Good day and welcome everyone to the RB Global 3rd Quarter 2025 Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. At this time, I would like to turn the conference over to Samir Rappad. Please go ahead.

Hello and good afternoon. Thank you for joining us today to discuss our third quarter results. Jim Kessler, our Chief Executive Officer, and Eric Guerin, our Chief Financial Officer, are on the call with me today. The following discussion will include forward-looking statements including projections of future earnings, business, and market trends. These statements should be considered in conjunction with the cautionary statements contained in our earnings release and periodic SEC reports. On this call, we will also discuss certain non-GAAP financial measures for the identification of non-GAAP financial measures, the most directly comparable GAAP financial measures, and the applicable reconciliation of the two, see our earnings release, and periodic SEC reports. At this time, I would like to turn the call over to our CEO, Jim Kessler. Jim?

Thanks, Samir, and good afternoon to everyone joining the call. To begin, I want to acknowledge the disciplined execution and commitment of our teammates. Their performance underpins our ability to consistently over-deliver on our operational and financial commitments while advancing our strategic priorities that position us for long-term shareholder value creation. Our disciplined execution was evident again in the quarter, with adjusted EBITDA increasing 16% on a 7% increase in gross transactional value. Starting with the automotive sector, our momentum continued and unit volume increasing by 9% year-over-year. This marks the third consecutive quarter we have outpaced the market, achieving solid year-over-year gains in market share. On the back of this robust performance, we are pleased to announce a significant expansion of our partnership with the U.S. General Services Administration, or GSA, where we expect to provide disposition services to approximately 35,000 re-marketed vehicles on an annualized run rate basis. We have just started receiving vehicles and expect to reach full run rate in the second quarter of 2026. Over the past five years, we have supported GSA with new vehicle marshalling, preparing and delivering vehicles for use while providing care, custody, and control of fleet returns across our national network. Under the new award, our scope extends to remarketing fleet return vehicles through our marketplace, creating a true end-to-end solution. For GSA, this eliminates redundant handoffs and third-party transport from our yards, delivering meaningful call savings and operational simplicity. This competitive win underscores the strength of our platform and the unmatched value we deliver to our customers and partners. Specifically, we believe there are three key reasons we secured this new award. First, the breadth and depth of our marketplace and buyer base. which drives superior liquidity and pricing. Second, the scale and proximity of our U.S. physical footprint enable an efficient one-stop service. And lastly, our proven execution and service quality built over five years of partnership with GSA. As we advance our strategy for remarketed vehicles, vehicles that are not salvaged, we continue to see a substantial organic growth runway in our targeted market segment. The dynamics for this space remain favorable, and our differentiated approach, grounded in operational efficiency, partner alignment, and ability to leverage our real estate, positions us to capture incremental share. We are confident our strategy will continue to enable us to deepen engagement with existing partners while expanding into adjacent opportunities that complement our core capabilities. I am proud to share that our teammates continue to over-deliver in our commitments, consistently exceeding service-level targets, even as we scaled volumes in the quarter. This operational discipline translates into tangible P&L benefits for our partners, reinforcing the value proposition of our platform. On-time toe and title performance remain exceptional at 99.7% and 99.8% respectively for the quarter, underscoring the strength of our process improvements and investments. We have also continued to drive meaningful progress in the assigned to settle cycle times, which delivers two key benefits. First, our partners experience a lower depreciation as assets move more quickly through the marketplace. Second, we are able to process more vehicles per acre of space. By reducing the assigned to settle cycle time through a combination of branch incentives, IA loan payoffs, total procurement, and our virtual inspection platform, we have effectively added approximately 25 percent incremental capacity in our yards compared to pre-transaction levels. This incremental capacity positions us well to support future volume growth. On the demand side, we saw continued strength this quarter. Our active buyer base expanded, underscoring the resilience of our platform and the team's success in driving deeper engagement. We broadened our reach by adding a new market alliance partner in Central America, and further optimized our multi-channel auction format to enhance price discovery and support premium price realization. These actions are translated into measurable outcomes, gross returns, or salvage values as the percentage of pre-accident cash value continue to expand, supported an approximately 2.5% increase in the U.S. insurance average selling price. Moving to the commercial, construction, and transportation sector, our growth strategy is playing out. Despite a complex and dynamic macroeconomic environment, we drove 14% year-over-year GTV growth, excluding the impact of the yellow corporation bankruptcy last year. We remain committed to investing in growth while also enhancing operational efficiency. This includes optimizing our territory manager network, deploying targeted productivity initiatives across the organization, and thoughtfully executing strategic M&A. I am pleased to announce that we have entered into a definitive agreement to acquire Smith-Broughton auctioneers and allied equipment sales for approximately $38 million. This strategic tuck-in acquisition strengthens our geographic footprint in Western Australia. This transaction brings on board a highly capable team of sales professionals with deep local relationships and market knowledge. This acquisition enhances our ability to serve customers in key verticals and aligns well with our broader growth strategy in the region. We currently expect this acquisition to close by year's end. At RV Global, we never stopped working to become more efficient. And in the third quarter, we realigned the executive leadership team and cascaded out a new operating model to the entire organization. This new transformative operating model is designed to unlock sustainable growth and drive long-term value for our shareholders. Senior leaders are driving a culture of clarity, focus, and speed, ensuring every team member is focused on what matters most, increase in transactional values, and deliver exceptional customer experiences that drive tangible value for our partners. Under this new model, RB Global's senior leadership teams will provide strategic oversight, efficient scaling, and promote best practices with functional support teams at the enterprise level, essentially providing a shared service function. In addition, we will have two specialized, high-performing marketplace execution teams that will each set enterprise-wide vision, growth strategy, and operational discipline while empowering brand-specific go-to-market teams to drive execution tailored to their unique marketplaces. keeping our go-to-market leadership close to customers and the verticals they operate in helps to maximize the speed and efficiency which buyers and sellers can do business on our platforms add value for our partner and position the company for a strong future in addition to looking for strategic acquisitions our disciplined approach to growth recognizes that strategic pruning is essential to sharpen our focus and simplifying the organization. We chose to divest DDI technologies in the fourth quarter. The team acquired this asset with the goal of using DDI technology to reduce operational cycle times. After our comprehensive review, we determined that it would be more efficient to divest DDI to a third party. We are confident that our operating model not only preserves RB Global's legacy, but also sets the stage for the next generation of growth, resilience, and shareholder value creation. We expect that our new operating model would generate over $25 million in total run rate savings by the second quarter of 2026. Our vision permeates the organization, and we are committed to over-delivering for our customers, partners, and investors as we build the future. I will now pass the call to Eric to review the financials and provide an update to the outlook.

