29, 2020Announces the acquisition of data firm Rouse Services for $250MM in cash and $25MM in RBA common shares.

Mar. 28, 2018Commercial launch of Marketplace-E, an online marketplace platform that included Make Offer, Buy Now, and Reserve Price.

Aug. 29, 2016Announces plans to acquire IronPlanet for ~$758.5MM (~13.0x IronPlanet's 2017E Adjusted EBITDA).

Jul. 12, 2016Completesacquisition of remaining 49% stake in RBFS for $41.4MM.

Nov. 5, 2015Announces acquisition of 75% stake in Xcira, a leading simulcast technology provider, for $12.4MM.

Feb. 19, 2016Acquires leading online listing service, Mascus, for $26.6MM.

Apr. 8, 2013Announces the commercial launch of EquipmentOne, the company's new online marketplace offering.

Nov. 14, 2008Ritchie Bros.' first unreserved heavy equipment auction in Poland.


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Acquisition of Euro Auctions Transaction summary On August 8, 2021, Ritchie Bros. announced the acquisition of Euro Auctions for $1,075 million (~£775 million), representing a purchase multiple of ~15.3x 2021E EBITDA (including ~$13 million of run-rate annual synergies). Management expects the acquisition to close in late-2021 or early-2022.

Feedback from channel checks Our conversations with a number of industry participants including competitors, customers, and former employees have provided an interesting picture of the competitive dynamic in the European market, reasons why Euro Auctions was able to secure significant share in the U.K. (where Ritchie Bros. was not as successful), and the market positioning of both Ritchie Bros. and Euro Auctions. Our key takeaways from the channel checks were as follows:

Euro Auctions has grown significantly over the last 20 years in the U.K. market, and the company leveraged its local market knowledge to capture market share.

Euro Auctions was viewed as a nimble operator that moved quickly to secure equipment from consignors, whereas transactions with Ritchie Bros. entailed more “approval” steps given the larger, more structured nature of the company. The perception in the industry was that the Euro Auctions representatives “walked around with the checkbook in hand”.

Euro Auctions was willing to transact with consignors regardless of the number of lots being offered – they would transact with a consignor selling one of two machines, whereas the feedback indicates that Ritchie Bros. was more focused on the “bigger fish”.

Another reason Euro Auctions was able to capture share in Europe was the company’s lower seller fees relative to Ritchie Bros. This worked well in large, competitive markets (like the U.K.), where Euro Auctions was able to capture significant share, but it also meant that the company was potentially “losing money” in some of its smaller markets.

Euro Auctions’ strength is primarily in the U.K. market, where they are able to secure a sizable share of the equipment being offered by consignors and are transacting through their channels. While Euro Auctions sells equipment across a number of other European and global markets, this does not necessarily imply a strong market position in each of those other countries (they sell “into” a number of other countries, but may not have a significant share of the equipment being offered by sale by local consignors in each of those markets).

Euro Auctions did well in Europe, but the company was not able to make inroads into the U.S., and this may have been one of the reasons that led Euro Auctions to acquire Yoder & Frey (a U.S.-based heavy machinery auctioneer) in late-2016. However, based on feedback from industry participants, this acquisition did not necessarily accelerate Euro Auctions’ growth in the U.S. as larger players such as Ritchie Bros. have remained dominant in this market.

Our thoughts on the transaction We estimate EPS accretion in the mid-single-digit range This estimate reflects ~$70 million of annual Adjusted EBITDA from Euro Auctions (inclusive of $13 million of run-rate synergies), $43 million of incremental interest associated with the acquisition debt, and an income tax rate of 25%. See Exhibit 7 for our 2022 and 2023 forecasts.

The transaction provides a leading platform in Europe, but it was not “cheap” Based on Ritchie Bros.’ historical results/commentary and feedback we received from a number of industry participants, the company has not been as successful in capturing share in Europe as it historically had been in the U.S. Over the last ~20 years, Euro Auctions captured a


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meaningful share in the U.K. market, and was a formidable competitor to Ritchie Bros. Some in the industry saw a potential acquisition of Euro Auctions as the most likely avenue for Ritchie Bros. to establish a sizable footprint in Europe. Having said that, we believe the ~15.3x 2021E EBITDA multiple (including synergies) paid for Euro Auctions is not “cheap”, considering the business is much closer to the “legacy” Ritchie Bros. business. While the acquisition multiple was modestly below Ritchie Bros.’ own trading multiple at the time of the announcement, it is higher than the ~13x 2017E Adjusted EBITDA paid by the company for IronPlanet in 2017. We note that this ~13x multiple includes $100 million NPV of tax synergies and $20 million of run-rate cost synergies.

We see potential to leverage the stronger “local market” brands post-close … Given the strength of the two platforms in their “primary” markets (Ritchie Bros. in North America and Euro Auctions in Europe), we see the potential for the company to rebrand its pro-forma North American operations under the Ritchie Bros. umbrella and the European operations under the Euro Auctions brand. We note that this is our view based on how well each of the brands has historically performed in their “primary” markets and the potential to realize some scale benefits in the local markets with an expanded footprint.

One comment mentioned to us by a number of industry participants was that customers (primarily consignors) become accustomed to the platform they primarily use and they are not always receptive to switching. As a result, we do not believe Ritchie Bros. will pursue a strategy to re-brand all of its global operations to a common brand. There could be some benefit, in our view, in leveraging the dominant brand in each region and “rolling” all local assets under that brand.

… however, varying fee structures between the two platforms are a consideration The one consideration to keep in mind, however, would be the varying fee structures across the Ritchie Bros. and Euro Auctions platforms. Following the Iron Planet acquisition, the company did pursue fee harmonization; however, given that the Euro Auctions customers have become accustomed to the relatively lower fees, it is uncertain how the company may address the varying fee structures (if at all).

Keys brothers have been instrumental in sourcing equipment The Keys brothers have been a driving force behind Euro Auctions and are very involved with sourcing equipment – Ritchie Bros. will need to ensure that there is no disruption to the equipment supply if the brothers are no longer involved with the business following the 3-year agreements. Our conversations have indicated that the Keys brothers were very hands-on with the sourcing of the equipment, and some of the brothers have equipment sourcing organizations that at times have accounted for up to 30%-40% of the equipment at the company’s auctions. We would note that we are unable to validate these estimates – but we do believe that the brothers are very involved in the sourcing and have historically been an integral part of the Euro Auctions business model/ecosystem.

Maintaining the Euro Auctions culture will be imperative Our conversations with industry participants have indicated that Euro Auctions, despite its increasing scale over the last two decades, maintained a “small business feel”. Customers felt that they were dealing with a local business with a relatively flat organizational structure. These characteristics, combined with the feedback that customers generally become very accustomed to the platform they typically use, lead us to believe it will be important for Ritchie Bros. to maintain the company’s culture and “way of doing business”. Given that this platform will continue to operate under its current brand and the brothers will be involved for at least a three-year period, we do not view this as a concern over the near- to medium-term.


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Business/transaction overview Euro Auctions business overview Euro Auctions is an omni-channel provider of unreserved heavy equipment auctions with onsite and online bidding (under the brands Euro Auctions and Yoder & Frey). In 2020, the company generated ~83% of its Hammer Value (approximately = GTV) in the U.K. and Germany (the U.K. alone accounting for ~68% of total company Hammer Value). Euro Auctions generated a 2020 Hammer Value of ~$624 million, revenue of ~$285 million, and EBITDA of ~$57 million (~$70 million including run-rate synergies).

Euro Auctions operates an at-risk business, which sources equipment (primarily from Europe) and “sells” these assets globally. The company’s footprint includes nine permanent sites (4 in Europe, 3 in North America, 1 in Australia, 1 in Middle East – see Appendix I), and ~71% of its revenue is transacted on an online platform (i.e., online bidding). Management noted that Euro Auctions’ Hammer Value (approximately = GTV) was stable over the past three years, while revenues have grown modestly over this timeframe (at a ~3.6% CAGR from 2018-2020). Ritchie Bros. has secured employment arrangements with Euro Auctions’ key management personnel, namely: 1) Derek Keys, who will continue to be involved for a minimum of three years after the closing of the transaction; 2) Jonnie Keys, who will assume a senior leadership position; and, 3) Lynden and Trevor Keys, who will both be retained as sourcing leads.

Our forecasts reflect debt reduction much sooner than guidance implies Ritchie Bros. plans to finance the $1,075 million (~£775 million) acquisition through a combination of cash on hand and new debt. With respect to current liquidity, the company has ~$302 million of unrestricted cash as of Q2 2021 and ~$448 million of unused capacity under its revolving credit facilities (total liquidity of ~$750 million). Following the closing of the transaction, management anticipates the company’s Adjusted Net Debt to Adjusted EBITDA ratio will increase to ~3.9x (vs. ~1.0x as of Q2 2021), and they have set a target to reduce leverage to below 2.5x by the end of 2025. Our forecasts reflect Net Debt/Adjusted EBITDA moderating to 3.1x by year-end 2022 and to 2.5x by year-end 2023. We believe the company’s leverage guidance is conservative and also reflects additional M&A over the next few years.

A look at the combined company Following the closing of the transaction, we estimate Ritchie Bros.’ pro-forma 2020 GTV at ~$6.0 billion (vs. ~$5.4 billion on a standalone basis) and pro-forma 2020 revenue of ~$1.7 billion (vs. ~$1.4 billion on a standalone basis). See Exhibit 33.

Exhibit 33 - 2020 standalone/combined GTV [LHS]; 2020 standalone/combined revenue [RHS]

Pro-forma GTV (2020)

Pro-forma revenue (2020)

Note: Hammer value used for Euro Auctions Gross Transaction Value (“GTV”) figure; Hammer value is approximately GTV; 2020 USD/GBP rate used of ~1.29. Source: Company presentation, FactSet, RBC Capital Markets

$5,411

$624

$6,035

$0

$2,000

$4,000

$6,000

$8,000

Ritchie Bros. Euro Auctions Combined

GTV

(U

S$M

M)

$1,377

$285

$1,662

25.5%

45.7%

27.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

$0

$400

$800

$1,200

$1,600

$2,000

Ritchie Bros. Euro Auctions Combined

Rev

enu

e as

a %

of

GTV

Rev

enu

e (U

S$M

M)


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In 2020, Ritchie Bros. generated 26%, 60% and 14% of its GTV from Canada, the U.S., and International markets, respectively. Following a combination with Euro Auctions, Ritchie Bros.’ international exposure would increase to ~22% of GTV (Euro Auctions generates ~90% of its Hammer Value outside the U.S.), while its exposure to Canada and U.S. would moderate to ~23% and ~55%, respectively. See Exhibit 34 below.

