~~0001046102rba:PremiumPricedStockOptionsMember2021-09-30~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ~~September~~June 30, ~~2021~~2022

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 001-13425

Ritchie Bros. Auctioneers Incorporated

(Exact Name of Registrant as Specified in its Charter)


Canada		98-0626225
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9500 Glenlyon Parkway
Burnaby, British Columbia, Canada		V5J 0C6
(Address of Principal Executive Offices)		(Zip Code)

(778) 331-5500

(Registrant’s Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares	RBA	New York Stock Exchange
Common Share Purchase Rights	N/A	New York Stock Exchange

Indicate by checkmark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ☐ No ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: ~~110,549,124~~110,809,591 common shares, without par value, outstanding as of ~~November~~August 3, ~~2021.~~2022.

Table of Contents

RITCHIE BROS. AUCTIONEERS INCORPORATED

FORM 10-Q

For the quarter ended ~~September~~June 30, ~~2021~~2022

INDEX

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Income Statements

(Expressed in thousands of United States dollars, except share and per share data)

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,


2021

2020

2021

2020

Revenue:









Service revenue

$
214,193

$
222,679

$
672,971

$
639,941

Inventory sales revenue

115,489

108,863

384,627

353,906

Total revenue

329,682

331,542

1,057,598

993,847

Operating expenses:









Costs of services

33,038

39,223

108,107

118,026

Cost of inventory sold

102,993

96,253

344,763

320,972

Selling, general and administrative expenses

108,578

110,186

336,475

309,203

Acquisition-related costs

10,255

—

16,226

—

Depreciation and amortization expenses

21,907

18,436

64,912

55,586

Gain on disposition of property, plant and equipment

(1,068)

(276)

(1,311)

(1,536)

Foreign exchange loss

360

336

788

1,330

Total operating expenses

276,063

264,158

869,960

803,581

Operating income

53,619

67,384

187,638

190,266

Interest expense

(8,807)

(8,737)

(26,620)

(26,801)

Other income, net

602

2,280

2,800

6,714

Income before income taxes

45,414

60,927

163,818

170,179

Income tax expense

13,057

15,437

42,541

48,741

Net income

$
32,357

$
45,490

$
121,277

$
121,438

Net income attributable to:









Stockholders

$
32,336

$
45,387

$
121,273

$
121,239

Non-controlling interests

21

103

4

199

Net income

$
32,357

$
45,490

$
121,277

$
121,438

Earnings per share attributable to stockholders:









Basic

$
0.29

$
0.42

$
1.10

$
1.11

Diluted

$
0.29

$
0.41

$
1.09

$
1.10

Weighted average number of shares outstanding:









Basic

110,410,172

109,018,469

110,233,851

108,887,026

Diluted

111,391,396

110,369,718

111,333,247

110,060,712


	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenue:
Service revenue	$	286,502	$	252,748	$	531,363	$	458,778
Inventory sales revenue		198,044		143,613		347,104		269,138
Total revenue		484,546		396,361		878,467		727,916

Operating expenses:
Costs of services		45,039		41,301		84,054		79,167
Cost of inventory sold		176,171		131,023		307,753		241,770
Selling, general and administrative		144,277		109,560		270,883		223,799
Acquisition-related costs		3,399		3,049		13,036		5,971
Depreciation and amortization		24,298		21,935		48,523		43,005
Foreign exchange loss (gain)		(158)		151		(322)		428
Total operating expenses		393,026		307,019		723,927		594,140
Gain on disposition of property, plant and equipment		347		175		170,167		243
Operating income		91,867		89,517		324,707		134,019

Interest expense		(18,463)		(8,867)		(39,149)		(17,813)
Change in fair value of derivatives, net		—		—		1,263		—
Other income, net		1,639		1,196		2,559		2,198
Income before income taxes		75,043		81,846		289,380		118,404

Income tax expense		21,632		21,065		57,868		29,484
Net income	$	53,411	$	60,781	$	231,512	$	88,920

Net income (loss) attributable to:
Stockholders	$	53,365	$	60,749	$	231,459	$	88,937
Non-controlling interests		46		32		53		(17)
Net income	$	53,411	$	60,781	$	231,512	$	88,920

Earnings per share attributable to stockholders:
Basic	$	0.48	$	0.55	$	2.09	$	0.81
Diluted	$	0.48	$	0.55	$	2.07	$	0.80

Weighted average number of shares outstanding:
Basic		110,760,339		110,311,615		110,705,182		110,144,229
Diluted		111,705,102		111,334,184		111,681,644		111,302,711

See accompanying notes to the condensed consolidated financial statements.


Ritchie Bros.	1

Table of Contents

Condensed Consolidated Statements of Comprehensive Income

(Expressed in thousands of United States dollars)

(Unaudited)


	Three months ended				Nine months ended				Three months ended				Six months ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Net income	$	32,357	$	45,490	$	121,277	$	121,438	$	53,411	$	60,781	$	231,512	$	88,920
Other comprehensive income (loss), net of income tax:
Foreign currency translation adjustment		(8,859)		12,549		(17,751)		7,445		(22,775)		1,468		(23,942)		(8,892)
Total comprehensive income	$	23,498	$	58,039	$	103,526	$	128,883	$	30,636	$	62,249	$	207,570	$	80,028

Total comprehensive income (loss) attributable to:
Stockholders	$	23,487	$	57,910	$	103,546	$	128,654	$	30,612	$	62,215	$	207,549	$	80,059
Non-controlling interests		11		129		(20)		229		24		34		21		(31)
	$	23,498	$	58,039	$	103,526	$	128,883	$	30,636	$	62,249	$	207,570	$	80,028

See accompanying notes to the condensed consolidated financial statements.


Ritchie Bros.	2

Table of Contents

Condensed Consolidated Balance Sheets

(Expressed in thousands of United States dollars, except share data)

(Unaudited)

September 30,

December 31,


2021

2020
Assets

Cash and cash equivalents

$
362,612

$
278,766
Restricted cash

105,742

28,129
Trade and other receivables

253,715

135,001
Less: allowance for credit losses

(4,138)

(5,467)
Inventory

64,201

86,278
Other current assets

31,796

27,274
Income taxes receivable

11,484

6,797
Total current assets

825,412

556,778

Property, plant and equipment

466,162

492,127
Other non-current assets

149,819

147,608
Intangible assets

285,148

300,948
Goodwill

837,708

840,610
Deferred tax assets

12,100

13,458
Total assets

$
2,576,349

$
2,351,529

Liabilities and Equity





Auction proceeds payable

$
428,555

$
214,254
Trade and other payables

228,939

243,786
Income taxes payable

5,033

17,032
Short-term debt

18,481

29,145
Current portion of long-term debt

1,172

10,360
Total current liabilities

682,180

514,577

Long-term debt

632,520

626,288
Other non-current liabilities

153,560

153,000
Deferred tax liabilities

45,732

45,265
Total liabilities

1,513,992

1,339,130

Commitments and Contingencies (Note 21 and Note 22 respectively)

Stockholders' equity:




Share capital:




Common stock; 0 par value, unlimited shares authorized, issued and outstanding shares: 110,467,596 (December 31, 2020: 109,876,428)

219,609

200,451
Additional paid-in capital

57,595

49,171
Retained earnings

836,759

791,918
Accumulated other comprehensive loss

(52,022)

(34,295)
Stockholders' equity

1,061,941

1,007,245
Non-controlling interest

416

5,154
Total stockholders' equity

1,062,357

1,012,399
Total liabilities and equity

$
2,576,349

$
2,351,529


	June 30,		December 31,
	2022		2021
Assets

Cash and cash equivalents	$	367,289	$	326,113
Restricted cash		164,371		102,875
Trade and other receivables		295,241		150,895
Less: allowance for credit losses		(3,763)		(4,396)
Inventory		124,964		102,494
Other current assets		36,212		64,346
Income taxes receivable		12,525		19,895
Total current assets		996,839		762,222

Restricted cash		—		933,464
Property, plant and equipment		442,743		449,087
Other non-current assets		168,360		142,504
Intangible assets		332,615		350,516
Goodwill		945,950		947,715
Deferred tax assets		7,458		7,406
Total assets	$	2,893,965	$	3,592,914

Liabilities and Equity

Auction proceeds payable	$	493,688	$	292,789
Trade and other liabilities		254,514		280,308
Income taxes payable		31,362		5,677
Short-term debt		8,637		6,147
Current portion of long-term debt		4,617		3,498
Total current liabilities		792,818		588,419

Long-term debt		639,755		1,733,940
Other non-current liabilities		155,911		147,260
Deferred tax liabilities		61,396		52,232
Total liabilities		1,649,880		2,521,851

Commitments and Contingencies (Note 22 and Note 23 respectively)
Stockholders' equity:
Share capital:
Common stock; 0 par value, unlimited shares authorized, issued and outstanding shares: 110,791,788 (December 31, 2021: 110,618,049)		235,244		227,504
Additional paid-in capital		73,014		59,535
Retained earnings		1,015,301		839,609
Accumulated other comprehensive loss		(79,883)		(55,973)
Stockholders' equity		1,243,676		1,070,675
Non-controlling interest		409		388
Total stockholders' equity		1,244,085		1,071,063
Total liabilities and equity	$	2,893,965	$	3,592,914

See accompanying notes to the condensed consolidated financial statements.


Ritchie Bros.	3

Table of Contents

Condensed Consolidated Statements of Changes in Equity

(Expressed in thousands of United States dollars, except where noted)

(Unaudited)

Attributable to stockholders

��




Additional

Accumulated

Non-

Common stock

paid-In

other

controlling

Number of

capital

Retained

comprehensive

interest

Total

Three months ended September 30, 2021

shares

Amount

("APIC")

earnings

loss

("NCI")

equity


Balance, June 30, 2021

110,366,808

$
215,666

$
51,800

$
832,037

$
(43,173)

$
5,097

$
1,061,427

Net income

—

—

—

32,336

—

21

32,357

Other comprehensive loss

—

—

—

—

(8,849)

(10)

(8,859)

—

—

—

32,336

(8,849)

11

23,498

Stock option exercises

100,703

3,942

(725)

—

—

—

3,217

Issuance of common stock related to vesting of share units

85

1

(7)

—

—

—

(6)

Acquisition of remaining interest in NCI

—

—

(672)

69

—

(4,692)

(5,295)

Share-based continuing employment costs related to business combination

—

—

2,707

—

—

—

2,707

Stock option compensation expense

—

—

2,133

—

—

—

2,133

Equity-classified share units expense

—

—

2,283

—

—

—

2,283

Equity-classified share units dividend equivalents

—

—

76

(76)

—

—

—

Cash dividends paid

—

—

—

(27,607)

—

—

(27,607)

Balance, September 30, 2021

110,467,596

$
219,609

$
57,595

$
836,759

$
(52,022)

$
416

$
1,062,357

Three months ended September 30, 2020















Balance, June 30, 2020

108,630,537

$
169,255

$
47,958

$
746,048

$
(64,207)

$
5,254

$
904,308

Net income

—

—

—

45,387

—

103

45,490

Other comprehensive income

—

—

—

—

12,523

26

12,549

—

—

—

45,387

12,523

129

58,039

Stock option exercises

751,268

26,470

(5,701)

—

—

—

20,769

Issuance of common stock related to vesting of share units

86

2

(7)

—

—

—

(5)

Stock option compensation expense

—

—

1,671

—

—

—

1,671

Equity-classified share units expense

—

—

4,138

—

—

—

4,138

Equity-classified share units dividend equivalents

—

—

194

(194)

—

—

—

Cash dividends paid

—

—

—

(24,053)

—

—

(24,053)

Balance, September 30, 2020

109,381,891

$
195,727

$
48,253

$
767,188

$
(51,684)

$
5,383

$
964,867


	Attributable to stockholders
				Additional				Accumulated		Non-
	Common stock			paid-In				other		controlling
	Number of			capital		Retained		comprehensive		interest		Total
Three months ended June 30, 2022	shares	Amount		("APIC")		earnings		loss		("NCI")		equity

Balance, March 31, 2022	110,735,243	$	231,064	$	61,123	$	989,923	$	(57,130)	$	385	$	1,225,365
Net income	—		—		—		53,365		—		46		53,411
Other comprehensive loss	—		—		—		—		(22,753)		(22)		(22,775)
	—		—		—		53,365		(22,753)		24		30,636
Stock option exercises	55,935		2,347		(471)		—		—		—		1,876
Issuance of common stock related to vesting of share units	610		14		(43)		—		—		—		(29)
Share-based continuing employment costs related to business combinations	—		1,819		261		—		—		—		2,080
Stock option compensation expense			—		3,056								3,056
Equity-classified share units expense	—		—		8,794		—		—		—		8,794
Equity-classified share units divided equivalents	—		—		294		(294)		—		—		—
Cash dividends paid	—		—		—		(27,693)		—		—		(27,693)
Balance, June 30, 2022	110,791,788	$	235,244	$	73,014	$	1,015,301	$	(79,883)	$	409	$	1,244,085


Three months ended June 30, 2021

Balance, March 31, 2021	110,253,056	$	210,765	$	43,612	$	795,781	$	(44,639)	$	5,089	$	1,010,608
Net income	—		—		—		60,749		—		32		60,781
Other comprehensive income	—		—		—		—		1,466		2		1,468
	—		—		—		60,749		1,466		34		62,249
Stock option exercises	113,290		4,889		(910)		—		—		—		3,979
Issuance of common stock related to vesting of share units	462		12		(30)		—		—		—		(18)
Share-based continuing employment costs related to business combinations	—		—		2,678		—		—		—		2,678
Stock option compensation expense	—		—		1,909		—		—		—		1,909
Equity-classified share units expense	—		—		4,404		—		—		—		4,404
Equity-classified share units dividend equivalents	—		—		137		(137)		—		—		—
Cash dividends paid	—		—		—		(24,356)		—		(26)		(24,382)
Balance, June 30, 2021	110,366,808	$	215,666	$	51,800	$	832,037	$	(43,173)	$	5,097	$	1,061,427


Ritchie Bros.	4

Table of Contents

~~Condensed Consolidated Statements of Changes in Equity~~

~~(Expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

Attributable to stockholders




Additional

Accumulated

Non-

Common stock

paid-In

other

controlling

Number of

capital

Retained

comprehensive

interest

Total

Nine months ended September 30, 2021

shares

Amount

("APIC")

earnings

loss

("NCI")

equity


Balance, December 31, 2020

109,876,428

$
200,451

$
49,171

$
791,918

$
(34,295)

$
5,154

$
1,012,399

Net income

—

—

—

121,273

—

4

121,277

Other comprehensive loss

—

—

—

—

(17,727)

(24)

(17,751)

—

—

—

121,273

(17,727)

(20)

103,526

Stock option exercises

411,856

17,099

(3,184)

—

—

—

13,915

Issuance of common stock related to vesting of share units

234,822

2,059

(11,384)

—

—

—

(9,325)

Acquisition of remaining interest in NCI

—

—

(672)

70

—

(4,614)

(5,216)

Share-based continuing employment costs related to business combination

(55,510)

—

7,938

—

—

—

7,938

Stock option compensation expense

—

—

5,903

—

—

—

5,903

Equity-classified share units expense

—

—

9,465

—

—

—

9,465

Equity-classified share units dividend equivalents

—

—

358

(358)

—

—

—

Cash dividends paid

—

—

—

(76,144)

—

(104)

(76,248)

Balance, September 30, 2021

110,467,596

$
219,609

$
57,595

$
836,759

$
(52,022)

$
416

$
1,062,357

Nine months ended September 30, 2020















Balance, December 31, 2019

109,337,781

$
194,771

$
52,110

$
714,051

$
(59,099)

$
5,154

$
906,987

Net income

—

—

—

121,239

—

199

121,438

Other comprehensive income

—

—

—

—

7,415

30

7,445

—

—

—

121,239

7,415

229

128,883

Stock option exercises

1,430,545

50,611

(10,417)

—

—

—

40,194

Issuance of common stock related to vesting of share units

138,877

3,515

(7,459)

—

—

—

(3,944)

Stock option compensation expense

—

—

4,401

—

—

—

4,401

Equity-classified share units expense

—

—

9,155

—

—

—

9,155

Equity-classified share units dividend equivalents

—

—

463

(463)

—

—

—

Cash dividends paid

—

—

—

(67,639)

—

—

(67,639)

Shares repurchased

(1,525,312)

(53,170)

—

—

—

—

(53,170)

Balance, September 30, 2020

109,381,891

$
195,727

$
48,253

$
767,188

$
(51,684)

$
5,383

$
964,867


	Attributable to stockholders
				Additional				Accumulated		Non-
	Common stock			paid-In				other		controlling
	Number of			capital		Retained		comprehensive		interest		Total
Six months ended June 30, 2022	shares	Amount		("APIC")		earnings		loss		("NCI")		equity

Balance, December 31, 2021	110,618,049	$	227,504	$	59,535	$	839,609	$	(55,973)	$	388	$	1,071,063
Net income	—		—		—		231,459		—		53		231,512
Other comprehensive loss	—		—		—		—		(23,910)		(32)		(23,942)
	—		—		—		231,459		(23,910)		21		207,570
Stock option exercises	80,183		3,554		(692)		—		—		—		2,862
Issuance of common stock related to vesting of share units	93,556		2,367		(5,945)		—		—		—		(3,578)
Share-based continuing employment costs related to business combinations			1,819		2,394		—		—		—		4,213
Stock option compensation expense			—		5,623		—		—		—		5,623
Equity-classified share units expense	—		—		11,684		—		—		—		11,684
Equity-classified share units dividend equivalents	—		—		415		(415)		—		—		—
Cash dividends paid	—		—		—		(55,352)		—		—		(55,352)
Balance, June 30, 2022	110,791,788	$	235,244	$	73,014	$	1,015,301	$	(79,883)	$	409	$	1,244,085

Six months ended June 30, 2021

Balance, December 31, 2020	109,876,428	$	200,451	$	49,171	$	791,918	$	(34,295)	$	5,154	$	1,012,399
Net income	—		—		—		88,937		—		(17)		88,920
Other comprehensive income	—		—		—		—		(8,878)		(14)		(8,892)
	—		—		—		88,937		(8,878)		(31)		80,028
Stock option exercises	311,153		13,157		(2,458)		—		—		—		10,699
Issuance (forfeiture) of common stock related to vesting of share units	234,737		2,058		(11,377)		—		—		—		(9,319)
Forfeiture of common stock related to business combinations	(55,510)		—		—		—		—		—		—
Share-based continuing employment costs related to business combinations	—		—		5,231		—		—		—		5,231
Stock option compensation expense	—		—		3,770		—		—		—		3,770
Equity-classified share units expense	—		—		7,182		—		—		—		7,182
Equity-classified share units dividend equivalents	—		—		281		(281)		—		—		—
Cash dividends paid	—		—		—		(48,537)		—		(26)		(48,563)
Balance, June 30, 2021	110,366,808	$	215,666	$	51,800	$	832,037	$	(43,173)	$	5,097	$	1,061,427

See accompanying notes to the condensed consolidated financial statements.


Ritchie Bros.	5

Table of Contents

Condensed Consolidated Statements of Cash Flows

(Expressed in thousands of United States dollars)

(Unaudited)


Nine months ended September 30,	2021		2020
Six months ended June 30,					2022		2021
Cash provided by (used in):
Operating activities:
Net income	$	121,277	$	121,438	$	231,512	$	88,920
Adjustments for items not affecting cash:
Depreciation and amortization expenses		64,912		55,586
Depreciation and amortization						48,523		43,005
Share-based payments expense		23,306		13,556		21,527		16,183
Deferred income tax expense		2,228		8,250		9,480		1,719
Unrealized foreign exchange (gain) loss		(98)		2,049
Unrealized foreign exchange gain						(1,965)		(65)
Gain on disposition of property, plant and equipment		(1,311)		(1,536)		(170,167)		(243)
Loss on redemption of the 2021 Notes						4,792		—
Amortization of debt issuance costs		2,155		2,375		2,352		1,443
Amortization of right-of-use assets		9,458		9,194		8,586		6,280
Gain on contingent consideration from equity investment		—		(1,700)
Change in fair value of derivatives						(1,263)		—
Other, net		2,253		2,427		2,805		1,568
Net changes in operating assets and liabilities		79,938		53,912		41,844		52,577
Net cash provided by operating activities		304,118		265,551		198,026		211,387
Investing activities:
Acquisition of Rouse, net of cash acquired		728		—
Acquisitions, net of cash acquired						(63)		728
Property, plant and equipment additions		(6,984)		(9,865)		(4,522)		(4,616)
Proceeds on disposition of property, plant and equipment		1,667		16,277		165,132		342
Intangible asset additions		(25,601)		(19,886)		(15,730)		(17,361)
Issuance of loans receivable		(2,622)		(2,985)		(6,093)		(2,622)
Repayment of loans receivable		436		355		1,554		226
Distribution from equity investment		—		4,212
Proceeds on contingent consideration from equity investment		—		1,700
Net cash used in investing activities		(32,376)		(10,192)
Net cash provided by (used in) investing activities						140,278		(23,303)
Financing activities:
Share repurchase		—		(53,170)
Dividends paid to stockholders		(76,144)		(67,639)		(55,352)		(48,537)
Acquisition of remaining interest in NCI		(5,556)		—
Dividends paid to NCI		(104)		—		—		(26)
Proceeds from exercise of options and share option plans		13,915		40,194		2,862		10,699
Payment of withholding taxes on issuance of shares		(9,160)		(3,870)		(3,716)		(9,155)
Net increase (decrease) in short-term debt		(9,271)		13,442		2,722		6,842
Repayment of long-term debt		(5,328)		(11,134)		(1,093,772)		(5,328)
Debt issue costs		(3,163)		(2,038)		(3,677)		—
Repayment of finance lease obligations		(8,445)		(6,927)		(5,390)		(5,355)
Net cash used in financing activities		(103,256)		(91,142)		(1,156,323)		(50,860)
Effect of changes in foreign currency rates on cash, cash equivalents, and restricted cash		(7,027)		5,826		(12,773)		(1,396)
Increase		161,459		170,043
(Decrease) Increase						(830,792)		135,828
Beginning of period		306,895		420,256		1,362,452		306,895
Cash, cash equivalents, and restricted cash, end of period	$	468,354	$	590,299	$	531,660	$	442,723

See accompanying notes to the condensed consolidated financial statements.


Ritchie Bros.	6

Table of Contents

1. General information

Ritchie Bros. Auctioneers Incorporated and its subsidiaries (collectively referred to as the “Company”, “Ritchie Bros.”, “we”, “us”, or “our”) provide a marketplace for insights, services and transaction solutions for commercial assets. The Company offers its customers end-to-end transaction solutions for used commercial and other durable assets through its omnichannel platform, which includes auctions, online marketplaces, listing services, and private brokerage services. The Company also offers a wide array of value-added services connected to commercial assets as well as asset management software and data as a service solutions to help customers make more accurate and reliable business decisions. Ritchie Bros. Auctioneers Incorporated is a company incorporated in Canada under the Canada Business Corporations Act, whose shares are publicly traded on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange (“NYSE”).

2. Significant accounting policies

(a) Basis of preparation

These unaudited condensed consolidated interim financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”). They include the accounts of Ritchie Bros. Auctioneers Incorporated and its subsidiaries from their respective dates of formation or acquisition. All significant intercompany balances and transactions have been eliminated.

Certain information and footnote disclosure required by US GAAP for complete annual financial statements have been omitted and, therefore, these unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, ~~2020,~~2021, included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated interim financial statements follow the same accounting policies and methods of application as our most recent annual audited consolidated financial statements except as described in Note 2(b) “ New and amended accounting standards and accounting policies”. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations, cash flows and changes in equity for the interim periods presented. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

~~In March 2020,~~

On February 24, 2022, the ~~World Health Organization declared~~geopolitical situation in Eastern Europe intensified with Russia’s invasion of Ukraine, sharply affecting economic and global financial markets. Subsequent economic sanctions of Russia have exacerbated ongoing economic challenges, including issues such as rising inflation and global supply chain disruption. The Company does not have any direct or significant operations in Russia or Ukraine, or any material operations in neighboring countries and only has limited number of direct customers in the ~~outbreak of COVID-19 as a pandemic, which quickly spread throughout the world.~~effected region. The extent of the ongoing ~~impact~~impacts of the ~~COVID-19 pandemic~~conflict on our operational and financial performance, the impact of higher fuel costs globally adding to inflationary pressures, including our ability to execute on our business strategies and initiatives and sustain our operations in Europe and globally, will depend on future developments, including the ~~duration~~continued evolvement of military activity and ~~spread~~sanctions imposed with Russia’s invasion of the pandemic in light of new variants, timing of mass vaccine distribution, and any related restrictions implemented by governments in various jurisdictions, as well as supply and demand impacts driven by our consignor and buyer base, all of which are uncertain and cannot be easily predicted.Ukraine. Given the evolving nature of ~~this situation,~~the crisis, the Company cannot currently reasonably estimate the impacts of ~~COVID-19~~the conflict on its business operations, results of operations, cash flows or financial performance.

~~(b) Revenue recognition~~

~~Revenues are comprised of:~~Reclassification

●	~~Service revenue, including the following:~~

Certain amounts in the prior period financial statements have been reclassified from selling, general and administrative expenses to cost of services for certain employee costs related to equipment inspections to conform to the presentation of the current period financial statements.

Revenue from auction and marketplace (“A&M”) activities, including commissions earned at our live and online bidding auctions, online marketplaces, and private brokerage services where we act as an agent for consignors of equipment and other assets, and various auction-related fees, including listing and buyer transaction fees; and

~~ii.~~

~~Other services revenue, including revenue from listing services, refurbishment, logistical services, financing, appraisals, data subscriptions, fees associated with private market transactionsand other ancillary service fees; and~~

●	~~Inventory sales revenue as part of A&M activities~~


Ritchie Bros.	7

Table of Contents

2. Significant accounting policies (continued)

(b) New and amended accounting standards and accounting policies

New accounting policies

Sale and leaseback

The transfer of the asset shall not be accounted for as a sale if the leaseback would be classified as a finance lease or a sales-type lease. For sale and leaseback transactions, the Company applies the requirements of ASC 606 Revenue ~~recognition (continued)~~

from Contracts with Customers to determine whether the transfer of the asset should be accounted for as a sale and applies ASC 842 Leases when accounting for the sale and leaseback transactions. If the transfer of the asset is a sale, the Company derecognizes the underlying asset and recognizes the gain on sale of property, plant and equipment. The Company recognizes ~~revenue when control of~~a lease obligation arising from the promised goods or services is transferred to our customers, or upon completion of the performance obligation, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The transaction price is reduced by estimates of variable consideration such as volume rebates and discounts. All estimates, which are evaluated at each reporting period, are based on the Company’s historical experience, anticipated volumes, and best judgment. For auctions, revenue is recognized when the auction sale is completeleaseback and the ~~Company has determined that the sale proceeds are collectible. Revenue is measured at~~corresponding ROU asset. If the fair value of the consideration ~~received or receivable and is shown net of value-added tax and duties.~~

~~Service revenues~~

Commissions from sales at the Company’s auctions represent the percentage earned by the Company on the gross proceeds from equipment and other assets sold at auction. The majority of the Company’s commissions are earned as a pre-negotiated fixed rate of the gross selling price. Other commissions from sales at the Company’s auctions are earned from underwritten commission contracts, when the Company guarantees a certain level of proceeds to a consignor.

The Company accepts equipment and other assets on consignment and stimulates buyer interest through professional marketing techniques and by matching sellers (also known as consignors) to buyers through the auction or private sale process. Prior to offering an item for ~~sale on its online marketplaces, the Company also performs inspections.~~

~~Following~~ the sale of ~~the item, the Company invoices the buyer for the purchase price of the~~an asset taxes, and, if applicable, the buyer transaction fee, collects payment from the buyer, and remits the proceeds to the seller, net of the seller commissions, applicable taxes, and applicable fees. Commissions are calculated as a percentage of the winning bid price of the property sold at auction. Fees are also charged to sellers for listing and inspecting equipment. Other revenue earned in the process of conducting the Company’s auctions include administrative, documentation, and advertising fees.

With the final acceptance of the winning bid, the highest bidder becomes legally obligated to pay the full purchase price, which is the winning bid of the property purchased, and the seller is legally obligated to relinquish the property in exchange for the winning bid price less any seller’s commissions. Commission and fee revenue are recognized on the date of the auction sale upon the final acceptance of the winning bid.

~~Under the standard terms and conditions of its auction sales, the Company is~~does not obligated to pay a consignor for property that has not been paid for by the buyer, provided the property has not been released to the buyer. If the buyer defaults on its payment obligation, also referred to as a collapsed sale, the sale is cancelled in the period in which the determination is made, and the property is returned to the consignor or placed in a later event-based or online auction. Historically, service revenues on cancelled sales have not been material.

Online marketplace commission revenue is reduced by a provision for disputes, which is an estimate of disputed items that are expected to be settled at a cost to the Company, related to settlements of discrepancies under the Company’s equipment condition certification program. The equipment condition certification refers to a written inspection report provided to potential buyers that reflects the condition of a specific piece of equipment offered for sale, and includes ratings, comments, and photographs of the equipment following inspection by one of the Company’s equipment inspectors.

The equipment condition certification provides that a buyer may file a written dispute claim during an eligible dispute period for consideration and resolution at the sole determination of the Company if the purchased equipment is not substantially in the condition represented in the inspection report. Typically, disputes under the equipment condition certification program are settled with minor repairs or additional services, such as washing or detailing the item; the estimated costs of such items or services are included in the provision for disputes.

Commission revenue is recorded net of commissions owed to third parties, which are principally the result of situations when the commission is shared with a consignor in an auction guarantee risk and reward sharing arrangement.


~~Ritchie Bros.~~	8

~~Table of Contents~~

~~2. Significant accounting policies (continued)~~

~~Service revenues (continued)~~

Underwritten commission contracts can take the form of guarantee contracts. Guarantee contracts typically include a pre-negotiated percentage of the guaranteed gross proceeds plus a percentage of proceeds in excess of the guaranteed amount. If actual auction proceeds are less than the guaranteed amount, commission is reduced; if proceeds are sufficiently lower, the Company can

incur a loss on the sale. Losses, if any, resulting from guarantee contracts are recorded in the period in which the relevant auction is completed. If a loss relating to a guarantee contract held at the period end to be sold after the period end is known or is probable and estimable at the financial statement reporting date, the loss is accrued in the financial statements for that period. The Company’s exposure from these guarantee contracts fluctuates over time.

Other services revenue also includes fees for refurbishment, logistical services, financing, appraisals, data subscriptions, fees associated with private market transactions and other ancillary service fees. Fees are recognized in the period in which the service is provided or the product is delivered to the customer.