Thanks, Jim. Total GTV increased by 7%. Automotive GTV increased by 6%, driven by a 9% increase in unit volumes, partially offset by a decline in the average price per vehicle sold. Unit volume growth was driven by year-over-year increases in market share across salvage and remarketed vehicles, as well as by organic growth from existing partners. U.S. insurance ASP increased approximately 2.5 percent. However, the average price per lot sold declined in automotive, primarily because of a higher proportion of remarketed vehicles were transacted compared to the prior year. In the third quarter, the macro environment remained favorable for salvage volumes, primarily due to the persistent inflation gap between vehicle repair costs and used vehicle values. This dynamic continues to drive an increase in the total loss ratio, with CCC Intelligent Solutions estimating the total loss frequency across all categories rose by nearly 70 basis points to 22.6%, up from 21.9% in the same period last year. year. GTV in the commercial construction and transportation sector increased by 9%, driven by a higher average price per lot sold, partially offset by a 15% decline in lot volumes. Excluding the impact of the yellow corporation bankruptcy, unit volumes would have increased approximately 2% year over year. The average price per lot sold increased primarily due to improvements in the asset mix. The favorable mix reflects a decline in lot volumes from the rental and transportation sectors, where assets typically carry lower average selling prices. As Jim noted, excluding the impact of the Yellow Corporation bankruptcy from the prior period, the increase in GTV for the commercial construction and transportation sector would have been approximately 14 percent. Moving to service revenue, service revenue increased 8 percent on higher GTV and a higher service revenue take rate. The service revenue take rate increased approximately 20 basis points year over year to 21.7 percent, driven by a higher average buyer fee rate structure, partially offset by a lower average commission rate and declines in our marketplace services businesses. Moving to adjusted EBITDA. Adjusted EBITDA increased 16% on GTV growth, expansion in our service revenue take rate, and a higher inventory return. Our team remains focused on managing our cost structure to maximize profit flow-through. In alignment with our broader organizational realignment, we recognized approximately $10 million and restructuring charges during the quarter, primarily related to severance costs. Our commitment to efficiency and discipline execution was once again evident in the third quarter, as adjusted EBITDA as a percentage of GTV expanded to 8.4%, up from 7.8% in the prior year. This margin improvement reflects the early impact of our transformation initiatives and underscores our ability to drive leverage in the model as we scale. Adjusted earnings per share in the third quarter increased by 31%, driven by a higher operating income, a lower net interest expense, and a lower adjusted tax rate. Our adjusted and gap tax rates came in lower than previously guided because we were able to capture certain additional tax deductions on our 2024 U.S. federal tax return, which we recently filed, and expect to do the same for 2025 and in the future. These additional deductions have been reflected in our full-year rate. As we look ahead, we now expect full-year 2025 gross transaction value growth to range between 0% and 1%, broadly in line with what we communicated last quarter. We are raising our full year 2025 adjusted EBITDA guidance range to $1.35 billion to $1.38 billion, reflecting continued operational discipline. Please note, our guidance does not incorporate any contribution from CAT-related GTV, given the unknowable nature of extreme weather events. Recall that CAT volumes contributed approximately $169 million in automotive GTV in the fourth quarter of 2024, which will affect the year-over-year growth comparison when we report the fourth quarter. With that, let's open the call for questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We'll take our first question from Sabahat Khan at RBC Capital Markets.