Exhibit 34 - Pro-forma geographic exposure by GTV following the combination with Euro Auctions

Ritchie Bros. 2020 GTV breakdown

Euro Auctions 2020 GTV breakdown

Pro-forma 2020 GTV breakdown

Note: Hammer value used for Euro Auctions Gross Transaction Value figure; U.K., Germany, and Spain are grouped into Europe for Euro Auctions; Euro Auctions “Other” includes Dubai and Australia. Source: Company presentation, RBC Capital Markets

Increased exposure to the “at-risk” model On a pro-forma basis, Ritchie Bros. would also generate a greater proportion of “Inventory revenue” (i.e., purchasing equipment before reselling it; categorized as “at-risk”) versus “Service revenue”. Management notes that the pro-forma business will have approximately a 50%/50% mix of Service and Inventory revenue. We estimate that ~82% of Euro Auctions’ total revenue is generated from inventory contracts, which is directionally in line with Ritchie Bros.’ International A&M inventory revenue mix of ~70% in 2020. Ritchie Bros.’ mix of Inventory revenue is much lower in North America (~32% in 2020).

Exhibit 35 - Pro-forma revenue mix following the combination with Euro Auctions

Ritchie Bros. 2020 A&M revenue mix breakdown

Euro Auctions 2020 revenue mix breakdown1

Pro-forma 2020 revenue mix breakdown

(1) We estimate Euro Auctions 2020 revenue mix by adding Ritchie Bros.’ total revenue and Euro Auctions’ total revenue, and backing out Euro Auctions’ mix of Inventory and Other revenues. Source: Company presentation, RBC Capital Markets

Canada, 26%

U.S., 60%

International, 14%

U.S., 10%

Europe, 85%

Other, 5% Canada,

23%

U.S., 55%

International, 22%

Service, 59%

Inventory, 41%

Other, 18%

Inventory, 82%

Service, 52%

Inventory, 48%


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Market opportunity + Supply & demand setup Large used equipment market provides runway GTV represents total proceeds from all items sold at Ritchie Bros.’ auctions and online marketplaces, and is the primary driver of commissions and fees. GTV is driven by a number of factors including used equipment pricing, category mix, equipment age, and the number of lots (volume of equipment) sold. In this section, we will first take a look at the global ~$300 billion used equipment market, and then discuss the outlook for equipment supply and demand, which would ultimately determine the outlook for GTV and revenue growth for the company.

Ritchie Bros. estimates the global annual used equipment market totals ~$300 billion (GTV). Leveraging the company’s prior estimates for the regional breakdown, we believe the U.S. and Canadian markets represent ~$44 billion (~15%) and ~$6 billion (~2%), respectively. The global used equipment market is comprised of: 1) auctions (~$30 billion), where Ritchie Bros. holds ~18% market share; 2) the private sales/brokerage (“Midstream”) channel (~$140 billion), which includes thousands of brokers and equipment resellers, as well as direct end-user to end-user sales; and, 3) the dealer/retail/rental (“Upstream”) channel (~$130 billion), which is dominated by OEMs, OEM dealers, independent dealers and equipment rental companies. See Exhibit 36 for our estimated breakdown of the used equipment market by sector.

Even as the global leader in asset management and disposition of commercial assets, Ritchie Bros.’ 2020 pro-forma (including Euro Auctions) GTV of ~$6.0 billion implies only a ~2.0% market share in the global used equipment market. Based on 2020 pro-forma metrics, the U.S. accounts for ~55% of Ritchie Bros.’ GTV, followed by Canada (~23%), and International (~22%).

Exhibit 36 - The global used equipment market is valued at ~$300 billion; auctions channel accounts for ~10% of the market

Global used equipment market by channel

Global used equipment market by end-market (RBC estimate)

Source: Company reports and presentations, RBC Capital Markets estimates

Dominant share in the auctions channel (~18% share) Ritchie Bros. holds the dominant position globally in the highly fragmented global auctions channel. The company operates in the auctions channel primarily through its: 1) live, unreserved, on-site auctions (also simulcast online to reach a global bidding audience), where the company also provides consignors with care, custody, and control at its live auction sites; and, 2) IronPlanet weekly online auctions, which are ideal for sellers looking to dispose of their assets without having to transport their equipment to a physical live auction site.

Ritchie Bros.’ competitive advantage in live, unreserved, on-site auctions is in part driven by the scale and global reach of its network. The company’s international footprint allows it to reach buyers globally, and the larger buyer base helps generate more demand and improved

Dealer/Rental/Retail (trade-ins

and sales directly to end users), 43.3%

Private sales (brokerage and end user to end user),

46.7%

Auctions - Ritchie Bros., 1.8%

Auctions - Other, 8.2%

Auctions, 10.0%

Construction, 28%

Transportation, 27%

Agriculture, 21%

Oil & Gas and other, 24%


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price realization for its consignors. The favorable prices and a larger buyer base attracts a larger number of consignors, and so on (a virtuous cycle!). During the pandemic, the company’s shift to 100% online bidding, combined with elevated disposal activity drove strong GTV through H2 2020. Another competitive advantage for Ritchie Bros. is its highly scalable business model, whereby the incremental cost of adding lots (equipment) across its multi-channel offerings (in person/online channels) is minimal as the most significant investment (capital required to setup the auction site or the digital infrastructure) is incurred upfront.

While Ritchie Bros. business is considered to be counter-cyclical in nature, a review of quarterly auction lots data on a TTM basis (as noted in Exhibit 37 below) indicates that major macro events/cycles typically drive auction lots (number of machines/equipment). For instance, during the oil price shock in 2015, a great deal of equipment was sold by O&G operators, which was “picked up” by buyers in Eastern Canada and abroad. Beginning in late-2016, while the economy was picking up, equipment availability tightened as asset owners “needed” their equipment (driven in part by strong construction demand in the U.S. during that period). This effect was also evident amidst the pandemic, when the uncertainty in the macro environment led many asset owners to sell their equipment/seek liquidity.

Exhibit 37 - Auction lots have somewhat followed the construction cycle, but GTV growth is dependent primarily on supply

Auction Lots on a TTM basis


Supply of used equipment likely to remain tight in the near-term Recall that GTV is driven by product availability and mix, equipment pricing, equipment age, and number of lots sold. Over the recent quarters, concerns related to equipment supply have led consignors to take a “wait and see” approach. Beginning in late-2020 and into 2021, the industry has faced equipment supply challenges driven in part by significant (and immediate) demand from a number of end-markets as the economic activity improved and heightened uncertainty surrounding new variants of COVID-19 globally (which impacted supply chains). The widespread chip shortage and the broader concerns related to new equipment availability from OEMs further impacted equipment supply. This dynamic could be a headwind as it relates to GTV growth over the near- and (potentially) medium-term.

The challenge arising from low used equipment supply is exacerbated by the outlook for strong demand as governments invest in infrastructure to “jump start” economic recoveries (driving increased demand from the construction sector) and as the strong commodity backdrop drives elevated activity levels across the global mining industry. The combination of low supply and

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Auction lots growth driven by volatility in Western Canada following the 2015 commodity crisis.

Decline in auction lots driven by robust construction demand in the U.S. leading end users to hold onto their equipment.

Auction lots growth driven initially by an uncertain operating backdrop, driven in part by pandemic related uncertainty.


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strong demand has resulted in a favorable pricing environment. This was noticeable at Ritchie Bros.’ 2021 Orlando auction, where total registered bidders reached 22,700 vs. 18,100 in 2020. However, tight equipment supply negatively impacted GTV at the company’s largest auction of the year (pricing strength was not enough to offset decline in lot count). See Exhibit 38 [LHS] for key metrics on the Orlando auctions.

Exhibit 38 - Tight equipment supply pressuring lot count [LHS]; Strong demand driving improved pricing [RHS]

2021 Orlando Auction key metrics

GTV: $191MM+

Bidders: 22,700+

Lots: 12,000+

Consignors: 1,000+

2020 Orlando Auction key metrics

GTV: $237MM+

Bidders: 18,100+

Lots: 13,500+

Consignors: 1,200+

Source: Company reports and press releases, Ritchie Bros. used equipment price indices, RBC Capital Markets

To assess the outlook for equipment supply, we look to:

1) OEM commentary as it relates to new equipment production/supply. Directionally speaking, higher OEM sales have typically been followed by higher GTV growth (see Exhibit 39).

2) OEM dealers (the outlook for dealer inventory replenishment). Historically, dealer inventory replenishment has been positively correlated with GTV (see Exhibit 40).

3) Equipment rental companies (the outlook for rental utilization and capex). Historically, higher rental capex has been a positive indicator for GTV growth.

OEM YoY sales growth is back in positive territory For our analysis, we look at OEM sales as a proxy for new equipment supply entering the market, as this measure has historically been correlated with Ritchie Bros.’ GTV (see Exhibit 39). We use a composite of four OEMs: Caterpillar, Komatsu, Hitachi and Deere and compare the YoY growth in TTM average OEM sales (dark blue line) to the YoY growth in TTM GTV (light blue line). This analysis indicates that OEM sales are a good leading indicator of GTV growth. We use TTM metrics for both GTV and OEM sales as these measures can be volatile on a quarterly basis. From 2012-2020, using our OEM sales composite on a two-quarter leading basis, we find a correlation of ~0.50, suggesting a fairly strong positive relationship.

There have been periods of divergence between our OEM sales composite and Ritchie Bros. GTV (i.e., early 2017 and 2020); however, these periods of divergence can typically be explained by broader macro factors. For instance, through early-2017, OEM sales were growing at an accelerated pace; however, GTV moderated due to elevated equipment utilization in the infrastructure space (which limited the availability of used equipment for auctions). Similarly, through 2020, while OEMs reported weaker sales YoY, nervous equipment owners in industries impacted by the pandemic were looking to liquidate their equipment (which led to a notable uptick in supply), while there was also an uptick in demand as buyers had to resort to the used/auction channel given lower OEM production. Some buyers also likely opted for a cheaper used option as opposed to buying new equipment mid-pandemic.