~~Inventory sales revenue~~

Underwritten commission contracts can take the form of inventory contracts. Revenue related to inventory contracts is recognized in the period in which the sale is completed, title to the property passes to the purchaser and the Company has fulfilled any other obligations that may be relevant to the transaction. In its role as auctioneer, the Company auctions its inventory to equipment buyers through the auction process. Following the sale of the item, the Company invoices the buyer for the purchase price of the asset, taxes, and, if applicable, the buyer transaction fee, and collects payment from the buyer.

With the final acceptance of the winning bid, the highest bidder becomes legally obligated to pay the full purchase price, which is the winning bid price of the property purchased. Title to the property is transferred in exchange for the winning bid price, and if applicable, the buyer transaction fee plus applicable taxes.

~~(c) Costs of services~~

Costs of services incurred in earning A&M revenues are comprised of expenses incurred in direct relation to conducting auctions (“direct expenses”), earning online marketplace revenue, and earning other fee revenue. Direct expenses include direct labour, buildings and facilities charges, travel, advertising and promotion costs and fees paid to unrelated third parties who introduce the Company to equipment sellers who sell property at the Company’s auctions and marketplaces. Costs of services to operate our online marketplace revenue excludes hosting costs where we leverage a shared infrastructure that supports both our internal technology requirements and external sales to our customers.

Costs of services incurred to earn online marketplace revenue in addition to the costs listed above also include inspection costs. Inspections are generally performed at the seller’s physical location. The cost of inspections includes payroll costs and related benefits for the Company’s employees that perform and manage field inspection services, the related inspection report preparation and quality assurance costs, fees paid to contractors who perform field inspections, related travel and incidental costs for the Company’s inspection service organization, and office and occupancy costs for its inspection services personnel. Costs of earning online marketplace revenue also include costs for the Company’s customer support, online marketplace operations, logistics, and title and lien investigation functions.

Costs of services incurred in earning other fee revenue include ancillary and logistical service expenses, direct labour (including commissions on sales), cloud infrastructure and hosting costs, software maintenance fees, and materials. Costs of services exclude depreciation and amortization expenses.

~~(d) Cost of inventory sold~~

~~Cost of inventory sold includes the purchase price of assets sold for the Company’s own account and is determined using a specific identification basis.~~

~~(e) Share-based payments~~

~~The Company classifies a share-based payment award as an equity or liability payment based on the substantive terms of the award and any related arrangement.~~


~~Ritchie Bros.~~	9

~~Table of Contents~~

~~2. Significant accounting policies (continued)~~

~~(e) Share-based payments (continued)~~

~~Equity-classified share-based payments~~

~~The cost of equity-settled share-based payment arrangements is recorded based on the estimated fair-value at the grant date and charged to earnings over the vesting period.~~

~~Share unit plans~~

The Company has a senior executive performance share unit (“PSU”) plan and an employee PSU plan that provides for the award of PSUs to certain senior executives and employees, respectively, of the Company. The Company has the option to settle certain share unit awards in cash or shares and expects to settle them in shares. The cost of PSUs granted is measured at the fair value of the underlying PSUs at the grant date. PSUs vest based on the passage of time and achievement of performance criteria or market conditions. Share-based compensation expense for PSUs with a market condition is recognized regardless of whether the market condition is satisfied subject to continuing service over the requisite service period.

The Company also has a senior executive restricted share unit (“RSU”) plan and an employee RSU plan that provides for the award of RSUs to certain senior executives and employees, respectively, of the Company. The Company has the option to settle certain share unit awards in cash or shares and expects to settle them in shares. The cost of RSUs granted is measured at the fair value of the underlying RSUs based on the fair value of the Company’s common shares at the grant date. RSUs vest based on the passage of time and include restrictions related to employment.

The fair value of awards expected to vest under these plans is expensed over the respective remaining service period of the individual awards, on an accelerated recognition basis, with the corresponding increase to APIC recorded in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in earnings, such that the consolidated expense reflects the revised estimate, with a corresponding adjustment to equity. Dividend equivalents on the equity-classified PSUs and RSUs are recognized as a reduction to retained earnings over the service period.

~~Stock option plans~~

The Company has three stock option compensation plans that provide for the award of stock options to selected employees, directors and officers of the Company. The cost of options granted is measured at the fair value of the underlying option at the grant date. The fair value of options expected to vest under these plans is expensed over the respective remaining service period of the individual awards, on an accelerated recognition basis, with the corresponding increase to APIC recorded in equity. Upon exercise, any consideration paid on exercise of the stock options and amounts fully amortized in APIC are credited to the common shares.

~~Liability-classified share-based payments~~

The Company maintains other share unit compensation plans that vest over a period of up to three years after grant. Under those plans, the Company is either required or expects to settle vested awards on a cash basis or by providing cash to acquire shares on the open market on the employee’s behalf, where the settlement amount is determined based on the average price of the Company’s common shares prior to the vesting date or, in the case of deferred share unit (“DSU”) recipients, following cessation of service on the Board of Directors.

These awards are classified as liability awards, measured at fair value at the date of grant and re-measured at fair value at each reporting date up to and including the settlement date. The determination of the fair value of the share units under these plans is described in Note 19. The fair value of the awards is expensed over the respective vesting period of the individual awards with recognition of a corresponding liability. Changes in fair value after vesting are recognized through compensation expense. Compensation expense reflects estimates of the number of instruments expected to vest.

The impact of forfeitures and fair value revisions, if any, are recognized in earnings such that the cumulative expense reflects the revisions, with a corresponding adjustment to the settlement liability. Liability-classified share unit liabilities due within 12 months of the reporting date are presented in trade and other payables while settlements due beyond 12 months of the reporting date are presented in other non-current liabilities.


~~Ritchie Bros.~~	10

~~Table of Contents~~

~~2. Significant accounting policies (continued)~~

~~(f) Leases~~

The Company determines if an arrangement is a lease at inception. The Company may have lease agreements with lease and non-lease components, which are generally accounted for separately. Additionally, for certain vehicle and equipment leases, management applies a portfolio approach to account for the right-of-use ("ROU") assets and liabilities for assets leased with similar lease terms.

~~Operating leases~~

Operating leases are included in other non-current assets, trade and other payables, and other non-current liabilities in our consolidated balance sheets if the initial lease term is greater than 12 months. For leases with an initial term of 12 months or less the Company recognizes those lease payments on a straight-line basis over the lease term.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, management uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Management uses the implicit rate when readily determinable. The Company includes lease payments for renewal or termination options in its determination of lease term, ROU asset, and lease liability when it is reasonably certain that the Company will exercise these options. Lease expense for lease payments is recognized on a straight-line basis over the lease term and is included in costs of services and selling, general and administrative ("SG&A") expenses.

~~Finance leases~~

~~Finance lease ROU assets and liabilities are included in property, plant and equipment, trade and other payables, and other non-current liabilities in our consolidated balance sheets.~~

Finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, management uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Management uses the implicit rate when readily determinable. The Company includes lease payments for renewal, purchase options, or termination options in its determination of lease term, ROU asset, and lease liability when it is reasonably certain that the Company will exercise these options. Finance lease ROU assets are generally amortized over the lease term and are included in depreciation expense. The interest on the finance lease liabilities is included in interest expense.

~~(g) Inventories~~

Inventory consists of equipment and other assets purchased for resale in an upcoming live on site auction or online marketplace event. The Company typically purchases inventory for resale through a competitive process where the consignor or vendor has determined this to be the preferred method of disposition through the auction process. In addition, certain jurisdictions require auctioneers to hold title to assets and facilitate title transfer on sale. Inventory is valued at the lower of cost and net realizable value where net realizable value represents the expected sale price upon disposition less make-ready costs and the costs of disposal and transportation. As part of its government business, the Company purchases inventory for resale as part of its commitment to purchase certain surplus government property (Note 21). The significant elements of cost include the acquisition price, in-bound transportation costs of the inventory, and make-ready costs to prepare the inventory for sale that are not selling expenses. Write-downs to the carrying value of inventory are recorded in cost of inventory sold on the consolidated income statement.

~~(h) Impairment of long-lived and indefinite-lived assets~~

Long-lived assets, comprised of property, plant and equipment, ROU assets, and intangible assets subject to amortization, are assessed for impairment whenever events or circumstances indicate that their carrying value may not be recoverable. For the purpose of impairment testing, long-lived assets are grouped and tested for recoverability at the lowest level that generates independent cash flows. An impairment loss is recognized when the carrying value of the assets or asset groups is greater than the future projected undiscounted cash flows. The impairment loss is calculated as the excess of the carrying value overequal the fair value of the asset, or ~~asset group. Fair value is based on valuation techniques or third party appraisals. Significant estimates~~if the payments for the lease are not at market rates, the Company will make adjustments to measure the sale proceeds at fair value. Any below-market terms are accounted for as a prepayment of lease payments and ~~judgments~~any above- market terms are ~~applied in determining these cash flows~~accounted for as additional financing provided by the buyer-lessor. If the transaction does not qualify for sale and ~~fair values.~~


~~Ritchie Bros.~~	11

~~Table of Contents~~

~~2. Significant~~leaseback accounting ~~policies (continued)~~

~~(h) Impairment of long-lived~~treatment, and ~~indefinite-lived assets (continued)~~

Indefinite-lived intangible assets are tested annually for impairment as of December 31, and between annual tests if indicators of potential impairment exist. The Company has the option of performing a qualitative assessment to first determine whether the quantitative impairment test is necessary. This involves an assessment of qualitative factors to determine the existence of events or circumstances that would indicate whether it is more likely than not that the carrying amountcontrol of the ~~indefinite-lived intangible~~asset has not transferred, then the asset is ~~less than its fair value. If the qualitative assessment indicates it is~~ not more likely than not that the carrying amount is less than its fair value, a quantitative impairment test is not required. Where a quantitative impairment test is required, the procedure is to compare the indefinite-lived intangible asset’s fair value with its carrying amount. An impairmentderecognized, and no gain or loss is ~~recognized~~recorded as the ~~difference between~~transaction is accounted for as a financing transaction.

New and amended accounting standards

In October 2021, the ~~indefinite-lived intangible asset’s carrying amount~~FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and ~~its fair value.~~

~~(i) Goodwill~~

~~Goodwill represents~~Contract Liabilities from Contracts with Customers. The update primarily addresses the ~~excess~~accounting for contract assets and contract liabilities from revenue contracts with customers acquired in a business combination. The update requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606 - Revenue from Contracts with Customers, whereas prior to the adoption of the ~~purchase price of an acquired enterprise over the fair value assigned to the~~update, contract assets acquired and contract liabilities assumed in a business ~~combination.~~

~~Goodwill is not amortized, but it is tested annually for impairment~~combination were recognized at the reporting unit level as of December 31, and between annual tests if indicators of potential impairment exist. The Company has the option of performing a qualitative assessment of a reporting unit to first determine whether the quantitative impairment test is necessary. This involves an assessment of qualitative factors to determine the existence of events or circumstances that would indicate whether it is more likely than not that the carrying amount of the reporting unit to which goodwill belongs is less than its fair value. If the qualitative assessment indicates it is not more likely than not that the reporting unit’s carrying amount is less than its fair value, a quantitative impairment test is not required.

If a quantitative impairment test is required, the procedure is to identify potential impairment by comparing the reporting unit’s fair value with its carrying amount, including goodwill. The reporting unit’s fair value is determined using various valuation approaches and techniques that involve assumptions based on what the Company believes a hypothetical marketplace participant would use in estimating fair value on the ~~measurement~~acquisition date. An impairment loss is recognized as the difference between the reporting unit’s carrying amount and its fair value. If the difference between the reporting unit’s carrying amount and fair value is greater than the amount of goodwill allocated to the reporting unit, the impairment loss is restricted by the amountThe amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the ~~goodwill allocated~~amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to ~~the reporting unit.~~

~~(j) Business~~all business combinations

~~Business combinations are accounted~~ for ~~using~~which the acquisition ~~method. The purchase price is determined based~~date occurs on or after the ~~fair value~~beginning of the ~~assets transferred, liabilities incurred,~~fiscal year that includes the interim period of early application and ~~equity interest issued,~~(2) prospectively to all business combinations that occur on or after considering any transactions that are separate from the business combination. The Company allocates the aggregate of the fair value of the purchase consideration transferred to the tangible and intangible assets acquired and the liabilities assumed on the basis of their fair values at the date of ~~acquisition, with any excess recorded~~initial application. The Company has early adopted the update as ~~goodwill. The fair value determinations require judgment~~of October 1, 2021 and ~~may involve~~therefore has applied the ~~use of significant estimates and assumptions, especially with respect~~amendments to intangible assets and contingent liabilities. The purchase price allocation may be provisional during a measurement period of up to one year to provide reasonable time to obtain the information necessary to identify and measure the assets acquired and liabilities assumed. Any such measurement period adjustments are recognized as to the assets and liabilities assumed, with the corresponding offset to goodwill, in the period inall acquisitions completed since January 1, 2021, which ~~the adjustment amounts are determined. Acquisition-related costs associated with~~includes only the acquisition ~~are expensed as incurred.~~


~~Ritchie Bros.~~	12

~~Table~~ of ~~Contents~~

~~2. Significant accounting policies (continued)~~

~~(k) New and amended accounting standards~~

~~In March 2020, the FASB issued an update to ASU 2020-04, Reference Rate Reform (Topic 848),~~ ~~Facilitation of the Effects of Reference Rate Reform~~SmartEquip, which was completed on ~~Financial Reporting~~, which addresses the effects of reference rate reform on financial reporting. ASU 2020-04 is effective for all entities as of March 12, 2020 through to December 31, 2022. If elected, and if certain criteria are met, this ASU requires less accounting analysis and recognition for modifications related to reference rate reform. The update issued provides optional expedients and exceptions for applying US GAAP to contract modifications, hedging relationships, derivatives and other transactions affected by the reference rate reform that reference LIBOR or another reference rate expected to be discontinued.

It was announced in March 2021 that LIBOR rates are expected to cease to be published as early as December 31, 2021 and as late as June 30, 2023 depending on the jurisdiction and the term of the rate. Our Credit Agreement (Note 16), which references LIBOR, was modified on September 21,November 2, 2021. ~~The modification included an amendment to~~ ~~include customary provisions to provide for the eventual replacement of LIBOR~~ that have been established as the secured overnight financing rate (SOFR), the Sterling Overnight Interbank Average Rate (SONIA), the euro short-term rate (€STR), Euro Interbank Offered rate (EURIBOR) and the Tokyo Interbank Offered Rate (TIBOR). The Company did not apply the optional expedient permitted under the standards as, in addition to the provisions to provide for the eventual replacement of LIBOR, other terms and conditions in the Credit Agreement were also modified and amended. As a result, the adoption of the ASU and the recent updates have not and are not expected to have a material impact on our consolidated financial statements.

3. Significant judgments, estimates and assumptions

The preparation of financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Future differences arising between actual results and the judgments, estimates and assumptions made by the Company at the reporting date, or future changes to estimates and assumptions, could necessitate adjustments to the underlying reported amounts of assets, liabilities, revenues and expenses in future reporting periods.

Judgments, estimates and underlying assumptions are evaluated on an ongoing basis by management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances and such changes are reflected in the assumptions when they occur.

Significant items subject to estimates ~~include~~and judgments during the ~~recoverable amounts~~six months ended June 30, 2022 were made in accounting for the completed sale and leaseback transaction of ~~goodwill and indefinite-lived intangible assets,~~our Bolton property (Note 15 & Note 21). The Company determined the ~~useful lives~~following estimates in calculating the gain on sale: the present value of ~~long-lived assets and finite-lived intangible assets, share-based compensation, share-based continuing employment costs,~~market rental payments of the ~~determination of~~Bolton property sold, the expected lease term in the leaseback arrangement and ~~lease liabilities, deferred income taxes, reserves for tax uncertainties, and other contingencies. Accounting for business combinations requires estimates with respect to~~ the ~~fair value~~Company’s incremental borrowing rate based on information available at the commencement date of the assets acquired and liabilities assumed. Such estimates of fair value may require valuation methods which use significant estimates and assumptions. At the acquisition of Rouse Services LLC (“Rouse”), we estimated the fair value of the intangible assets acquired, using a valuation method, which required management to make estimates with respect to expected future cash flows and growth rates, gross margins, attrition rates, royalty rates, discount rates, terminal value, and forecast period. The Company based these estimates on historical and anticipated results, industry trends, economic analysis, and various other assumptions that it believes are reasonable, including assumptions as to future events.

~~As of September 30, 2021, the Company performed a qualitative assessment of the A&M, Rouse, and Mascus reporting units and the Company concluded there were no indicators of impairment.~~lease.


Ritchie Bros.	8

Table of Contents

4. Seasonality

The Company’s operations are both seasonal and event driven. ~~Revenues tend~~Revenue tends to be the highest during the second and fourth calendar quarters as the Company generally conducts more auctions during these quarters. Volumes tend to also be lower during the third quarter, as supply of used equipment is lower as it is actively being used and not available for sale. Late December through mid-February and mid-July through August are traditionally less active periods.

~~The restrictions imposed and effects of the overall economic environment as a result of the COVID-19 pandemic have impacted and may continue to impact these trends.~~


~~Ritchie Bros.~~	13

~~Table of Contents~~

5. Business combinations

(a)	~~Rouse~~SmartEquip acquisition

On ~~December 8, 2020,~~November 2, 2021, the Company acquired all of the issued and outstanding ~~units~~common shares of ~~Rouse~~SmartEquip for a total cash purchase price of $173,743,000. During the first quarter of 2022, the Company finalized the net working capital adjustment under the purchase agreement and increased the purchase price by $63,000, resulting in a total purchase price of ~~$251,724,000. The Company paid cash consideration~~$173,806,000.

SmartEquip is an innovative technology platform that supports customers' management of ~~$250,265,000, of which $2,169,000 was placed in escrow. In~~ the ~~second quarter of 2021, the Company received a post-closing release from escrow of $728,000 related to net working capital adjustments, resulting in total net cash consideration paid of $249,537,000.~~

~~Rouse is a leading provider of construction~~ equipment ~~market data intelligence~~lifecycle and ~~performance benchmarking solutions. Rouse provides appraisals to asset-backed lenders and market intelligence and software to rental companies, contractors and dealers to optimize the used~~integrates parts procurement with both original equipment ~~sales process, and comparisons of rental rates, utilization, and other key performance metrics to industry benchmarks for rental companies~~manufacturers and dealers. ~~The combination of Rouse with the Company is expected to enhance the data analytics and service offerings available to customers.~~

The acquisition was accounted for in accordance with ASC 805, Business Combinations. The following table summarizes the ~~fair value~~preliminary allocation of ~~consideration transferred at~~ the ~~date of acquisition, as well as the final~~ purchase price ~~allocation of~~to the fair value of assets acquired and liabilities assumed.

December 8, 2020
Total cash consideration paid

$
249,537
Equity consideration paid for pre-combination services

1,459
Final purchase price

$
250,996

~~Rouse~~SmartEquip purchase price allocation


	December 8, 2020
Purchase price	$	250,996	$	173,806

Assets acquired:
Cash and cash equivalents	$	226	$	2,039
Trade and other receivables		4,601		2,926
Other current assets		159		486
Property, plant and equipment		1,171		120
Other non-current assets		3,741		75
Deferred tax assets		7,584		8,932
Intangible assets		79,300		71,700

Liabilities assumed:
Trade and other payables		5,630
Trade and other liabilities				1,239
Deferred revenue				3,565
Other non-current liabilities		3,188		119
Deferred tax liabilities		936		18,192

Fair value of identifiable net assets acquired		87,028		63,163
Goodwill acquired on acquisition	$	163,968	$	110,643

The deferred tax assets are presented net of a $1,486,000 valuation allowance.

The following table summarizes the fair values of the identifiable intangible assets acquired:


	Fair value		Weighted average
Asset	at acquisition		amortization period
Customer relationships	$	50,700	4 - 15 years
Software and technology assets		18,900	7 years
Trade names and trademarks		1,000	3 years
Backlog		1,100	2 years
Total	$	71,700	11.3 years


Ritchie Bros.	149

Table of Contents

5. Business combinations (continued)

~~Rouse~~SmartEquip purchase price allocation (continued)

The ~~following table summarizes~~amounts included in the SmartEquip provisional purchase price allocation are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed at the date of the acquisition. The final determination of the fair values of ~~the identifiable intangible~~certain assets ~~acquired:~~

Fair value

Weighted average
Asset

at acquisition

amortization period
Customer relationships

$
71,000

15 years
Software and technology assets

7,500

4 years
Trade names and trademarks

800

2 years
Total

$
79,300

13.8 years

~~During~~and liabilities will be completed within the quarter ended March 31, 2021, the Company recorded an adjustment of $603,000 to increase the liabilities assumed and increase the goodwill acquired on acquisition. During the quarter ended June 30, 2021, the Company finalized the net working capital adjustment under the purchase agreement and reduced the purchase price by $728,000. The Company also recorded an adjustment of $1,677,000 to reduce the liabilities assumed on acquisition. These measurement period ~~adjustments, since~~of up to one year from the acquisition ~~resulted in~~date. Adjustments to the preliminary values during the measurement period may impact the amounts recorded as assets and liabilities with a ~~total net decrease~~corresponding adjustment to goodwill ~~of $1,802,000.~~

~~The purchase price allocation was finalized on June 30, 2021. At September 30, 2021, $1,169,000 continues to~~and will be ~~held~~recognized in ~~escrow until December 4, 2021 or until such date that a joint decision is made for~~ the ~~funds to be released.~~period in which the adjustments are determined.

Goodwill

Goodwill has been assigned and allocated to “Other” for segmented information purposes and is based on an analysis of the fair value of net assets acquired. Goodwill relates to benefits expected from the acquisition of ~~Rouse’s~~SmartEquip’s business, its assembled workforce and associated technical expertise, as well as anticipated synergies from applying the Company’s auction expertise and transactional capabilities to ~~Rouse’s~~SmartEquip’s existing customer base. The transaction is considered a ~~taxable~~non-taxable business combination and ~~all of~~ the goodwill is not deductible for tax purposes.

Transactions recognized separately from the acquisition of assets and ~~assumption~~assumptions of liabilities

At the date of acquisition, the Company issued ~~312,193~~63,971 common shares to certain previous ~~unitholders~~shareholders of ~~Rouse~~SmartEquip in return for their continuing employment service. The common shares are expected to vest ~~at various vesting dates~~one third on each anniversary date of the acquisition over a three-year period ~~from the date of acquisition~~ as continuing employment services are provided to the Company. At the date of acquisition, the Company estimated that it will recognize a total fair value of ~~$20,735,000 of~~$4,375,000 share-based continuing employment costs in acquisition-related costs over the vesting period, with an increase to additional paid-in capital, subject to continuing employment of those individuals. As and when the common shares vest, the Company will recognize the fair value of the issued common shares from additional paid-in capital to share ~~capital.~~

During the three month period ended March 31, 2021, one of the previous unitholders of Rouse, who became an employee of the Company after the acquisition, terminated their employment contract, which resulted in the forfeiture of 55,510 shares as no vesting conditions had been achieved and reversal of share based continuing employment costs of $98,000. As a result, at September 30, 2021, the number of common shares expected to vest is 256,683 and the total unrecognized fair value of the share-based continuing employment costs expected to be recognized is $9,191,000capital (Note ~~18)~~19).

During the quarter ended ~~September~~June 30, ~~2021,~~2022, the Company recorded ~~$3,021,000 in~~$668,000 of acquisition-related costs, ~~for legal, advisory, integration and other professional fees,~~all of which ~~included $2,707,000 of~~related to share-based continuing employment costs.


~~Ritchie Bros.~~	15

~~Table of Contents~~

~~5. Business combinations (continued)~~

(b)	Euro Auctions acquisition

On August 9, 2021, the Company ~~through its indirect wholly owned subsidiary Ritchie Bros UK. Holdings Ltd,~~ entered into a Sale and Purchase Agreement (“SPA”) pursuant to which it ~~has~~ agreed to purchase Euro Auctions Limited, ~~and its subsidiaries,~~ William Keys & Sons Holdings Limited, ~~and its subsidiaries,~~ Equipment & Plant Services Ltd, and Equipment Sales Ltd. (collectively, “Euro Auctions”), each being a private limited ~~companies~~company incorporated in Northern Ireland (the “Euro Auctions Acquisition”).

Under the terms of the SPA, the Company ~~will~~was to acquire all of the outstanding shares of Euro Auctions from their existing shareholders for approximately £775,000,000 (approximately ~~$1.04~~$1.02 billion) cash consideration, to be paid on closing. ~~The Euro Auctions acquisition is subject~~On April 29, 2022, the Company made a decision to ~~regulatory clearances and~~discontinue the ~~satisfaction of other customary closing conditions, including obtaining of antitrust clearance in~~Phase 2 review by the United ~~Kingdom. Euro Auctions are providers of unreserved auction services~~Kingdom’s Competition and Markets Authority (“CMA”). The SPA automatically terminated on June 28, 2022. In addition, in ~~the commercial assets space with operations in the United Kingdom, the United Arab Emirates, Australia and the United States.~~

~~In connection with the execution of the SPA,~~April 2022, the Company ~~also obtained a financing commitment letter (“Commitment Letter”), dated August 8, 2021 from Goldman Sachs Bank USA (“GS Bank”) pursuant to which GS Bank~~terminated, without cost, its deal contingent forward currency contracts (Note 13) and certain other financial institutions committed to provide a $530 million senior secured revolving credit facility and a $100 million senior secured term loan facility (together, the “Bank Commitments”), and a senior unsecured bridge loan facility up to $1,150 million (the “Bridge Commitment”). On September 21, 2021, the Company amended its existing Credit Agreement (Note 16) and thereby cancelled the Bank Commitments. Further, the Bridge Commitment was reduced by $200 million. The remaining aggregate principal amount of the total financing commitment from GS Bank was reduced from $1,150 million to $950 million.

~~GS Bank is also acting as the Company’s financial adviser with respect to the Euro Auctions Acquisition. Consideration of $15,000,000 is payable to GS Bank in respect of such services, contingent~~ on consummation of the acquisition. GS Bank also agrees to credit (or, at GS Bank’s option, refund) $2,000,000 of the transaction fee, to the extent paid, against any further transaction fee that becomes payable to GS Bank in connection with it acting in connection with a financing transaction as described above. These costs have not been recognized as at September 30, 2021. The fee of $15,000,000 (or $13,000,000, net of any amounts credited) will be expensed as acquisition-related costs when it is recognized.

~~During the quarter ended September 30, 2021, the Company incurred $6,133,000 in acquisition-related expenses for the acquisition of the Euro Auctions.~~

~~(c) SmartEquip acquisition~~

On September 24, 2021, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) to acquire SmartEquip, a Delaware, United States corporation. SmartEquip has a multi-manufacturer platform that provides customers with real-time service and diagnostic support, dynamically customized, via serial number, to each asset in their fleet, and enables the electronic procurement of parts from original equipment manufacturers and their dealers.

~~On November 2, 2021, the Company closed the acquisition of SmartEquip and issued a total of 63,971 common shares to certain of the former shareholders of SmartEquip.~~

~~Under the terms of the Merger Agreement, the Company acquired~~May 4, 2022, redeemed all of the ~~issued and outstanding common shares of SmartEquip for $175,000,000, subject~~2021 Notes (Note 17) at a redemption price equal to ~~certain adjustments, including for working capital, indebtedness, and SmartEquip’s transaction expenses. The purchase price was paid in cash, with the exception of a portion~~100% of the ~~consideration payable to certain of SmartEquip’s shareholders who are entering into employment agreements with the Company, which was paid in common shares~~original offering price of the ~~Company.~~

~~During the quarter ended September 30, 2021, the Company incurred $1,101,000 in acquisition-related expenses for the acquisition of SmartEquip.~~

notes, plus accrued and unpaid interest..


Ritchie Bros.	1610

Table of Contents

6. Segmented information

The Company’s principal business activity is the management and disposition of used industrial equipment and other durable assets. The Company’s operations are comprised of 1 reportable segment and other business activities that are not reportable as follows:

●	Auctions and Marketplaces – This is the Company’s only reportable segment, which consists of the Company’s live ~~on site~~onsite auctions, its online auctions and marketplaces, and its brokerage service;

●

Other includes the results of ~~Rouse,~~ Ritchie Bros. Financial Services (“RBFS”), Rouse, Mascus online services, SmartEquip, and the results from various value-added services and make-ready activities, including the Company’s equipment refurbishment services, ~~Asset Appraisal Services,~~ and Ritchie Bros. Logistical Services (“RB Logistics”).


	Three months ended September 30, 2021						Nine months ended September 30, 2021						Three months ended June 30, 2022						Six months ended June 30, 2022
	A&M		Other		Consolidated		A&M		Other		Consolidated		A&M		Other		Consolidated		A&M		Other		Consolidated
Service revenue	$	178,344	$	35,849	$	214,193	$	560,573	$	112,398	$	672,971
Service revenue:
Commissions													$	136,403	$	—	$	136,403	$	252,778	$	—	$	252,778
Fees														98,588		51,511		150,099		183,217		95,368		278,585
Total service revenue														234,991		51,511		286,502		435,995		95,368		531,363
Inventory sales revenue		115,489		—		115,489		384,627		—		384,627		198,044		—		198,044		347,104		—		347,104
Total revenue	$	293,833	$	35,849	$	329,682	$	945,200	$	112,398	$	1,057,598	$	433,035	$	51,511	$	484,546	$	783,099	$	95,368	$	878,467
Costs of services		19,751		13,287		33,038		63,326		44,781		108,107		28,985		16,054		45,039		54,559		29,495		84,054
Cost of inventory sold		102,993		—		102,993		344,763		—		344,763		176,171		—		176,171		307,753		—		307,753
Selling, general and administrative expenses ("SG&A")		96,194		12,384		108,578		301,956		34,519		336,475
Selling, general and administrative														125,535		18,742		144,277		234,346		36,537		270,883
Segment profit	$	74,895	$	10,178	$	85,073	$	235,155	$	33,098	$	268,253	$	102,344	$	16,715	$	119,059	$	186,441	$	29,336	$	215,777
Acquisition-related costs						10,255						16,226						3,399						13,036
Depreciation and amortization expenses ("D&A")						21,907						64,912
Gain on disposition of property, plant and equipment ("PPE")						(1,068)						(1,311)
Foreign exchange loss						360						788
Depreciation and amortization																		24,298						48,523
Foreign exchange gain																		(158)						(322)
Total operating expenses																	$	393,026						723,927
Gain on disposition of property, plant and equipment																		347						170,167
Operating income					$	53,619					$	187,638					$	91,867					$	324,707
Interest expense						(8,807)						(26,620)						(18,463)						(39,149)
Change in fair value of derivatives																		—						1,263
Other income, net						602						2,800						1,639						2,559
Income tax expense						(13,057)						(42,541)						(21,632)						(57,868)
Net income					$	32,357					$	121,277					$	53,411					$	231,512

Three months ended September 30, 2020

Nine months ended September 30, 2020


A&M

Other

Consolidated

A&M

Other

Consolidated

Service revenue

$
188,949

$
33,730

$
222,679

$
543,340

$
96,601

$
639,941

Inventory sales revenue

108,863

—

108,863

353,906

—

353,906

Total revenue

$
297,812

$
33,730

$
331,542

$
897,246

$
96,601

$
993,847

Costs of services

21,733

17,490

39,223

69,018

49,008

118,026

Cost of inventory sold

96,253

—

96,253

320,972

—

320,972

SG&A expenses

103,933

6,253

110,186

290,077

19,126

309,203

Segment profit

$
75,893

$
9,987

$
85,880

$
217,179

$
28,467

$
245,646

D&A expenses



18,436





55,586

Gain on disposition of PPE

(276)





(1,536)

Foreign exchange loss

336





1,330

Operating income

$
67,384





$
190,266

Interest expense



(8,737)





(26,801)

Other income, net



2,280





6,714

Income tax expense





(15,437)





(48,741)

Net income





$
45,490





$
121,438

The chief operating decision maker “CODM” does not evaluate the performance of the Company’s operating segments or assess allocation of resources based on segment assets and liabilities, nor does the Company classify liabilities on a segmented basis.