Great. Thanks and good afternoon. Just, again, starting off with the last comments there by Eric around the full year guidance, if you can maybe just give us a setup on how you view both segments heading into the tail end of the year. Obviously, good performance here in Q3 relative to what the street was expecting, but just curious kind of some of the puts and takes that you're seeing into the tail end of this year that led to this nudge up in guidance. So thanks so much.

Yeah. So actually the guidance, we tightened the range on GTV, so we didn't nudge it up. If you recall last quarter, I said zero to 3%, but guided to the lower end of the range. So with one quarter left, I've just tightened that range to 0% to 1% on GTV. Was that your question you were referring to?

Sorry, it was more on the EBITDA side on just like well- The street expectations, the magnitude of the guide-up on EBITDA versus maybe the outperformance. Yeah, sorry, just to clarify. Yeah, yeah, thank you.

No, on the EBITDA side, we had strong performance in Q3 but was in line with what we were expecting. However, we did outperform a little bit with the operating model that we put in place. As I described, we have some savings on a run rate basis that will be $25 million, but we do have some savings that will occur in the fourth quarter of this year. And I've incorporated some of that savings into the guide that I just described in my prepared remarks.

Okay. And then just for my follow-up, I guess we can maybe shed some color on this agreement with the GSA. say, I guess it looks like from your material, about a 35,000 vehicle addition. Maybe you can just walk us through what were you doing for them before sort of on the vehicle front on volume. And then should we assume the economics on these remarketed vehicles are similar to what you would collect on 35,000 vehicles if these were added on the salvage side?

Thank you. yep i'll start the conversation then pass to eric um to jump in so i think as i mentioned in my comments and kind of think about we would take care custody controls so when they needed a car delivered it would show up to our site we would get the car ready kind of think basic marshalling type of activities you know to make sure it had a title it was ready to go it was clean what this really adds to us is the disposition service that we were not doing for them. So we're really excited about to have the whole package in this agreement. And from the financial standpoint, I will pass it to Eric.

Yeah, so on the financial side, the model is a little bit different. But what I can say is that the ASPs will be accretive to our ASPs in the salvage space. There are some other services, Jim's comment, that we'll be providing that will be revenue generating, but it's a little bit different model than the salvage model.

Great. Thank you.

No problem.

We'll take our next question from Steve Hansen at Raymond James.

Yeah. Good afternoon, guys. Thanks for the time. Another small strategic tuck in here in Western Australia, which is encouraging. That marks sort of the second acquisition you made in the space here in the recent year. So, you know, what is the, maybe just maybe if you could just clarify on exactly what you're getting out of this deal, are there some additional white space specifically about that market that's most appealing? And then more broadly is how do you view the broader landscape in other jurisdictions or even in the same jurisdictions here from a pipeline perspective? Thanks.