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0%

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30%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

US Heavy Equipment Price Index Canada Heavy Equipment Price Index

“In the US and Canada, we expect industry sales of large ag equipment to be up roughly 25% for the year… At this point, we are anticipating producing in line with retail demand for the year, keeping inventory levels relatively tight heading into fiscal year 2022... North American construction equipment industry sales are now forecast to be up between 15% and 20%, [while] sales of compact construction equipment are expected to be up between 20% to 25%.”

– John Deere, FQ3 2021 conference call

“Resource Industries end-user demand should see support from both mining and heavy construction and quarry and aggregates. We also expect Energy & Transportation sales to increase on stronger underlying demand. All of this is expected to lead to good volume growth in the third quarter, even while we manage supply chain challenges.”

– Caterpillar, Q2 2021 conference call


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Exhibit 39 - Consensus OEM sales (proxy for production) projected to increase into 2022

Source: Company reports, RBC Capital Markets, FactSet consensus estimates

Given the historical lag between OEM sales and GTV, we expect the decline in OEM sales through 2020 and early-2021 (which limited the volume of new equipment supply entering the market) to drive supply side challenges and limit GTV growth over the coming quarters. Furthermore, the supply of new equipment over the near-term from OEMs will likely be impacted to some extent by broader supply chain challenges (chip shortages, freight challenges) and labor disruptions.

Dealers reduced inventory in Q2; Caterpillar does not expect significant restocking We also look at changes in Caterpillar dealer inventory levels as a proxy for sentiment/equipment availability. Given that dealer inventories and GTV can be lumpy on a quarterly basis, we compare the TTM Caterpillar dealer inventory levels with the TTM YoY change in Ritchie Bros.’ GTV. We note a moderately strong positive relationship between these two variables (correlation of 0.55 from 2012-2020). Directionally, dealer inventory replenishment should be positive for used equipment supply. As new equipment enters the market, asset owners should dispose of (at least some of) their older equipment, which will add to the supply of used equipment for sale (which directionally should be supportive of GTV growth). See Exhibit 40.

While the relationship has been fairly strong over the long run, there were some periods when changes in dealer inventory did not align with GTV growth. For example, in 2015, uncertainties following the downturn in global commodity markets resulted in a cautious approach on the part of Equipment Dealers; however, Ritchie Bros. was able to capitalize on large asset dispositions out of Western Canada. In fact, the company historically has outperformed during early recessionary periods given the surge in used equipment supply that enters the market (usually from firms/sectors experiencing challenges and/or needing liquidity).

Other periods of disconnect include 2018 (integration of IronPlanet) and 2020 (Ritchie Bros. realized GTV growth while dealers looked to reduce inventory levels amidst the uncertain backdrop). In 2020, Caterpillar dealers reduced their inventory by ~$3.0 billion, with Finning and Toromont noting the uncertain operating backdrop/economic slowdown as a key driver. In Q2 2021, Caterpillar noted stronger-than-expected end-user demand YoY, but dealers reduced inventory by $400 million in the quarter (in part reflecting the impact of supply chain challenges/limited equipment availability). Looking ahead, Caterpillar does not expect to see a significant benefit from re-stocking through the rest of the year.

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YoY change in TTM OEM SalesYoY change in TTM GTVConsensus forecasts for YoY growth in OEM sales

“We are in an excellent position from a cost, inventory and capability perspective to capture the next phase of market growth... we really ramped up inventory purchases last fall… we have seen a recovery in new equipment demand, which was widespread across all of our regions and was driven by the construction sector.”

– Finning International, Q2 2021 conference call

“Inventory levels continue to be adjusted in light of market activity, and are below prior-year levels… we've been running lower in inventory deliberately… that's a reflection of the tightening working capital environment. But I could see easily that we would be investing +C$200MM in inventory over time, going into a more normal “environment.”

– Toromont, Q2 2021 conference call


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Exhibit 40 - TTM changes in dealer inventories generally a good leading indicator for GTV


Rebound in rental utilization likely to be a modest headwind for equipment supply Directionally, higher rental utilization rates reported by pure-play equipment rental companies suggest “tightness” in the used equipment market as these operators are likely to defer replacement/sale of their fleets (given the strong demand for rentals). In Exhibit 41, we highlight the dollar utilization (measured as rental revenue divided by average fleet at original cost) for Herc Holdings, H&E Equipment Services, and Ashtead Group. We note that dollar utilization declined early in the pandemic, but rebounded through H2 2020 and into 2021. Recent outlook commentary by rental companies also pointed to improving customer demand (nearing pre-pandemic levels). United Rentals, the largest equipment rental company in North America (with ~14% market share in the U.S.), noted Q2 fleet productivity (a comprehensive metric that reflects the combined impact of changes in rental rates, time utilization, and mix) of +17.8% YoY, a significant sequential improvement from -0.5% YoY in Q1 2021 (driven primarily by better fleet absorption). For the remainder of 2021, management expects to see robust fleet productivity improvement as the operating backdrop improves (easier prior year comparables also to be a driver).

Exhibit 41 - Rental $ utilization has rebounded for pure play rental companies

Note: We use U.S. dollar utilization for Ashtead Group Plc. Source: Company reports, RBC Capital Markets

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TTM change in dealer inventories (US$MM) [LHS] YoY change in TTM GTV [RHS]

GTV/dealer inventory disconnect due to Western Canada asset sales post commodity crisis

IronPlanet contribution

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“But every week, every Monday, I look at where our utilization was compared to the prior year as well by product type, by region, the various geographies. Yesterday was the first time we eclipsed our utilization at the same time in 2019.”

– H&E Equipment Services, Q2 2021 conference call

“Dollar utilization was a post spend record 42.1% in the second quarter, a solid improvement of 410 basis points from pre-pandemic 2019… this positive momentum changes our fleet efficiency going forward and sets up a record year in terms of fleet utilization and returns.”

– Herc Holdings, Q2 2021 conference call


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




With positive momentum in rental utilization over the recent quarters, rental fleet owners are likely to “keep” their equipment for longer. We would also note that while some rental companies leverage partners such as Ritchie Bros. to dispose of their used equipment (i.e., the February 2020 announcement by Ritchie Bros. that Sunbelt Rentals would leverage RBAS technology to manage its fleet), others sell their used equipment themselves.

Rental capex guidance provides a more supportive outlook for equipment supply The 2021 capex outlook provided by the pure play rental companies offers a more supportive data point for equipment supply. This is a relevant metric for Ritchie Bros. as rental equipment capex historically has been a strong leading indicator for rental disposals (rental companies selling older equipment should be positive for equipment supply as some of it could pass through Ritchie Bros.’ channels). We note that the average fleet age for Herc, H&E Equipment, and Ashtead was ~43 months in Q2 2021 (vs. long-term average of 39 months).

At Q2 reporting, United Rentals increased their 2021 net rental capex guidance to $1.50-$1.70 billion (vs. $1.25-$1.45 billion previously), well above the $103 million invested in 2020 and in line with pre-pandemic levels. Similarly, Herc Holdings has guided for 2021 net rental capex of $500-$550 million ($400-$450 million previously), above the $152 million invested in 2020, and also above the $414 million invested in 2019. In Exhibit 42, we highlight the TTM historical gross capex for United Rentals, as well as consensus estimates for 2021 and 2022. With equipment rental capex projected to increase significantly in 2021, a larger amount of older used equipment could come to market, which we believe could help could drive stronger GTV through 2022.

Exhibit 42 - United Rentals capex ($MM; TTM) expected to increase through 2021 as the operating backdrop improves

Source: Company reports, FactSet Consensus estimates, RBC Capital Markets

Equipment demand outlook is supportive In the last section, we noted a recurring theme: used equipment supply is likely to be limited over the near- and (potentially) medium-term. In this section, we focus on the demand side of the equation, and in particular, we detail the demand outlook in Ritchie Bros.’ core end-markets, which include: 1) Construction (~55% of GTV); 2) Transportation (~22%); and, 3) Other (~23%; includes O&G, Agriculture, and other end-markets). See RHS of Exhibit 43. Relative to the global used equipment market, Ritchie Bros. over-indexes in Construction and under-indexes in Agriculture and the O&G/Other segment. See LHS of Exhibit 43. As we will detail throughout this section, overall demand fundamentals appear to be strong across all of Ritchie Bros.’ end-markets.

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United Rentals expects gross capex of $2.5B-$2.7B in 2021, with the additional investments to support higher demand

“We raised our gross CapEx guidance by $300MM, a good portion of which reflects fleet we're purchasing from Acme Lift.”

– United Rentals, Q2 2021 conference call


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




Exhibit 43 - Ritchie Bros. “over-indexes” in Construction relative to the global used equipment market

Global used equipment market by end-market (RBC estimate)

Ritchie Bros. 2020 GTV mix by end-market

Source: Company reports and presentations, RBC Capital Markets estimates

Construction end-market (~28% of global used equipment market) The Construction end-market, which consists of both heavy construction (i.e., large excavators, motor graders, etc.) and light construction (i.e., skid steers, backhoes, smaller excavators, etc.) accounts for a significant proportion of Ritchie Bros.’ GTV (~55% of 2020 GTV). Using the company’s more recent estimate of the global used equipment market of ~$300 billion, we estimate that the global construction end-market likely totals ~$80-$90 billion. By region, Europe and the U.S. account for almost 50% of the construction end-market. See the figure on the left for management’s estimated geographic mix for this end market as of 2015.