	Three months ended June 30, 2021						Six months ended June 30, 2021
	A&M		Other		Consolidated		A&M		Other		Consolidated
Service revenue:
Commissions	$	129,334	$	—	$	129,334	$	233,309	$	—	$	233,309
Fees		83,334		40,080		123,414		151,430		74,039		225,469
Total service revenue		212,668		40,080		252,748		384,739		74,039		458,778
Inventory sales revenue		143,613		—		143,613		269,138		—		269,138
Total revenue	$	356,281	$	40,080	$	396,361	$	653,877	$	74,039	$	727,916
Costs of services		25,176		16,125		41,301		49,480		29,687		79,167
Cost of inventory sold		131,023		—		131,023		241,770		—		241,770
Selling, general and administrative		99,215		10,345		109,560		201,996		21,803		223,799
Segment profit	$	100,867	$	13,610	$	114,477	$	160,631	$	22,549	$	183,180
Acquisition-related costs						3,049						5,971
Depreciation and amortization						21,935						43,005
Foreign exchange loss						151						428
Total operating expenses					$	307,019						594,140
Gain on disposition of property, plant and equipment						175						243
Operating income					$	89,517					$	134,019
Interest expense						(8,867)						(17,813)
Other income, net						1,196						2,198
Income tax expense						(21,065)						(29,484)
Net income					$	60,781					$	88,920


Ritchie Bros.	1711

Table of Contents

6. Segmented information (continued)

The Chief Operating Decision Maker does not evaluate the performance of the Company’s operating segments or assess allocation of resources based on segment assets and liabilities, nor does the Company classify liabilities on a segmented basis.

The Company’s geographic breakdown of total revenue and location is as follows:

United



States

Canada

Europe

Other

Consolidated
Total revenue for the three months ended:















September 30, 2021

$
173,137

$
55,925

$
40,620

$
60,000

$
329,682
September 30, 2020

177,883

58,059

41,891

53,709

331,542
Total revenue for the nine months ended:

September 30, 2021

$
563,941

203,093

$
143,263

$
147,301

$
1,057,598
September 30, 2020

573,001

191,692

115,659

113,495

993,847


	United
Total revenue for the three months ended:	States		Canada		Australia		Europe		Other		Consolidated
June 30, 2022	$	215,466	$	143,466	$	71,734	$	36,989	$	16,891	$	484,546
June 30, 2021		183,391		98,690		44,514		55,467		14,299		396,361
Total revenue for the six months ended:
June 30, 2022	$	463,416	$	208,699	$	100,809	$	74,809	$	30,734	$	878,467
June 30, 2021		390,805		147,168		64,077		102,643		23,223		727,916

7. Revenue

The Company’s revenue from the rendering of services is as follows:


	Three months ended				Nine months ended				Three months ended				Six months ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Service revenue:
Commissions	$	110,275	$	112,762	$	343,584	$	331,711	$	136,403	$	129,334	$	252,778	$	233,309
Fees		103,918		109,917		329,387		308,230		150,099		123,414		278,585		225,469
		214,193		222,679		672,971		639,941		286,502		252,748		531,363		458,778
Inventory sales revenue		115,489		108,863		384,627		353,906		198,044		143,613		347,104		269,138
	$	329,682	$	331,542	$	1,057,598	$	993,847	$	484,546	$	396,361	$	878,467	$	727,916


Ritchie Bros.	12

Table of Contents

8. Operating expenses

Costs of services


	Three months ended				Nine months ended				Three months ended				Six months ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021

Employee compensation expenses									$	17,045	$	14,953	$	32,966	$	29,483
Ancillary and logistical service expenses	$	11,433	$	16,550	$	38,521	$	45,368		13,446		14,819		24,201		27,088
Employee compensation expenses		12,182		11,442		37,567		35,057
Buildings, facilities and technology expenses		2,496		1,653		7,501		7,768
Travel, advertising and promotion expenses		3,205		4,782		13,022		17,518		7,200		5,299		12,372		9,817
Other costs of services		3,722		4,796		11,496		12,315		4,323		3,926		7,636		7,774
Buildings, facilities and technology expenses										3,025		2,304		6,879		5,005
	$	33,038	$	39,223	$	108,107	$	118,026	$	45,039	$	41,301	$	84,054	$	79,167

~~SG&A expenses~~Selling, general and administrative


	Three months ended				Nine months ended				Three months ended				Six months ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Wages, salaries and benefits	$	66,880	$	69,862	$	215,867	$	194,403	$	84,301	$	67,932	$	161,787	$	144,889
Share-based compensation expense		5,627		8,568		16,945		17,329		13,640		7,540		19,026		11,318
Buildings, facilities and technology expenses		18,213		15,901		53,035		46,108		23,327		17,479		43,412		34,822
Travel, advertising and promotion expenses		6,541		5,479		18,527		20,565		9,392		6,824		17,366		11,986
Professional fees		6,323		4,546		16,557		13,570		7,616		5,202		17,363		10,234
Other SG&A expenses		4,994		5,830		15,544		17,228
Other selling, general and administrative										6,001		4,583		11,929		10,550
	$	108,578	$	110,186	$	336,475	$	309,203	$	144,277	$	109,560	$	270,883	$	223,799

Acquisition-related costs


	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
SmartEquip:
Share-based continuing employment costs	$	668	$	—	$	1,326	$	—
Other acquisition-related costs		—		—		516		—

Euro Auctions:
Other acquisition-related costs		1,317		—		8,012		—

Rouse:
Share-based continuing employment costs		1,414		2,678		2,887		5,231
Other acquisition-related costs		—		371		295		740
	$	3,399	$	3,049	$	13,036	$	5,971

Depreciation and amortization


	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Depreciation	$	7,889	$	8,345	$	15,636	$	16,182
Amortization		16,409		13,590		32,887		26,823
	$	24,298	$	21,935	$	48,523	$	43,005


Ritchie Bros.	1813

Table of Contents

~~8. Operating expenses (continued)~~

~~Depreciation and amortization expenses~~

Three months ended

Nine months ended

September 30,

September 30,


2021

2020

2021

2020

Depreciation expense

$
8,127

$
7,705

$
24,309

$
23,278

Amortization expense

13,780

10,731

40,603

32,308

$
21,907

$
18,436

$
64,912

$
55,586

9. Income taxes

At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year. The estimate reflects, among other items, management’s best estimate of operating results. It does not include the estimated impact of foreign exchange rates or unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes.

For the three months ended ~~September~~June 30, ~~2021,~~2022, income tax expense was ~~$13,057,000,~~$21,632,000, compared to an income tax expense of ~~$15,437,000~~$21,065,000 for the same period in ~~2020.~~2021. The effective tax rate was 29% in the ~~third~~second quarter of ~~2021,~~2022, compared to ~~25%~~26% in the ~~third~~second quarter of ~~2020.~~

2021. The effective tax rate increased in the three months ended ~~September~~June 30, ~~2021,~~2022 compared to the three months ended ~~September~~June 30, ~~2020~~2021 primarily due ~~a decrease in deductible stock options exercised~~to higher return to provision adjustments and ~~a greater estimate of non-deductible expenses.~~higher income taxes related to tax uncertainties. Partially offsetting this increase was a lower ~~income taxes related to tax uncertainties.~~estimate of non-deductible expenses.

For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, income tax expense was ~~$42,541,000,~~$57,868,000, compared to an income tax expense of ~~$48,741,000~~$29,484,000 for the same period in ~~2020.~~2021. The effective tax rate was ~~26%~~20% for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~29%~~25% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~

2021. The effective tax rate decreased in the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 primarily due to the non-taxable gain portion on the sale of a parcel of land including all buildings in Bolton, Ontario and a decrease in the estimate of non-deductible ~~expenses, a higher tax deduction for share unit expenses in excess of compensation expense and lower income taxes related to tax uncertainties.~~ expenses.

Partially offsetting this decrease was a higher estimate of income taxed in jurisdictions with higher tax rates and a lower tax deduction for ~~stock options exercised.~~

~~On April 8, 2020,~~performance share units (“PSUs”) and restricted share units (“RSUs”) expenses that exceeded the ~~United States Department of Treasury and the Internal Revenue Service (“IRS”) clarified income tax benefits~~ related to hybrid financing arrangements would not be deductible (“Hybrid Interest”). The lower estimate of non-deductible expenses is primarily due to the net income tax benefits of approximately $6,228,000 in the twelve months ended December 31, 2019, which were no longer deductible and accordingly were reversed in the nine months ended September 30, 2020.compensation expense.

The Canada Revenue Agency (“CRA”) is currently conducting an audit of the Company’s 2014, 2015, 2017, and ~~2015~~2018 taxation years. Management believes that the Company is in full compliance with Canadian tax laws. However, ~~there can be no assurance that~~ the CRA ~~will not~~could challenge the manner in which the Company has filed its income tax returns and reported its income. In the event that the CRA challenges the manner in which the Company has filed its tax returns and reported its income, the Company will have the option to appeal any such decision. If the Company is not successful, however, the CRA audit could potentially result in additional income taxes, penalties, and interest, which could have a material adverse effect on the Company.


Ritchie Bros.	1914

Table of Contents

10. Earnings per share attributable to stockholders

Basic earnings per share (“EPS”) attributable to stockholders was calculated by dividing the net income attributable to stockholders by the weighted average (“WA”) number of common shares outstanding during the period. Diluted EPS attributable to stockholders was calculated by dividing the net income attributable to stockholders by the weighted average number of shares of common stock outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include unvested PSUs, unvested RSUs, and outstanding stock options. The dilutive effect of potentially dilutive securities is reflected in diluted EPS by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities.


	Three months ended					Nine months ended					Three months ended					Six months ended
	September 30, 2021					September 30, 2021					June 30, 2022					June 30, 2022
	Net income		WA	Per		Net income		WA	Per		Net income		WA	Per		Net income		WA	Per
	attributable to		number	share		attributable to		number	share		attributable to		number	share		attributable to		number	share
	stockholders		of shares	amount		stockholders		of shares	amount		stockholders		of shares	amount		stockholders		of shares	amount
Basic	$	32,336	110,410,172	$	0.29	$	121,273	110,233,851	$	1.10	$	53,365	110,760,339	$	0.48	$	231,459	110,705,182	$	2.09
Effect of dilutive securities:
Share units		—	324,218		—		—	408,574				—	397,274		—		—	423,767		(0.01)
Stock options		—	657,006		—		—	690,822		(0.01)		—	547,489		—		—	552,695		(0.01)
Diluted	$	32,336	111,391,396	$	0.29	$	121,273	111,333,247	$	1.09	$	53,365	111,705,102	$	0.48	$	231,459	111,681,644	$	2.07


	Three months ended					Nine months ended					Three months ended					Six months ended
	September 30, 2020					September 30, 2020					June 30, 2021					June 30, 2021
	Net income		WA	Per		Net income		WA	Per		Net income		WA	Per		Net income		WA	Per
	attributable to		number	share		attributable to		number	share		attributable to		number	share		attributable to		number	share
	stockholders		of shares	amount		stockholders		of shares	amount		stockholders		of shares	amount		stockholders		of shares	amount
Basic	$	45,387	109,018,469	$	0.42	$	121,239	108,887,026	$	1.11	$	60,749	110,311,615	$	0.55	$	88,937	110,144,229	$	0.81
Effect of dilutive securities:
Share units		—	548,859		—		—	519,915		—		—	322,371		—		—	450,752		—
Stock options		—	802,390		(0.01)		—	653,771		(0.01)		—	700,198		—		—	707,730		(0.01)
Diluted	$	45,387	110,369,718	$	0.41	$	121,239	110,060,712	$	1.10	$	60,749	111,334,184	$	0.55	$	88,937	111,302,711	$	0.80


Ritchie Bros.	2015

Table of Contents

11. Supplemental cash flow information

Nine months ended September 30,

2021

2020

Trade and other receivables

$
(120,160)

$
(185,899)

Inventory

16,926

3,938

Advances against auction contracts

3,132

6,566

Prepaid expenses and deposits

1,671

2,184

Income taxes receivable

(4,923)

1,191

Auction proceeds payable

217,423

213,596

Trade and other payables

(13,684)

20,675

Income taxes payable

(12,278)

4,179

Operating lease obligation

(9,000)

(8,809)

Other

831

(3,709)

Net changes in operating assets and liabilities

$
79,938

$
53,912

Net changes in operating assets and liabilities

Nine months ended September 30,

2021

2020

Interest paid, net of interest capitalized

$
31,054

$
31,173

Interest received

1,010

1,775

Net income taxes paid

56,016

32,750

Non-cash purchase of property, plant and equipment under finance lease

6,173

8,431

Non-cash right of use assets obtained (reassessed) in exchange for new lease obligations

13,545

595


Six months ended June 30,	2022		2021
Trade and other receivables	$	(152,893)	$	(134,522)
Inventory		(25,842)		(2,207)
Advances against auction contracts		(11,238)		(761)
Prepaid expenses and deposits		20,774		3,157
Income taxes receivable		6,985		(3,847)
Auction proceeds payable		205,910		230,309
Trade and other liabilities		(22,639)		(20,686)
Income taxes payable		25,866		(12,723)
Operating lease obligation		(6,936)		(6,329)
Other		1,857		186
Net changes in operating assets and liabilities	$	41,844	$	52,577

September 30,

December 31,

2021

2020

Cash and cash equivalents

$
362,612

$
278,766

Restricted cash

105,742

28,129

Cash, cash equivalents, and restricted cash

$
468,354

$
306,895

Interest and tax payments


Six months ended June 30,	2022		2021
Interest paid, net of interest capitalized	$	20,846	$	16,387
Interest received		1,415		635
Net income taxes paid		13,855		43,249

Non-cash purchase of property, plant and equipment under finance lease		5,261		4,568
Non-cash right of use assets obtained in exchange for new lease obligations		18,472		9,451

Cash, cash equivalents, and restricted cash


	June 30,		December 31,
	2022		2021
Cash and cash equivalents	$	367,289	$	326,113
Restricted cash
Current		164,371		102,875
Non-current		—		933,464
Cash, cash equivalents, and restricted cash	$	531,660	$	1,362,452

12. Fair value measurement

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement or disclosure:

●	Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at measurement date;

●	Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and

●	Level 3: Unobservable inputs for the asset or liability.


Ritchie Bros.	2116

Table of Contents

12. Fair value measurement (continued)


		September 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
		Carrying				Carrying					Carrying				Carrying
	Category	amount		Fair value		amount		Fair value		Category	amount		Fair value		amount		Fair value
Fair values disclosed:
Cash and cash equivalents	Level 1	$	362,612	$	362,612	$	278,766	$	278,766	Level 1	$	367,289	$	367,289	$	326,113	$	326,113
Restricted cash	Level 1		105,742		105,742		28,129		28,129	Level 1		164,371		164,371		1,036,339		1,036,339
Loan receivables	Level 2		7,889		8,302		5,798		6,438
Loans receivable										Level 2		11,749		11,678		7,267		7,267
Derivative financial assets
Deal contingent forward contract										Level 3		—		—		751		751
Forward currency contracts										Level 2		37		37		—		—
Derivative financial liabilities
Deal contingent forward contract										Level 3		—		—		2,005		2,005
Short-term debt	Level 2		18,481		18,481		29,145		29,145	Level 2		8,637		8,637		6,147		6,147
Long-term debt
Senior unsecured notes	Level 1		494,078		511,875		492,734		514,219
Senior unsecured notes (as defined in Note 17)
2016 Notes										Level 1		495,434		489,800		494,531		508,125
2021 USD Notes										Level 2		—		—		598,052		625,125
2021 CAD Notes										Level 2		—		—		332,337		339,100
Term loan	Level 2		93,232		93,762		97,812		98,420	Level 2		91,989		92,348		92,821		93,226
Long-term revolver loan	Level 2		46,382		46,442		46,102		46,184
Long-term revolver loans										Level 2		56,949		57,000		219,699		219,772

The carrying value of the ~~Company’s~~Company��s cash and cash equivalents, restricted cash, trade and other receivables, advances against auction contracts, loan receivables maturing within a year, auction proceeds payable, trade and other payables, and short-term debt approximate their fair values due to their short terms to maturity. The fair value of the loan receivables with a maturity date greater than one year isare determined by estimating discounted cash flows using market rates. The carrying ~~value~~values of the term loan and long-term revolver loan, before deduction of deferred debt issue costs, approximate their fair ~~value~~values as the interest rates on the loans ~~are~~is short-term in nature. The fair ~~value~~values of the senior unsecured notes isare determined by reference to a quoted market ~~price.~~price of the notes traded in an over-the-counter broker market.

The Company holds derivative financial assets and liabilities that are required to be measured at fair value on a recurring basis. The fair values of the deal contingent forward contracts were determined using a probability weighted mark to market valuation and observable Level 2 inputs, including foreign currency spot exchange rates, forward pricing curves, and an unobservable Level 3 input, the expected date of settlement. The change in the valuation of the derivatives due to the range of possible expected settlement dates was not significant to the financial statements. The fair value of the forward currency contracts are determined using observable Level 2 inputs, including foreign currency spot exchange rates and forward pricing curves. The fair value considers the credit risk of the Company and its counterparties.

13. Derivative financial instruments

The Company’s derivative financial instruments are accounted for as derivatives under ASC 815, Derivatives and Hedging, and are classified in other current assets and other current liabilities. The Company has not applied hedge accounting to these instruments.

The Company enters into forward currency contracts from time to time to manage its exposure to foreign currency exchange rate fluctuations recognized by its subsidiaries on specific monetary loan receivables. During the three and six month periods ended June 30, 2022, a loss of $1,866,000 and $1,296,000 respectively was recognized for the change in fair values of the forward currency contracts within foreign exchange loss (gain) in the consolidated income statement.

The Company also held 2 deal contingent foreign exchange forward currency contracts to manage its exposure to foreign currency exchange rate fluctuations against the U.S. and Canadian dollar on £343,000,000 of the £775,000,000 purchase consideration for the proposed Euro Auctions Acquisition. The notional amounts of the derivative instruments were £216,000,000 (U.S. dollar forward) and £127,000,000 (Canadian dollar forward). These forward contracts were terminated by the Company in April 2022 at no cost.


Ritchie Bros.	17

Table of Contents

~~13.~~14. Trade and other receivables

Trade receivables are generally secured by the equipment that they relate to as it is Company policy that equipment is not released until payment has been collected. The following table presents the activity in the allowance for expected credit losses for the period ended ~~September~~June 30, ~~2021:~~2022:


Balance at December 31, ~~2020~~2021	$	~~(5,467)~~(4,396)
Current period provision		~~(392)~~(120)
Write-offs charged against the allowance		~~1,721~~753
Balance ~~September~~at June 30, ~~2021~~2022	$	~~(4,138)~~(3,763)


~~Ritchie Bros.~~	22

~~Table of Contents~~

~~14.~~15. Other current assets


	September 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Advances against auction contracts	$	3,107	$	6,487	$	14,783	$	4,102
Assets held for sale		7,067		—		323		17,538
Prepaid expenses and deposits		21,622		20,787		21,069		41,955
Derivative financial asset						37		751
	$	31,796	$	27,274	$	36,212	$	64,346

Assets held for sale

Balance, December 31, 2020

$
—
Reclassified from property, plant and equipment

7,308
Disposal

(241)
Balance, September 30, 2021

$
7,067


Balance at December 31, 2021	$	17,538
Reclassified from (to) property, plant and equipment		(10,148)
Disposal		(7,067)
Balance at June 30, 2022	$	323

On ~~August 13, 2021,~~March 17, 2022, the Company ~~entered into an agreement to sell~~completed the sale and leaseback of a parcel of land including all buildings, in Bolton, ~~Ontario.~~Ontario, for a total sale consideration of $208,195,000 Canadian dollars (approximately $165 million) net of closing and transaction costs, and recognized a gain on disposition of property, plant and equipment of $169,092,000. The ~~selling price for~~net book value of the Bolton property ~~is approximately $170,000,000 ($210,000,000 CAD)~~was $7,067,000. The payments for the lease were not considered to be at market rates given an initial two year rent free period and, ~~is subject~~accordingly, the Company adjusted the sales proceeds and the gain to ~~certain closing adjustments.~~fair value. The ~~Company also anticipates that it will incur approximately $1,500,000 in selling costs. The Company intends to relocate its auction operation from the~~ Bolton property continues to be used for auction operations under the operating leaseback agreement until the completion of the acquisition and development of a replacement property located in Amaranth, Ontario. The closing of the sale of the Bolton property is conditioned upon, among other customary closing conditions, the Company receiving: (i) zoning and other governmental approvals necessary for the construction and development of the replacement property and (ii) confirmation from the vendor of the replacement property that it has satisfied its conditions under a separate agreement of purchase and sale with respect to the replacement property. These conditions must be satisfied or waived by the Company by April 1, 2022 and are subject to an extension that shall not extend past October 1, 2022. In addition, upon closing of the sale of the Bolton property, the Company intends to lease the Bolton property for a period of two years and has an option to renew the lease for 2 additional one-year periods, until such time as the replacement property is available for relocation of the Company’s operations. During such lease period, the Company will continue to conduct normal auction operations at the Bolton property. (Note 21)

As at ~~September 30,~~December 31, 2021, the Company ~~has~~also classified ~~the Bolton property,~~vacant land in Casa Grande, Arizona with a net book value of ~~$7,067,000~~$10,500,000 as an asset held for sale. During the quarter ended June 30, 2022, the Company assessed that the property no longer met the asset held for sale oncriteria and therefore reclassified the ~~balance sheet.~~net book value of the property to property, plant and equipment.

~~15.~~16. Other non-current assets


	September 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Right-of-use assets	$	118,972	$	116,503	$	134,219	$	114,414
Tax receivable		9,830		11,050		10,641		10,289
Loans receivable		3,907		4,870		7,199		—
Deferred debt issue costs		5,516		2,263		4,223		5,236
Other		11,594		12,922		12,078		12,565
	$	149,819	$	147,608	$	168,360	$	142,504

The Company recognized a right-of-use asset of $16,587,000 as a result of the sale and leaseback transaction on the Bolton property in March 2022 (Note 15 and 21) and recognized a right-of-use asset of $9,020,000 as a result of a new lease signed on an auction site in Maltby, United Kingdom in June 2022 (Note 21).


Ritchie Bros.	18

Table of Contents

16. Other non-current assets (continued)

Loans receivable

As at ~~September~~June 30, ~~2021,~~2022, the Company held ~~two non-recourse~~four financing lending arrangements ~~with~~that are fully collateralized and secured by certain equipment. These financing lending arrangements have a term of one to four ~~years, which are fully collateralized and secured by certain equipment.~~years. In the event of default under these agreements, the Company will take possession of the equipment as collateral to recover its loans receivable balance. The loans receivable balance as at ~~September~~June 30, ~~2021~~2022 was ~~$7,889,000,~~$11,749,000, of which ~~$3,982,000~~$4,550,000 is recorded in trade and other receivables and $7,199,000 in non-current loans receivable (December 31, ~~2020: $5,798,000,~~2021: $7,267,000, of which ~~$927,000~~$7,267,000 was recorded in trade and other ~~receivables)~~receivables and NaN in non-current loans receivable). The expected credit loss allowance is not significant.


~~Ritchie Bros.~~	23

~~Table of Contents~~

~~16.~~17. Debt


	Carrying amount				Carrying amount
	September 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Short-term debt	$	18,481	$	29,145	$	8,637	$	6,147

Long-term debt:

Term loan and long-term revolver loan:
Term loan denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 2.61%, due in monthly installments of interest only, maturing in September 2026		93,762		98,420
Long-term revolver loan denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 2.61%, due in monthly installments of interest only, maturing in September 2026		46,442		46,184
Revolving facilities and delayed-draw term loan facility:
Delayed-draw term loan denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 3.08%, due in monthly installments of interest only, maturing in September 2026						92,348		93,283
Long-term revolver loan denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 2.29%, due in monthly installments of interest only, maturing in September 2026						-		46,206
Long-term revolver loan denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 2.29%, due in monthly installments of interest only, maturing in September 2026						-		56,492
Long-term revolver loan denominated in U.S. dollars, secured, bearing interest at a weighted average rate of 2.53%, due in monthly installments of interest only, maturing in September 2026						57,000		117,000
Less: unamortized debt issue costs		(590)		(690)		(410)		(463)

Senior unsecured notes:
Bearing interest at 5.375% due in semi-annual installments, with the full amount of principal due in January 2025		500,000		500,000
Bearing interest at 5.375% due in semi-annual installments, with the full amount of principal due in January 2025 (the "2016 Notes")						500,000		500,000
Less: unamortized debt issue costs						(4,566)		(5,469)
Bearing interest at 4.75% due in semi-annual installments, with the full amount of principal due in December 2031 (the "2021 USD Notes")						-		600,000
Less: unamortized debt issue costs						-		(1,948)
Bearing interest at 4.95% due in semi-annual installments, with the full amount of principal due in December 2029 (the "2021 CAD Notes")						-		333,464
Less: unamortized debt issue costs		(5,922)		(7,266)		-		(1,127)
Total long-term debt		633,692		636,648		644,372		1,737,438

Total debt	$	652,173	$	665,793	$	653,009	$	1,743,585

Long-term debt:
Current portion	$	1,172	$	10,360	$	4,617	$	3,498
Non-current portion		632,520		626,288		639,755		1,733,940
Total long-term debt	$	633,692	$	636,648	$	644,372	$	1,737,438

As at ~~September~~June 30, ~~2021,~~2022, the Company had unused committed revolving credit facilities aggregating ~~$686,313,000, of which $676,313,000 is~~$673,459,000 that are available until September ~~21,~~ 2026 subject to certain covenant ~~restrictions.~~ restrictions, unused uncommitted revolving credit facilities aggregating $5,000,000 that are available until October 2023, and unused uncommitted revolving credit facilities aggregating $5,000,000 with no maturity date.The Company was in compliance with all financial and other covenants applicable to the credit facilities at ~~September~~June 30, ~~2021~~2022.


Ritchie Bros.	19

Table of Contents

17. Debt (continued)

Short-term debt

Short-term debt is comprised of drawings in different currencies on the Company’s committed revolving credit facilities and has a weighted average interest rate of ~~1.8%~~2.7% (December 31, ~~2020: 2.3%~~2021: 1.8%).

Long-term debt

a)	~~Term~~Revolving facilities and delayed-draw term loan ~~and long-term revolver loan~~facility

~~On August 14, 2020,~~During 2016, the Company entered into ~~an amendment of the Credit Agreement dated October 27, 2016~~a credit agreement with a syndicate of ~~lenders, totaling $630,000,000~~lenders. The credit agreement is comprised ~~of:~~

~~(1)~~

~~Multicurrency revolving facilities of up to $530,000,000 (the “Revolving Facilities”); and~~

~~(2)~~

~~A delayed-draw term loan facility of up to $100,000,000 (the Delayed-Draw Term Loan Facility, the “DDTL Facility” and together with the Revolving Facilities, the “Facilities”).~~

Onof multicurrency revolving facilities (the “Revolving Facilities”) and a delayed-draw term loan facility (the “DDTL Facility”, together with the Revolving Facilities, the “Facilities”). The credit agreement was most recently amended in September ~~21,~~ 2021, ~~the Company entered into another amendment of its Credit Agreement. The amendment,~~which, among other things (i) extended the maturity date of the Facilities from October 27, 2023 to September 21, 2026, (ii) increased the total size of the Facilities provided under the Credit Agreement to up to $1,045,000,000, including $295,000,000 of commitments under the DDTL Facility, (iii) reduced the applicable margin for base rate loans and LIBOR loans at each pricing tier level, (iv) reduced the applicable percentage per annum used to calculate the commitment fee in respect of the unused commitments under the ~~Revolving~~ Facilities at each pricing tier level, and (v) included customary provisions to provide for the eventual replacement of LIBOR as a benchmark interest rate.


~~Ritchie Bros.~~	24

~~Table of Contents~~

~~16. Debt (continued)~~

a)	~~Term loan and long-term revolver loan (continued)~~

Immediately prior to the amendment, the aggregate principal amount outstanding under the DDTL Facility was $90,000,000 ($118,889,995 ~~CAD)~~Canadian dollars). In connection with the amendment, the Company refinanced that amount with the proceeds from a borrowing under the DDTL Facility. ~~There~~Under the terms of the amendment, there are no mandatory principal repayments of borrowings under the DDTL Facility until the earlier of when the remaining $205,000,000 is drawn or Q3the third quarter of 2022. The Company did not draw on the remaining $205,000,000 before it expired on June 28, 2022 and, therefore, mandatory principal repayments will begin in the third quarter of 2022. Once principal payments become mandatory, they are subject to an annual amortization rate of 5%, payable in quarterly installments, with the balance payable at maturity. As a result of the expiry of the DDTL Facility, the Company wrote off $710,000 of deferred debt issuance costs in the quarter recognized in non-current asset to interest expense.

~~The Company incurred debt issuance costs~~As of ~~$4,262,000 in connection with the amendment during the three month period ending September~~June 30, ~~2021. As at September 30, 2021,~~2022, the Company had unamortized deferred debt issue costs relating to the ~~Credit Agreement~~Facilities of ~~$6,106,000.~~$4,633,000.

b)	Senior unsecured notes

2016 Notes

On December 21, 2016, the Company completed the offering of $500,000,000 aggregate principal amount of 5.375% senior unsecured notes due January 15, 2025 (the ~~“Notes”~~“2016 Notes”). Interest on the 2016 Notes is payable semi-annually. The 2016 Notes are jointly and severally guaranteed on an unsecured basis, subject to certain exceptions, by certain of the Company’s subsidiaries. IronPlanet, Rouse, SmartEquip, and certain of their respective subsidiaries were added as additional guarantors in connection with the acquisitions of IronPlanet, Rouse and ~~Rouse,~~SmartEquip, respectively.

