RB GLOBAL INC. Q2 FY2025 earnings call

• Disciplined execution led to adjusted EBITDA increasing 7% on a 2% increase in gross transactional value. - Automotive sector continued momentum with market share gains, unit volume up 9% YOY, and new alliance partners internationally. - Joint venture in the U.K. with LKQ Corporation, with RB Global retaining 100% of the salvage auction part. - Acquisition of J.M. Wood, a strategic enhancement in the Southeast U.S. - Investment in technological initiatives and sales force optimization to improve customer experience and operational efficiency. - Preparation for cat events through simulations and cross-functional alignment, with dedicated cat capacity growing.

Automotive sector: Unit volume increased by 9% year-over-year, GTV increased by 8%, with U.S. insurance average selling prices up approximately 1% year-over-year. Commercial construction and transportation sector: GTV decreased by 6% due to an 18% decline in lot volumes, partially offset by an increase in average selling price. Service revenue increased 3% with a service revenue take rate of 21.1%, up approximately 20 basis points year-over-year.

• GTV guidance is at the lower end of the range. - Adjusted EBITDA guidance raised to $1.34 billion to $1.37 billion. - Quarterly dividend increased by 7% to $0.31 per quarter. - Guidance does not incorporate cat-related GTV due to unknowable nature of extreme weather events.

• Macroeconomic uncertainty affecting customers and partners. - Trade policy uncertainty, including tariffs and changing stances. - Interest rate fluctuations and their impact on equipment owners' decisions. - Unknowable nature of cat events impacting GTV growth projections.

Q: Maybe just following up on sort of those last comments there around kind of H2, just given the performance through H1, it feels like there might be a bit more room potentially on the full year EBITDA than even the guidance uptick suggests. Or just what are some of the things you're keeping an eye on the pros and the cons through the back half of the year...

A: Yes. Thank you for the question. This is Eric. As you look at the back half of the year, as I said in my prepared remarks, we do see still the cautious or to wait and see on some of our partners and a lot more focus on potential mega projects later in the year. And I think that's something that's continued, and I want to make sure we take that in consideration. But if you look at the EBITDA at midpoint front half of the year versus back half of the year, even with this guidance, you'll see an acceleration in growth in the second half versus the front half. So I feel comfortable with where I am on the guidance, and we'll obviously, as we do each quarter, assess the best path. But right now, I think the tightening of the range and then moving the midpoint conservatively here is the best approach for us.

Q: With the J.M. Wood acquisition now closed, I'm just curious about how you're thinking about the broader M&A pipeline out there...

A: Yes. So look, I don't think we're going to get into specifics of our strategy, but we believe there are a lot of opportunities in the M&A side that stay core to our business. On the salvage side, we believe in organic growth that we can expand internationally inside of holdco, we already do that today. We believe there's big upside there. We see a lot of tuck-ins that can happen, especially when you think about the global footprint that we have. So similar things that we've done with J.M. Wood, we see a whole pipeline there. But we're going to really stay focused on the things that really complement our business that really do what we're good at, which is process transactions and provided services to our buyers and sellers. And we think we have a ton of opportunity and a ton of upside in the verticals that I mentioned.

Q: Maybe just a follow-on on the IAA side of the business. Can you give us an update on how Australia is going and the buildout there?

A: No. Thank you for your question. So something that we're really excited about. We spent a lot of work getting ready to get Australia up and running, and I am so proud of the team we are going to process our first set of cars for sale in the next 10 days. So all the work to get our sites ready to get the process, the systems up and running, the integration with Suncorp. And we're really excited to see that all that work come to fruition and not only come into the fit with Suncorp, but what it means for future market share for us once when we have the infrastructure set up. So we're really excited. But in the next 10 days, we'll be processed in our first cars.