Exhibit 44 - Strong correlation between U.S. non-residential construction and TTM GTV

Source: Company reports, Office for National Statistics, RBC Capital Markets

Given the company’s sizeable exposure to the U.S. (~55% of 2020 revenue) and to the construction end-market (as detailed above), we were not surprised to see a strong positive relationship between Ritchie Bros.’ TTM GTV and U.S. non-residential construction. As noted in Exhibit 44 above, the correlation between U.S. total non-residential construction and Ritchie Bros.’ TTM GTV has been 0.91 from 2002-2020. Looking ahead, we expect public investment in non-residential construction to remain strong, and believe the U.S. bipartisan infrastructure bill currently making its way through Congress could further accelerate investment levels. This proposed bill includes investments in infrastructure (transportation), educational/healthcare facilities, water/wastewater, rail, and broadband, and if passed, will likely support construction demand in 2022 and beyond (~$550 billion of incremental spend over the next 5

Construction, 28%

Transportation, 27%

Agriculture, 21%

Oil & Gas and other, 24% Construction,

55%

Transportation, 22%

Other, 23%

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U.S. total non-residental construction (US$B) [LHS]TTM GTV (US$MM) [RHS]

2002-2020 correlation: 90.6%2010-2020 correlation: 92.3%2015-2020 correlation: 76.6%

Construction end-market composition by geography

Source: Company estimates

Europe, 29%

U.S., 17%China,

11%

Japan, 10%

Canada, 3%

Other, 30%


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




years). RBC economics is forecasting real U.S. non-residential investment in structures to be -5.8% YoY and +3.2% YoY in 2021 and 2022, respectively.

Ritchie Bros.’ TTM GTV is also highly correlated to U.K. construction output (see Exhibit 45). Looking ahead, we expect U.K. infrastructure spend to be supported by public infrastructure spending programs, and the significant economic recovery in this market should also drive stronger private investment (recent commentary from global E&C firms points to a strong demand environment). We note that the U.K. will become an increasingly important market for Ritchie Bros. following the pending acquisition of Euro Auctions.

Exhibit 45 - Construction spending in the U.K. is also another key driver for Ritchie Bros.

Source: Company reports, Office for National Statistics, RBC Capital Markets

Transportation end-market (~27% of global used equipment market) The company’s exposure to the Transportation end-market consists primarily of trucks and trailers, and it accounted for ~22% of consolidated 2020 GTV. Using the total market size of ~$300 billion, we estimate the size of the global Transportation end-market at ~$75-$90 billion. By region, Europe and the U.S. account for ~60% of this end-market (see the figure on the left for management’s estimated geographic mix as of 2015). This an attractive end-market as a typical truck “turns” 3x in its lifecycle (i.e., multiple entry points into the company’s ecosystem) and typical fleet owners have 2-3 trailers per truck.

Exhibit 46 - Typical truck turns 3x over its life; typically fleet owners have 2-3 trailers/truck


We believe the commercial transportation vertical remains a growth opportunity for the company given the relatively low market penetration ($1.1-$1.2 billion of estimated GTV in this end-market vs. our global addressable market estimate of ~$75-$90 billion). Demand for commercial trucks has been strong, with significant pressure on the freight hauling industry to get more trucks into service, according to FTR Associates (“FTR”), an industry source in the Transportation sector. However, like many other industries, the supply of new trucks is limited due to component and part shortages. In the U.S., there has been an increase in truck retail

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U.K. infrastructure construction output (£MM) [LHS]TTM GTV (US$MM) [RHS]

2002-2020 correlation: 78.3%2010-2020 correlation: 83.1%2015-2020 correlation: 76.0%

Transportation end-market composition by geography

Source: Company estimates

Europe, 38%

U.S., 22%

China, 5%

Japan, 6%

Canada, 2%

Other, 27%


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




sales across all classes following a dip early in the pandemic (see Exhibit 47). Furthermore, projections by FTR point to continued growth across all truck classes from 2021-2022, which should translate into good availability in used commercial transportation equipment over the next several years.

Exhibit 47 - Demand in the trucking sector expected to remain strong (# of units) and improve from current levels

Source: FTR Associates, Bloomberg, RBC Capital Markets

Agricultural end-market (~21% of global used equipment market) We estimate the Agriculture end-market accounts for ~8%-10% of Ritchie Bros.’ annual GTV. Using the used equipment market size of ~$300 billion, we estimate the global Agriculture end-market to be ~$60-$65 billion.

Exhibit 48 - Key agriculture commodities remain at supportive levels, which should support the equipment replacement cycle

Price of Corn (measured in $/bushel)

Price of Soybeans (measured in $/bushel)

Price of Wheat (measured in €/ton)

Source: Insider Inc., RBC Capital Markets

We believe that the elevated crop prices and improved farm fundamentals point to a favorable outlook for the Agriculture end-market. Ritchie Bros. has been successful in leveraging Timed Auction Lot (“TAL”) technology for on-the-farm agricultural events over the last year, which have been received well by its customers. TAL technology also resulted in meaningful reduction in employee costs, travel, advertising, and promotion expenses. We believe the sector will continue its strong momentum, and TAL technology is an optimal low cost way to service this end-market.

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Class 4-5 Truck retail sales units - US Class 6-7 Truck retail sales units - US Class 8 Truck retail sales units - US

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617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




Oil & Gas end-market 2020 was a challenging year for the global oil market on account of geopolitical dynamics which drove excess oil production, and the impact of the pandemic that exacerbated an already challenging oil price environment. WTI reached “negative” territory at the trough in April 2020. Since then, WTI pricing has recovered to the mid-$60 level, driven by stronger demand from China, global production cuts and stronger visibility to an economic recovery (vaccine rollout has also been a tailwind).

Looking ahead, the RBC Energy & Utilities Equity Team estimates WTI prices at $67.64/bbl for 2021 and $72.27/bbl for 2022. This compares to the average price of $38.58/bbl in 2020 and $57.31/bbl in 2019. While we believe the WTI price forecasts imply a supportive outlook for activity levels and equipment demand in the end-market over the medium-term, the company will have to cycle/comp against the increased supply from the Oil & Gas market that supported 2020 GTV (the sector contributed to GTV growth, but we do not believe that Ritchie Bros. benefitted from any large scale displacement in the sector).

Exhibit 49 - WTI forecasts of $67.64/bbl for 2021 and $72.27/bbl for 2022 (vs. $38.58/bbl in 2020)

Source: FactSet (monthly average price of WTI used), RBC Energy & Utilities Equity Team, RBC Capital Markets estimates

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YoY Change % Crude Oil WTI /Global Spot NYMEX ($/bbl) RBC Price Forecast

Long-term average WTI price: $65.38/bbl

RBCCM 2022E forecast: $72.27

RBCCM 2021E forecast: $67.64


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




From an auctioneer to marketplace: Driving midstream/upstream penetration Over the recent years, Ritchie Bros. has increasingly evolved from an “auctioneer” to a “technology-driven marketplace”. The company has been working towards becoming a multi-channel asset management and disposition platform, with a holistic marketplace at the center of its new go-to-market strategy. To support this evolution, the company has leveraged investments in its technology platforms and capabilities (i.e., introduction of new channels and ancillary services), and has undertaken a number of acquisitions (most notably IronPlanet and Rouse).

In this section, we discuss: 1) the key technology-based milestones that have paved the way for Ritchie Bros. to transition from operating primarily as a live-event auctioneer to a technology-driven marketplace; and, 2) RBAS and the Inventory Management System, two “solutions” that should enable the shift to a technology-driven marketplace. While some of these strategies/solutions are in the early stages of development/roll-out, we highlight the Flonger-term opportunity presented by these platforms, how they can help drive penetration in the Midstream and Upstream channels, and some challenges the company may face on its journey.

The journey from an auctioneer to digitally-enabled marketplace Ritchie Bros. commenced operations in 1958 as an auctioneer, and built its brand/scale over the following decades. Over the past decade, however, the company has undertaken a strategic shift to become a multi-channel, full service marketplace for customers looking to buy, sell, and manage their used equipment. Of the total ~$300 billion global used equipment market, the auctions channel (where Ritchie Bros. holds a dominant share) accounts for only ~$30 billion. Transforming from an auctioneer to a marketplace should help the company make further inroads into the remaining ~90% of the used equipment market, which is comprised of the Midstream (private sales/brokerage) and Upstream (dealer/retail/rental) channels, while also growing its competitive positioning in the auctions channel.

There are several reasons why entering the non-auction channels would be an attractive pursuit for Ritchie Bros. These include: 1) consignors often wanting optionality when it comes to the tradeoff between control over the transaction (e.g., price, timing) and certainty over the transaction closing (e.g., unreserved vs. reserved, selling the asset via listing or private transaction, etc.); and, 2) auctions simply not always being the desired/appropriate channel for some business cases. Some transactions are more sensitive/personalized by nature (e.g., transactions for specialized or high-value equipment), which makes non-auction channels more viable options in these situations.

We note that increasing focus on the Midstream/Upstream channels would not only grow the company’s TAM and diversify its revenue base, but should improve Ritchie Bros.’ value proposition for both consignors/buyers. Its full suite of solutions (private sales, reserved marketplaces, options for micro services), powered by the IMS at the heart of its operations, is intended to provide consignors with greater optionality and instill confidence that they can maximize the value of their assets by interacting with Ritchie Bros. Meanwhile, for buyers, they receive improved visibility, selection, and a better understanding of fair market values. The challenge, however, will be to drive adoption of these platforms – i.e., convincing customers to upload their inventories into IMS, and to leverage RBAS as their one-stop shop to manage their fleets. This will entail having to “convert” some users that have more traditionally relied on manual inventory management processes (think spreadsheets), and also convincing some customers that may be using a competitor’s platform to switch to the Ritchie Bros. ecosystem. Given our discussions with industry participants, we have found that folks become accustomed to their way of doing business and may not be inclined to leave a platform they are comfortable with for a new one.


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




Expediting the transition with IronPlanet While the acquisitions of AssetNation (which provided foundational infrastructure for EquipmentOne), Xcira (which strengthened online presence in the core auctions business), and Mascus (an additional foothold for non-auctions business) provided Ritchie Bros. with enhanced technological capabilities and provided its customers with access to new channels/options, the May 2017 acquisition of IronPlanet was the most significant inflection point in the company’s digital evolution.

IronPlanet’s online-only sales channels allowed Ritchie Bros. to evolve into a technology-enabled platform, providing the company with a sizable, customer facing, multi-channel platform. Ritchie Bros.’ GTV from the online marketplace channel (i.e., excluding live on-site auctions) was ~3% of total GTV in both 2015 and 2016, but grew to ~12% in 2017 (partial year contribution from IronPlanet) and to ~17% in 2018 after reflecting a full year of IronPlanet results. See Exhibit 50.