2021 Notes

On December 21, 2021, the Company completed the offering of two series of senior notes: (i) $600,000,000 aggregate principal amount of 4.750% senior notes due December 15, 2031 (the “2021 USD Notes”) and (ii) $425,000,000 Canadian dollar aggregate principal amount of 4.950% senior notes due December 15, 2029 (the “2021 CAD Notes”, and together with the 2021 USD Notes, the “2021 Notes”).

The gross proceeds from the 2021 Notes offering together with certain additional amounts including prepaid interest were placed into escrow accounts and were expected to be held in escrow until the completion of the proposed Euro Auctions Acquisition. On May 4, 2022, the Company redeemed all of the 2021 Notes at a redemption price equal to 100% of the original offering price of the notes, plus accrued and unpaid interest. The Company was relieved of its obligations for the 2021 Notes upon redemption and therefore recognized the difference of $4,792,000 between the reacquisition price and the net carrying amount of the debt extinguished (which included unamortized deferred debt issuance costs) as a loss on redemption of the 2021 Notes in interest expense in the consolidated income statement.


Ritchie Bros.	20

Table of Contents

~~17.~~18. Other non-current liabilities


	September 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Operating lease liability	$	114,068	$	112,818	$	118,737	$	109,882
Tax payable		18,253		19,706		19,657		18,859
Finance lease liability		14,809		17,109		13,458		13,983
Other		6,430		3,367		4,059		4,536
	$	153,560	$	153,000	$	155,911	$	147,260

~~18.~~19. Equity and dividends

Share capital

Common stock

Unlimited number of common shares, without par value.

Preferred stock

Unlimited number of senior preferred shares, without par value, issuable in series.

Unlimited number of junior preferred shares, without par value, issuable in series.

All issued shares are fully paid. NaN preferred shares have been issued.

Shares issued for business ~~combination~~combinations

InThe Company has issued the following common shares in connection with the ~~acquisition~~acquisitions of Rouse ~~the Company issued 312,193 common shares on December 8, 2020.~~and SmartEquip. These shares were issued to certain previous unitholders and ~~employees~~shareholders of Rouse and ~~their vesting is subject to continuing employment with the Company over a three year period from the acquisition date. The fair value of these common shares was $71.09~~SmartEquip, based on the fair market value of the Company’s common shares onat the ~~date of acquisition. During the first nine months of 2021, 55,510 common shares were forfeited.~~

~~At September 30, 2021, the unrecognized~~acquisition date. The Company records share-based continuing employment costs ~~were $9,191,000 (September 30, 2020:~~ ~~$nil), which~~in acquisition-related costs over the vesting period, with an increase to additional paid-in capital. The vesting of shares issued for business combinations is ~~expected~~subject to ~~be recognized~~continuing employment with the Company over various dates over a ~~weighted average~~three year period ~~of 1.5 years.~~from their respective acquisition dates. As ~~at September 30, 2021,~~and when the ~~number of~~ common shares ~~which had not yet vested was 256,683.~~vest, the Company will recognize the fair value of the issued common shares from additional paid-in capital to share capital.


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~~18.~~19. Equity and dividends (continued)

~~Share repurchase~~Shares issued for business combinations (continued)


	Rouse			SmartEquip			Total

								Weighted average
	Common	Fair value		Common	Fair value		Common	fair value
	shares	per common		shares	per common		shares	per common
	issued	shares		issued	shares		issued	shares
Outstanding, December 31, 2021	189,665	$	71.09	63,971	$	68.39	253,636	$	70.41
Granted	—		—	—		—	—		—
Vested	(27,816)		71.09	—		—	(27,816)		71.09
Forfeited	—		—	—		—	—		—
Outstanding, June 30, 2022	161,849	$	71.09	63,971	$	68.39	225,820	$	70.33

Outstanding, December 31, 2020	312,193	$	71.09	—	$	—	312,193	$	71.09
Granted	—		—	—		—	—		—
Vested	—		—	—		—	—		—
Forfeited	(55,510)		71.09	—		—	(55,510)		71.09
Outstanding, June 30, 2021	256,683	$	71.09	—	$	—	256,683	$	71.09

~~There were 0 common shares repurchased during~~

In the three months ended ~~September~~June 30, ~~2021 (three months ended September 30, 2020:~~ ~~nil) and during~~2022, the ~~nine months ended September 30, 2021 (nine months ended September 30, 2020: 1,525,312~~Company recognized $1,819,000 of share capital from additional paid-in capital for the portion of common shares ~~repurchased for $53,170,000).~~previously issued in connection with the acquisition of Rouse that have vested as of June 30, 2022.

~~Change in non-controlling interest~~

~~On September 13, 2021,~~As at June 30, 2022, the ~~Company purchased the remaining 25% membership interest in~~unrecognized share-based continuing employment cost was $6,520,000 (June 30, 2021: $11,898,000), which is expected to be recognized over a weighted average period of ~~Xcira, LLC, a Delaware limited liability Company, for a purchase price of $5,555,555. The transaction increased the Company’s ownership interest in Xcira, LLC to 100%.~~1.4 years.

Dividends

Declared and paid

The Company declared and paid the following dividends during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:

Dividend

Total

Dividend

Total

Declaration date

per share

Record date

dividends

Payment date

Declaration date

per share

Record date

dividends

Payment date

Nine months ended September 30, 2021:

Six months ended June 30, 2022:

Fourth quarter 2021

January 21, 2022

0.2500

February 11, 2022

27,659

March 4, 2022

First quarter 2022

May 6, 2022

0.2500

May 27, 2022

27,693

June 17, 2022

Six months ended June 30, 2021:

Fourth quarter 2020

January 22, 2021

0.2200

February 12, 2021

24,181

March 5, 2021

January 22, 2021

0.2200

February 12, 2021

24,181

March 5, 2021

First quarter 2021

May 7, 2021

0.2200

May 26, 2021

24,279

June 16, 2021

May 7, 2021

0.2200

May 26, 2021

24,279

June 16, 2021

Second quarter 2021

August 4, 2021

0.2500

August 25, 2021

27,607

September 15, 2021

Nine months ended September 30, 2020:

Fourth quarter 2019

January 24, 2020

0.2000

February 14, 2020

21,905

March 6, 2020

First quarter 2020

May 6, 2020

0.2000

May 27, 2020

21,681

June 17, 2020

Second quarter 2020

August 5, 2020

0.2200

August 26, 2020

24,053

September 16, 2020

Declared and undistributed

Subsequent to ~~September~~June 30, ~~2021,~~2022, the Company’s Board of Directors declared a quarterly dividend of ~~$0.25~~$0.27 cents per common share, payable on ~~December 15, 2021~~September 14, 2022 to stockholders of record on ~~November~~August 24, ~~2021.~~2022. This dividend payable has not been recognized as a liability in the consolidated financial statements. The payment of this dividend ~~will~~is expected to not have any tax consequences for the Company.

Foreign currency translation reserve

Foreign currency translation adjustments within other comprehensive income include intra-entity foreign currency transactions that are of a long-term investment nature, which generated a net loss of ~~$3,331,000~~$8,553,000 and ~~a net loss of $5,890,000~~$9,437,000 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021 (2020:~~2022 (2021: net gain of ~~$5,634,000~~$1,095,000 and ~~$3,300,000)~~net loss of $2,559,000).


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~~19.~~20. Share-based payments

Share-based payments consist of the following compensation costs:


	Three months ended				Nine months ended				Three months ended				Six months ended
	September 30,				September 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
SG&A expenses:
Selling, general and administrative:
Stock option compensation expense	$	2,133	$	1,671	$	5,903	$	4,401	$	3,056	$	1,909	$	5,623	$	3,770
Equity-classified share units		2,283		4,138		9,840		9,155		8,801		4,404		11,691		7,557
Liability-classified share units		527		2,123		(862)		1,938		1,075		526		319		(1,389)
Employee share purchase plan - employer contributions		684		636		2,064		1,835		708		701		1,393		1,380
		5,627		8,568		16,945		17,329		13,640		7,540		19,026		11,318
Acquisition-related costs:
Share-based continuing employment costs		2,707		—		7,938		—		2,080		2,678		4,213		5,231
		2,707		—		7,938		—		2,080		2,678		4,213		5,231
	$	8,334	$	8,568	$	24,883	$	17,329	$	15,720	$	10,218	$	23,239	$	16,549

Stock option plans

The Company has the following three stock option plans that provide for the award of stock options and premium-priced stock options to selected employees, directors, and officers of the Company: a)(i) Amended and Restated Stock Option Plan, b)(ii) IronPlanet 1999 Stock Plan, and c)(iii) IronPlanet 2015 Stock Plan.

Stock option activity for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 is presented below:


	Stock options							Premium-priced stock options							Stock options							Premium-priced stock options
				WA							WA							WA							WA
	Common	WA		remaining		Aggregate		Common	WA		remaining		Aggregate		Common	WA		remaining		Aggregate		Common	WA		remaining		Aggregate
	shares under	exercise		contractual		intrinsic		shares under	exercise		contractual		intrinsic		shares under	exercise		contractual		intrinsic		shares under	exercise		contractual		intrinsic
	option	price		life (in years)		value		option	price		life (in years)		value		option	price		life (in years)		value		option	price		life (in years)		value
Outstanding, December 31, 2020	1,985,754	$	34.95		7.7	$	68,717	—	$	—		—	$	—
Outstanding, December 31, 2021															2,208,057		42.55		7.7		41,884	1,017,064		91.24		5.7		—
Granted	690,353		54.88					721,980		91.37		5.9			689,437		58.02		—		—	119,157		91.37		—		—
Exercised	(411,856)		33.79				10,652								(80,183)		35.70		—		1,964	—		—		—		—
Forfeited	(27,130)		46.69												(36,126)		42.85		—		—	(17,789)		90.93		—		—
Outstanding, September 30, 2021	2,237,121		41.17		7.7		45,878	721,980		91.37		5.9		—
Exercisable, September 30, 2021	929,944	$	31.85		6.1	$	27,718	—	$	—		—	$	—
Outstanding, June 30, 2022															2,781,185		46.58		7.8		51,797	1,118,432		91.26		5.2		—
Exercisable, June 30, 2022															1,307,090		37.42		6.5		36,130	—		—		—		—

Stock options

The Company uses the Black Scholes option pricing model to fair value stock options. Significant assumptions used to estimate the fair value of stock options granted during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 are presented in the following table on a weighted average basis:


Nine months ended September 30,	2021		2020
Six months ended June 30,						2022		2021
Risk free interest rate	0.5	%	0.7	%		2.2	%	0.5	%
Expected dividend yield	1.66	%	1.96	%		1.74	%	1.66	%
Expected lives of the stock options	4	years	5	years	��	4	years	4	years
Expected volatility	32.3	%	27.9	%		31.7	%	32.3	%

At ~~September~~June 30, ~~2021,~~2022, the unrecognized stock-based compensation cost related to the non-vested stock options was ~~$7,052,000,~~$11,746,000, which is expected to be recognized over a weighted average period of ~~2.2~~2.4 years.

~~Premium-priced stock options~~

On August 12, 2021, the Company granted premium-priced stock options to the senior executives with exercise prices above the fair market value of the Company’s common shares on grant date. The premium-priced stock options vest and become exercisable upon the third anniversary of the grant date and expire on the sixth anniversary of the grant date. The fair values of the premium-priced stock options were calculated on the grant date using a Monte Carlo simulation model. The weighted average estimated grant date fair value of premium-priced options during the three month period ended September 30, 2021 was $7.24 per option.


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~~19.~~20. Share-based payments (continued)

Premium-priced stock options ~~(continued)~~

The Company also grants premium-priced stock options to the senior executives with exercise prices above the fair market value of the Company’s common shares on grant dates. The premium-priced stock options vest and become exercisable upon the third anniversary of their grant date. The premium-priced stock options granted in August and November 2021 expire on the sixth anniversary of their grant date, and those granted in June 2022 expire in August 2027 to coincide with the expiry of the August 2021 grant. The fair values of the premium-priced stock options were calculated on the grant date using a Monte Carlo simulation model. The weighted average estimated grant date fair value of premium-priced options during the three month period ended June 30, 2022 was $8.00 per option.

The significant assumptions used to estimate the fair values ~~are presented in the following table:~~were as follows:


~~August 12, 2021~~	~~2021~~
~~Risk free interest rate~~	~~1.0~~	%
~~Expected dividend yield~~	~~1.66~~	%
~~Expected lives of the stock options~~	5	~~years~~
~~Expected volatility~~	~~30.6~~	%

In addition, the estimated fair value of a premium priced stock option is a function of the expected stock option exercise behaviour assumption. The Company estimated that vested premium priced stock options will be exercised at the midpoint between (i) the later of the date that the premium priced stock options are expected to vest and the date that the exercise price is achieved, and (ii) the end of the premium priced options contractual term.


Six months ended June 30,	2022		2021
Risk free interest rate	3.0	%	—	%
Expected dividend yield	1.63	%	—	%
Expected lives of the stock options	4	years	—	years
Expected volatility	30.2	%	—	%

At ~~September~~June 30, ~~2021,~~2022, the unrecognized stock-based compensation cost related to the premium-priced stock options was ~~$4,988,000,~~$7,380,000, which is expected to be recognized over a weighted average period of ~~2.9~~2.4 years.

Share unit plans

~~During the three month period ended September 30, 2021, the Company granted PSUs with market conditions to senior executives.~~

Share unit activity for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 is presented below:


	Equity-classified awards									Liability-classified awards				Equity-classified awards									Liability-classified awards
	PSUs			PSUs with Market Conditions			RSUs			DSUs				PSUs			PSUs with Market Conditions			RSUs			DSUs
		WA grant			WA grant			WA grant				WA grant			WA grant			WA grant			WA grant				WA grant
		date fair			date fair			date fair				date fair			date fair			date fair			date fair				date fair
	Number	value		Number	value		Number	value			Number	value		Number	value		Number	value		Number	value			Number	value
Outstanding, December 31, 2020	542,676	$	38.09	—	$	—	134,937	$	39.14		137,514	$	32.06
Outstanding at December 31, 2021														523,618	$	45.90	88,305	$	65.45	79,112	$	54.96		156,589	$	35.28
Granted	142,847		56.55	88,305		65.45	29,805		56.55		14,569		56.42	225,382		58.66	14,574		69.92	33,827		57.68		12,124		56.78
Vested and settled	(161,248)		31.14	—		—	(88,348)		33.20		—		—	(93,241)		36.42	—		—	(22,349)		46.01		—		—
Forfeited	(16,878)		47.36	—		—	(6,347)		58.58		—		—	(3,474)		51.04	—		—	(3,891)		61.55		—		—
Outstanding, September 30, 2021	507,397	$	45.18	88,305	$	65.45	70,047	$	52.28		152,083	$	34.39
Outstanding at June 30, 2022														652,285	$	51.64	102,879	$	66.08	86,699	$	58.03		168,713	$	36.82

The total market value of liability-classified share units vested and released during the first ~~nine~~six months of ~~2021~~2022 was NaN ~~(December~~(as at December 31, ~~2020:~~2021: NaN).

Senior executive and employee PSU plans

The Company grants PSUs under a senior executive PSU plan and an employee PSU plan (the “PSU Plans”). Under the PSU Plans, the number of PSUs that vest is conditional upon specified market, service, and/or performance vesting conditions being met.

The PSU Plans allow the Company to choose whether to settle the awards in cash or in shares. The Company intends to settle by issuance of shares. With respect to settling in shares, the Company has the option to either (i) arrange for the purchase of shares on the open market on the employee’s behalf based on the cash value that otherwise would be delivered, or (ii) issue a number of shares equal to the number of units that vest.

Fair values of equity-classified PSUs are estimated on grant date using the ~~20-day volume weighted average~~market close price of the Company's common shares listed on the ~~New York Stock Exchange.~~NYSE, as these are not subject to market vesting conditions.

At ~~September~~June 30, ~~2021,~~2022, the unrecognized share unit expense related to equity-classified PSU’s was ~~$12,193,000,~~$21,018,000, which is expected to be recognized over a weighted average period of ~~1.9~~2.1 years.


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~~19.~~20. Share-based payments (continued)

PSUs with market conditions

~~On August 12, 2021 the~~The Company ~~granted~~also grants PSUs to senior executives with a market condition where vesting is conditional upon the total stockholder return performance of the Company’s stock relative to the performance of a peer group over a three year performance period from the date of grant. The PSUs granted in August and November 2021 have a three year performance period and the PSUs granted in June 2022 have approximately a 2 year performance period to coincide with the remaining performance period of the August 2021 grant. The fair value ~~of $65.45~~ per PSU granted during the three month period ended June 30, 2022 of $69.92 was calculated on the grant date using the Monte Carlo simulation model ~~and taking~~which takes into consideration a required post-vesting holding period of one year with a discount value of ~~$5.90~~$5.34 per PSU. The discount was calculated using the Chaffe Protective Put Method and an effective tax rate of 35%.

The significant assumptions used to estimate the fair value are presented in the following table:


~~August 12, 2021~~	~~2021~~
~~Risk free interest rate~~	~~0.5~~	%
~~Expected dividend yield~~	~~1.63~~	%
~~Expected lives of the PSUs~~	3	~~years~~
~~Expected volatility~~	~~31.0~~	%
~~Average expected volatility of comparable companies~~	~~38.6~~	%


Six months ended June 30,	2022		2021
Risk free interest rate	2.7	%	—	%
Expected dividend yield	1.63	%	—	%
Expected lives of the PSUs	2	years	—	years
Expected volatility	33.4	%	—	%
Average expected volatility of comparable companies	34.4	%	—	%

At ~~September~~June 30, ~~2021,~~2022, the unrecognized share unit expense related to equity-classified PSUs with market conditions was ~~$5,516,000,~~$5,062,000, which is expected to be recognized over a weighted average period of ~~2.9~~2.1 years.

RSUs

The Company has ~~RSU~~restricted share unit plans (RSU plans) that are equity-settled and not subject to market vesting conditions.

Fair values of RSUs are estimated on grant date using the ~~20-day volume weighted average~~market close price of the Company's common shares listed on the ~~New York Stock Exchange.~~NYSE.

At ~~September~~June 30, ~~2021,~~2022, the unrecognized share unit expense related to equity-classified RSUs was ~~$1,798,000,~~$2,849,000, which is expected to be recognized over a weighted average period of ~~1.5~~1.6 years.

DSUs

The Company has ~~DSU~~deferred share unit plans (DSU plans) that are cash-settled and not subject to market vesting conditions.

Fair values of ~~DSUs~~deferred share units (“DSUs”) are estimated on grant date and at each reporting ~~date.~~date using the market close price of the Company’s common shares listed on the NYSE. DSUs are granted under the DSU plan to members of the Board of Directors. There is 0 unrecognized share unit expense related to liability-classified DSUs as they vest immediately and are expensed upon grant.

At ~~September~~June 30, ~~2021,~~2022, the Company had a total share unit liability of ~~$9,501,000 (December~~$10,976,000 (as at December 31, ~~2020: $9,597,000)~~2021: $10,056,000) in respect of share units under the DSU plans.

Employee share purchase plan

The Company has an employee share purchase plan that allows all employees that have completed two months of service to contribute funds to purchase common shares at the current market value at the time of share purchase. Employees may contribute up to 4% of their salary. The Company will match between 50% and 100% of the employee’s contributions, depending on the employee’s length of service with the Company.


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Table of Contents

~~20.~~21. Leases

~~The Company’s breakdown of lease expense is as follows:~~

Three months ended

Nine months ended

September 30,

September 30,

2021

2020

2021

2020
Operating lease cost

$
4,592

$
4,310

$
13,584

$
12,780
Finance lease cost

Amortization of leased assets

2,693

2,355

8,096

6,664
Interest on lease liabilities

196

219

622

680
Short-term lease cost

2,845

2,115

7,428

7,146
Sublease income

(15)

(110)

(45)

(406)

$
10,311

$
8,889

$
29,685

$
26,864

~~Operating leases~~

The Company ~~has entered~~enters into commercial leases for various ~~auction~~auctions sites and offices, ~~located in North America, Europe,~~ the ~~Middle East, Australia and Asia. The~~ majority of ~~these leases~~which are ~~non-cancellable. The Company also has further~~non-cancellable, and additional operating leases for computer equipment, ~~certain~~ motor vehicles and small office ~~equipment where it is not in the best interest of the Company to purchase these assets.~~

equipment. The majority of the Company’s operating leases have a fixed term with a remaining life between one month and 2018 years, with renewal options included in the contracts. The leases have varying contract terms, escalation clauses and renewal options. Generally, there are no restrictions placed upon the lessee by entering into these leases, other than restrictions on use of property, sub-letting and alterations. At the inception of a lease, the Company determines whether it is reasonably certain to exercise a renewal option and includes the options in the determination of the lease term and the lease liability where it is reasonably certain to exercise the option. If the Company’s intention is to exercise an option subsequent to the commencement of the lease, the Company will re-assess the lease term. The Company has included certain renewal options in its operating lease liabilities for key property leases for locations that have strategic importance to the Company, such as its Corporate Head Office. The Company has not included any purchase options available within its operating lease portfolio in its determination of its operating lease liability.

~~The future aggregate minimum lease payments under non-cancellable operating leases are as follows:~~

Remainder of 2021

$
3,878
2022

16,285
2023

14,499
2024

11,004
2025

10,871
Thereafter

108,595
Total future minimum lease payments

$
165,132
less: imputed interest

(38,981)
Total operating lease liability

$
126,151
less: operating lease liability - current

(12,083)
Total operating lease liability - non-current

$
114,068

~~At September 30, 2021, the weighted average remaining lease term for operating leases is 14.1 years and the weighted average discount rate is 3.7%.~~


~~Ritchie Bros.~~	30

~~Table of Contents~~

~~20. Leases (continued)~~

~~Finance leases~~

The Company ~~has entered~~also enters into finance lease arrangements for certain vehicles, computer and yard equipment and office ~~furniture. The~~furniture, the majority of ~~the~~these leases have a fixed term with a remaining life of one month to six years with renewal options included in the contracts. ~~In certain of these leases,~~

On March 17, 2022, the Company completed the sale and leaseback of its Bolton property, a parcel of land including all buildings, in Bolton, Ontario (Note 15). The Company intends to lease the Bolton property for a period of 28 months until such time that the replacement property is available for the relocation of the Company’s operations. The lease has ~~the~~an initial rent-free period of two years and an option to ~~purchase~~renew the ~~leased~~lease for two additional one-year periods, during which time the lease is cancellable at one month’s notice. Upon completion of the sale, the Company recorded a $16,587,000 ROU asset ~~at fair market value or~~representing the right-of-use of the Bolton property for the estimated lease term and a ~~stated residual value~~$4,477,000 long term lease liability representing the obligation to make lease payments arising from the operating lease at the end of the ~~lease term. For certain leases such as vehicle leases,~~initial two-year period.

On June 30, 2022, the Company ~~has included renewal options~~also recorded $9,020,000 in ROU asset and long term lease liability relating to a lease signed on its Maltby auction site in the ~~determination~~United Kingdom.

The Company’s breakdown of ~~its~~ lease ~~liabilities.~~

~~As at September 30, 2021, the net carrying amount of computer and yard equipment and other assets under capital leases~~expense is ~~$23,531,000 (December 31, 2020: $25,649,000), and is included in the total property, plant and equipment as disclosed on the consolidated balance sheets.~~

~~Assets recorded under finance leases are~~ as follows:


			Accumulated		Net book		Three months ended				Six months ended
As at September 30, 2021	Cost		depreciation		value
Computer equipment	$	14,558	$	(7,942)	$	6,616
Yard and others		32,314		(15,399)		16,915
	$	46,872	$	(23,341)	$	23,531	June 30,				June 30,
							2022		2021		2022		2021
Operating lease cost							$	6,229	$	4,392	$	10,940	$	8,992
Finance lease cost
Amortization of leased assets								2,616		2,815		5,248		5,403
Interest on lease liabilities								186		205		360		426
Short-term lease cost								2,901		1,922		6,364		4,583
Sublease income								—		(15)		—		(30)
							$	11,932	$	9,319	$	22,912	$	19,374

Accumulated

Net book
As at December 31, 2020

Cost

depreciation

value
Computer equipment

$
16,597

$
(8,317)

$
8,280
Yard and others

28,234

(10,865)

17,369

$
44,831

$
(19,182)

$
25,649

~~The future aggregate minimum lease payments under non-cancellable finance leases are as follows:~~

Remainder of 2021

$
2,651
2022

9,292
2023

6,988
2024

4,434
2025

1,482
Thereafter

281
Total future minimum lease payments

$
25,128
less: imputed interest

(1,163)
Total finance lease liability

$
23,965
less: finance lease liability - current

(9,156)
Total finance lease liability - non-current

$
14,809

~~At September 30, 2021, the weighted average remaining lease term for finance leases is~~ ~~3.0~~ ~~years and the weighted average discount rate is 3.5%.~~

~~21.~~22. Commitments

Commitment for inventory ~~purchase~~purchases

~~On April 1, 2021, the DLA~~The Company was awarded two new contracts towith the ~~Company.~~United States Government Defense Logistics Agency (the “DLA”) on April 1, 2021. The new contracts (one for the Eastern portion of the United States and one for the Western portion of the United States) cover both surplus non-rolling and rolling stock. Both contracts commenced on June 1, 2021 and have a base term of two years with 3 one-year renewal options.

During the first two years of the contracts, the Company is committed to purchase on a combined basis up to either: (i) 600,000 assets, or (ii) assets with an expected minimum value of up to $77,000,000; whichever is less. ~~As at September~~At June 30, ~~2021,~~2022, the Company has purchased ~~94,769~~263,503 assets with a total value of ~~$16,941,000~~$54,520,000 pursuant to the two year period of this contract, which commenced on June 1, 2021.


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~~22.~~

23. Contingencies

Legal and other claims

The Company is subject to legal and other claims that arise in the ordinary course of its business. Management does not believe that the results of these claims will have a material effect on the Company’s consolidated balance sheet or consolidated income statement.

Guarantee contracts

In the normal course of business, the Company will in certain situations guarantee to a consignor a minimum level of proceeds in connection with the sale at auction of that consignor’s equipment.

At ~~September~~June 30, ~~2021,~~2022, there were ~~$63,776,000~~$30,791,000 of assets guaranteed under contract, of which ~~74%~~88% is expected to be sold prior to ~~December 31, 2021,~~September 30, 2022, with the remainder to be sold by December 31, 2022 ~~(December~~(as at December 31, ~~2020: $22,773,000~~2021: $43,450,000 of which ~~23%~~61% was expected to be sold prior to the end of March 31, ~~2021~~2022 with the remainder to be sold by December 31, ~~2021)~~2022).

The outstanding guarantee amounts are undiscounted and before estimated proceeds from sale at auction.


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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

Forward-looking statements may appear throughout this Quarterly Report on Form 10-Q, including the following section “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Forward-looking statements are typically identified by such words as “aim”, “anticipate”, “believe”, “could”, “continue”, “estimate”, “expect”, “intend”, “may”, “ongoing”, “plan”, “potential”, “predict”, “will”, “should”, “would”, “could”, “likely”, “generally”, “future”, “long-term”, or the negative of these terms, and similar expressions intended to identify forward-looking statements. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially, and include, among others, statements relating to:

●

our future strategy, objectives, targets, projections and performance;

●

potential growth and market opportunities;

●

potential future mergers and ~~acquisitions, including the planned acquisitions of the Euro Auctions (as hereinafter defined);~~acquisitions;

●

our ability to integrate potential acquisitions;

●

the impact of our new initiatives, services, investments, and acquisitions on us and our customers;

●

our future capital expenditures and returns on those expenditures; and

●

financing available to us ~~pursuant to the Commitment Letter (as hereinafter defined),~~from our credit facilities or other sources, our ability to refinance borrowings, and the sufficiency of our working capital to meet our financial needs.

While we have not described all potential risks related to our business and owning our common shares, the important factors discussed in “Part II, Item 1A: Risk Factors” of this Quarterly Report on Form 10-Q and in “Part I, Item 1A: Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which is available on our website at ~~www.rbauction.com~~https://investor.ritchiebros.com, on EDGAR at www.sec.gov, or on SEDAR at www.sedar.com, are among those that we consider may affect our performance materially or could cause our actual financial and operational results to differ significantly from our expectations. Except as required by applicable securities law and regulations of relevant securities exchanges, we do not intend to update publicly any forward-looking statements, even if our expectations have been affected by new information, future events or other developments.

Unless indicated otherwise, all tabular dollar amounts, including related footnotes, presented below are expressed in thousands of United States (“U.S.”) dollars.

We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (“US GAAP”). Except for Gross Transaction Value (“GTV”)¹, which is a measure of operational performance and not a measure of financial performance, liquidity, or revenue, the amounts discussed below are based on our consolidated financial statements. ~~Unless indicated otherwise, all tabular dollar amounts, including related footnotes, presented below are expressed in thousands of United States (“US”) dollars.~~

In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial data but not presented in our financial statements prepared in accordance with US GAAP. Certain of these data are considered “non-GAAP financial measures” under the SEC rules. The definitions of and reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable US GAAP financial measures are included either with the first use thereof or in the Non-GAAP Measures section within the Management’s Discussion and Analysis of Financial Condition and Results of Operations. Non-GAAP financial measures referred to in this Quarterly Report on Form 10-Q are labeled as “non-GAAP measure” ~~or designated as such with an asterisk (*)~~. Please see pages ~~59-60~~51-53 for explanations of why we use these non-GAAP measures and the reconciliation to the most comparable GAAP financial measures.

Overview

Ritchie Bros. Auctioneers Incorporated (“Ritchie Bros.”, the “Company”, “we”, or “us”) (NYSE & TSX: RBA) was founded in 1958 in Kelowna, British Columbia, Canada and is a world leader in asset management technologies and disposition of commercial assets, selling $5.5 billion of used equipment and other assets during 2021. Our expertise, unprecedented global reach, market insights, and trusted portfolio of brands provide us with a unique position within the used equipment market.

¹GTV represents total proceeds from all items sold at our auctions and online marketplaces. GTV is not a measure of financial performance, liquidity, or revenue, and is not presented in our consolidated financial statements.