First, I'll start. I'm really excited about what the pipeline opportunity is across the globe here in the U.S. and international. We've been doing business in Canada for a long period of time, but we've been really more on the eastern side of Australia. So for us, this opens up the western part of Australia, which gets us really excited. So more of a geography type of play as we think about being able to service all of Australia. And the team that we pick up, we're really excited about. They match really well from a culture standpoint of how Ritchie Brothers operates in Australia. So it really gives us the chance to service all of Australia instead of the eastern part of the business.

That's very helpful. Thanks. And just to follow up on some of the earlier commentary about volume and market share, particularly on the auto side, how do you feel about that opportunity for market share gains going forward? I think we've all been talking about and looking for evidence around that market share gain pattern. Your reported results seem to suggest that. But from a contract standpoint, do you have anything that you're working on and or that you see visibility on that would help you grow domestic market share further or faster? Or should we just, you know, wait and see as the results sort of trickle through? I mean, what can you tell us at this point, Nick?

Look, I'm going to go back to comments that I've probably said each quarter when the same question has come up. Our focus is really on what we can control, and what we can control is how we perform. And hopefully you can see from the SLAs that I mentioned in my comments, when you're performing at this high 99% compliance level, I believe the industry is noticing it. I believe the industry is appreciating what we're bringing to the table. So it makes me very optimistic about what our future is, but we're not going to get into any kind of, you know, deals that aren't done or things that we can't talk about at this point. But based on our performance, we're really optimistic, and we're really excited to compete in the space.

Very helpful, and we do appreciate the data that's helpful on our side. Thanks.

Next, we'll move to Krista Friesen at CIBC.

Hi. Thanks for taking my question. And maybe just back on the GTV growth, pretty solid growth in the CC&T division. I appreciate some of this is likely due to JM Wood, but I'm just wondering if you can break it down a bit more for us or quantify what was JM Wood versus organic.

Yep, I'll pass this over to Eric. yeah so on on gtv uh jm wood actually does go across ccnt and a little bit in automotive so i can tell you at a high level uh to our overall growth it was about a two percent uh terro in to our to our overall gtv okay great thank you and then maybe just on the uh the geographic split But it looks like Canada and international continue to kind of be the drivers here.

Is that changing at all as we get into Q4 here? Or are you hearing any changes from your customers in the U.S.?

Yeah, I'm not sure of the comment between Canada and international that you're referencing. But we saw growth across all the areas that we've done business in.

Okay, great. Thank you. I'll jump back in the queue.

Okay. As a reminder, if you would like to ask a question, please press star one. We'll go next to Craig Kennison at Baird.

Hey, good afternoon. Thanks for taking my question. Eric, could I ask you just to explain the motivation behind narrowing that range in Q4? Obviously, you have one quarter left, but you took the top end down. Any factors that played a role in a slightly more conservative outlook?

Yeah, as we got through the third quarter, again, if you remember on Q2, I had a good indication of what the forecast looked like, but we could have had some additional movement in the back half of the year. And that's why I did keep the range at zero to three, but indicated towards the lower end. And now with pretty much three months left in the year, now, in fact, two months left in the year, I wanted to make sure I could provide a more pointed guide, and that's why I tightened the range to zero to one.

Yeah, and Craig, just one thing I would add to Eric's comment is just as a reminder, last fourth quarter, we had a significant CAT event that flew through to GTV, and I think Eric has shared with what that number is, and at this point, we know the likelihood of any CAT event happening to help offset that isn't going to happen. unless something odd happens historically that hasn't happened before. So kind of just keep that in mind as you think about looking at the numbers as we tighten the range. We are going up against a significant one-time event that happened last year. That's not going to happen this year.

Yeah, thank you. And then as a follow-up, a bigger picture question on your automotive business. I recognize it's primarily a salvage-based business, but we're getting a lot of calls from clients and investors. who are more concerned about the adjacent used car space and that ecosystem. There have been some disappointments there and some subprime credit issues as well.

Can you clarify for all of us on the call to what extent you're even exposed to any of those concerns on, I would say, that non-salvage whole car ecosystem? yeah just as a reminder when when we talk about our whole car business um again think about cars that are whole cars but are slightly damaged it's very complementary to the salvage business and the buyer base that we have and we're not really upstream and in cars you know over a significant dollar amount like 15 000 and above so we really have no exposure we're really more into cars that I would call the whole cars, but slightly damaged is the majority of where we play. So think about a car that's less than $5,000 in that range. So we don't have any of the exposure and anything that we go upstream is sort of like the GSA contract where there's a normal cycle of cars that come in. You're not dependent on the broader economic environment.