Exhibit 50 - IronPlanet significantly increased the scale of Ritchie Bros.’ online platforms


The acquisition offered Ritchie Bros. a number of benefits including: 1) a scalable technology platform; 2) a larger tech-focused talent pool; and, 3) IronPlanet complementing the existing EquipmentOne and Mascus businesses, creating a value proposition that could cater to a broader group of potential customers. Overall, it allowed Ritchie Bros. to both increase share of wallet with existing customers as well as gain new customers.

As noted in Exhibit 50 above, GTV associated with online platforms (i.e., GTV excluding its live auctions) as a % of total GTV remains relatively low, and provides a strong case for maintaining a network of physical sites. Many consignors prefer to offload their equipment in the early stages of the transaction (i.e., delegating the inspections, appraisals, marketing, and logistics to the auction house).

Having said that, it is important to highlight that a majority of total GTV is still won through online channels (i.e., by online bidders that may be present at live auctions, or those following the auction online). Exhibit 51 illustrates that online buyers have accounted for an increasing proportion of total GTV wins since the acquisition of IronPlanet. The large increase in 2020 reflects the impact of the pandemic and the shift to 100% online bidding at the company’s live auction sites in Q1 2020.

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IronPlanetacquisition


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Exhibit 51 - Ritchie Bros. shifted seamlessly to 100% online bidding in early 2020 (% of GTV)


We would group the progress on the digital evolution following the IronPlanet transaction into three major “milestones”. The first was the launch of Marketplace-E. Launched in early 2018, Marketplace-E was created by combining EquipmentOne (which at that point specialized in transportation and energy assets) with IronPlanet’s Daily Marketplace (a defined-period reserve format specializing in construction assets). The second milestone was the transition to 100% online transactions/events (even in the live auction channel) in response to the COVID-19 pandemic. Finally, the third major post-IronPlanet technology-based development was the December 2020 acquisition of Rouse Services, a data-driven firm that should enhance Ritchie Bros.’ capabilities in data analytics and shore up the marketplace portfolio.

Exhibit 52 - The technology-enabled journey from “auctioneer” to “global marketplace”


54% 59% 65%

94%

46% 41% 35%

6%

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2017 2018 2019 2020

Online buyers % of total GTV Live buyers % of total GTV

Core Ritchie Bros. – 1958

IronPlanet – 2017

Mascus – 2016

EquipmentOne – 2013

AssetNation – 2012

Rouse Services – 2020

RB Asset Solutions – 2018

Marketplace-E – 2018

Scalable, holistic technology-driven marketplace

Technology-enabled solutions with ancillary

services

Auctioneer

Launches & acquisitions Ritchie Bros. business modelChronology

2018 – 2020

2012 – 2017

1958 – 2012


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




RB Asset Solutions (“RBAS”) provides a new way to go-to-market We expect that RBAS, the company’s complete end-to-end asset management and disposition system, will be a key enabler of the transition towards becoming a digitally enabled marketplace. RBAS was launched in Q3 2018, and was introduced as an “innovative SaaS-based offering to our customers, leveraging the power of our technologies, global reach and network effect, driven by our platform.” RBAS allows the company to: 1) embed itself into customers’ infrastructure (ERP systems), creating more stickiness with customer accounts; 2) provide a suite of value-added offerings (IMS, pricing tools, inspection apps, etc.), creating non-GTV related revenue opportunities; and, 3) provide customers the option to sell through one of Ritchie Bros.’ channels, creating GTV related revenue opportunities.

Exhibit 53 - A look at the three segments of the global used equipment market and Ritchie Bros.’ brands serving each silo


RBAS is comprised of three key components: 1) the Inventory Management System (“IMS”); 2) data; and, 3) services. These RBAS components are combined to provide a suite of tools, services, and marketplaces that equipment owners can use to maximize the value of their fleet. The RBAS platform is delivered over the cloud, meaning that the platform is highly scalable. In the following sections, we will highlight how this platform will be central to the company’s strategy to drive increased penetration in the Midstream ($140 billion) and Upstream ($130 billion) channels of the used equipment market.

Inventory Management System: foundational to unlocking value from RBAS The Inventory Management System (or IMS) is the gateway through which users can leverage all other services within the RBAS. As the name implies, the IMS is the platform where customers upload their inventories/asset fleets. Once a customer uploads their inventory/fleet to the IMS, they can use the RBAS platform as a one-stop shop to manage their assets, leverage the company’s data repository to make the most optimal decisions regarding their assets, sell their assets using one of Ritchie Bros. channels, and order other ancillary services. Ritchie Bros. has initially focused on smaller end-users who may be managing their fleet in a more “manual” way (e.g., spreadsheets) and can transition to this online platform easily. For its larger, strategic accounts, Ritchie Bros. has API-based integrations with the


617267_08085208-f42c-4a75-88f8-fe85d54c8fc2.pdf




clients’ ERP systems. As of their December 2020 Investor Day, management noted that they had ~1 million assets under management in the IMS.

Providing easy-to-access asset level data can help drive adoption of RBAS The second pillar of RBAS is the company’s extensive data repository that helps asset owners get a better understanding of pricing. Ritchie Bros. has access to historical auction data, market trends data and pricing indices, and the acquisition of Rouse provided the company with a perspective outside of the traditional auctions channel. Ultimately, Ritchie Bros.’ rich data sets (which now include legacy Ritchie + Rouse data), combined with customers’ own utilization/maintenance records, should help customers make more informed decisions regarding their fleets (i.e., maximize the value of their fleets). An example of Ritchie Bros. leveraging its data to provide relevant asset level information is the recently introduced RB Price Estimate tool in the IMS. This tool uses machine-learning based pricing algorithms to analyze the characteristics of a specific asset within the context of historical prices achieved on Ritchie Bros.’ various platforms to provide an estimated value for the asset.

À la carte menu: RBAS hosts a suite of services for customers The ultimate goal of the IMS is to serve as the customer’s gateway to access a wide range of disposition-related services. Ritchie Bros.’ new go-to-market strategy not only allows the company to be more competitive within the ~$300 billion used equipment market, but also offers the ability to provide a wide array of potential products/services (an incremental $100-$150 billion market). The company defines services very broadly and includes the data and analytics mentioned above, access to the numerous disposition channels, as well as the breakup of its traditional full-service offering into “micro services” (inspections, escrow, financing, payment processing, title transfer and storage). See Exhibit 54. The idea here is that once a piece of equipment is added to the IMS, the customer has the flexibility/choice to consume the micro services on an as needed basis.

Exhibit 54 - Unlocking opportunities beyond the ~$300 billion used equipment market



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Challenge will be to drive adoption … which is not an easy task, in our view As detailed above, the company has established a well-rounded omni-channel platform that offers customers significant flexibility in how and where they transact, and it also offers a number of tools to help them optimize the value they realize for their assets. In our view, the challenge for the company moving forward will be to drive increased adoption of its online offerings (IMS, RBAS, etc.). This will require Ritchie Bros. to convince customers of all sizes to “upload” their fleets to the company’s portal and leverage its platform as their one-stop shop to manage their assets. For smaller customers, the company may have to convince some to transition away from manual processes they may be using (think spreadsheets), and for larger/strategic customers, they may have to utilize Ritchie Bros.’ platform in conjunction with systems/platforms they may already be using internally. The other obvious consideration is competition – there are large-scale platforms (e.g., Machinery Trader) that some customers may already be using. In such cases, it may be difficult to get customers to shift away from a platform they have become accustomed to.

Increasing penetration in the Midstream channel Having solidified its positon as the market leader in the auctions channel, the company has increasingly focused on the Midstream and the Upstream used equipment channels over recent years. The Midstream channel is estimated to be a $140 billion market encompassing private peer-to-peer transactions (either direct or through brokerage arrangements). In this section, we will highlight how the RBAS platform could help drive penetration in the highly fragmented midstream market. We view MarketPlace-E as a key driver of increased penetration in the Midstream channel, supported by listing and private transaction offerings (Mascus and Private Treaty).

Marketplace-E/listing services Ritchie Bros.’ primary offerings in the Midstream channel include Marketplace-E, Mascus, RB Private Treaty, and GovPlanet. Marketplace-E is a reserved online marketplace that provides customers with options such as “Make Offer”, “Buy Now”, and “Reserve Price”, which provide users more control over the transaction, whereas the traditional unreserved format of Ritchie Bros.’ live auctions has no minimum bids or reserve prices, and each item is sold to the highest bidder.

Exhibit 55 - Online marketplace GTV has become a bigger piece of the pie; proportion of fee revenue has increased in tandem

GTV by channel (2015-2020)

Service revenue mix (2015-2020)


97% 97%88% 83% 81% 76%

3% 3%

12% 17% 19% 24%

2015 2016 2017 2018 2019 2020

Live on site auctions Online marketplaces

79% 75%63%

56% 54% 52%

21% 25%37%

44% 46% 48%

2015 2016 2017 2018 2019 2020

Commissions Fees


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Historically, GTV from online marketplaces (which includes Marketplace-E) has grown at a faster rate than GTV from live on-site auctions, and Marketplace-E has been one of the fastest growing service offerings within this channel. When IronPlanet was acquired in 2017, ~12% of the combined firm’s GTV was generated in online marketplaces (from ~3% in 2016); however, the mix has increased to ~24% in 2020. See LHS of Exhibit 55 above. Similarly, Ritchie Bros.’ mix of revenue generated from fees increased from ~37% in 2017 to ~48% in 2020, driven in part by its increased presence in the Midstream channel (i.e., generating new revenue streams such as listing fees). See RHS of Exhibit 55 above.

Mascus: An online portal for heavy equipment transactions In February 2016, Ritchie Bros. acquired Mascus International Holding (“Mascus”), an Amsterdam-based listing company, for $26.6 million. Mascus operates a global online portal for transacting in heavy equipment and vehicles, and the acquisition not only expanded the breadth of Ritchie Bros. solutions by adding a listing platform, but also provided the company with a turnkey tech-enabled asset management solution. Mascus helped drive fee revenue for Ritchie Bros. and provided complementary geographic exposure. Mascus was already a leading online heavy machinery brand in Europe, with similar end-market coverage to Ritchie Bros., while Ritchie Bros. bolstered Mascus’ presence in the U.S. Mascus is also a key component of the RBAS offering as it provides customers with the added optionality of using a listing service that can facilitate peer-to-peer transactions.