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~~Overview~~

Ritchie Bros. Auctioneers Incorporated (“Ritchie Bros.”, the “Company”, “we”, or “us”) (NYSE & TSX: RBA) was founded in 1958 in Kelowna, British Columbia, Canada and is a world leader in asset management technologies and disposition of commercial assets, selling $5.41 billion of used equipment and other assets during 2020. Our expertise, extensive global reach, market insight, and trusted portfolio of brands provide us with a unique position in the used equipment market. We sell used equipment for our customers through our unreserved auctions at over 40 auction sites worldwide, which are also simulcast online to reach a global bidding audience and through our online marketplaces.

Through our unreserved auctions, online marketplaces, listings, and private brokerage services, we sell a broad range of primarily used commercial and ~~unused commercial~~industrial assets ~~including earthmoving equipment, truck tractors, truck trailers,~~as well as government ~~surplus, oil and gas equipment and other industrial assets.~~surplus. Construction and ~~heavy machinery~~transportation assets comprise the majority of the equipment ~~sold.~~sold by GTV dollar value. Customers selling equipment through our sales channels include end users (such as construction companies), equipment dealers, original equipment manufacturers (“OEMs”) and other equipment owners (such as rental companies). Our customers participate in a variety of sectors, including ~~heavy~~ construction, transportation, agriculture, energy, and ~~mining.~~

natural resources.

We also provide our customers with a wide array of ~~other~~value added services aligned with our growth strategy to create a global marketplace for used equipment services and solutions. Our other services include access to equipment financing, asset appraisals and inspections, online equipment listing, logistical services, and ancillary services such as equipment refurbishment. ~~Additionally, we~~We offer our customers asset technology solutions to manage the ~~end-to-end~~end to end disposition process of their assets and provide market data intelligence to make more accurate and reliable business decisions.

Additionally, we offer our customers an innovative technology platform that supports equipment lifecycle management and parts procurement integration with both original equipment manufacturers and dealers, as well as software as a service platform for end-to-end parts procurement and digital catalogs and diagrams.

We operate globally with locations in ~~more than~~ 12 countries, including the ~~U.S.,~~United States, Canada, the Netherlands, Australia, and the United Arab Emirates, and ~~the Netherlands, and~~maintain a presence in 48 countries where customers are able to sell from their own yards. In addition, we employ more than ~~2,600 full time~~2,700 full-time employees worldwide.

~~Proposed~~Discontinuation of the proposed acquisition of Euro Auctions

On August 9, 2021, ~~through our indirect, wholly owned subsidiary Ritchie Bros UK. Holdings Ltd,~~ we entered into a Sale and Purchase Agreement (“SPA”) pursuant to which we ~~have~~ agreed to purchase Euro Auctions Limited, ~~and its subsidiaries,~~ William Keys & Sons Holdings Limited, ~~and its subsidiaries,~~ Equipment & Plant Services Ltd, and Equipment Sales Ltd. (collectively, “Euro Auctions”), each being a private limited ~~companies~~company incorporated in Northern Ireland (the “Euro Auctions Acquisition”).

~~Under the terms~~, for a purchase price of ~~the SPA, we will acquire all of the outstanding shares of Euro Auctions from their existing shareholders for~~ approximately ~~£775,000,000~~£775 million (approximately ~~$1.04~~$1.02 billion) in cash, ~~consideration,~~which was to be paid on closing. On April 29, 2022, the Company announced its decision to discontinue the Phase 2 review by the Competition and Markets Authority (“CMA”). The Euro Auctions acquisition is subject to regulatory clearances and the satisfaction of other customary closing conditions, including obtaining of antitrust clearance in the United Kingdom. Euro Auctions are providers of unreserved auction services in the commercial assets space with strong international expertise, presence and brand, with operations in the United Kingdom, the United Arab Emirates, Australia and the United States.SPA automatically terminated on June 28, 2022.

In connection with the execution of the SPA, we also obtained a financing commitment letter (“Commitment Letter”), dated August 8, 2021 from Goldman Sachs Bank USA (“GS Bank”) pursuant to which GS Bank and certain other financial institutions committed to provide a $530 million senior secured revolving credit facility and a $100 million senior secured term loan facility (together, the “Bank Commitments”), and a senior unsecured bridge loan facility up to $1,150 million (the “Bridge Commitment”). On September 21, 2021, we amended our existing Credit Agreement and thereby cancelled the Bank Commitments. Further, the Bridge Commitment was reduced by $200 million. The remaining aggregate principal amount of the total financing commitment from GS Bank was reduced from $1,150 million to $950 million.

GS Bank is also acting as our financial adviser with respect to the Euro Auctions Acquisition. Consideration of $15,000,000 is payable to GS Bank in respect of such services, contingent on consummation of the acquisition. GS Bank also agrees to credit (or, at GS Bank’s option, refund) $2,000,000 of the transaction fee, to the extent paid, against any further transaction fee that becomes payable to GS Bank in connection with it acting in connection with a financing transaction as described above. These costs have not been recognized as at September 30, 2021. The fee of $15,000,000 (or $13,000,000, net of any amounts credited) will be expensed as acquisition related costs when it is recognized.

The acquisition of Euro Auctions is aligned with our accelerated growth efforts and with our strategy of becoming the trusted global marketplace for insights, services and transaction solutions for commercial assets. Euro Auctions will enhance our international presence and accelerate our international growth by offering diversified choice to customers around the world, facilitate better price


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discovery and more equipment selection. In addition, both companies will achieve synergy by unlocking value for Euro Auctions customers post acquisition through adoption of our inventory management system platform.

~~Acquisition of SmartEquip~~

On September 24, 2021, we entered into an Agreement and Plan of Merger (“Merger Agreement”) to acquire SmartEquip, a Delaware, United States corporation. SmartEquip has a multi-manufacturer platform that provides customers with real-time service and diagnostic support, dynamically customized, via serial number, to each asset in their fleet, and enables the electronic procurement of parts from original equipment manufacturers and their dealers.

~~On November 2, 2021, we closed the acquisition of SmartEquip and issued a total of 63,971 common shares to certain of the former shareholders of SmartEquip.~~

Under the terms of the Merger Agreement, we acquired all of the issued and outstanding common shares of SmartEquip for $175,000,000, subject to certain adjustments, including for working capital, indebtedness, and SmartEquip’s transaction expenses. The purchase price was paid in cash, with the exception of a portion of the consideration payable to certain of SmartEquip’s shareholders who are entering into employment agreements with the Company, which was paid in common shares of the Company.

The acquisition of SmartEquip will enable and accelerate adoption of parts and service sales on behalf of our dealer and original equipment manufacturer partners by providing a seamless experience for end users, and will deepen our inventory management system connectivity and will further enable digital solutions at scale around inspections and ancillary services, while enabling better optimization of search and advertising revenue streams. The acquisition further aligns to our execution strategy of becoming a trusted global marketplace for insights, services and transaction solutions for commercial assets.

Impact of COVID-19 to our Business

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic ~~which quickly spread~~(“COVID-19”).

In response, we transitioned all of our traditional live onsite auctions to online bidding utilizing our existing online bidding technology. As restrictions ease, we began to return to travel and to welcome in-person attendance at several of our live onsite auctions, and we continue to consider a transition back to our other onsite auction events throughout the ~~world, resulting~~year. The health and welfare of our employees, customers and suppliers continues to be a top priority and we continue to operate with precautionary measures in significant global economic disruption that materially impacted several countries and regions in which we operate, including the United States, Canada, Europe, the Middle East, Australia and Asia. It has resulted in travel restrictions, economic uncertainty, and business slowdowns or shutdowns in affected areas and has negatively disrupted global manufacturing and workforce participation, including our own.place, as appropriate.

In ~~Q3 2021,~~the first six months of 2022, our ability to move equipment to and from our auction sites and across borders ~~continues to vary regionally~~has improved with ~~Asia and Australia continuing to be negatively impacted as regional governments continue to enforce heavy~~ travel restrictions and quarantine ~~requirements. In these regions, the restrictions have also resulted~~requirements continuing to lift particularly in ~~some challenges in customer interactions~~Australia and ~~challenges for our customers~~Europe, but with certain countries within Asia continuing to complete equipment inspections. In our International region, travel and quarantine restrictions are slowly being lifted as people become vaccinated, which is slowly driving up our auction volumes as equipment can be moved between borders more easily.experience lockdowns. In the United States and Canada, COVID-19 has not materially impacted our ability to operate our businesses and move equipment. Globally, we continued to see ~~surges in~~heightened shipping, fuel and freight costs combined with extended lead times, making transportation of equipment both more costly and more challenging, ~~which is~~ negatively impacting the buying and selling ~~behaviours~~behaviour of our customers. Additionally, COVID-19 in combination with various macro economic factors ~~is still impacting~~impacted the supply chains of new equipment production, which isin turn negatively ~~affecting~~affected the supply of used equipment being sold throughout our regions, most predominantly in North ~~America.~~America.

~~Our top priority regarding~~For a further discussion of risks to our business and operating results arising from COVID-19, please refer to the ~~COVID-19 pandemic remains the health and welfare~~“Risk Factors” section of our ~~employees, customers, suppliers and others with whom we partner to run~~Annual Report on Form 10-K for the year ended December 31, 2021.

Impact of Russia-Ukraine conflict on our business activities. We continue to adhere to all local government and jurisdictional safety guidelines, and, in some instances, we are applying additional over-and-above safety measures. Many of our employees continue to work from home on a temporary basis and travel continues to be limited given ongoing travel restrictions.Business

~~Since~~On February 24, 2022, the ~~beginning~~geopolitical situation in Eastern Europe intensified with Russia’s invasion of ~~the COVID-19 pandemic, we continue to be able to operate~~Ukraine, sharply affecting economic and ~~serve our customers’ equipment~~global financial markets. Subsequent economic sanctions on Russia have exacerbated ongoing economic challenges, including issues such as rising inflation, global supply chain disruption and immediate liquidity needs through our platform of auction technology solutions and online auction capabilities. In addition to running our IronPlanet weekly featured online auction, our online Marketplace-E solution and our GovPlanet online auctions, we modified our operationsincrease in ~~March 2020 to transition all of our traditional live on site industrial auctions and events to online bidding. Buyers are generally still able to visit our auction sites~~fuel prices.

The rise in advance of the auctions to conduct inspections and pick up equipment post auction, but we have not been holding live auction events in our theatres. As restrictions ease in the US and elsewhere, we will be considering a transition backfuel cost has impacted us to some ~~measure~~extent due to the surge in transportation costs which has impacted both the cost and timing of ~~in-person attendance at~~export and import of equipment between countries globally and contributed to an increase in operating costs of our ~~on site auction events.~~


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~~Our priority is~~equipment in our operations. Increases in European natural gas prices may also result in an acceleration of a slowdown in the economy, especially in Europe where, historically, Eastern European countries have contributed to ~~continue to support~~importing and exporting equipment for our ~~employees,~~operations.

We do not have any operations in Russia or Ukraine, or any material operations in neighboring countries and only have a limited number of direct customers in the effected region. However, we ~~are actively monitoring~~cannot estimate the situation and changing dynamics in each of our respective regions and adjusting our operations as necessary. As of September 30, 2021, layoffs or furlough activities related to the COVID-19 pandemic have been limited in scope.

~~The~~ extent of the ongoing ~~impact~~impacts of the ~~COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives, will depend on~~conflict, other unforeseen conditions, future developments, including the ~~duration~~continued evolvement of military activity and ~~spread~~sanctions imposed with Russia’s invasion of Ukraine, which could adversely affect the ~~pandemic in light of new variants, timing of mass vaccine distribution,~~domestic economy generally and any related restrictions implemented by governments in various jurisdictions, as well as supply and demand impacts driven by our consignor and buyer base, all of which are uncertain and cannot be easily predicted. Although as of September 30, 2021, we continue to operate our auctions in all regions, there is no assurance that our operations could not be impacted in the future.

We continue to actively monitor the evolving impact COVID-19 is having in the world and remain ready to take further actions or adjust our response based on any new governmental guidance or recommendations. It is unknown how long the pandemic will last, or whether we will see a resurgence of cases as new variants develop or spread, how many people are ultimately going to be affected by it, and the long-term implications to local or global economies. Equally, the effects of the COVID-19 pandemic on equipment supply, buyer demand, and potential pricing volatility, or the potential impact on our buyers’ ability to pay or secure financing are still not readily discernable. Additionally, there is a level of uncertainty about the long-term impact of the COVID-19 pandemic on our third party vendors, partners and the service providers with whom we currently do business with today. As such, given the ongoing nature of the COVID-19 pandemic, we are not currently able to reasonably estimate the future impacts on our business ~~operations, results of operations, cash flows, financial performance or our ability to pay dividends.~~specifically.

Service Offerings

We offer our equipment seller and buyer customers multiple distinct, complementary, multi-channel brand solutions that address the range of their needs. Our global customer base has a variety of transaction options, breadth of services, and the widest selection of used equipment available to them. For a complete listing of channels and brand solutions available under our Auctions & Marketplace ("A&M") segment, as well as our Other Services segment, please refer to our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which is available on our website at www.rbauction.com, on EDGAR at www.sec.gov, or on SEDAR at www.sedar.com.

Contract options

We offer consignors several contract options to meet their individual needs and sale objectives. Through our A&M business, options include:

●	Straight commission contracts, where the consignor receives the gross proceeds from the sale less a pre-negotiated commission rate;

●	Guarantee contracts, where the consignor receives a guaranteed minimum amount plus an additional amount if proceeds exceed a specified level; and

●	Inventory contracts, where we purchase, take custody, and hold used equipment and other assets before they are resold in the ordinary course of business.

We collectively refer to guarantee and inventory contracts as underwritten or “at-risk” contracts.

Value-added services

●

We also provide a wide array of value-added services to make the process of selling and buying equipment convenient for our customers, including repair and refurbishment services, financial services through Ritchie Bros. Financial Services (“RBFS”), logistical services through RB Logistics, end-to-end asset management and disposition services through RB Asset Solutions, as well as other services such as appraisals, insights, data intelligence and performance benchmarking solutions. We offer equipment listing services under the RitchieList brand in North America and Mascus brand in Europe to make private selling more efficient and safe for customers, including a secure transaction management service, complete with invoicing. We also provide an innovative technology platform that supports customers' management of the equipment lifecycle and integrates parts procurement with both original equipment manufacturers and dealers.

Seasonality

Our GTV and ~~associated~~resulting A&M segment ~~revenues~~revenue are affected by the seasonal nature of our business. GTV and our A&M segment ~~revenues~~revenue tend to increase during the second and fourth calendar quarters, during which time we generally conduct more business than in the first and third calendar quarters. Given the operating leverage inherent in our business model, the second and fourth quarter also tend to produce higher operating margins, given the higher volume and revenue generated in those quarters.

~~The restrictions imposed and effects of the overall economic environment as a result of the COVID-19 pandemic may continue to impact these trends.~~


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Revenue Mix Fluctuations

Our revenue is comprised of service revenue and inventory sales revenue. Service revenue from A&M segment activities ~~include~~includes commissions earned at our auctions, online marketplaces, and private brokerage services, and various auction-related fees, including listing and buyer transaction fees. We also recognize revenues from our Other ~~Segment~~Services segment as fees within service revenue. Inventory sales revenue is recognized as part of our A&M activities and relates to revenues earned through our inventory contracts.

Inventory sales revenue can fluctuate significantly, as it changes based on whether our customers sell using a straight or guarantee commission contract, or an inventory contract at time of selling. Straight or guarantee commission contracts will result in the commission being recognized as service revenue, while inventory contracts will result in the gross transaction value of the equipment sold being recorded as inventory sales revenue with the related cost recognized in cost of inventory sold. As a result, a change in the revenue mix between service revenues and ~~revenue from~~ inventory sales revenue can have a significant impact on revenue growth percentages.


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Performance Overview

Net income attributable to stockholders decreased ~~29%~~12% to ~~$32.3~~$53.4 million, compared to ~~$45.4~~$60.7 million in ~~Q3 2020.~~the second quarter of 2021. Diluted earnings per share (“EPS”) attributable to stockholders decreased ~~29%~~13% to ~~$0.29~~$0.48 per share in ~~Q3 2021~~the second quarter of 2022 as compared to ~~$0.41~~$0.55 per share in ~~Q3 2020.~~the second quarter of 2021. Non-GAAP diluted adjusted EPS attributable to ~~stockholders* decreased~~stockholders increased 10% to ~~$0.44~~$0.74 per share in ~~Q3 2021~~the second quarter of 2022 compared to ~~$0.49~~$0.67 per share in ~~Q3 2020.~~

~~Beginning in~~ the ~~third~~second quarter of 2021, we updated the calculation of our non-GAAP diluted adjusted EPS attributable to stockholders* to add-back share-based payments expense, all acquisition-related costs, amortization of acquired intangible assets, and gain or loss on disposition of property, plant and equipment. These adjustments have been applied retrospectively to all periods presented.2021.

For the ~~third~~second quarter of ~~2021~~2022 as compared to the ~~third~~second quarter of ~~2020:~~2021:

Consolidated results:

●	Total revenue ~~in Q3 2021 decreased 1%~~increased 22% to ~~$329.7~~$484.5 million

Service revenue ~~in Q3 2021 decreased 4%~~increased 13% to ~~$214.2~~$286.5 million

Inventory sales revenue ~~in Q3 2021~~ increased 6%38% to ~~$115.5 million~~

●	~~Total selling, general and administrative expenses (“SG&A”) in Q3 2021 decreased 1% to $108.6~~$198.0 million

●	Operating income ~~in Q3 2021 decreased 20%~~increased 3% to ~~$53.6~~$91.9 million

●	Non-GAAP adjusted operating ~~income* in Q3 2021~~income increased 12% to $119.6 million

●	Net income decreased ~~11%~~12% to ~~$75.1~~$53.4 million

●	Non-GAAP adjusted ~~Earnings Before Interest, Taxes, Depreciation~~earnings before interest, taxes, depreciation and Amortization*amortization (“~~EBITDA) in Q3 2021 decreased 9%~~EBITDA”) increased 11% to ~~$90.6 million~~

●	~~Net income in Q3 2021 decreased 29% to $32.4~~$136.2 million

●	Cash provided by operating activities was ~~$304.1~~$198.0 million for the first ~~nine~~six months of ~~2021~~2022

●

Cash on hand at the end of ~~Q3 2021~~the second quarter of 2022 was ~~$468.4~~$531.7 million, of which ~~$362.6~~$367.3 million was unrestricted, and restricted cash decreased 84% in the six month period ending June 30, 2022 as a result of the redemption of our 2021 Notes in the quarter for $931.0 million

Auctions & Marketplaces segment results:

●	GTV ~~in Q3 2021 decreased 4%~~increased 10% to ~~$1.3~~$1.7 billion and ~~decreased 5%~~increased 13% when excluding the impact of foreign exchange

●	A&M total revenue ~~in Q3 2021 decreased 1%~~increased 22% to ~~$293.8~~$433.0 million

Service revenue ~~in Q3 2021 decreased 6%~~increased 10% to ~~$178.3~~$235.0 million

Inventory sales revenue ~~in Q3 2021~~ increased 6%38% to ~~$115.5~~$198.0 million

Other Services segment results:

●	Other Services total revenue ~~in Q3 2021~~ increased 6%29% to ~~$35.8~~$51.5 million

RBFS revenue ~~in Q3 2021~~ increased ~~55%~~69% to ~~$11.3~~$19.9 million

~~Rouse~~SmartEquip revenue of ~~$6.5~~$5.0 million was recognized in ~~Q3 2021,~~the second quarter of 2022, which was its ~~third~~second full quarter since its acquisition ~~on December 8, 2020~~in November 2021

In addition, the total number of organizations activated on our ~~Business Inventory Management System~~business inventory management system (“IMS”), a gateway into our marketplace, increased by ~~141%~~50% as compared to ~~Q2 2021.~~the first quarter of 2022.

Other Company developments:

●	On ~~September 8, 2021,~~June 2, 2022, the Company ~~appointed~~announced the appointment of Eric Jacobs as its Chief ~~Operating~~Financial Officer, ~~James Kessler, to the additional role of President of the Company.~~

●

~~On October~~effective June 6, ~~2021,~~2022. Sharon Driscoll, the ~~Company’s~~former Chief Financial Officer, is remaining with the Company in an advisory capacity to assist with the transition prior to her previously announced that she intends to retire within two years. As part of an effective succession process, Ms. Driscoll will continue to serve as CFO until her successor has been appointed and will then assume a role as an Executive Vice President serving as an advisor to the Company.retirement.


Ritchie Bros.	3831

Table of Contents

Results of Operations

Financial overview

Three months ended September 30,

Nine months ended September 30,

% Change

% Change

(in U.S. $000's, except EPS and percentages)

2021

2020

2021 over 2020


2021

2020

2021 over 2020


Service revenue:

Commissions

$
110,275

$
112,762

(2)
%

$
343,584

$
331,711

4
%

Fees

103,918

109,917

(5)
%

329,387

308,230

7
%

Total service revenue

214,193

222,679

(4)
%

672,971

639,941

5
%

Inventory sales revenue

115,489

108,863

6
%

384,627

353,906

9
%

Total revenue

329,682

331,542

(1)
%

1,057,598

993,847

6
%

Costs of services

33,038

39,223

(16)
%

108,107

118,026

(8)
%

Cost of inventory sold

102,993

96,253

7
%

344,763

320,972

7
%

Selling, general and administrative expenses

108,578

110,186

(1)
%

336,475

309,203

9
%

Operating expenses

276,063

264,158

5
%

869,960

803,581

8
%

Operating income

53,619

67,384

(20)
%

187,638

190,266

(1)
%

Operating income as a % of total revenue

16.3
%

20.3
%

(400)
bps

17.7
%

19.1
%

(140)
bps

Non-GAAP adjusted operating income*

75,055

84,588

(11)
%

239,563

225,454

6
%

Net income attributable to stockholders

32,336

45,387

(29)
%

121,273

121,239

0
%

Non-GAAP adjusted net income attributable to stockholders*

49,276

54,592

(10)
%

159,638

148,266

8
%

Diluted earnings per share attributable to stockholders

$
0.29

$
0.41

(29)
%

$
1.09

$
1.10

(1)
%

Non-GAAP diluted adjusted EPS attributable to stockholders*

$
0.44

$
0.49

(10)
%

$
1.43

$
1.35

6
%

Effective tax rate

28.8
%

25.3
%

350
bps

26.0
%

28.6
%

(260)
bps

Total GTV

1,270,258

1,321,379

(4)
%

4,072,439

3,962,386

3
%

Service GTV

1,154,769

1,212,516

(5)
%

3,687,812

3,608,480

2
%

Service revenue as a % of total GTV

16.9
%

16.9
%

—
bps

16.5
%

16.2
%

30
bps

Inventory GTV

115,489

108,863

6
%

384,627

353,906

9
%

Service revenue as a % of total revenue

65.0
%

67.2
%

(220)
bps

63.6
%

64.4
%

(80)
bps

Inventory sales revenue as a % of total revenue

35.0
%

32.8
%

220
bps

36.4
%

35.6
%

80
bps

Cost of inventory sold as a % of operating expenses

37.3
%

36.4
%

90
bps

39.6
%

39.9
%

(30)
bps

Service GTV as a % of total GTV - Mix

90.9
%

91.8
%

(90)
bps

90.6
%

91.1
%

(50)
bps

Inventory sales revenue as a % of total GTV - Mix

9.1
%

8.2
%

90
bps

9.4
%

8.9
%

50
bps


	Three months ended June 30,									Six months ended June 30,
							% Change									% Change
(in U.S. $000's, except EPS and percentages)	2022			2021			2022 over 2021			2022			2021			2022 over 2021
Service revenue:
Commissions	$	136,403		$	129,334			5	%	$	252,778		$	233,309			8	%
Fees		150,099			123,414			22	%		278,585			225,469			24	%
Total service revenue		286,502			252,748			13	%		531,363			458,778			16	%
Inventory sales revenue		198,044			143,613			38	%		347,104			269,138			29	%
Total revenue		484,546			396,361			22	%		878,467			727,916			21	%
Costs of services		45,039			41,301			9	%		84,054			79,167			6	%
Cost of inventory sold		176,171			131,023			34	%		307,753			241,770			27	%
Selling, general and administrative		144,277			109,560			32	%		270,883			223,799			21	%
Total operating expenses		393,026			307,019			28	%		723,927			594,140			22	%
Gain on disposition of property, plant and equipment		347			175			98	%		170,167			243			69,928	%
Operating income		91,867			89,517			3	%		324,707			134,019			142	%
Operating income as a % of total revenue		19.0	%		22.6	%		(360)	bps		37.0	%		18.4	%		1,860	bps
Non-GAAP adjusted operating income		119,579			106,973			12	%		208,439			164,748			27	%
Non-GAAP adjusted operating income as a % of total revenue		24.7	%		27.0	%		(230)	bps		23.7	%		22.6	%		110	bps
Net income attributable to stockholders		53,365			60,749			(12)	%		231,459			88,937			160	%
Non-GAAP adjusted net income attributable to stockholders		83,072			74,545			11	%		134,035			110,540			21	%
Non-GAAP adjusted EBITDA		136,219			122,970			11	%		192,624			195,874			(2)	%
Diluted earnings per share attributable to stockholders	$	0.48		$	0.55			(13)	%	$	2.07		$	0.80			159	%
Non-GAAP diluted adjusted EPS attributable to stockholders	$	0.74		$	0.67			10	%	$	1.20		$	0.99			21	%
Effective tax rate		28.8	%		25.7	%		310	bps		20.0	%		24.9	%		(490)	bps

Total GTV		1,684,276			1,527,642			10	%		3,123,381			2,802,182			11	%
Service GTV		1,486,232			1,384,029			7	%		2,776,277			2,533,044			10	%
Service revenue as a % of total GTV		17.0	%		16.5	%		50	bps		17.0	%		16.4	%		60	bps
Inventory GTV		198,044			143,613			38	%		347,104			269,138			29	%

Service GTV as a % of total GTV - Mix		88.2	%		90.6	%		(240)	bps		88.9	%		90.4	%		(150)	bps
Inventory sales revenue as a % of total GTV - Mix		11.8	%		9.4	%		240	bps		11.1	%		9.6	%		150	bps

Certain amounts in the prior period have been reclassified from selling, general and administrative expenses to cost of services, refer to note 2(a) of the consolidated financial statements

Total GTV

Total GTV ~~decreased 4%~~increased 10% to ~~$1.3~~$1.7 billion in ~~Q3 2021~~the second quarter of 2022 and increased 3%11% to ~~$4.1~~$3.1 billion in the first ~~nine~~six months of ~~2021.~~2022. Total GTV ~~decreased 5%~~increased 13% in ~~Q3 2021~~each of second quarter of 2022 and ~~increased 3% in~~ the first ~~nine~~six months of ~~2021,~~2022, when excluding the impact of foreign exchange.

In ~~Q3 2021,~~second quarter of 2022, GTV ~~decreased primarily in International and Canada, and remained relatively flat in the US. GTV volume decreased primarily driven~~increased year-over-year with consistently strong used equipment values, aided by an unfavourable supply environment across all regions, as well as auction calendar shifts of $34 million from the impact of the COVID-19 pandemic that were shifted from the first half of 2020 into Q3 2020 that did not repeat in Q3 2021. These decreases wereinflation, partially offset by ~~the continued strong price performance experienced across all regions due to high demand for used equipment, predominantly in the construction~~lower lot counts, unfavourable mix and ~~transportation sectors. In International, the decreased volumes were driven by the auction shifts of (1) Moerdijk, Netherlands, (2)Polotitlan, Mexico and (3) Ocana, Spain auctions in Q3 2020 and lower volumes selling through our online channels driven by~~ an unfavourable ~~supply environment. These decreases were partially offset by positive~~impact of foreign exchange. In Canada, several large inventory packages in Western Canada and strong year-over-year performances ~~in Australia, including a new~~at our agricultural ~~event. In Canada, GTV volume decreased due~~events primarily contributed to the ~~tight supply market~~growth in GTV volume. Canada also benefited from higher GTV generated by RBFS via PurchaseSafe which ~~led to an unfavourable year-over year performance mainly in our Western region, partially offset by an increased volume from providing~~provides escrow services for private brokered ~~transactions in RBFS.~~transactions. In the ~~US,~~United States, we saw favourable year-over-year performances across a number of our auctions and began to see the results of our strategic growth initiatives, including from our local yards, and investments made in our sales teams in Texas. In International, Australia saw significant growth in GTV volume driven by a higher number of inventory packages and strong performances from a large new national auction event attributable primarily to overall improved market conditions and the lifting of border restrictions.

For the first six months of 2022, total GTV increased 11% driven by the same macro economic factors as discussed above, with higher volumes ~~remained flat~~growth across all regions, despite a continued unfavourable supply environment. In Canada, GTV growth was driven by strong performances across several agricultural events, strong execution by our Canadian strategic accounts teams, higher volume from RBFS, and higher numbers of inventory packages as discussed above. In the United States, GTV volume increased primarily for the same reasons as discussed above. In addition, we saw a large dispersal of ~~$99 million of pipeline~~ construction equipment in our Phoenix, Arizona auction and positive year-over year performance at our flagship Orlando, Florida event. In International, the increase in GTV volume was primarily driven by Australia for the same reasons as discussed above, as well as due to a ~~single-owner auction~~new event in ~~New Mexico~~Corio, Victoria and Texas, and higher volumes selling through our GovPlanet business from the new non-rolling and rolling stock contracts effective June 1, 2021. Offsetting these, the US saw lower supply from our US strategic accounts in the rental and finance sectors which had grown significantly in the prior year.

two agricultural events.


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For the first nine months of 2021, total GTV increased 3% due to strong pricing partially offset by an unfavourable tight supply environment impacting all regions. We saw higher volumes in International and Canada, partially offset by relatively flat volumes in the US. In International, GTV increases were driven by the lifting of border restrictions, improved economic climate and higher activity in Australia. We also saw strong performances at our auctions in Europe with the addition of several new auctions and satellite yards as well as positive impact from foreign exchange. In Canada, we primarily benefited from a favourable foreign exchange impact, and also saw increased volumes across a number of our auctions, most notably in Toronto and within the Canadian agricultural market, and a significant increase in volumes in our RBFS business as discussed above, offset by softer performances in Western Canada. In the US, GTV remained flat mainly for the same reasons as discussed above, as well, the Orlando and Las Vegas, US auctions and the non-repeat of a collector car event, contributed to lower volumes, offset by positive online performance.Total revenue

Total revenue

~~Total~~ ~~revenue decreased 1%~~ increased 22% to ~~$329.7~~$484.5 million in ~~Q3 2021,~~the second quarter of 2022, with total service revenue ~~decreasing~~increasing by ~~4%, offset by an increase in~~13% and inventory sales revenue increasing by 6%38%. Total revenue increased 6%21% to ~~$1.1 billion~~$878.5 million for the first ~~nine~~six months of ~~2021.~~2022, with total service revenue increasing by 16% and inventory sales revenue increasing by 29%.