Craig, I'd also add that on our whole car space, we do benefit a little bit from subprime because we do have a repossession business, so it's not necessarily a direct negative is what I would say.

Thank you, Samir.

We'll go next to Gary Prestapino at Barrington.

Yeah, just a couple of questions here. I just want to be clear. This GSA contract is for whole cars, not any damaged cars. Are they really cars that have got heavy mileage, heavy usage on, and that would appeal to your buyer base?

Correct. These cars are going to go through a life cycle for the people using the cars, right, which then at the end of the day would be cars that our buyer base would be very interested in.

So would they be more or less buy-here, pay-here dealers or exploited overseas?

I think it's a combination. I don't think we're going to get into specific of who's going to buy cars, but it will be a combination.

Okay. And then just any comments on the yellow iron sector? You didn't really make too many comments on that on your narrative. Are you still seeing signers holding on to their equipment?

Look, I think the way I would say, and I'll pass it over to Samir or Eric to jump in, I think we're still in an uncertain period of time where with tariffs, every time you turn around, something else is being said and something's being stopped and going with steel, everything like that. I would also just say, you know, interest rates and what's going to happen as the Fed made their comments that they're not sure about that there's going to be another cut. Any of those things from an uncertain period of time just creates uncertainty. And I think our partners are trying to figure it out. And, again, what we stay focused on on this side is I think we're in a great spot when the dam kind of opens up and disposition services need to happen. But, again, what we're trying to do is add value to our partners to make sure we're able to help them get value in their P&L and get them the recovery they need when they need it. Thank you, Jim.

And we'll take a follow-up from Steve and Hansen at Raymond James.

Yeah, thanks, guys. I just wanted to go back to the new operating model just quickly, if I may. And I think you've articulated $25 million in run rate savings by the second quarter of 2016. It sounds like the line of sight on that savings is pretty clear. But just maybe any comments around sort of the pace of the rollout and what ultimately – what milestones to be looking for to make sure you hit that $25 million mark and whether there's potential upside things.

So what I would just say real quick about the operating model, just to make sure we're clear, this was not a cost-cutting exercise. That came out of the model. The model was really making sure role clarity, focus for the organization. And as a company grows through acquisition, unfortunately, you create certain layers in the company that you might not need as you operate more efficiently and get clarity and focus. So for us, this wasn't just a cost-cutting exercise. It was we want to be efficient. We want to create clarity. We want to create focus on the organization. And the one thing that was important for me is at some departments, we would have eight levels of management and organization. And we really got that down to four or five. So we have a good line of sight when we talk about numbers of transition periods, who rolls off, when they roll off, all that kind of stuff. But again, this was not about that. And we would have plans as we think about what do we want to invest in to create a better return, all that kind of stuff. And I'll pass if Eric wants to add any other color to my comments.

Yeah, I think to Jim's point, we have full line of sight to the $25 million. It started, obviously, at the top with Jim's leadership team, and we continue to roll the operating model through the full organization. And, again, it's not about cost reduction. It's about how do we get closer to the customer and make sure we are meeting our expectations and our partner's expectations.

Very helpful. And one last one, if I squeeze it in, is just, Jim, back on your M&A commentary, referencing the global landscape, I think in the past you've referenced the appeal of some of the specialty narrower auctions, and a gag has been raised in the past. Are those still avenues that you would like to pursue, or is it going to be more of the jam woods of the world in this latest one that we've seen here in Western Australia? Thanks.

No, I think there's two things that we're very interested in. One is a geography, if that helps us fill out where we're currently doing business. but we definitely still like anyone that adds a vertical and expertise that we can take and scale across our network. So I would say they're the two things as we think about opportunities that kind of fit the profile of something that we would look at. Appreciate the caller. Thanks.

And that concludes our Q&A session. I will now turn the conference back over to Jim Kessler for closing remarks.

Thank you so much. In closing, I would like to thank the incredible RB Global team worldwide. The disciplined execution, hard work, and dedication of our teammates continues to drive our strong performance and fuel the momentum we have in our business. I'm excited about the opportunities we have ahead of us and look forward to continue to over-deliver our commitments while advancing our strategic priorities that position us for long-term shareholder value creation. Thank you for your continued support and interest in RB Global, and we look forward to talk to you next time. Thank you.

This concludes today's conference call. Thank you for your participation. you may not disconnect.