Private Treaty: A more discrete channel Ritchie Bros.’ private brokerage service, Private Treaty, is appropriately named for its private and confidential nature as it allows end users to privately negotiate and transact for used equipment (typically best suited for specialized and/or high-value heavy equipment not suitable for traditional auction or listing channels). Through Private Treaty, Ritchie Bros. facilitates these negotiations and manages the settlement of transactions.

Increasing penetration in the Upstream channel The Upstream channel is a ~$130 billion annual market, and transactions in the channel include dealers, rental companies and other retail participants transacting directly with end users. Given that some participants (i.e., dealers and rental companies) are also Ritchie Bros.’ customers, it is critical that the company’s participation and expansion in this channel do not directly “compete” with existing players.

Pursuing “cooperative competition” to drive penetration with strategic accounts Strategic accounts refer to larger customers such as rental companies, dealers, very large construction companies, financial institutions, etc. In this section we highlight how RBAS is also intended to improve penetration with this customer group and tap additional revenue streams (including the $100-$150 billion parts and services market). Often times, Ritchie Bros. acts as a facilitator for strategic accounts by providing insights and services that can help strategic accounts realize improved pricing.

It is a more “cooperative” model as opposed to a “competitive” one. Ritchie Bros. offers tools and services to help these larger institutions optimize the returns they realize on their large fleets. The key in this channel, in our view, will be to ensure that these larger players become involved with IMS/RBAS and leverage Ritchie Bros.’ tools and platforms to manage their fleets. The idea here is that leveraging IMS/RBAS should allow these customers to gain a better understanding of market (pricing) trends, and should also create opportunities for Ritchie Bros. to “sell” some of its micro services (which are offered via RBAS), and potentially lead these customers to sell equipment through the company’s platforms to some extent.


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Parts and services is another sizable opportunity Management estimates that the parts and services market is $100-$150 billion in size. When fully operational (i.e., after uploading their fleets) on RBAS, customers should be able to “add on” parts and services offerings as they are “checking out”. While the sale of the part/service ultimately flows through an OEM/dealer (think Finning or Toromont), Ritchie Bros. can “clip a fee” from that transaction for the referral. This allows Ritchie Bros. to participate in this market without having to directly compete with the incumbents. This form of “cooperative competition” only strengthens the company’s relationship with strategic accounts, in our view, and can allow Ritchie Bros. to further integrate itself with these sizable industry participants.

Marketplace solutions strengthen relationship with CAT and its dealers As part of the IronPlanet transaction, Ritchie Bros. entered into an initial five-year strategic alliance agreement with Caterpillar (with option to renew), whereby the company would support Caterpillar and its dealers using its data intelligence, sales information and marketing efforts. Ritchie Bros. also acquired CAT Auction Services, a brand for on-site auctions at Caterpillar dealer sites. Through Ritchie Bros., Caterpillar and its dealers gain access to lead generation data on not only who bought the equipment, but additional color on other bidders as well. The company can also provide leads for parts and services work (as discussed above). In return, Ritchie Bros. became Caterpillar’s preferred global partner for live onsite and online auctions for used equipment. Ritchie Bros.’ participation in the $100-$150 billion products and services market aligns directly with Caterpillar’s goal of doubling its Machinery, Energy & Transportation (“ME&T”) services sales from its 2016 baseline of $14 billion to $28 billion by 2026.


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Company Description Headquartered in Burnaby, British Columbia, Ritchie Bros. Auctioneers Incorporated is a global leader in asset management technologies and the disposition of commercial assets, with over 40 auction sites (50+ auction sites on a pro-forma basis when including the pending acquisition of Euro Auctions) and 2,600+ full time employees as of Q2 2021 (~2,820 for the pro-forma business). Ritchie Bros. helps customers transact in used and unused earthmoving equipment, truck trailers, government surplus, oil & gas equipment, and other assets. Through its global marketplaces, Ritchie Bros. also offers customers a number of channels where they can dispose of assets, including: 1) live, unreserved auctions; 2) IronPlanet weekly online auctions; and, 3) Marketplace-E (reserved online marketplace), among others. In addition, the company provides a wide array of services including financing, appraisals, inspections, listing services, logistics and other ancillary services. In 2020, Ritchie Bros. generated revenue of $1.4 billion (~$1.7 billion on a pro-forma basis) and Adjusted EBITDA of $354 million. On a pro-forma basis, including the contribution from Euro Auctions, 2020 Adjusted EBITDA would have been ~$424 million (including targeted run-rate synergies of $13 million).

Exhibit 56 - Revenue [LHS]; Adjusted EBITDA and Adjusted EBITDA margin [RHS]

Revenue ($MM)

Adjusted EBITDA ($MM) [LHS] and Adjusted EBITDA margin [RHS]


Ritchie Bros. operates across two principal business segments: 1) Auctions and Marketplaces (“A&M”; ~90% of 2020 revenue); and, 2) Other Services (~10%). See Exhibit 57 [LHS]. Pro-forma the acquisition of Euro Auctions, we estimate the mix of A&M revenue will increase modestly to ~92% of consolidated 2022 revenue.

Exhibit 57 - Ritchie Bros. 2020 revenue by business segment [LHS]; Ritchie Bros. 2020 GTV by end-market [RHS]

Ritchie Bros. revenue by business segment (2020)

Ritchie Bros. 2020 GTV mix by end-market

Source: Company reports, Company presentation, RBC Capital Markets

$1,170 $1,319 $1,377 $1,444

$1,827

$0

$400

$800

$1,200

$1,600

$2,000

2018 2019 2020 2021E 2022E

$257 $295

$354 $366

$453

22.0% 22.3%25.7% 25.3% 24.8%

0%

10%

20%

30%

40%

50%

$0

$100

$200

$300

$400

$500

2018 2019 2020 2021E 2022E

Auctions and Marketplaces

90%

Other10%

Construction, 55%

Transportation, 22%

Other, 23%


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The A&M segment includes live, on-site auction solutions, online auctions and marketplaces, as well as brokerage services. The Other Services segment includes offerings such as RBFS, RBAS, Mascus (listing service), among others. Buyers leveraging Ritchie Bros.’ platforms include end users (such as construction companies/contractors), original equipment manufacturers (“OEMs”), OEM dealers and other equipment owners (i.e., rental companies) in end-markets including heavy construction, transportation, agriculture, energy, among others. See Exhibit 57 [RHS].

An overview of the key products and services offered Over its history, Ritchie Bros. was primarily focused on live, unreserved, on-site auctions, but over the more recent years, the company has expanded its offerings via organic and inorganic initiatives and has transformed the company into a full-service marketplace. As noted in the section, Market opportunity + Supply & demand setup, the auction channel accounts for ~$30 billion of the total annual ~$300 billion global used equipment market. The current go-to-market strategy better enables the company to increasingly compete in the $140 billion Midstream channel and the $130 billion Upstream channel, in our view.

Exhibit 58 - List of core Ritchie Bros.’ solutions/services offered by operating segment

Auctions and Marketplaces

Brand Solutions Description

Live unreserved onsite auctions with live simulcast (held at one of 40+ operational facilities, or off-site) Onsite and online bidding through website (rbauction.com) or mobile app Certainty of sale – no minimum bids or reserve prices

Online marketplace for selling and buying used heavy equipment (auctions are held every Thursday in North America; monthly in the rest of the world)

Online bidding – sale & transactions all take place online Equipment sold from customer premises; no need to move equipment to a physical auction site

Online marketplace offering multiple price and timing options (buy now, make offer, and reserve price) Increased seller control over price and process Buy and sell anytime – no waiting for the next event

Confidential, negotiated sale of large equipment Ritchie Bros. estimates private channel makes up $140 billion (~47% of the total used equipment market)

Online marketplace for the sale of government and military assets; weekly online auctions Selling rolling stock (vehicles, construction equipment) and surplus non rolling stock (clothing, industrial

equipment, medical equipment, and field gear)

Operates unreserved heavy equipment auctions through an omni-channel platform (onsite and online

bidding) under two brands in Europe and North America: Euro Auctions and Yoder & Frey

Other Services

Brand Solutions Description

A complete end-to-end asset management and disposition system designed to help customers optimize their disposition process, by offering a complete inventory management system, data analytics and dashboards, branded e-commerce sites, and multiple external sales channels

Leading European online equipment listing service and B2B portals

Offering financing and leasing to buyers through both live and online auction channels, as well as financing equipment outside of RBA channels

RBA does not underwrite the financing; leverages finance institutions to find the lender for the client


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Unbiased, certified appraisal services, as well as truck and lease return inspection services

Leader in market intelligence on sales and rental equipment data

Note: Other brand solutions within the Auctions and Marketplaces segment include Kruse Energy (selling used energy equipment), Truck Planet (online truck and trailer marketplace) and Leake (selling collector vehicles). Other brand solutions within the Other Services segment include other ancillary services (painting, repair work), RB Inspection Services, and RB Logistics (end-to-end transportation solution); Ritchie Bros. announced the acquisition of Euro Auctions on August 8, 2021 and expects the transaction to close in late 2021 or early 2022. Source: Company reports, RBC Capital Markets

The range of options made available by Ritchie Bros. to potential consignors (sellers) offer varying degrees of control/certainty of sale. See Exhibit 59. At one end of the spectrum, the Mascus listing service (top left in Exhibit 59) provides users with a high degree of control, less certainty of sale and requires more effort on the part of the seller. Meanwhile, Ritchie Bros.’ live, unreserved, on-site auctions (bottom right in Exhibit 59) require limited effort on the part of the seller (Ritchie Bros. takes care of everything), but does not provide the same level of control to the seller (i.e., the equipment will sell at the auction, regardless of price).

Exhibit 59 - Ritchie Bros.’ offerings cater to varying degrees of control/effort


Geographic exposure largely unchanged since 2020, however … In 2005, the U.S. represented ~57% of Ritchie Bros.’ revenue mix, followed by Canada (~23%), Europe (~13%) and the rest of the world (~7%), which is largely consistent with the company’s revenue mix based in 2020. From 2005-2015, we note that the revenue mix shifted from the U.S. (which was impacted the most post financial crisis) towards Canada (which benefited from a booming Oil & Gas market). However, from 2015-2020, U.S. exposure increased as a result of the IronPlanet acquisition (~93% of IronPlanet’s 2015 revenue was from the Americas).