Foreign currency fluctuation also had ~~a favourable~~an unfavourable impact on our revenue primarily due to the ~~appreciation~~depreciation of the ~~Canadian dollar,~~Euro, the Australian dollar and the ~~Euro~~Canadian dollar relative to the USU.S. dollar.

Service Revenue

~~Q3 2021~~

~~In Q3 2021, total service~~Service revenue ~~decreased 4% with fees revenue decreasing 5% and commissions revenue decreasing 2%. Service revenues comprise~~is comprised of commissions that are earned on ~~Service~~service GTV, and ~~Fees~~fees which are earned on total GTV, as well as from our other services such as Ancillary Services, RBFS, Rouse, Mascus, RB Logistics, ~~and~~ RB Asset ~~Solutions.~~

Service GTV decreased 5% to $1.2 billion primarily due to the unfavourable supply environment which impacted our volumes across all regions despite continued strong pricing. In International, lower year-over-year performances across Europe combined with auction calendar shifts contributed to lower Service GTV, partially offset by higher volumes in Australia combined with a new agricultural event. In Canada, lower Service GTV was primarily due to softer year-over-year performances in EdmontonSolutions and Grand Prairie, partially offset by an increase in escrow services provided by RBFS for private brokered transactions through our Marketplace-E platform. In the US, Service GTV remained flat despite a very large dispersal of $99 million of pipeline construction equipment in a single-owner auction event. In addition, in the prior year, the US benefited from a strong execution by the US strategic accounts and regional sales teams driving growth. Softer performances in our Fort Worth and Houston auctions also contributed to lower volumes.SmartEquip.

Fees revenue decreased 5%, primarily due to lower fees on mix of lower proportion of small value lots across all regions, and lower fees from our Ancillary services as some sellers have elected to forgo paint or repair services driven by a strong market demand for used equipment and lower unit of volumes in the construction and transportation end markets. In the ~~US, we also saw lower listing fees in line with lower online volumes, and lower document fees due to a decline in the total number~~second quarter of titled lots sold. These decreases were partially offset by higher fee revenue from the acquisition of Rouse, higher funded volume in RBFS, as well as higher buyer fees from the implementation of the revised global buyer fee structure on May 1, 2021 and from the higher buyer fee structure in Australia. In addition, we also benefited from the re-instatement of fees at the Canadian on-the-farm auctions which were waived in Q3 2020 as part of our COVID-19 pandemic response.

Commissions revenue decreased 2%, partly due to the decrease in Service GTV of 5%, offset by higher rate performance in the US attributable to a lower volume of US strategic accounts, and stronger straight commission rate performance in our GovPlanet business driven by favourable mix of contracts.

~~First nine months of 2021~~

~~For the first nine months of 2021,~~2022, total service revenue increased 5%13% with fees revenue increasing 7%22% and commissions revenue increasing 4%5%.

Service GTV increased 2%7% to ~~$3.7~~$1.5 billion ~~with increases in Canada and International while performances~~mainly in the ~~US remained relatively flat. In Canada, positive year-over-year performances in Toronto~~United States and ~~in our Canadian agricultural market, and an~~Canada. Fees revenue increased 22% with buyer fees growing faster than the GTV increase of 10%, reflecting the increase in ~~escrow services provided by our RBFS business contributed~~buyer fee rates implemented in early 2022. Fees revenue also increased due to higher ~~Service GTV, which was partially offset by softer performances~~RBFS revenues on higher funded volumes, and the inclusion of fees from SmartEquip since its acquisition on November 2, 2021. Commissions revenue increased 5%, slightly less than the 7% increase in ~~Grand Prairie and Edmonton. International saw higher~~ service GTV, as a result of increased activity in Australia combined with a new agricultural event, and higher activity in Europe as a result of improved market economic conditions and the ease of restrictions from the gradual recovery of the COVID-19 pandemic. Service GTV remained flat in the US as discussed above. In addition, softer


~~Ritchie Bros.~~	40

~~Table of Contents~~

~~performances at our Orlando, Las Vegas, and regional combined auctions and~~primarily driven by the non-repeat of several high performing guarantee contracts in Canada, as well as a ~~collector car event~~lower commissions revenue from a higher proportion of GTV contributed ~~to lower volume partially offset~~ by ~~higher~~RBFS from facilitating financing arrangements.

For the first six months of 2022, total service revenue increased 16% with fees revenue increasing 24% and commissions revenue increasing 8%. Service GTV ~~sold through our online platform.~~

increased 10% to $2.8 billion across all regions with increases most notably in the United States and Canada. Fees revenue increased ~~7%, mainly due to fee revenue earned from the acquisition of Rouse, higher fees driven by higher funded volume in RBFS, and higher~~24% with buyer fees ~~in line with higher~~growing faster than GTV of ~~3%. We also implemented our revised global buyer-fee structure on May 1, 2021, and re-instated fees at~~11% for the Canadian on-the-farm auctions at the beginning of the year, which contributed to higher buyer fees. In addition, Australia and our GovPlanet business have higher buyer fee structures, which also led to higher buyer fees. These increases were partially offset by lower fees on mix of lower proportion of small value lots across all regions and lower fees from our Ancillary servicessame reasons as discussed ~~above, and lower fees from the non-repeat of a collector car event in the US.~~above.

Commissions revenue increased 4%8%, ~~largely driven by~~slightly less than the 10% increase in ~~Service~~service GTV ~~of 2%. The remaining increase in commission revenue was driven by improved rates on straight commission contracts in Canada and within our GovPlanet business.~~for the same reasons as discussed above.

Inventory Sales Revenue

Inventory sales revenue as a percentage of total GTV increased to ~~9.1%~~11.8% from ~~8.2%~~9.4% in ~~Q3 2021~~the second quarter of 2022 and increased to ~~9.4%~~11.1% from ~~8.9%~~9.6% in the first ~~nine~~six months of ~~2021.~~

~~Q3 2021~~2022.

In ~~Q3 2021,~~the second quarter of 2022, inventory sales revenue increased 6%38% primarily due to higher activity in ~~International, offset by the US and~~ Canada. The improved year-over-year performance in ~~our International region~~Canada was driven primarily by ~~an increased activity~~two large inventory contracts in the transportation sector. In International, inventory sales revenue grew in Australia ~~combined with a new agricultural event. In the US, an unfavourable supply environment combined with the non-repeat of several~~from higher inventory contracts ~~led to lower inventory sales revenue. These decreases were primarily offset by increased volumes~~ sold ~~through our GovPlanet business from the~~at a large new ~~non-rolling and rolling stock contracts effective June 1, 2021~~national auction event, as well as a result of the overall improvement in market conditions and the lifting of border restrictions. In the United States, higher ~~activity following the government shut down in response to COVID-19 in prior year. In Canada, the tight supply market~~volume of inventory contracts contributed to ~~lower volumes across Western Canada.~~

~~First nine months of 2021~~higher inventory sales revenue.

For the first ~~nine~~six months of ~~2021,~~2022, inventory sales revenue increased 9%29% primarily ~~due to~~in the United States and Canada for the same reasons as discussed above. In addition, in the United States, inventory sales revenue also grew from a ~~higher mix~~large dispersal of construction equipment in our Phoenix, Arizona auction, partially offset by a lower volume of inventory contracts as well as higher activity in Australia and across various countries in Europe partly due to the overall improved economic conditions from the gradual recovery of the COVID-19 pandemic and the addition of several new auctions. We also saw higher volumes in our ~~GovPlanet business, partially offset by softer performances in both the US~~Orlando, Florida and ~~Canada, as discussed above.~~Atlanta, Georgia events.

Underwritten Contracts

We offer our customers the opportunity to use underwritten commission contracts to serve their disposition strategy needs, entering into such contracts where the risk and reward profile of the terms are agreeable. Our underwritten contracts, which include inventory and guarantee contracts increased to ~~22.5%~~21.0% in ~~Q3 2021~~the second quarter of 2022 compared to ~~15.4%~~17.6% in ~~Q3 2020.~~the second quarter of 2021. For the first ~~nine~~six months of ~~2021,~~2022, our underwritten contracts were ~~18.3%~~19.2% compared to ~~18.7%~~16.3% in the prior period.

Operating Income

For ~~Q3 2021,~~the second quarter of 2022, operating income ~~decreased 20%~~increased 3% or ~~$13.8~~$2.4 million to ~~$53.6~~$91.9 million, primarily due to ~~a 4% decrease in service~~flow through from higher revenues, coupled with a 5% increase in total operating expenses. Operating expenses included $10.3 million in acquisition-related costs for the proposed acquisitions of Euro Auctions and SmartEquip, and continuing acquisition related costs incurred for the acquisition of Rouse in Q4 2020, as well as incremental depreciation and amortization of the intangible assets acquired in Rouse. In terms of ongoing operations, cost of services and selling and general administrative expenses were lower. For the first nine months of 2021, operating income decreased 1% or $2.6 million to $187.6 million primarily due to higher operating expenses due to the same reasons noted above, partially offset by higher ~~service revenues~~selling, general and administrative expenses. Selling, general and administrative expenses increased due to higher short-term incentive expenses and share-based payments driven by strong performance. Share-based payments also increased as a result of a higher expense relating to share-based awards issued to senior executives, and higher expense from the premium-priced options and PSU’s with market conditions granted in late 2021. We saw higher wages, salaries and benefits expenses driven by higher headcount, in part due to the acquisition of SmartEquip, as well as to accelerate our growth initiatives and our


Ritchie Bros.	33

Table of Contents

transformational journey to become a trusted global marketplace. Building, facilities and technology costs also increased mainly due to the amortization of the right-of-use asset of the Bolton property from the sale and lease back arrangement completed in the first quarter of 2022, as well as higher costs as we shift to cloud-based solutions to improve customer experiences. In addition, we saw higher travel, advertising and promotion costs from increased activity in global travel as well as inflation, and higher marketing expenses to promote new initiatives. Professional fees also increased, primarily driven by our investment in new modern architecture to support our future marketplace and services strategy. Inflation also resulted in higher personnel and travel costs.

For the first six months of 2022, operating income increased 142% due to the inclusion of a gain of $169.1 million on property, plant and equipment from the sale of the Bolton property in the first quarter of 2022. Operating income increased 16%, when excluding the impact of the gain, primarily due to flow through from ~~inventory sales.~~higher revenue, partially offset by higher selling, general and administrative expenses mainly due the same reasons as discussed above.

Income tax expense and effective tax rate

At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year. The estimate reflects, among other items, management’s best estimate of operating results. It does not include the estimated impact of foreign exchange rates or unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes.


~~Ritchie Bros.~~	41

~~Table~~For the second quarter of ~~Contents~~

~~For Q3 2021,~~2022, income tax expense ~~decreased 15%~~increased 3% to ~~$13.1~~$21.6 million and our effective tax rate increased ~~350~~310 bps to ~~29%~~28.8% as compared to ~~Q3 2020.~~the second quarter of 2021. For the ~~nine~~first six months ~~ended September 30, 2021,~~of 2022, income tax expense ~~decreased 13%~~increased 96.3% to ~~$42.5~~$57.9 million and our effective tax rate decreased ~~260~~490 bps to ~~26%,~~20.0% as compared to the ~~nine~~first six months ~~ended September 30, 2020.~~of 2021.

~~Increase~~The increase in the effective tax rate for Q3the second quarter of 2022 compared to the second quarter of 2021 was primarily due ~~a decrease in deductible stock options exercised~~to higher return to provision adjustments and ~~a greater estimate of non-deductible expenses.~~higher income taxes related to tax uncertainties. Partially offsetting this increase was a lower ~~income taxes related to tax uncertainties.~~estimate of non-deductible expenses.

~~Decrease~~The decrease in the effective tax rate for the first ~~nine~~six months of 2022 compared to the first six months of 2021 was primarily due to ~~a decrease in~~ the ~~estimate~~non-taxable gain portion on the sale of ~~non-deductible expenses, higher tax deduction for share unit expenses in excess of compensation expense and lower income taxes related to tax uncertainties.~~the Bolton property. Partially offsetting this decrease was a higher estimate of income taxed in jurisdictions with higher tax rates and a lower tax deduction for ~~stock options exercised.~~PSU and RSU share unit expenses that exceeded the related compensation expense.

On April 8, 2020, the United States Department of Treasury and the Internal Revenue Service (“IRS”) clarified income tax benefits related to hybrid financing arrangements would not be deductible (“Hybrid Interest”). The lower estimate of non-deductible expenses is primarily due to the net income tax benefits of approximately $6.2 million in the twelve months ended December 31, 2019 which were no longer deductible and accordingly were reversed in the nine months ended September 30, 2020.

Net income

In ~~Q3 2021,~~the second quarter of 2022, net income attributable to stockholders decreased ~~29%~~12% to ~~$32.3~~$53.4 million primarily due to higher interest expense, which included the loss on redemption of the 2021 Notes and certain related ~~to lower operating income.~~interest expense incurred in the quarter in connection with the discontinued Euro Auctions acquisition. For the first ~~nine~~six months of ~~2021,~~2022, net income attributable to stockholders ~~remained flat at $121.3~~increased 160% to $231.5 million, primarily due to ~~lower~~the gain of $169.1 million on property, plant and equipment from the sale of the Bolton property recognized in the first quarter of 2022, as well as higher operating income, ~~partially~~ offset by ~~lower tax expense.~~higher interest expense incurred on our 2021 Notes.

Diluted EPS

Diluted EPS attributable to stockholders decreased ~~29%~~13% to ~~$0.29~~$0.48 per share for ~~Q3 2021~~the second quarter of 2022 and ~~decreased 1%~~increased 159% to ~~$1.09~~$2.07 per share for the first ~~nine~~six months of ~~2021. This decrease is primarily due to the decrease~~2022, in line with net ~~income attributable to stockholders, combined with an increase in the weighted average number of dilutive shares outstanding over the same comparative period.~~

~~US dollar exchange rate comparison~~

We conduct global operations in many different currencies, with our presentation currency being the US dollar. The following table presents the variance in select foreign exchange rates over the comparative reporting periods:

% Change


2021 over

Value of one local currency to U.S dollar

2021

2020

2020

Period-end exchange rate







Canadian dollar

0.7886

0.7514

5
%
Euro

1.1581

1.1732

(1)
%
Australian dollar

0.7231

0.7171

1
%

Average exchange rate -Three months ended September 30,

Canadian dollar

0.7942

0.7506

6
%
Euro

1.1793

1.1686

1
%
Australian dollar

0.7351

0.7148

3
%

Average exchange rate -Nine months ended September 30,

Canadian dollar

0.7992

0.7391

8
%
Euro

1.1966

1.1242

6
%
Australian dollar

0.7592

0.6764

12
%

For Q3 2021, foreign exchange had a favourable impact on total revenue and an unfavourable impact on expenses. These impacts were primarily due to the fluctuations in the Canadian dollar, Australian dollar, and the Euro exchange rates relative to the US dollar.

income.


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U.S. dollar exchange rate comparison

We conduct global operations in many different currencies, with our presentation currency being the U.S. dollar. The following table presents the variance in select foreign exchange rates over the comparative reporting periods:


					% Change
					2022 over
Value of one local currency to U.S. dollar	2022		2021		2021
Period-end exchange rate - June 30,
Canadian dollar		0.7768		0.8067	(4)	%
Euro		1.0477		1.1857	(12)	%
Australian dollar		0.6898		0.7499	(8)	%

Average exchange rate - Three months ended June 30,
Canadian dollar		0.7836		0.8139	(4)	%
Euro		1.0658		1.2046	(12)	%
Australian dollar		0.7151		0.7698	(7)	%

Average exchange rate - Six months ended June 30,
Canadian dollar		0.7864		0.8139	(3)	%
Euro		1.0941		1.2046	(9)	%
Australian dollar		0.7194		0.7698	(7)	%

For the second quarter of 2022, foreign exchange had an unfavourable impact on total revenue and a favourable impact on expenses. These impacts were primarily due to the fluctuations in the Euro, Australian dollar and Canadian dollar exchange rates relative to the U.S. dollar.

Non-GAAP Measures

As part of management’s non-GAAP measures, we may eliminate the financial impact of adjusting items which are after-tax effects of significant recurring and non-recurring items that we do not consider to be part of our normal operating results.

Beginning in Q3 2021, we updated our calculation of non-GAAP measures and included the impact of share-based payments expense, all acquisition-related costs, amortization of acquired intangible assets and gain or loss of disposition of property, plant and equipment. These adjustments have been applied retrospectively to all periods presented.

Non-GAAP adjusted net income attributed to stockholders ~~decreased 10%~~increased 11% to ~~$49.3~~$83.1 million in ~~Q3 2021~~the second quarter of 2022 and increased 8%21% to ~~$159.6~~$134.0 million for the first ~~nine~~six months of ~~2021.~~2022.

Non-GAAP diluted Adjusted EPS attributable to stockholders ~~decreased~~increased 10% to ~~$0.44~~$0.74 per share in ~~Q3 2021~~the second quarter of 2022 and increased 6%21% to ~~$1.43~~$1.20 per share for the first ~~nine~~six months of ~~2021.~~2022.

Non-GAAP adjusted ~~Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) decreased 9%~~EBITDA increased 11% to ~~$90.6~~$136.2 million in ~~Q3 2021~~the second quarter of 2022 and increased 6%23% to ~~$286.2~~$241.1 million for the first ~~nine~~six months of ~~2021.~~2022.

Debt at the end of ~~Q3 2021~~the second quarter of 2022 represented ~~3.8~~2.2 times net income as at and for the 12 months ended ~~September~~June 30, ~~2021, consistent with the~~2022, compared to debt at ~~Q3 2020,~~the second quarter of 2021, which represented ~~3.8~~3.7 times net income as at and for the 12 months ended ~~September~~June 30, ~~2020.~~2021. The non-GAAP adjusted net debt/non-GAAP adjusted EBITDA was 0.7 times as at and for the 12 months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~0.5~~0.9 times as at and for the 12 months ended ~~September~~June 30, ~~2020.~~2021.


Ritchie Bros.	35

Table of Contents

Segment Performance

We provide our customers with a wide array of services. The following table presents a breakdown of our consolidated results between the A&M segment and Other Services segment. A complete listing of channels and brand solutions under the A&M segment, as well as our Other Services segment, is available in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.


	Three months ended September 30, 2021						Nine months ended September 30, 2021						Three months ended June 30, 2022						Six months ended June 30, 2022
(in U.S $000's)	A&M		Other		Consolidated		A&M		Other		Consolidated		A&M		Other		Consolidated		A&M		Other		Consolidated
Service revenue	$	178,344	$	35,849	$	214,193	$	560,573	$	112,398	$	672,971
Service revenue:
Commissions													$	136,403	$	—	$	136,403	$	252,778	$	—	$	252,778
Fees														98,588		51,511		150,099		183,217		95,368		278,585
Total service revenue														234,991		51,511		286,502		435,995		95,368		531,363
Inventory sales revenue		115,489		—		115,489		384,627		—		384,627		198,044		—		198,044		347,104		—		347,104
Total revenue		293,833		35,849		329,682		945,200		112,398		1,057,598	$	433,035	$	51,511	$	484,546	$	783,099	$	95,368	$	878,467
Ancillary and logistical service expenses		—		11,433		11,433		—		38,521		38,521		—		13,446		13,446		—		24,201		24,201
Other costs of services		19,751		1,854		21,605		63,326		6,260		69,586		28,985		2,608		31,593		54,559		5,294		59,853
Cost of inventory sold		102,993		—		102,993		344,763		—		344,763		176,171		—		176,171		307,753		—		307,753
SG&A expenses		96,194		12,384		108,578		301,956		34,519		336,475
Selling, general and administrative														125,535		18,742		144,277		234,346		36,537		270,883
Segment profit	$	74,895	$	10,178	$	85,073	$	235,155	$	33,098	$	268,253	$	102,344	$	16,715	$	119,059	$	186,441	$	29,336	$	215,777

Three months ended September 30, 2020

Nine months ended September 30, 2020
(in U.S $000's)

A&M

Other

Consolidated

A&M

Other

Consolidated
Service revenue

$
188,949

$
33,730

$
222,679

$
543,340

$
96,601

$
639,941
Inventory sales revenue

108,863

—

108,863

353,906

—

353,906
Total revenue

297,812

33,730

331,542

897,246

96,601

993,847
Ancillary and logistical service expenses

—

16,550

16,550

—

45,368

45,368
Other costs of services

21,733

940

22,673

69,018

3,640

72,658
Cost of inventory sold

96,253

—

96,253

320,972

—

320,972
SG&A expenses

103,933

6,253

110,186

290,077

19,126

309,203
Segment profit

$
75,893

$
9,987

$
85,880

$
217,179

$
28,467

$
245,646


	Three months ended June 30, 2021						Six months ended June 30, 2021
(in U.S $000's)	A&M		Other		Consolidated		A&M		Other		Consolidated
Service revenue:
Commissions	$	129,334	$	—	$	129,334	$	233,309	$	—	$	233,309
Fees		83,334		40,080		123,414		151,430		74,039		225,469
Total service revenue		212,668		40,080		252,748		384,739		74,039		458,778
Inventory sales revenue		143,613		—		143,613		269,138		—		269,138
Total revenue	$	356,281	$	40,080	$	396,361	$	653,877	$	74,039	$	727,916
Ancillary and logistical service expenses		—		14,819		14,819		—		27,088		27,088
Other costs of services		25,176		1,306		26,482		49,480		2,599		52,079
Cost of inventory sold		131,023		—		131,023		241,770		—		241,770
Selling, general and administrative		99,215		10,345		109,560		201,996		21,803		223,799
Segment profit	$	100,867	$	13,610	$	114,477	$	160,631	$	22,549	$	183,180


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Table of Contents

Auctions and Marketplaces Segment

Results of A&M segment operations are presented below for the comparative reporting periods.


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
							% Change								% Change								% Change								% Change
							2021 over								2021 over								2022 over								2022 over
(in U.S. $000's, except percentages)	2021			2020			2020		2021			2020			2020		2022			2021			2021		2022			2021			2021
Service revenue	$	178,344		$	188,949		(6)	%	$	560,573		$	543,340		3	%
Service revenue:
Commissions																	$	136,403		$	129,334		5	%		252,778			233,309		8	%
Fees																		98,588			83,334		18	%		183,217			151,430		21	%
Total service revenue																		234,991			212,668		10	%	$	435,995		$	384,739		13	%
Inventory sales revenue		115,489			108,863		6	%		384,627			353,906		9	%		198,044			143,613		38	%		347,104			269,138		29	%
Total revenue		293,833			297,812		(1)	%		945,200			897,246		5	%	$	433,035		$	356,281		22	%		783,099			653,877		20	%
A&M service revenue as a % of total A&M revenue		60.7	%		63.4	%	(270)	bps		59.3	%		60.6	%	(130)	bps		54.3	%		59.7	%	(540)	bps		55.7	%		58.8	%	(310)	bps
Inventory sales revenue as a % of total A&M revenue		39.3	%		36.6	%	270	bps		40.7	%		39.4	%	130	bps		45.7	%		40.3	%	540	bps		44.3	%		41.2	%	310	bps
Costs of services		19,751			21,733		(9)	%		63,326			69,018		(8)	%		28,985			25,176		15	%		54,559			49,480		10	%
Cost of inventory sold		102,993			96,253		7	%		344,763			320,972		7	%		176,171			131,023		34	%		307,753			241,770		27	%
SG&A expenses		96,194			103,933		(7)	%		301,956			290,077		4	%
Selling, general and administrative																		125,535			99,215		27	%		234,346			201,996		16	%
A&M segment expenses	$	218,938		$	221,919		(1)	%	$	710,045		$	680,067		4	%	$	330,691		$	255,414		29	%	$	596,658		$	493,246		21	%
Cost of inventory sold as a % of A&M expenses		47.0	%		43.4	%	360	bps		48.6	%		47.2	%	140	bps		53.3	%		51.3	%	200	bps		51.6	%		49.0	%	260	bps
A&M segment profit	$	74,895		$	75,893		(1)	%	$	235,155		$	217,179		8	%	$	102,344		$	100,867		1	%	$	186,441		$	160,631		16	%
Total GTV		1,270,258			1,321,379		(4)	%		4,072,439			3,962,386		3	%		1,684,276			1,527,642		10	%		3,123,381			2,802,182		11	%
A&M service revenue as a % of total GTV- Rate		14.0	%		14.3	%	(30)	bps		13.8	%		13.7	%	10	bps		14.0	%		13.9	%	10	bps		14.0	%		13.7	%	30	bps

Gross Transaction Value

In response to ~~the~~ COVID-19, ~~pandemic,~~ in March 2020, we transitioned all our traditional ~~live on site~~onsite auctions to online bidding utilizing our existing online bidding technology and simultaneously ceased almost all public attendance at our live auction theaters. Our core online auction channels (IronPlanet.com, GovPlanet.com, Marketplace-E) continued to operate as usual. In 2022, we began to return to live in-person onsite bidding at some of our auction events, offering both onsite and online bidding.

To facilitate the ~~live~~ auction process, ~~transition~~we have continued to ~~a virtual platform and under strict safety guidelines, we enabled~~enable equipment drop off at our physical yards, ~~prior to the online event,~~ with buyers able to conduct inspections pre-auction and collect equipment post auction. In addition, ~~where auctioneers were not able to attend a physical site,~~ we ~~used Time~~balanced Timed Auctioned Lots (“TAL”) solutions for selected ~~International~~industrial and on-the-farm agriculture events.

We believe it is meaningful to consider revenue in relation to GTV. Total GTV and Service GTV by geographical regions, as well as GTV by sector, are presented below for the comparative reporting period.

GTV by Geography


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,						Six months ended June 30,
					% Change				��			% Change						% Change						% Change
(in U.S. $000's)		2021		2020	2021 over 2020			2021			2020	2021 over 2020
(in U.S. $000's, except percentages)															2022		2021	2022 over 2021			2022		2021	2022 over 2021
Total GTV by Geography
United States	$	798,725	$	796,111	0	%	$	2,421,204		$	2,451,003	(1)	%	$	803,604	$	740,826	8	%	$	1,723,456	$	1,622,479	6	%
Canada		266,574		281,639	(5)	%		1,028,260			960,382	7	%		626,389		551,075	14	%		936,157		761,687	23	%
International		204,959		243,629	(16)	%		622,975			551,001	13	%		254,283		235,741	8	%		463,768		418,016	11	%
Total GTV		1,270,258		1,321,379	(4)	%		4,072,439			3,962,386	3	%		1,684,276		1,527,642	10	%		3,123,381		2,802,182	11	%

Service GTV by Geography
United States		761,483		755,712	1	%		2,263,773			2,281,460	(1)	%		736,268		686,973	7	%		1,567,428		1,502,289	4	%
Canada		260,788		273,914	(5)	%		1,004,831			925,336	9	%		586,945		543,147	8	%		887,648		744,044	19	%
International		132,498		182,890	(28)	%		419,208			401,684	4	%		163,019		153,909	6	%		321,201		286,711	12	%
Total Service GTV¹		1,154,769		1,212,516	(5)	%		3,687,812			3,608,480	2	%		1,486,232		1,384,029	7	%		2,776,277		2,533,044	10	%

¹ Service GTV is calculated as total GTV less inventory sales revenue.


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Table of Contents

GTV by Sector

The following pie charts illustrate the breakdown of total GTV by sector for ~~Q3 2021~~the second quarter of 2022 compared to ~~Q3 2020.~~the second quarter of 2021.

The construction sector includes heavy equipment such as trucks, excavators, cranes and dozers. The transportation sector includes vehicles, buses, trailers and trucks that are used for transport. The other sector primarily includes equipment sold in the agricultural, forestry and energy industries.

In ~~Q3 2021,~~the second quarter of 2022, total GTV mix compared to ~~Q3 2020 decreased~~the second quarter of 2021 increased by 1%6 percentage points in the transportation sector ~~and~~driven by 2%large inventory contracts in Canada, primarily offset by a 5 percentage points decrease in the construction sector.

Total Auction Metrics

We review a number of metrics including the following key metrics, to evaluate our business, measure our performance and identify trends affecting our ~~business, formulate business plans and make strategic decisions.~~

~~Number of auction sales days.~~ ~~We define auction sales days as the number of auction days per auction event. Each day an auction is held is an auction sales day. An auction can have multiple auction sales days.~~business.

Bids per lot sold. Each bid is completed electronically through our real-time online bidding system. A lot is defined as a single asset to be sold, or a group of assets bundled for sale as one unit. This metric calculates the total number of bids received for a lot divided by the total number of lots sold.

Total lots sold. We define a lot as a single asset to be sold, or a group of assets bundled for sale as one unit. Low value assets are sometimes bundled into a single lot, collectively referred to as “small value lots”.


	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
			% Change				% Change				% Change				% Change
	2021	2020	2021 over 2020		2021	2020	2021 over 2020		2022	2021	2022 over 2021		2022	2021	2022 over 2021
Number of auction sales days	128	120	7	%	461	433	6	%
Bids per lot sold *	26	25	4	%	27	24	13	%	28	27	4	%	28	28	—	%
Total lots sold *	107,825	142,472	(24)	%	372,290	392,234	(5)	%	144,167	148,206	(3)	%	249,934	263,035	(5)	%

* Management reviews industrial equipment auction metrics excluding GovPlanet; as a result, GovPlanet business metrics are excluded from these metrics


~~Ritchie Bros.~~	45

~~Table of Contents~~

The number of auction sales days increased 7% to 128 in Q3 2021. Auction sales days increased despite a decrease in total GTV of 4% mainly due to supply constraints which resulted in less average GTV sold per sale day. For the first nine months of 2021, the number of auction sales days increased 6% to 461; despite the increase in days, GTV only increased 3% reflecting the negative impact of supply constraints.

The total number of bids per lot sold increased 4% to 2628 in Q3the second quarter of 2022 compared to the second quarter of 2021 and ~~increased 14% to 27~~remained flat for the first ~~nine~~six months of ~~2021 driven by higher~~2022, reflecting continued strong demand for used equipment from buyers in a tight supply ~~market and partly due to our increased marketing efforts and higher online activity.~~market.

The total lots sold decreased ~~by 24%~~3% to ~~107,825~~144,167 in ~~Q3 2021 mainly due to a tight equipment supply environment. For~~ the ~~first nine months~~second quarter of ~~2021, the total lots sold decreased 5% to 372,290~~2022 primarily impacted by the tight supply market, ~~and~~ the shift to a lower proportion of small value lots sold across all regions, as well as reduction in lot counts, partially offset by higher average selling prices.

