Ritchie Bros. Auctioneers Incorporated (RBA)
Q4 2012 Earnings Call
February 26, 2013 11:00 am ET
Peter James Blake - Chief Executive Officer and Director
Robert K. Mackay - President
Robert S. Armstrong - Chief Strategic Development Officer
Steven C. Simpson - Chief Sales Officer
Robert A. McLeod - Chief Financial Officer
Yuri Lynk - Canaccord Genuity, Research Division
Jamie Sullivan - RBC Capital Markets, LLC, Research Division
Andrew Moussa - Crédit Suisse AG, Research Division
Hamzah Mazari - Crédit Suisse AG, Research Division
Neil Forster - Scotiabank Global Banking and Markets, Research Division
Nathan Brochmann - William Blair & Company L.L.C., Research Division
Scott L. Stember - Sidoti & Company, LLC
Bert Powell - BMO Capital Markets Canada
Chirag Patel - Jefferies & Company, Inc., Research Division
Stephen E. Volkmann - Jefferies & Company, Inc., Research Division
Gary F. Prestopino - Barrington Research Associates, Inc., Research Division
Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division
Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division
Ben Cherniavsky - Raymond James Ltd., Research Division
Previous Statements by RBA
» Ritchie Bros. CEO Discusses Q3 2010 Results – Earnings Call Transcript
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» Ritchie Bros. Auctioneers Incorporated Q1 2010 Earnings Call Transcript
Peter James Blake
Thanks, Candice. Good morning, everyone. I'm Peter Blake, CEO of Ritchie Bros. Thanks for joining us today on our 2012 year-end investor conference call. With me in Vancouver are Rob Mackay, our President; Rob McLeod, our CFO; Bob Armstrong, our Chief Strategic Development Officer; and Steve Simpson, our Chief Sales Officer.
Before we go on, I'd like to make a Safe Harbor statement. The following discussion will include forward-looking statements. Comments that are not statements of fact, including projections of future earnings, revenue, gross auction proceeds and other items, are considered forward-looking and involve risks and uncertainties. The risks and uncertainties that could cause our actual financial and operating results to differ significantly from our forward-looking statements are detailed from time to time in our securities filings, including our management's discussion and analysis to financial condition and the results of operations for the period ended December 31, 2012, which is available on the SEC, SEDAR and company website.
Actual results may differ materially from those contemplated in the forward-looking statements. We do not undertake any obligation to update the information contained in this call, which speaks only as of today's date.
Also, during today's call, we will talk about gross auction proceeds or GAP, which represents the total proceeds from all items sold at our auctions. Our definition of gross auction proceeds may differ from those used by other participants in our industry. GAP is not a measure of financial performance and is not presented in our financial statements. The most directly comparable measure in our statements is auction revenues, which represent the revenues we earned from our auctions.
The focus of our call today will be to review the highlights of our 2012 performance and to set the stage for 2013. We will also give you some insight into what we see happening in the used equipment marketplace.
While we did a lot of things right in 2012, including record GAP, opening new auction sites and laying the groundwork for Ritchie Bros. EquipmentOne, looking back on the year, we asked ourselves if there was anything that we could have done differently, what would they have been? And for us, there are 2 answers. One was hire more Territory Managers, and two was achieve better results in our at risk business. Having a full complement of highly productive Territory Managers is critical for us to deliver growth in GAP and auction revenues, and we did not hire enough of them in 2012. With the result that we ended the year with 259 Territory Managers, which were short of our target. Secondly, the underperformance of our at risk business negatively impacted our auction revenues. Together, we believe these 2 misses had a material impact on our bottom line.
2012 was a decent year for Ritchie Bros., but if we have performed better in these 2 areas, it would have been an excellent year. We still achieved record gross auction proceeds of $3.9 billion for the year. We set a record with $1 billion in volume in our Canadian auction sites. And we delivered pretax adjusted earnings growth of 17% when you exclude the incremental AssetNation acquisition cost. So while we are generally satisfied with the 2012 results, we know that we can and will do better in 2013, and we have taken a number of corrective actions for '13 to make that happen.
To date, we've had a handful of mainly U.S. auctions, including our big one in Orlando. And as always, the mix of what we sell is not consistent year-over-year and auction to auction. We are seeing strength in the prices of used equipment and our auction -- or volumes are hitting our targets giving us confidence that our first quarter will meet and exceed our Q1 2012 GAP.
Before Bob and Steve outline our plans for 2013, Rob Mackay will update you on the used equipment market.
Robert K. Mackay
Good morning, everyone. In 2012, GAP in our largest market, United States, remained flat overall, with the strength in the Eastern and Central U.S. making up for the weaknesses in the West. After years of negative economic news in the United States, we are noticing an increasing sense of optimism amongst our customers, and this has been reflected in the generally strong prices we have seen in the first auctions of the year.
Europe remains challenging in 2012, particularly in the North, although we made some important inroads in the region with the opening of our auction site in the U.K. While Southern Europe is still coping with their financial crisis, the need for our customers to create liquidity to move surplus assets has and will continue to generate good volumes for us. Our business model and our unique global presence enable us to match local supply with global demand, an extremely valuable proposition for equipment owners, especially in countries where domestic demand has been shrinking.