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Exhibit 60 - Evolution of revenue by geography (pre- and post-IronPlanet)

Revenue by geography – 2005

Revenue by geography – 2015 (pre-IronPlanet)

Revenue by geography – 2020


… the acquisition of Euro Auctions increases exposure to “International” markets Euro Auctions generates ~90% of its Hammer Value (which approximately = GTV) in markets outside of the U.S. As a result, the GTV mix by geography (and ultimately, the revenue mix) going forward will likely be more weighted towards international markets. On a pro-forma basis, 55% of the combined company’s GTV would be generated in the U.S. (60% previously), 23% in Canada (26% previously), and 22% from International markets (14% previously).

Overview of Ritchie Bros.’ revenue drivers 1. Commissions (~33% of 2020 revenue) – Ritchie Bros. generates commissions from

equipment sales at live auctions, online marketplaces, and private brokerage services. Customers can sell using “Straight Commission contracts” (Ritchie Bros. gets a pre-negotiated commission rate; customer receives the gross proceeds from the sale less a pre-negotiated commission rate), and “Guarantee contracts” (consignors are guaranteed a minimum amount plus an additional amount if proceeds exceed a specified level). A third option is referred to as “Inventory contracts” and is discussed below.

2. Fees (~30% of 2020 revenue) – This includes inspection fees, fees from value-added services and make-ready activities, as well as fees paid by buyers.

3. Inventory sales revenue (~37% of 2020 revenue) – Ritchie Bros. purchases, takes custody, and holds the equipment and other assets before they are resold in the ordinary course of business. The accounting treatment of this process includes the GTV of the equipment sold being recorded as revenue (at gross value) and the associated cost (price paid by Ritchie Bros.) being recorded as COGS. This revenue recognition method came into effect on January 1, 2018, when Ritchie Bros. adopted Topic 606, which changed the basis of presentation of revenue earned from inventory sales and ancillary and logistical services from net to gross. There was no impact on operating income, the balance sheet, or the cash flow statement as a result of this adoption.

Ritchie Bros. collectively refers to Guarantee and Inventory contracts as “underwritten” or “at-risk” contracts, as there is a fixed cost associated with those contracts, while the revenue is dependent on market conditions at the time of sale (i.e., there is some level of risk that the company could incur a loss).

In Exhibit 61 [top], we detail Ritchie Bros.’ revenue based on commissions, fees, and inventory sales. In Exhibit 61 [bottom], we highlight Ritchie Bros.’ underwritten or “at-risk” % of GTV, and overlay the gross margin that the company generated on inventory sales in the corresponding period. We note that the higher mix of underwritten GTV and the lower margin in certain years could be a function of a weak industry pricing environment, which could lead

U.S., 57%

Canada, 23%

Europe, 13%

Other, 7%

U.S., 50%Canada,

32%

Europe, 9%

Other, 8%

U.S., 55%

Canada, 22%

Europe, 12%

Other, 11%


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more consignors to sell their equipment to Ritchie Bros. outright as opposed to selling through the auction channel (and this dynamic is also reflected in the lower gross margin that the company ultimately realizes).

Exhibit 61 - Historical composition of revenue [top]; Mix of straight commission vs. underwritten contracts [bottom]

Ritchie Bros. revenue composition by commissions, fees, and inventory sales ($MM)

Ritchie Bros. GTV composition: straight commission vs. underwritten “at-risk” contracts (and associated impact on GM % on Inventory sales)


Live auctions remain the core business and are the largest driver of GTV Ritchie Bros. offers a number of disposition channels, but the majority of GTV is still realized through its live, unreserved, on-site auctions (~76% or $4,127 million of $5,411 million total GTV in 2020). We note that bidders are increasingly participating in live auctions online via simulcast, which was the only bidding method available for much of 2020 as a result of COVID-19 (94% of GTV in 2020 was purchased by online buyers, compared to 65% in 2019). We expect live auctions to remain the core business, albeit with an increasing shift to marketplace channels as the company continues to evolve from “auctioneer” to the “global trusted marketplace”.

In Exhibit 62, we note the number of auctions, bidder registrations per auction, consignors per auction, and lots per auction from 2010-2020. As highlighted in the exhibit, there was a notable increase in consignors per auction, lots per auction, and bidder registrations per auction in 2020, which reflected in part a decrease in the number of auctions to 168 (from 194 in 2019), and contributed to an increase in GTV per auction. The YoY decrease in auctions during 2020 (-13% YoY) reflected ongoing network/site optimization (e.g., pooling smaller regional events into larger virtual events) and the transition to 100% online bidding. The number of bidders per auction of 5,697 was up 51% YoY (from 3,776 in 2019), and reflected strong demand for used equipment as well as the decline in total number of auctions held. While there were ~330

92% 87% 80% 80% 79% 38% 33% 41% 36% 33% 33%

10% 17% 24%28% 28% 30%

52% 51% 36%

36%39%

37%

$357.1 $396.1 $438.0 $467.3 $481.1

$1,080.5 $1,127.0

$971.2

$1,170.0

$1,318.6$1,377.3

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Commissions Fees Inventory sales

Pro-forma Topic 606 adoption

76% 64% 68% 72% 69% 71% 75% 83% 83% 80% 80%

24% 36% 32% 28% 31% 29% 25% 17% 17% 20% 20%

7.0%5.8%

9.9%

6.5%7.9%

10.1%11.6% 11.0%

6.6%

9.4%

-1.0%

1.0 %

3.0 %

5.0 %

7.0 %

9.0 %

11. 0%

13. 0%

15. 0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100 %

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Straight commission contracts [LHS] Underwritten "at-risk" contracts [LHS] Gross profit margin on inventory sold [RHS]


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consignors per auction in 2020 (+9% YoY from 303 in 2019), the total consignors decreased in 2020 (55,400 consignors in 2020, -6% YoY from 58,850 in 2019). More notably, average lots per auction in 2020 was 2,556 (+17% YoY from 2,179 in 2019), with total number of lots increasing to 429,400 (+2% YoY from 422,800 in 2019).

Exhibit 62 - Key on site auction metrics reflect site rationalization, increased online bidding, and robust demand

Number of auctions

Bidder registrations per auction

Consignors (000s)

Consignors per auction

Lots (000s)

Lots per auction


230 228 221 245

233 229 232 245

183 194 168

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Ritchie Bros. closed5 on site locations in North America

1,481 1,689 1,762 1,735

1,989 2,216 2,366 2,349

3,033

3,776

5,697

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

40 41 42 44 45 48

53 57

54 59

55

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

175 181 190 178

194 208

230 232

295 303 330

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

277 269 287 301

320 355

399 383 377

423 429

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1,204 1,178 1,299 1,229

1,371 1,548

1,718 1,561

2,060 2,179

2,556

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020


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Appendix I – Interactive map of Ritchie Bros.’ and Euro Auctions’ global auction sites

Exhibit 63 - Please click on the image below to be directed to an interactive map of Ritchie Bros.’ pro-forma (including Euro Auctions) global network of auction sites

Source: Company reports, RBC Elements, RBC Capital Markets


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https://www.rbccm.com/assets/rbccm/docs/html/RBAEA_AuctionSites_2021-09-10.html


Target/Upside/Downside ScenariosRitchie Bros. Auctioneers Inc.

6m4m2m

M J J A S O N2019

D J F M A M J J A S O N2020

D J F M A M J J A2021

S

CURRENT 61.57

TARGET 65.00

CURRENT 61.57

TARGET 65.00

76

71

66

61

56

51

46

41

36

31

26

125 Weeks 30APR19 - 17SEP21

RBA US Rel. S&P 500 COMPOSITE MA 40 weeks

Source: Bloomberg and RBC Capital Markets estimates for Target

ValuationOur $65 price target is based on ~31.0x our blended2022/2023 Adjusted EPS forecast of $2.07. We believe ourtarget multiple fairly reflects the current operating backdrop(strong demand environment, but tight equipment supply),Ritchie Bros.’ organic growth outlook, its Free Cash Flowprofile, and potential for additional smaller-sized M&A overthe coming years. We value Ritchie Bros. at a premium to theAuctioneers/Online marketplaces peer group. Our price targetsupports our Sector Perform rating.

Upside scenarioIn our upside scenario, we assume Ritchie Bros. deliversbetter-than-expected top-line growth over our forecasthorizon, driven by stronger-than-expected GTV growth andstronger penetration into the midstream/upstream markets.We also assume that ongoing industry supply tightness isalleviated in the near- to medium-term, which would besupportive of GTV growth. Applying a 37.0x multiple to ahigher blended 2022/2023 Adjusted EPS forecast drives ourupside value of $81.

Downside scenarioIn our downside scenario, we assume that the “tight”equipment supply environment persists for longer-than-anticipated, which negatively impacts GTV growth andAdjusted EBITDA margins. We also assume slower tractionfor the RBAS platform, which could limit upside in theonline channels and impact the company's ability to drivepenetration in the midstream/upstream segments. Applyinga 25.0x multiple to a lower blended 2022/2023 Adjusted EPSforecast drives our downside value of $45.

Investment summaryPositioning for growth across multiple channels – Over thepast decade, the company has undertaken a strategic shifttowards becoming a multi-channel, full service marketplacefor customers looking to buy, sell, and manage their usedequipment (as compared to its historical positioning as anauctioneer). To support this evolution, the company hasleveraged investments in its technology platforms and hasundertaken a number of acquisitions.

Driving adoption of IMS/RBAS will be key – The company hasestablished an omni-channel platform that offers customerssignificant flexibility in how and where they transact, andit also offers a number of tools (i.e., relevant data) to helpcustomers optimize the value of their assets. The challengefor the company moving forward, in our view, will be to driveincreased adoption of its online offerings (IMS, RBAS, etc.).

Demand is strong, but supply is likely to remain constrained– Ritchie Bros. generates ~75%-80% of its GTV fromthe Construction and Transportation end-markets, and thedemand outlook in both of these markets is supportive.The supply of used equipment, however, is expected to beconstrained over the near- to medium-term, which couldimpact GTV growth.

We expect deleveraging ahead of management guidance– Following the (potential) closing of the Euro Auctionstransaction (expected in late-2021/early-2022), we estimatethat leverage will increase to 3.8x LTM Adjusted EBITDA.Absent any further M&A, we estimate leverage decreasingto ~2.5x by year-end 2023. The company is guiding to aleverage ratio <2.5x by year-end 2025, which we believe isa conservative target and likely reflects the assumption offurther small- to medium-sized M&A.