~~Online Bidding~~

~~Across all channels, 100%~~ For the first six months of 2022, the total ~~GTV was purchased by online buyers in Q3 2021 and Q3 2020 which is a direct impact of the COVID-19 pandemic as we pivoted~~lots sold decreased 5% to 100% online bidding from our traditional live on site auctions where on site attendance was not permitted. The Company had considered returning to in-person attendance at select events at our larger live events in the US in Q3 2021; however, this decision has been postponed given the resurgence of COVID-19. We will continue to monitor the evolving impact of the COVID-19 pandemic going forward and consider when a transition back to some measure of in-person attendance at our on site auction events is safe.

~~Productivity~~

The majority of our business continues to be generated by our A&M segment operations. Sales Force Productivity within this segment is an operational statistic that we believe provides a gauge of the effectiveness of our Revenue Producers in increasing GTV. Revenue Producers is a term used to describe our revenue-producing sales personnel. This definition includes Regional Sales Managers and Territory Managers.

~~Our Sales Force Productivity~~249,934, primarily for the ~~trailing 12-month period ended September 30, 2021 was $14.3 million per Revenue Producer compared to $13.0 million per Revenue Producer for the trailing 12-month period ended September 30, 2020.~~

same reasons as discussed above.


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Table of Contents

A&M revenue

Total A&M revenue ~~decreased 1%~~increased 22% to ~~$293.8~~$433.0 million in ~~Q3 2021 and increased 5% to $945.2 million for~~ the ~~first nine months~~second quarter of ~~2021.~~2022.

A&M revenue by geographical region are presented below:


	Three months ended September 30,					Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
			% Change						% Change						% Change						% Change
(in U.S. $000's, except percentages)	2021	2020	2021 over 2020			2021		2020	2021 over 2020			2022		2021	2022 over 2021			2022		2021	2022 over 2021
A&M Revenue by Geography
United States
Service revenue	119,871	121,810	(2)	%	$	353,828	$	357,944	(1)	%	$	127,318	$	112,183	13	%	$	266,188	$	236,388	13	%
Inventory sales revenue	37,242	40,399	(8)	%		157,431		169,543	(7)	%		67,337		53,853	25	%		156,028		120,190	30	%
A&M revenue- United States	157,113	162,209	(3)	%		511,259		527,487	(3)	%
A&M revenue - United States												194,655		166,036	17	%		422,216		356,578	18	%
Canada
Service revenue	36,929	40,591	(9)	%		140,930		126,508	11	%		80,702		76,021	6	%		119,517		104,080	15	%
Inventory sales revenue	5,786	7,725	(25)	%		23,429		35,046	(33)	%		39,444		7,928	398	%		48,509		17,643	175	%
A&M revenue- Canada	42,715	48,316	(12)	%		164,359		161,554	2	%
A&M revenue - Canada												120,146		83,949	43	%		168,026		121,723	38	%
International
Service revenue	21,544	26,548	(19)	%		65,815		58,888	12	%		26,971		24,464	10	%		50,290		44,271	14	%
Inventory sales revenue	72,461	60,739	19	%		203,767		149,317	36	%		91,263		81,832	12	%		142,567		131,305	9	%
A&M revenue- International	94,005	87,287	8	%		269,582		208,205	29	%
A&M revenue - International												118,234		106,296	11	%		192,857		175,576	10	%
Total
Service revenue	178,344	188,949	(6)	%		560,573		543,340	3	%		234,991		212,668	10	%		435,995		384,739	13	%
Inventory sales revenue	115,489	108,863	6	%		384,627		353,906	9	%		198,044		143,613	38	%		347,104		269,138	29	%
A&M total revenue	293,833	297,812	(1)	%		945,200		897,246	5	%
Total A&M revenue												433,035		356,281	22	%		783,099		653,877	20	%

United States

In ~~Q3 2021,~~the second quarter of 2022, service revenue ~~decreased 2% while~~increased 13% partially due to the 7% increase in service ~~GTV remained relatively flat.~~GTV. The ~~decrease~~remaining increase was primarily due to higher buyer fee rates implemented in early 2022. In addition, we saw positive rate performances in our straight commission contracts from a lower proportion of GTV sourced from strategic accounts. These increases were partially offset by lower buyer fees on a lower proportion of small value lots, lower listing fees driven by lower online volumes and lower document fees driven by a decline in the total number of titled lots sold. These decreases were partially offset by higher buyer fees from the implementation of a revised global buyer-fee structure on May 1, 2021 and positive rate performances in our straight commission contracts driven by a lower proportion of GTV sourced from strategic accounts and from our GovPlanet business due to favourable mix.lots.

For the first ~~nine~~six months of ~~2021,~~2022, service revenue ~~decreased 1% in line with a 1% decrease in~~increased 13% while Service GTV increased 4% primarily for the same reasons as discussed ~~above, as well as~~above. In addition, we saw lower fees ~~earned from the non-repeat of a collector car event in Q1 2020, partially offset~~associated with online inspections driven by ~~improved rates on our guarantee contracts.~~lower online lot counts.

In ~~Q3 2021,~~the second quarter of 2022, inventory sales revenue ~~decreased 8%~~increased 25% primarily due to ~~lower volumes~~higher volume of inventory contracts, sourced at our combined regional events, and at several of our other auctions primarily in Fort Worth driven by a lower mix of and the non-repeat of inventory contracts and the tight supply market environment, despite higher pricing. These decreases were partially offset byincluding higher volumes sold through our GovPlanet business as a result of the new non-rolling and rolling stock contracts effective June 1, ~~2021 and higher volumes due to the government shutdowns in the prior year in response to COVID-19 pandemic.~~

2021. For the first ~~nine~~six months of ~~2021,~~2022, inventory sales revenue ~~decreased 7%~~increased 30% primarily due to a large dispersal of construction equipment in our Phoenix, Arizona auction, as well as for the same reasons as discussed ~~above. In addition, we saw~~earlier. These increases were partially offset by a lower ~~volumes~~volume of inventory contracts ~~at our~~in Orlando, ~~auctions, partially offset by positive performance in Houston.~~Florida and Atlanta, Georgia auctions.

Canada

In ~~Q3 2021,~~the second quarter of 2022, service revenue ~~decreased 9%~~increased 6%, ~~partially due to~~slightly less than the ~~5% decrease~~8% increase in Service ~~GTV. The remaining decrease was due to~~GTV primarily driven by the non-repeat of several high performing guarantee contracts in the prior year, as well as lower ~~fees~~commissions from a ~~lower~~higher proportion of ~~small value lots,~~GTV contributed by RBFS. These were partially offset by ~~higher buyer~~an increase in fees from the ~~implementation of the new~~higher buyer fee ~~structure~~rates implemented in ~~May 1, 2021 and the re-instatement of fees waived at the Canadian on-the-farm auctions in Q3 2020 as part of our COVID-19 pandemic response.~~early 2022.

For the first ~~nine~~six months of ~~2021,~~2022, service revenue increased ~~11%, partially due to~~15% while Service GTV increased 19%. Service revenue growth was lower than the 9% increase in Service GTV ~~and higher fees earned~~primarily for the same reasons as discussed ~~above, as well as improved commission rates on both our guarantee and straight commission contracts.~~above.

In ~~Q3 2021,~~the second quarter of 2022, inventory sales revenue ~~decreased 25%,~~increased 398% primarily ~~due to equipment supply constraints contributing to lower year-over-year performances~~driven by two large inventory contracts in ~~our Western Canada region.~~the transportation sector.

For the first six months of 2022, inventory sales revenue increased 175% primarily for the same reason.


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Table of Contents

For the first nine months of 2021, inventory sales revenue decreased 33%, primarily due to lower mix of inventory contracts and the equipment supply constraints in the energy sector contributing to lower year-over-year performance at our Edmonton auction, lower rate performances and the non-repeat of several large inventory contracts.

International

In ~~Q3 2021,~~the second quarter of 2022, service revenue ~~decreased 19%, primarily~~increased 10% partially due to the ~~28% decrease in Service GTV. Offsetting this were higher buyer fees from the higher buyer fee structure in Australia and from the implementation of the revised buyer fees structure on May 1, 2021.~~

~~For the first nine months of 2021, service revenue increased 12%, partly due to the 4%~~6% increase in Service GTV. The remaining increase was due to ~~the~~ higher buyer fees ~~as discussed above.~~

~~In Q3 2021, inventory sales revenue increased 19%, primarily driven by positive year-over-year performance from higher volumes of inventory contracts sourced~~ in Australia ~~combined with~~arising from a ~~new agricultural event.~~favourable mix of contracts resulting in net higher buyer fees rate.

For the first ~~nine~~six months of ~~2021,~~2022, service revenue increased 14% primarily due to the 12% increase in Service GTV for the same reason as discussed above.

In the second quarter of 2022, inventory sales revenue increased ~~36%~~12%, mainly in Australia driven by a higher number of inventory contracts sold at a large new national auction event, as well as from the overall improvement in market conditions and the lifting of border restrictions.

For the first six months of 2022, inventory sales revenue increased 9% primarily ~~for the same reasons~~driven by growth in Australia as discussed above, ~~as well as higher private treaty deals in Australia, strong performances at our auctions in Europe~~combined with the addition of ~~several~~one new ~~auctions~~event and ~~satellite yards, and higher inventory volumes from the improved economic conditions from the gradual recovery of the COVID-19 pandemic in Australia, Europe and Middle East.~~two agricultural events.

Costs of services

A&M costs of services ~~decreased 9%~~increased 15% to ~~$19.8~~$29.0 million in ~~Q3 2021~~the second quarter of 2022 compared to ~~Q3 2020. This decrease was primarily driven by lower activity~~the second quarter of 2021 in line with ~~lower~~total GTV ~~contributing~~increase of 10%. In addition, we incurred additional fees paid to ~~cost reductions~~third parties in ~~online inspection and advertising expenses, partially offset by higher costs to support our GovPlanet business growth.~~connection with profit sharing arrangements on inventory packages.

For the first ~~nine~~six months of ~~2021,~~2022, A&M costs of services ~~decreased 8%~~increased 10% to ~~$63.3~~$54.6 million, ~~primarily~~in line with total GTV increase of 11% and for the same ~~reasons noted above and cost savings from the implementation of travel restrictions due to the COVID-19 pandemic. The decrease was further driven by cost reductions in~~reason as discussed above. We also incurred higher building, facilities and technology expenses ~~due to the non-repeat of costs incurred~~ to support our ~~Q1 2020 collector car event. These decreases were partially offset by an unfavourable impact of foreign exchange, and higher employee compensation expenses~~flagship Orlando event, which returned to ~~support our growth strategy and to support increased activity in our GovPlanet business.~~live in-person onsite bidding.

Cost of inventory sold

A&M cost of inventory sold increased 7%34% to ~~$103.0~~$176.2 million in ~~Q3 2021~~the second quarter of 2022 compared to ~~Q3 2020,~~ the second quarter of 2021 primarily in line with the 6% increase in inventory sales revenue. Cost of inventory sold increased at a higher rate than the increase in inventory sales revenue, indicating a slight decrease in the revenue rates, primarily in our US region.

~~For the first nine months of 2021, A&M cost of inventory sold increased 7% to $344.8 million, primarily in line with the 9%~~38% increase in inventory sales revenue. Cost of inventory sold increased at a lower rate than the increase in inventory sales revenue, indicating an increase in the revenue rates, primarily in ~~our GovPlanet business and~~Canada.

For the ~~US region, partially offset by the International region. The unfavourable impact~~first six months of ~~foreign exchange also contributed to an increase in~~2022, A&M cost of inventory ~~sold.~~sold increased 27% to $307.8 million primarily in line with the 29% increase in inventory sales revenue.

~~SG&A expenses~~Selling, general and administrative

A&M ~~SG&A expenses decreased 7%~~selling, general and administrative increased 27% to ~~$96.2~~$125.5 million in ~~Q3 2021~~the second quarter of 2022 compared to ~~Q3 2020. The decrease~~the second quarter of 2021. This increase was primarily due to ~~lower~~higher short-term incentive expenses and ~~long-term incentive~~higher share-based payments driven by strong performance. Share-based payments also increased as a result of a higher expense relating to share-based awards issued to senior executives, and higher expense from the premium-priced options and PSU’s with market conditions granted in late 2021. Building, facilities and technology costs also increased mainly due to the amortization of the right-of-use asset of the Bolton property from the sale and lease back arrangement completed in the first quarter of 2022, as well as higher costs as we shift to cloud-based solutions to improve customer experiences. In addition, we saw higher wages, salaries and benefits expenses, as well as higher headcount to accelerate our growth initiatives and our transformational journey to become a trusted global marketplace. We also saw higher travel, advertising and promotion costs from increased activity in global travel, and higher marketing expenses to promote new initiatives. Inflation has also driven higher personnel and travel costs. Professional fees also increased primarily driven by our ~~softer performance, the non-repeat of prior year one-time $4.3 million severance costs related to the realignment of leadership~~investment in new modern architecture to support ~~the new global operations organization,~~our future marketplace and ~~lower share-based payment expenses.~~services strategy. These ~~decreases~~increases were partially offset by ~~higher wages, salaries~~a favourable impact of foreign exchange.

For the first six months of 2022, A&M selling, general and ~~benefit expenses driven by higher headcount~~administrative increased 16% to ~~support our growth initiatives,~~$234.3 million primarily due to higher building, facilities and technology costs, ~~primarily in our GovPlanet business as a result of the new non-rolling and rolling stock contracts effective June 1, 2021, an unfavourable foreign exchange impact and~~higher share-based payments, higher professional fees, ~~related to SOX compliance, consulting~~higher wages, salaries and ~~legal costs.~~

~~For the first nine months of 2021, A&M segment SG&A~~benefits expenses ~~increased 4% to $302.0 million primarily~~and travel, advertising and promotion for the same reasons as discussed above and due to an unfavourable impact of foreign exchange. The increases were offset by the non-repeat of a prior year one-time incentive accrual to employees during the COVID-19 pandemic and lower travel, advertising and entertainment expenses, as travel restrictions largely remained in place since the beginning of Q2 2020.above.


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Other Services Segment

Results of Other Services segment operations are presented below for the comparative reporting periods.


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
					% Change						% Change						% Change						% Change
(in U.S. $000's, except percentages)	2021		2020		2021 over 2020		2021		2020		2021 over 2020		2022		2021		2022 over 2021		2022		2021		2022 over 2021
Service revenue	$	35,849	$	33,730	6	%	$	112,398	$	96,601	16	%	$	51,511	$	40,080	29	%	$	95,368	$	74,039	29	%
Ancillary and logistical service expenses		11,433		16,550	(31)	%		38,521		45,368	(15)	%		13,446		14,819	(9)	%		24,201		27,088	(11)	%
Other costs of services		1,854		940	97	%		6,260		3,640	72	%		2,608		1,306	100	%		5,294		2,599	104	%
SG&A expenses		12,384		6,253	98	%		34,519		19,126	80	%
Selling, general and administrative														18,742		10,345	81	%		36,537		21,803	68	%
Other services profit	$	10,178	$	9,987	2	%	$	33,098	$	28,467	16	%	$	16,715	$	13,610	23	%	$	29,336	$	22,549	30	%

In ~~Q3 2021,~~the second quarter of 2022, Other Services revenue increased 6%29% to ~~$35.8~~$51.5 million primarily due to ~~the inclusion of Rouse of $6.5 million and~~ higher RBFS revenues of ~~$4.0~~$8.1 million, and $5.0 million of second full quarter revenue recognized since the acquisition of SmartEquip on November 2, 2021. These increases were partially offset by lower ancillary revenue of ~~$7.1~~$1.4 million ~~as some sellers have elected to forgo paint or repair services~~ driven by ~~a strong market demand for used equipment and~~ lower ~~unit~~fees earned on redeployment of ~~volumes~~assets in the ~~construction and transportation end markets.~~United States.

In the first ~~nine~~six months of ~~2021,~~2022, Other Services revenue increased ~~16%~~29% to ~~$112.4~~$95.4 million due to ~~the increase in revenue from Rouse of $18.4 million and~~ higher RBFS revenues of ~~$9.2~~$14.6 million and $9.7 million of revenue from SmartEquip. These increases were partially offset by lower ancillary revenue of ~~$12.0 million for the same reason as noted above and lower revenue of~~ $2.2 ~~million from our asset appraisal services.~~million.

Ancillary and logistical service expenses decreased ~~31%~~9% to ~~$11.4~~$13.4 million in ~~Q3 2021~~ the second quarter of 2022 and decreased ~~15%~~11% to ~~$38.5~~$24.2 million in the first ~~nine~~six months of ~~2021,~~2022, in line with lower ancillary revenue. Other costs of services increased ~~97%~~100% to ~~$1.9~~$2.6 million in ~~Q3 2021~~ the second quarter of 2022 and increased ~~72%~~104% to ~~$6.3~~$5.3 million in the first ~~nine~~six months of ~~2021~~2022 mainly due to the inclusion of ~~Rouse as this is~~SmartEquip since its acquisition on November 2, 2021. Selling, general and administrative increased 81% to $18.7 million in the ~~third full~~second quarter of ~~costs recognized since acquisition. SG&A expense~~2022 and increased ~~98%~~68% to ~~$12.4~~$36.5 million in ~~Q3 2021~~the first six months of 2022, primarily in wages, salaries and ~~increased 80%~~benefits expenses due to ~~$34.5 million, primarily due to~~the growth in our RBFS business, ~~and~~ the inclusion of ~~Rouse.~~SmartEquip and higher headcount in Rouse to support our growth initiatives.

RBFS revenue increased ~~55%~~69% in ~~Q3 2021,~~ the second quarter of 2022 and increased ~~40%~~70% in the first ~~nine~~six months of ~~2021~~2022, driven by higher funded ~~volume~~volumes and improved rate on fees earned from facilitating financing ~~arrangements as well as~~arrangements. In the ~~growth in our PurchaseSafe service to provide escrow services to private brokered transactions. Some~~second quarter of the positive performance in RBFS also benefited from the favourable impact of foreign exchange fluctuation, as well as from a larger dedicated sales team driving increase volumes compared to the first nine months of 2020. In Q3 2021,2022, our funded volume, which represents the amount of lending brokered by RBFS, increased 51% to ~~$176.4~~$298.0 million, and increased ~~42%~~57% when excluding the impact of foreign exchange. In the first ~~nine~~six months of ~~2021,~~2022, our funded volume increased ~~39%~~55% to ~~$520.4~~$531.6 million, and increased ~~28%~~58% when excluding the impact of foreign exchange.

In ~~Q3 2021,~~the second quarter of 2022, Other Services profit increased 2%23% to ~~$10.2~~$16.7 million mainly driven by ~~our Rouse and RBFS operations, offset by lower margins in ancillary and asset appraisal services.~~RBFS. In the first ~~nine~~six months of ~~2021,~~2022, Other Services profit increased ~~16%~~30% to ~~$33.1~~$29.3 million ~~primarily due to the same reasons.~~also driven by RBFS.

Additionally, in the first quarter of 2021, we launched a business version of our ~~inventory management system (“IMS”),~~IMS, which offers our customers end-to-end asset management and disposition services, data analytics, dashboards, branded e-commerce sites and multiple external sales channels to help our customers achieve optimal returns. We continue to grow the number of organizations activated on IMS. During the ~~third~~second quarter of ~~2021,~~2022, the number of organizations activated on our IMS increased by ~~141%~~50% compared to the ~~second~~first quarter of ~~2021.~~2022.

As we evolve to a marketplace, we also facilitate retail and peer-to-peer auction events and equipment sale transactions via our online technology in exchange for hosting fees. During the ~~third~~second quarter of ~~2021,~~2022, customers that used this service disposed of ~~$33.4~~$31.9 million of assets, which is a decrease of 12% from the second quarter of 2021 primarily driven by an ~~increase of 43% from Q3 2020.~~unfavourable supply environment. For the first ~~nine~~six months of ~~2021,~~2022, this service facilitated transactions of ~~$112.7~~$68.3 million, ~~an 80% increase~~a 14% decrease as compared to the prior ~~year.~~year for the same reason mentioned above.


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Liquidity and Capital Resources

Our principal sources of liquidity are our cash provided by operating activities and borrowings from our revolving credit facilities, which we renewed on September 21, 2021.

~~In the first nine months of 2021, our operational liquidity was not materially impacted by the COVID-19 pandemic.~~ We believe that our existing working capital and availability under our credit facilities isare sufficient to satisfy our present operating requirements and contractual obligations. ~~With future uncertainty due to COVID-19, we will continue to evaluate~~Our material short-term cash requirements include (i) inventory purchases, (ii) capital expenditures for intangible assets and property, plant and equipment (iii) payment of quarterly dividends on an as-declared basis, (iv) settlement of contracts with consignors and other suppliers, (v) personnel expenditures, with a majority of bonuses paid annually in the ~~nature~~first quarter following each fiscal period, (vi) income tax payments, primarily paid in quarterly installments, (vii) lease payments, and ~~extent~~(viii) principal payments on short-term and current portions of ~~any impacts~~long-term debt, and (ix) interest payments related to our ~~liquidity as events unfold. Our future growth strategies continue~~current debt obligations. We also have inventory purchase commitments, related to ~~include but are not limited~~our GovPlanet business, which is described in Note 26 of our consolidated financial statements.

During the first quarter of 2022, we completed the sale and leaseback of the Bolton property for a total sale consideration and net proceeds of approximately $165.0 million. The proceeds from the sale were used to repay our revolving credit facilities. We have also leased back the Bolton property while we complete the acquisition and development of a replacement property and auction site located in Amaranth, Ontario over the next two to three years. We intend to fund the material cash requirement for the acquisition and development of the Amaranth property from cash flows from ongoing operations.

During the second quarter of 2022, as a result of the Company’s decision to discontinue the phase 2 review by the United Kingdom’s Competition and Markets Authority (“CMA”), the Company redeemed all of the 2021 Notes, which were held in escrow, at a redemption price equal to 100% of the original offering price of the notes, plus accrued and unpaid interest. As such, on May 4, 2022, the Company paid net proceeds of approximately $931 million to its bondholders.

Other long-term cash requirements include long-term debt principal repayments, which are disclosed according to maturity date in Note 21 in our ~~A&M, RBFS, Rouse, and Mascus operating segments,~~Annual Report on Form 10-K for the year ended December 31, 2021, as well as ~~other growth opportunities like mergers~~interest payments related to our non-current debt obligations. We are also committed under various letters of credit and provide certain guarantees in the normal course of business.

If we were to consider further acquisitions ~~including the acquisition of the Euro Auctions and SmartEquip. The execution of these growth strategies may affect our financing needs and ability~~ to ~~make payments~~deliver on our strategic growth drivers, we may seek financing through equity markets or additional debt ~~fund our other liquidity needs and make planned capital expenditures. Upon~~markets. The sale of equity securities may result in dilution to our ~~Bolton, Ontario property the company intends~~shareholders. Issuance of preferred equity securities could provide for rights, preferences or privileges senior to ~~relocate to a replacement auction site in Amaranth, Ontario; the proceeds~~those of ~~the sale will~~our common stock. Further, this additional capital may not be ~~used to largely repay debt while the replacement property will be funded from cashflow from ongoing operations.~~available on reasonable terms, or at all.

We assess our liquidity based on our ability to generate cash and secure credit to fund operating, investing, and financing activities. Our liquidity is primarily affected by fluctuations in cash provided by operating activities, significant acquisitions of businesses, payment of dividends, share repurchases, our net capital spending¹, and voluntary repayments of ~~our Delayed-Draw Term Loan Facility (“DDTL Facility”).~~debt. We believe our principal sources of liquidity, ~~combined with the senior unsecured bridge loan facility provided by GS Bank and other financial institutions, the new upsized DDTL Facility~~which include cash flow from operations, our current unused capacity under our revolving credit facilities of ~~$205.0~~$683 million, ~~and~~ ~~approximately $170.0 million ($210.0 million CAD) of anticipated proceeds on the sale of our Bolton, Ontario, property are~~is sufficient to fund our current operating activities and future growth ~~strategies, including the proposed acquisitions of Euro Auctions and SmartEquip.~~strategies.

Cash provided by operating activities can fluctuate significantly from period to period due to factors such as differences in the timing, size and number of auctions during the period, the volume of our inventory contracts, the timing of the receipt of auction proceeds from buyers and of the payment of net amounts due to consignors, as well as the location of the auction with respect to restrictions on the use of cash generated therein.

As previously discussed, we have agreed pursuant to the SPA (subject to anti-trust and other customary closing conditions) to purchase Euro Auctions for £775.0 million (approximately $1.04 billion). On September 21, 2021, we amended our existing Credit Agreement, increasing our DDTL Facility to $295.0 million, of which $205.0 million remains undrawn at September 30, 2021 and available to fund the acquisition of Euro Auctions. Concurrently, we cancelled the commitment for the senior secured revolving facility and the senior secured term loan facility. Further, the senior unsecured bridge facility commitment was reduced by $200.0 million. The remaining aggregate principal amount of the total financing commitment from GS Bank was reduced from $1,150.0 million to $950.0 million.

~~Cash flows~~

Nine months ended September 30,

% Change

(in U.S. $000's, except percentages)

2021

2020

2021 over 2020

Cash provided by (used in):







Operating activities

$
304,118

$
265,551

15
%

Investing activities

(32,376)

(10,192)

218
%

Financing activities

(103,256)

(91,142)

13
%

Effect of changes in foreign currency rates

(7,027)

5,826

(221)
%

Net increase in cash, cash equivalents, and restricted cash

$
161,459

$
170,043

(5)
%

Net cash provided by operating activities increased $38.6 million in the first nine months of 2021 mainly due to higher net cash inflow from the change in operating assets and liabilities. This change was primarily due to a net positive movement in our trade receivables related to the timing, size, and number of auctions with lower GTV in the month of September 2021 versus September 2020, as well as net inflows from inventory with lower investments in Australia and higher sales in Europe. These increases were partially offset by negative cash flows driven by larger bonus payments and the timing of payments related to local payroll, consumption and income taxes over the comparative period.

1	We calculate net capital spending as property, plant and equipment additions plus intangible asset additions less proceeds on disposition of property, plant and equipment.


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Cash flows


	Six months ended June 30,
					% Change

(in U.S. $000's, except percentages)	2022		2021		2022 over 2021
Cash provided by (used in):
Operating activities	$	198,026	$	211,381	(6)	%
Investing activities		140,278		(23,303)	(702)	%
Financing activities		(1,156,323)		(50,861)	2,173	%
Effect of changes in foreign currency rates		(12,773)		(1,389)	820	%
Net (decrease) increase in cash, cash equivalents, and restricted cash	$	(830,792)	$	135,828	(712)	%

Net cash ~~used in investing~~provided by operating activities ~~increased $22.2~~decreased $13.4 million in the first ~~nine~~six months of ~~2021.~~2022, mainly due to lower cash inflows from the change in operating assets and liabilities. This change arose primarily due to the timing, size and number of auctions. We also saw a net higher outflow from inventory, with an increase in purchases in the United States partially offset by higher sales in International mainly in Australia, as well as an increase in advances paid against auction contracts for several consignment contracts in Europe, which are expected to be sold in the third quarter of 2022. These outflows were offset by cash inflows from income taxes for the accrual of the taxable gain portion on the sale of our Bolton property made in the first quarter of 2022, and lower-income tax payments as a result of timing of instalments. We also saw a positive net cash flow impact from prepaying in the fourth quarter of 2021 and the first quarter of 2022 interest on the 2021 Notes held in escrow and from lower bonus payments.

Net cash provided by investing activities increased $163.6 million in the first six months of 2022. This increase was primarily due to lower cash proceeds from land sales and equity investments in the first nine months of 2021 compared to the first nine months of 2020. In the comparative period, we recognized net proceeds of $15.5 million on the sale of ~~land in the United States, $4.2 million~~our Bolton property for total net cash proceeds of ~~proceeds on the distribution of equity investments, and $1.7 million of proceeds on contingent consideration from equity investments.~~

approximately $165.0 million.

Net cash used in financing activities increased ~~$12.1 million~~$1.1 billion in the first ~~nine~~six months of ~~2021. This increase was~~2022, primarily due to the ~~following changes over~~$931 million repayment of long-term debt as a result of the ~~comparative period:~~

●

~~A $26.3 million decrease in cash generated~~redemption of our 2021 Notes on May 4, 2022. We also made a $164.0 million repayment of debt on our long-term revolving credit facilities from ~~the issuance of share capital on exercise of stock options;~~

●

~~A net $16.9 million decrease in borrowings;~~

●

~~$8.5 million more dividends paid to shareholders; and~~

●

~~$5.6 million paid in Q3 2021 to acquire the remaining 25% membership interest in Xcira, LLC.~~

~~Partially offsetting this change was~~ the ~~fact that we did not effect any share repurchases~~proceeds from the sale of the Bolton property in the first ~~nine months~~quarter of ~~2021, whereas~~2022. In addition, we ~~spent $53.2~~also saw lower proceeds of $7.8 million from the exercise of stock options and higher dividends of $6.8 million paid to our shareholders compared to the comparative period in 2021. Partially offsetting these changes were a $15.4 million increase in draws on ~~share repurchases~~our short-term debt and a decrease of $5.4 million in ~~Q1 2020.~~withholding tax payments on the issuance of shares.

Dividend information

We declared a dividend of ~~$0.22~~$0.25 per common share for each of the ~~quarters ended September 30, 2020, December 31, 2020, and March 31, 2021. We declared a dividend of $0.25 per common share for the~~ quarter ended June 30, ~~2021.~~2021, September 30, 2021, December 31, 2021, and March 31, 2022. We have declared, but not yet paid, a dividend of ~~$0.25~~$0.27 per common share for the quarter ended ~~September~~June 30, ~~2021.~~2022. All dividends that we pay are “eligible dividends” for Canadian income tax purposes unless indicated otherwise.

Return on average invested capital

Our return on average invested capital is calculated as net income attributable to stockholders divided by our average invested capital. We calculate average invested capital over a trailing 12-month period by adding the average long-term debt over that period to the average stockholders’ equity over that period.

Return on average invested capital ~~decreased 80~~increased 500 bps to ~~10.3%~~16.4% for the 12-month period ending ~~September~~June 30, ~~2021~~2022 from ~~11.1%~~11.4% for the 12-month period ending ~~September~~June 30, ~~2020.~~2021. This ~~change was~~increase is primarily due to an increase in ~~the average stockholders’ equity~~net income attributable to stockholders over the comparative period, ~~which was~~mainly driven by ~~net income growth and stock option exercises, partially~~the gain from the sale of the Bolton property. This increase was offset by ~~dividends paid during~~a higher average invested capital over the ~~12-month~~comparative period ~~ending September 30,~~as a result of the senior notes issued into escrow on December 21, 2021. Return on invested capital (“ROIC”) excluding escrowed debt (non-GAAP measure) ~~increased 40~~decreased 60 bps to 13.4% during the 12 months ended ~~September~~June 30, ~~2021~~2022 compared to ~~13.0% for~~14.0% in 2021, primarily due to the ~~12 months period ending September 30, 2020.~~

~~Credit facilities~~

~~On August 14, 2020, we entered into an amendment~~inclusion of the gain on the Bolton property in the non-GAAP adjusted average invested capital.