Risks to rating and price targetKey downside risks to our rating and price target include:1) equipment supply constraints impacting the industry forlonger than anticipated; 2) risks associated with guarantee/inventory contracts; 3) integration challenges following the(potential) closing of the Euro Auctions transaction; and,4) foreign exchange risk (Ritchie Bros. reports in USD, andgenerates ~40-45% of its GTV from regions outside the U.S.).

Key upside risks to our rating and price target include:1) an earlier-than-anticipated improvement in the supplyenvironment, which would drive better-than-expected GTV/revenue/Adjusted EBITDA margins; 2) stronger-than-expected"uptake" of the company's marketplace solutions; and,3) higher-than-expected revenue/cost synergies from thepending Euro Auctions transaction.





Company descriptionHeadquartered in Burnaby, British Columbia, Ritchie Bros. Auctioneers Incorporated is a global leader in asset managementtechnologies and the disposition of commercial assets, with over 40 auction sites (50+ auction sites on a pro-forma basis whenincluding the pending acquisition of Euro Auctions) and 2,600+ full time employees as of Q2 2021 (~2,820 for the pro-formabusiness). Ritchie Bros. helps customers transact in used and unused earthmoving equipment, truck trailers, government surplus,oil & gas equipment, and other assets. Through its global marketplaces, Ritchie Bros. also offers customers a number of channelswhere they can dispose of assets, including: 1) live, unreserved auctions; 2) IronPlanet weekly online auctions; and, 3) Marketplace-E (reserved online marketplace), among others. In addition, the company provides a wide array of services including financing,appraisals, inspections, listing services, logistics and other ancillary services. In 2020, Ritchie Bros. generated revenue of $1.4billion (~$1.7 billion on a pro-forma basis) and Adjusted EBITDA of $354 million. On a pro-forma basis, including the contributionfrom Euro Auctions, 2020 Adjusted EBITDA would have been ~$424 million (including targeted run-rate synergies of $13 million).

Required disclosuresNon-U.S. analyst disclosureOne or more research analysts involved in the preparation of this report (i) may not be registered/qualified as research analystswith the NYSE and/or FINRA and (ii) may not be associated persons of the RBC Capital Markets, LLC and therefore may not besubject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securitiesheld by a research analyst account.

Conflicts disclosuresThe analyst(s) responsible for preparing this research report received compensation that is based upon various factors, includingtotal revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generatedby investment banking activities of the member companies of RBC Capital Markets and its affiliates.

Please note that current conflicts disclosures may differ from those as of the publication date on, and as set forth in,this report. To access current conflicts disclosures, clients should refer to https://www.rbccm.com/GLDisclosure/PublicWeb/DisclosureLookup.aspx?entityId=1 or send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza,29th Floor, South Tower, Toronto, Ontario M5J 2W7.

A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services fromRitchie Bros. Auctioneers Incorporated in the past 12 months.

RBC Capital Markets, LLC makes a market in the securities of Ritchie Bros. Auctioneers Incorporated.

A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other thaninvestment banking services from Ritchie Bros. Auctioneers Incorporated during the past 12 months. During this time, a membercompany of RBC Capital Markets or one of its affiliates provided non-securities services to Ritchie Bros. Auctioneers Incorporated.

RBC Capital Markets has provided Ritchie Bros. Auctioneers Incorporated with investment banking services in the past 12 months.

RBC Capital Markets has provided Ritchie Bros. Auctioneers Incorporated with non-securities services in the past 12 months.

Explanation of RBC Capital Markets Equity rating systemAn analyst's 'sector' is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assignedto a particular stock represents solely the analyst's view of how that stock will perform over the next 12 months relative to theanalyst's sector average.RatingsOutperform (O): Expected to materially outperform sector average over 12 months.Sector Perform (SP): Returns expected to be in line with sector average over 12 months.Underperform (U): Returns expected to be materially below sector average over 12 months.Restricted (R): RBC policy precludes certain types of communications, including an investment recommendation, when RBC isacting as an advisor in certain merger or other strategic transactions and in certain other circumstances.Not Rated (NR): The rating, price targets and estimates have been removed due to applicable legal, regulatory or policy constraintswhich may include when RBC Capital Markets is acting in an advisory capacity involving the company.




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As of March 31, 2020, RBC Capital Markets discontinued its Top Pick rating. Top Pick rated securities represented an analysts bestidea in the sector; expected to provide significant absolute returns over 12 months with a favorable risk-reward ratio. Top Pickrated securities have been reassigned to our Outperform rated securities category, which are securities expected to materiallyoutperform sector average over 12 months.Risk RatingThe Speculative risk rating reflects a security's lower level of financial or operating predictability, illiquid share trading volumes,high balance sheet leverage, or limited operating history that result in a higher expectation of financial and/or stock price volatility.

Distribution of ratingsFor the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories -Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Outperform (O),Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings arenot the same because our ratings are determined on a relative basis.

Distribution of ratings

RBC Capital Markets, Equity Research

As of 30-Jun-2021

Investment Banking

Serv./Past 12 Mos.

Rating Count Percent Count Percent

BUY [Outperform] 787 55.70 318 40.41

HOLD [Sector Perform] 575 40.69 173 30.09

SELL [Underperform] 51 3.61 4 7.84

Rating and price target history for: Ritchie Bros. Auctioneers Incorporated, RBA US as of 17-Sep-2021 (in USD)

80

70

60

50

40

30

20Q2 Q3 2019 Q1 Q2 Q3 2020 Q1 Q2 Q3 2021 Q1 Q2 Q3

10-Aug-2018Rtg:SP

Target: 36.00

04-Mar-2019Rtg:SP

Target: 35.00

13-May-2019Rtg:SP

Target: 34.00

20-Aug-2019Rtg:SP

Target: 36.00

08-Nov-2019Rtg:SP

Target: 40.00

10-Feb-2020Rtg:NR

Target: NA

Legend:TP: Top Pick; O: Outperform; SP: Sector Perform; U: Underperform; R: Restricted; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage;NR: Not Rated; NA: Not Available; RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to datea security was removed from a recommended list; Rtg: Rating.

Created by: BlueMatrix

References to a Recommended List in the recommendation history chart may include one or more recommended lists or modelportfolios maintained by RBC Wealth Management or one of its affiliates. RBC Wealth Management recommended lists includethe Guided Portfolio: Prime Income (RL 6), the Guided Portfolio: Dividend Growth (RL 8), the Guided Portfolio: ADR (RL 10),and the Guided Portfolio: All Cap Growth (RL 12). RBC Capital Markets recommended lists include the Strategy Focus List andthe Fundamental Equity Weightings (FEW) portfolios. The abbreviation 'RL On' means the date a security was placed on aRecommended List. The abbreviation 'RL Off' means the date a security was removed from a Recommended List.

Equity valuation and risks





For valuation methods used to determine, and risks that may impede achievement of, price targets for covered companies, pleasesee the most recent company-specific research report at www.rbcinsight.com or send a request to RBC Capital Markets ResearchPublishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7.

Ritchie Bros. Auctioneers IncorporatedValuationOur $65 price target is based on ~31.0x our blended 2022/2023 Adjusted EPS forecast of $2.07. We believe our target multiplefairly reflects the current operating backdrop (strong demand environment, but tight equipment supply), Ritchie Bros.’ organicgrowth outlook, its Free Cash Flow profile, and potential for additional smaller-sized M&A over the coming years. We value RitchieBros. at a premium to the Auctioneers/Online marketplaces peer group. Our price target supports our Sector Perform rating.

Risks to rating and price targetKey downside risks to our rating and price target include: 1) equipment supply constraints impacting the industry for longer thananticipated; 2) risks associated with guarantee/inventory contracts; 3) integration challenges following the (potential) closing ofthe Euro Auctions transaction; and, 4) foreign exchange risk (Ritchie Bros. reports in USD, and generates ~40-45% of its GTV fromregions outside the U.S.).

Key upside risks to our rating and price target include: 1) an earlier-than-anticipated improvement in the supply environment,which would drive better-than-expected GTV/revenue/Adjusted EBITDA margins; 2) stronger-than-expected "uptake" of thecompany's marketplace solutions; and, 3) higher-than-expected revenue/cost synergies from the pending Euro Auctionstransaction.

Conflicts policyRBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request.To access our current policy, clients should refer tohttps://www.rbccm.com/global/file-414164.pdfor send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, SouthTower, Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time.

Dissemination of research and short-term trade ideasRBC Capital Markets endeavors to make all reasonable efforts to provide research content simultaneously to all eligible clients,having regard to local time zones in overseas jurisdictions. RBC Capital Markets provides eligible clients with access to EquityResearch Reports and to SPARC on the Firms proprietary INSIGHT website, via email and via third-party vendors. SPARC containsmarket color and commentary regarding subject companies on which the Firm currently provides equity research coverage.Research Analysts may, from time to time, include short-term trade ideas in Research Reports and / or in SPARC. A short-termtrade idea offers a short-term view on how a security may trade, based on market and trading events, and the resulting tradingopportunity that may be available. A short-term trade idea may differ from the price targets and recommendations in our publishedResearch Reports reflecting the Research Analyst's views of the longer-term (one year) prospects of the subject company, as aresult of the differing time horizons, methodologies and/or other factors. Thus, it is possible that a subject company's commonequity that is considered a long-term 'Sector Perform' or even an â€˜Underperform might present a short-term buying opportunityas a result of temporary selling pressure in the market; conversely, a subject company's common equity rated a long-term â€˜Outperform could be considered susceptible to a short-term downward price correction. Short-term trade ideas are not ratings,nor are they part of any ratings system, and the firm generally does not intend, nor undertakes any obligation, to maintain orupdate short-term trade ideas. Short-term trade ideas may not be suitable for all investors and have not been tailored to individualinvestor circumstances and objectives, and investors should make their own independent decisions regarding any securities orstrategies discussed herein. Please contact your investment advisor or institutional salesperson for more information regardingRBC Capital Markets research.

Analyst certificationAll of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all ofthe subject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly orindirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report.

Third-party-disclaimersSeptember 20, 2021 Sabahat Khan (416) 842-7880; [email protected] 63



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