Credit ~~Agreement dated October 27, 2016 totaling US$630.0 million~~facilities

We have a credit agreement which is comprised of multicurrency revolving facilities (the “Revolving Facilities”) and a delayed-draw term loan facility (the “DDTL Facility”, together with ~~a syndicate of lenders comprising:~~

~~(1)~~

~~Multicurrency revolving facilities of up to US$530.0 million (the “Revolving Facilities”); and~~

~~(2)~~

~~A delayed-draw term loan facility of up to US$100.0 million (the “DDTL Facility” and together with the Revolving Facilities, the “Facilities”).~~

Onthe Revolving Facilities, the “Facilities”). The credit agreement was most recently amended in September ~~21,~~ 2021, ~~we entered into another amendment of the Credit Agreement. The amendment,~~which, among other things (i) extended the maturity date of the Facilities from October 27, 2023 to September 21, 2026, (ii) increased the total size of the Facilities provided under the Credit Agreement to up to $1.045 billion,


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including $295.0 million of commitments under the DDTL Facility, (iii) reduced the applicable margin for base rate loans and LIBOR loans at each pricing tier level, (iv) reduced the applicable percentage per annum used to calculate the commitment fee in respect of the unused commitments under the ~~Revolving~~ Facilities at each pricing tier level, and (v) included customary provisions to provide for the eventual replacement of LIBOR as a benchmark interest rate.

Immediately prior to the amendment, the aggregate principal amount outstanding under the DDTL Facility was $90.0 million ($118.9 million CAD). In connection with the amendment, wethe Company refinanced that amount with the proceeds from a borrowing under the DDTL Facility. There are no mandatory principal repayments of borrowings under the DDTL Facility until the earlier of when the remaining $205.0 million is ~~drawn.~~drawn or third quarter of 2022. The Company did not draw on the remaining $205,000,000 before it expired on June 28, 2022 and, therefore, mandatory principal repayments will begin in the third quarter of 2022. Once ~~the DDTL Facility is fully drawn, borrowings~~principal payments become mandatory, they are subject to ~~mandatory principal repayments at~~ an annual amortization rate of 5%, payable in quarterly installments, with the balance payable at maturity.


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~~Table of Contents~~

Credit facilities at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:

(in U.S. $000's, except percentages)

September 30, 2021

December 31, 2020

% Change

Committed







Term loan facility

$
298,762

$
98,420

204
%
Revolving credit facilities

760,000

540,000

41
%
Total credit facilities

$
1,058,762

$
638,420

66
%
Unused







Term loan facility

$
205,000

$
—

0
%
Revolving credit facilities

686,313

455,124

51
%
Total credit facilities unused

$
891,313

$
455,124

96
%

As previously discussed, pursuant to the Commitment Letter, GS Bank has committed to provide the remaining Bridge Loan Facility to support the Euro Auctions acquisition. Prior to the closing of the Euro Auctions acquisition, the Company will seek to replace all or a portion of the Bridge Loan Facility with senior unsecured debt securities or certain other bank loan facilities.


(in U.S. $000's, except percentages)	June 30, 2022		December 31, 2021		% Change
Committed
DDTL Facility	$	92,349	$	298,284	(69)	%
Revolving credit facilities		750,000		750,000	—	%
Uncommitted
Revolving credit facilities		10,000		10,000	—	%
Total credit facilities	$	852,349	$	1,058,284	(19)	%
Unused
DDTL Facility	$	—	$	205,000	(100)	%
Revolving credit facilities		683,459		525,581	30	%
Total credit facilities unused	$	683,459	$	730,581	(6)	%

Debt covenants

We were in compliance with all financial and other covenants applicable to our credit facilities at ~~September~~June 30, ~~2021. Our debt covenants did not change as a result of amending our Credit Agreement.~~2022.

Our ability to borrow under our syndicated revolving credit facility is subject to compliance with financial covenants of a consolidated leverage ratio ~~covenant~~ and a consolidated interest coverage ~~ratio covenant.~~ratio. In the event of sustained deterioration of global markets and economies, we expect the covenants pertaining to our leverage ratio would be the most restrictive to our ability to access funding under our credit agreement. We continue to ~~assess the impact of the COVID-19 pandemic on our business and~~ evaluate courses of action to maintain current levels of liquidity and compliance with our debt covenants.

~~Share repurchase program~~

On August 5, 2020, our Board of Directors authorized a share repurchase program for the repurchase of up to $100.0 million worth of our common shares, approved by the Toronto Stock Exchange, over a period of 12 months, ending August 23, 2021. No share repurchases were made during the nine months ended September 30, 2021.

~~Off-Balance Sheet Arrangements~~

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, financial performance, liquidity, capital expenditures or capital resources.

Critical Accounting Policies, Judgments, Estimates and Assumptions

In preparing our consolidated financial statements in conformity with US GAAP, we must make decisions that impact the reported amounts and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgments based on our understanding and analysis of the relevant circumstances and historical experience ~~which take into consideration the impact of COVID-19 pandemic~~ and related circumstances. As at June 30, 2022, other than the estimates in accounting for the sale and leaseback transaction related to the sale of ~~September 30, 2021,~~our Bolton property in the first quarter of 2022, as described below, there were no material changes in our critical accounting policies, judgments, estimates and assumptions from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, or in the notes to our consolidated financial statements included in “Part I, Item 1: Consolidated Financial Statements” in this Quarterly Report on Form 10-Q.

Effective ~~January~~October 1, ~~2020,~~2021, we early adopted ~~Topic 848,~~ ASU 2021-08, Business Combinations (Topic 805): ~~Facilitation~~Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The update primarily addresses the accounting for contract assets and contract liabilities from revenue contracts with customers acquired in a business combination. An entity that early adopts in an interim period should apply the amendments (i) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the ~~Effects~~fiscal year that includes the interim period of ~~Reference Rate Reform~~early application and (ii) prospectively to all business combinations that occur on ~~Financial Reporting, and in March 2020,~~or after the ~~FASB issued an update~~date of initial application. We have applied the amendments to the ~~standard. The standard provides relief for companies preparing~~SmartEquip acquisition, which was completed on November 2, 2021.

Significant items subject to estimates and judgements during the six month period ended June 30, 2022 were made in accounting for the ~~discontinuation of reference rates such as LIBOR. This guidance is effective March 12, 2020 through to December 31, 2022. The adoption of the ASU~~completed sale and ~~the recent updates have not and are not expected to have a material impact on our consolidated financial statements.~~

~~For a discussion~~leaseback transaction of our ~~new and amended accounting standards, refer to Note 2 of~~Bolton property. We determined the ~~Consolidated Financial Statements, Significant Accounting Policies.~~following estimates in calculating the gain on


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sale: the present value of market rental payments of the Bolton property sold, the expected lease term in the leaseback arrangement and our incremental borrowing rate based on information available at the commencement date of the lease.

For a discussion of our new and amended accounting standards, refer to Note 2(b) of the Consolidated Financial Statements, Significant Accounting Policies.

Non-GAAP Measures

We reference various non-GAAP measures throughout this Quarterly Report on Form 10-Q. These measures do not have a standardized meaning and are, therefore, unlikely to be comparable to similar measures presented by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with US GAAP. Non-GAAP financial measures included in this Quarterly Report on Form 10-Q are labeled as “non-GAAP measure” ~~or designated as such with an asterisk (*)~~.

Non-GAAP Adjusted Operating Income*Income Reconciliation

We believe that non-GAAP adjusted operating income*income provides useful information about the growth or decline of our operating income for the relevant financial period and eliminates the financial impact of adjusting items we do not consider to be part of our normal operating results.

~~Adjusting~~Non-GAAP adjusted operating income*income eliminates the financial impact of adjusting items from operating income, which are significant recurring and non-recurring items that we do not consider to be part of our normal operating results, such as share-based payments expense, acquisition-related costs, amortization of acquired intangible assets, management reorganization costs, and certain other items, which we refer to as ~~‘adjusting items’~~“adjusting items”.

~~Beginning in the third quarter of~~In 2021, we updated the calculation of non-GAAP adjusted operating income*income to add-back share-based payments expense, all acquisition-related costs (including any share based continuing employment costs recognized in acquisition-related costs), amortization of acquired intangible assets, and gain or loss on disposition of property, plant and equipment. We have also adjusted for certain non-recurring advisory, legal and restructuring costs. These adjustments have been applied retrospectively to all periods ~~presented.~~presented, as applicable.

The following table reconciles non-GAAP adjusted operating income*income to operating income, which is the most directly comparable GAAP measure in our consolidated ~~income~~financial statements.


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
					% Change						% Change						% Change						% Change
(in U.S. $000's, except percentages)	2021		2020		2021 over 2020		2021		2020		2021 over 2020		2022		2021		2022 over 2021		2022		2021		2022 over 2021
Operating income	$	53,619	$	67,384	(20)	%	$	187,638	$	190,266	(1)	%	$	91,867	$	89,517	3	%	$	324,707	$	134,019	142	%
Share-based payments expense		5,627		8,568	(34)	%		16,945		17,329	(2)	%		13,640		7,540	81	%		19,026		11,318	68	%
Acquisition-related costs		10,255		—	100	%		16,226		—	100	%		3,399		3,049	11	%		13,036		5,971	118	%
Amortization of acquired intangible assets		6,622		4,993	33	%		20,065		15,476	30	%		8,426		6,802	24	%		16,958		13,443	26	%
Gain on disposition of property, plant and equipment		(1,068)		(276)	287	%		(1,311)		(1,536)	(15)	%
Severance		—		3,919	(100)	%		—		3,919	(100)	%
Non-GAAP adjusted operating income*	$	75,055	$	84,588	(11)	%	$	239,563	$	225,454	6	%
Gain on disposition of property, plant and equipment and related costs														1,153		(175)	(759)	%		(168,667)		(243)	69,310	%
Non-recurring advisory, legal and restructuring costs														1,094		240	356	%		3,379		240	1,308	%
Non-GAAP adjusted operating income													$	119,579	$	106,973	12	%	$	208,439	$	164,748	27	%

(1)	Please refer to pages ~~59-60~~51-53 for a summary of adjusting items during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~September~~June 30, ~~2020.~~2021.

(2)	Non-GAAP adjusted operating income*income represents operating income excluding the effects of adjusting items.


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Non-GAAP Adjusted Net Income Attributable to Stockholders*Stockholders and Non-GAAP Diluted Adjusted EPS Attributable to Stockholders*Stockholders Reconciliation

We believe that non-GAAP adjusted net income attributable to stockholders*stockholders provides useful information about the growth or decline of our net income attributable to stockholders for the relevant financial period and eliminates the financial impact of adjusting items we do not consider to be part of our normal operating results. Non-GAAP diluted Adjusted EPS attributable to stockholders*stockholders eliminates the financial impact of adjusting items from net income attributable to stockholders which are after-tax effects of significant non-recurring or recurring items that we do not consider to be part of our normal operating results, such as share-based payments expense, acquisition-related costs, amortization of acquired intangible assets, management reorganization costs, and certain other items, which we refer to as ~~‘adjusting items’~~“adjusting items”.

~~Beginning in the third quarter of~~In 2021, we updated the calculation of non-GAAP diluted adjusted EPS attributable to stockholders*stockholders to add-back share-based payments expense and all acquisition-related costs (including any share based continuing employment costs recognized in acquisition-related costs), amortization of acquired intangible assets, and gain or loss on disposition of property, plant and equipment. Thesecertain adjustments that have been applied retrospectively to all periods ~~presented.~~presented, as applicable (refer to non-GAAP adjusted operating income reconciliation above).

The following table reconciles non-GAAP adjusted net income attributable to stockholders*stockholders and non-GAAP diluted adjusted EPS attributable to stockholders*stockholders to net income attributable to stockholders and diluted EPS attributable to stockholders, which are the most directly comparable GAAP measures in our consolidated ~~income~~financial statements.


(in U.S. $000's, except share and per share data, and percentages)													Three months ended June 30,						Six months ended June 30,
																	% Change						% Change
	Three months ended September 30,						Nine months ended September 30,						2022		2021		2022 over 2021		2022		2021		2022 over 2021
					% Change						% Change
(in U.S. $000's, except share and
per share data, and percentages)	2021		2020		2021 over 2020		2021		2020		2021 over 2020
Net income attributable to stockholders	$	32,336	$	45,387	(29)	%	$	121,273	$	121,239	0	%	$	53,365	$	60,749	(12)	%	$	231,459	$	88,937	160	%
Share-based payments expense		5,627		8,568	(34)	%		16,945		17,329	(2)	%		13,640		7,540	81	%		19,026		11,318	68	%
Acquisition-related costs		10,255		—	100	%		16,226		—	100	%		3,399		3,049	11	%		13,036		5,971	118	%
Amortization of acquired intangible assets		6,622		4,993	33	%		20,065		15,476	30	%		8,426		6,802	24	%		16,958		13,443	26	%
Gain on disposition of property, plant and equipment		(1,068)		(276)	287	%		(1,311)		(1,536)	(15)	%
Severance		—		3,919	(100)	%		—		3,919	(100)	%
Gain on disposition of property, plant and equipment and related costs														1,153		(175)	(759)	%		(168,667)		(243)	69,310	%
Loss on redemption of the 2021 Notes and certain related interest expense														9,664		—	100	%		9,664		—	100	%
Change in fair value of derivatives														—		—	—	%		(1,263)		—	(100)	%
Non-recurring advisory, legal and restructuring costs														1,094		240	356	%		3,379		240	1,308	%
Related tax effects of the above		(4,496)		(7,999)	(44)	%		(13,560)		(14,389)	(6)	%		(7,669)		(3,660)	110	%		10,443		(9,126)	(214)	%
Change in uncertain tax provision - tax effect		—		—	—	%		—		6,228	(100)	%
Non-GAAP adjusted net income attributable to stockholders*	$	49,276	$	54,592	(10)	%	$	159,638	$	148,266	8	%
Non-GAAP adjusted net income attributable to stockholders													$	83,072	$	74,545	11	%	$	134,035	$	110,540	21	%
Weighted average number of dilutive shares outstanding		111,391,396		110,369,718	1	%		111,333,247		110,060,712	1	%		111,705,102		111,334,184	0	%		111,681,644		111,302,711	0	%

Diluted earnings per share attributable to stockholders	$	0.29	$	0.41	(29)	%	$	1.09	$	1.10	(1)	%	$	0.48	$	0.55	(13)	%	$	2.07	$	0.80	159	%
Non-GAAP diluted adjusted EPS attributable to Stockholders*	$	0.44	$	0.49	(10)	%	$	1.43	$	1.35	6	%
Non-GAAP diluted adjusted EPS attributable to stockholders													$	0.74	$	0.67	10	%	$	1.20	$	0.99	21	%

(1)	Please refer to pages ~~59-60~~51-53 for a summary of adjusting items during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~September~~June 30, ~~2020.~~2021.

(2)	Non-GAAP adjusted net income attributable to stockholders*stockholders represents net income attributable to stockholders excluding the effects of adjusting items.

(3)	Non-GAAP diluted adjusted EPS attributable to stockholdersstockholders is calculated by dividing non-GAAP adjusted net income attributable to ~~stockholders,~~stockholders, net of the effect of dilutive securities, by the weighted average number of dilutive shares outstanding.


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Non-GAAP Adjusted EBITDA*EBITDA

We believe non-GAAP adjusted EBITDA*EBITDA provides useful information about the growth or decline of our net income when compared between different financial periods. We use non-GAAP adjusted EBITDA as a key performance measure because we believe it facilitates operating performance comparisons from period to period.

~~Beginning in the third quarter of~~In 2021, we updated the calculation of non-GAAP adjusted EBITDA*EBITDA to add-back share-based payments expense and all acquisition-related costs (including any share based continuing employment costs recognized in acquisition-related costs), and gain or loss on disposition of property, plant and equipment. Thesecertain adjustments which have been applied retrospectively to all periods ~~presented.~~presented, as applicable (refer to non-GAAP adjusted operating income reconciliation above).

The following table reconciles non-GAAP adjusted EBITDA*EBITDA to net income, which is the most directly comparable GAAP measure in, or calculated from, our consolidated ~~income~~financial statements:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
					% Change						% Change						% Change						% Change
					2021 over						2021 over						2022 over						2022 over
(in U.S. $000's, except percentages)	2021		2020		2020		2021		2020		2020		2022		2021		2021		2022		2021		2021
Net income	$	32,357	$	45,490	(29)	%	$	121,277	$	121,438	(0)	%	$	53,411	$	60,781	(12)	%	$	231,512	$	88,920	160	%
Add: depreciation and amortization expenses		21,907		18,436	19	%		64,912		55,586	17	%
Add: depreciation and amortization														24,298		21,935	11	%		48,523		43,005	13	%
Add: interest expense		8,807		8,737	1	%		26,620		26,801	(1)	%		18,463		8,867	108	%		39,149		17,813	120	%
Less: interest income		(375)		(510)	(26)	%		(1,009)		(1,775)	(43)	%		(871)		(332)	162	%		(1,415)		(634)	123	%
Add: income tax expense		13,057		15,437	(15)	%		42,541		48,741	(13)	%		21,632		21,065	3	%		57,867		29,484	96	%
EBITDA		75,753		87,590	(14)	%		254,341		250,791	1	%		116,933		112,316	4	%		375,636		178,588	110	%
Share-based payments expense		5,627		8,568	(34)	%		16,945		17,329	(2)	%		13,640		7,540	81	%		19,026		11,318	68	%
Acquisition-related costs		10,255		—	100	%		16,226		—	100	%		3,399		3,049	11	%		13,036		5,971	118	%
Gain on disposition of property, plant and equipment		(1,068)		(276)	287	%		(1,311)		(1,536)	(15)	%
Severance		—		3,919	(100)	%		—		3,919	(100)	%
Non-GAAP adjusted EBITDA*	$	90,567	$	99,801	(9)	%	$	286,201	$	270,503	6	%
Gain on disposition of property, plant and equipment and related costs														1,153		(175)	(759)	%		(168,667)		(243)	69,310	%
Change in fair value of derivatives														—		—	—	%		(1,263)		—	(100)	%
Non-recurring advisory, legal and restructuring costs														1,094		240	356	%		3,379		240	1,308	%
Non-GAAP adjusted EBITDA													$	136,219	$	122,970	11	%	$	241,147	$	195,874	23	%

(1)	Please refer to pages ~~59-60~~51-53 for a summary of adjusting items during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~September~~June 30, ~~2020.~~2021.

(2)

Non-GAAP adjusted EBITDA*EBITDA is calculated by adding back depreciation and amortization, ~~expenses,~~ interest expense, income tax expense, and subtracting interest income from net income, as well as adding back share-based payments expense, acquisition-related costs, and excluding the effects of any non-recurring or unusual adjusting items.


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Non-GAAP Adjusted Net Debt*Debt and Non-GAAP Adjusted Net Debt/Non-GAAP Adjusted EBITDA*EBITDA Reconciliation

We believe that comparing non-GAAP adjusted net debt/non-GAAP adjusted EBITDA*EBITDA on a trailing 12-month basis for different financial periods provides useful information about the performance of our operations as an indicator of the amount of time it would take us to settle both our short and long-term debt. We do not consider this to be a measure of our liquidity, which is our ability to settle only short-term obligations, but rather a measure of how well we fund liquidity. Measures of liquidity are noted under “Liquidity and Capital Resources”.

The following table reconciles non-GAAP adjusted net debt*debt to debt, non-GAAP adjusted EBITDA*EBITDA to net income, and non-GAAP adjusted net ~~debt*/~~debt/ non-GAAP adjusted EBITDA*EBITDA to debt/ net income, respectively, which are the most directly comparable GAAP measures in, or calculated from, our consolidated financial statements.


	As at and for the 12 months ended September 30,								As at and for the 12 months ended June 30,
							% Change								% Change
(in U.S. $millions, except percentages)	2021			2020			2021 over 2020		2022			2021			2022 over 2021
Short-term debt	$	18.5		$	20.3		(9)	%	$	8.6		$	35.2		(76)	%
Long-term debt		633.7			632.6		0	%		644.4			636.5		1	%
Debt		652.2			652.9		(0)	%		653.0			671.7		(3)	%
Less: Cash and cash equivalents		(362.6)			(470.3)		(23)	%
Non-GAAP adjusted net debt*		289.6			182.6		59	%
Less: cash and cash equivalents										(367.3)			(301.8)		22	%
Non-GAAP adjusted net debt										285.7			369.9		(23)	%
Net income	$	170.2		$	173.0		(2)	%	$	294.4		$	183.3		61	%
Add: depreciation and amortization expenses		84.3			74.2		14	%
Add: depreciation and amortization										93.4			80.8		16	%
Add: interest expense		35.4			37.1		(5)	%		58.3			35.3		65	%
Less: interest income		(1.6)			(3.1)		(48)	%		(2.2)			(1.7)		29	%
Add: income tax expense		59.3			61.6		(4)	%		81.8			61.7		33	%
EBITDA		347.6			342.8		1	%		525.7			359.4		46	%
Share-based payments expense		21.5			17.6		22	%		30.8			24.4		26	%
Acquisition-related costs		22.2			—		100	%		37.3			12.0		211	%
Gain on disposition of property, plant and equipment		(1.3)			(1.6)		(19)	%
Severance		—			3.9		(100)	%
Non-GAAP adjusted EBITDA*	$	390.0		$	362.7		8	%
Gain on disposition of property, plant and equipment and related costs										(169.9)			(0.5)		33,880	%
Change in fair value of derivatives										—			—		—	%
Non-recurring advisory, legal and restructuring costs										6.6			4.2		57	%
Non-GAAP adjusted EBITDA									$	430.5		$	399.5		8	%
Debt/net income		3.8	x		3.8	x	0	%		2.2	x		3.7	x	(41)	%
Non-GAAP adjusted net debt/Non-GAAP adjusted EBITDA		0.7	x		0.5	x	40	%
Non-GAAP adjusted net debt/non-GAAP adjusted EBITDA										0.7	x		0.9	x	(22)	%

(1)	Please refer to pages ~~59-60~~51-53 for a summary of adjusting items during the trailing 12-months ended ~~September~~June 30, ~~2021~~2022 and ~~September~~June 30, ~~2020.~~2021.

(2)

Non-GAAP adjusted EBITDA*EBITDA is calculated by adding back depreciation and amortization, ~~expenses,~~ interest expense, income tax expense, and subtracting interest income from net income, as well as adding back share-based payments expense, acquisition-related costs, gain/ loss on disposition of property, plant and equipment, terminated and ongoing transaction costs, and excluding the effects of any non-recurring or unusual adjusting items.

(3)	Non-GAAP adjusted net debt*debt is calculated by subtracting cash and cash equivalents from short and long-term debt.

(4)	Non-GAAP adjusted net ~~debt/~~debt/Non-GAAP adjusted EBITDAEBITDA is calculated by dividing non-GAAP adjusted net debtdebt by non-GAAP adjusted ~~EBITDA.~~EBITDA.


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Operating Free Cash Flow*Flow (“OFCF”) Reconciliation

We believe ~~OFCF*,~~OFCF, when compared on a trailing 12-month basis to different financial periods, provides an effective measure of the cash generated by our business and provides useful information regarding cash flows remaining for discretionary return to stockholders, mergers and acquisitions, or debt reduction. Our balance sheet scorecard includes OFCF*OFCF as a performance metric. OFCF*OFCF is also an element of the performance criteria for certain annual short-term and long-term incentive awards.

The following table reconciles OFCF*OFCF to cash provided by operating activities, which is the most directly comparable GAAP measure in, or calculated from, our consolidated statements of cash flows:


	12 months ended September 30,							12 months ended June 30,
					% Change							% Change
(in U.S. $ millions, except percentages)	2021		2020		2021 over 2020			2022		2021		2022 over 2021
Cash provided by operating activities	$	296.7	$	289.2		3	%	$	304.2	$	270.9		12	%
Property, plant and equipment additions		11.4		16.5		(31)	%		9.7		12.7		(24)	%
Intangible asset additions		34.6		28.9		20	%		32.0		33.0		(3)	%
Proceeds on disposition of property plant and equipment		(1.8)		(16.6)		(89)	%		(166.7)		(0.6)		27,683	%
Net capital spending	$	44.2	$	28.8		53	%	$	(125.0)	$	45.1		(377)	%
OFCF*	$	252.5	$	260.4		(3)	%
OFCF								$	429.2	$	225.8		90	%

(1)	OFCF*OFCF is calculated by subtracting net capital spending from cash provided by operating activities.


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Non-GAAP Adjusted Net Income Attributable to Stockholders*Stockholders and ROIC*ROIC Reconciliation

We believe that comparing ROIC*ROIC on a trailing 12-month basis for different financial periods, provides useful information about the after-tax return generated by our investments.

~~Beginning in the third quarter of~~

In 2021, we updated the calculation of non-GAAP ~~diluted~~ adjusted ~~EPS~~net income attributable to stockholders*stockholders to add-back share-based payments expense and all acquisition-related costs (including any share based continuing employment costs recognized in acquisition-related costs), amortization of acquired intangible assets, and gain or loss on disposition of property, plant and equipment. Thesecertain adjustments that have been applied retrospectively to all periods ~~presented.~~presented, as applicable (refer to non-GAAP adjusted operating income reconciliation above).

The following table reconciles non-GAAP adjusted net income attributable to stockholders*stockholders and ROIC*ROIC to net income attributable to stockholders and return on average invested capital which are the most directly comparable GAAP measures in, or calculated from, our consolidated financial statements:


	As at and for the 12 months ended September 30,
										As at and for the 12 months ended June 30,
							% Change									% Change
(in U.S. $millions, except percentages)	2021			2020			2021 over 2020			2022			2021			2022 over 2021
Net income attributable to stockholders	$	170.1		$	172.8			(2)	%	$	294.4		$	183.2			61	%
Share-based payments expense		21.5			17.6			22	%		30.8			24.4			26	%
Acquisition-related costs		22.2			—			100	%		37.3			12.0			211	%
Amortization of acquired intangible assets		25.7			21.0			22	%		31.5			24.1			31	%
Gain on disposition of property, plant and equipment		(1.3)			(1.6)			(19)	%
Severance		—			3.9			(100)	%
Gain on disposition of property, plant and equipment and related costs											(169.9)			(0.5)			33,880	%
Loss on redemption of the 2021 Notes and certain related interest expense											9.7			—			100	%
Non-recurring advisory, legal and restructuring costs											6.6			4.2			57	%
Related tax effects of the above		(19.7)			(17.2)			15	%		(0.8)			(23.3)			(97)	%
Change in uncertain tax provision - tax effect		1.5			6.2			(76)	%		—			1.5			(100)	%
Non-GAAP adjusted net income attributable to stockholders*	$	220.0		$	202.7			9	%
Opening long-term debt	$	632.6		$	689.3			(8)	%
Ending long-term debt		633.7			632.6			0	%
Non-GAAP adjusted net income attributable to stockholders										$	239.6		$	225.6			6	%
Long-term debt - opening balance										$	636.5		$	632.0			1	%
Long-term debt - ending balance											644.4			636.5			1	%
Non-GAAP adjusted ending long-term debt											644.4			636.5			1	%
Average long-term debt		633.2			661.0			(4)	%		640.5			634.3			1	%
Opening stockholders' equity	$	959.5		$	838.2			14	%
Ending stockholders' equity		1,061.9			959.5			11	%
Non-GAAP adjusted average long-term debt											640.5			634.3			1
Stockholders' equity - opening balance										$	1,056.3		$	899.1			17	%
Stockholders' equity - ending balance											1,244.1			1,056.3			18	%
Average stockholders' equity		1,010.7			898.9			12	%		1,150.2			977.7			18	%
Average invested capital	$	1,643.9		$	1,559.9			5	%	$	1,790.8		$	1,612.0			11	%

Return on average invested capital		10.3	%		11.1	%		(80)	bps		16.4	%		11.4	%		500	bps
ROIC*		13.4	%		13.0	%		40	bps
Non-GAAP ROIC											13.4	%		14.0	%		(60)	bps
Non-GAAP ROIC excluding escrowed debt											13.4	%		14.0	%		(60)	bps

(1)	Please refer to pages ~~59-60~~51-53 for a summary of adjusting items during the trailing 12-months ended ~~September~~June 30, ~~2021~~2022 and ~~September~~June 30, ~~2020.~~2021.

(2)	Return on average invested capital is calculated as net income attributable to stockholders divided by average invested capital. We calculate average invested capital as the average long-term debt and average stockholders’ equity over a trailing 12-month period.

(3)	ROICROIC is calculated as non-GAAP adjusted net income attributable to stockholdersstockholders divided by average invested capital.

(4)	Leases (Topic 842) requires lessees to recognize almost all leases, including operating leases, on the balance sheet through a right-of-use asset and a corresponding lease liability. The lease liability is not included in the calculation of debt.


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Adjusting Items Non-GAAP Measures

~~Beginning in the third quarter of~~In 2021, we began adjusting for ~~the following items that~~share-based payment expenses, amortization of acquired intangible assets and all gains or losses on disposition of property, plant and equipment, which we dodid not consider to be part of our normal operating results. These adjustments in 2021 have been applied retrospectively to all periods presented. ~~The following describes~~

Adjusting items during the ~~nature~~trailing 12-months ended June 30, 2022 were:

Recognized in the second quarter of ~~these adjusting items recognized in each period:~~2022

●

~~Share-based~~$13.6 million share based payments expense - includes stock option compensation expense, and compensation expense for equity classified share units, liability classified share units, and employer contributions related to our employee share purchase plan.expense.

●

~~Amortization~~$3.4 million of ~~acquired intangible assets – includes amortization~~acquisition-related costs related to the proposed acquisition of ~~all intangible assets acquired primarily from~~Euro Auctions and the completed acquisitions of ~~IronPlanet, Rouse~~SmartEquip and ~~Mascus.~~Rouse.

●

~~Gain or loss~~$8.4 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet, SmartEquip, and Rouse.

●

$1.2 million gain on disposition of property, plant and equipment –and related costs includes ~~any~~a $1.3 million non-cash cost in the quarter relating to the adjustment made to recognize the Bolton property sale proceeds at fair value when calculating the $169.0 million gain ~~or loss recognized for~~on the ~~difference between~~Bolton property in the ~~sales proceeds~~first quarter of 2022, and ~~the carrying amount~~$0.1 million gain on disposition of ~~the disposed~~ property, plant and ~~equipment.~~equipment in the quarter.

~~The following are additional adjusting items during the trailing 12 month periods which we do not consider to be part of our normal operating results.~~

~~Additional adjusting items during the trailing 12-months ended September 30, 2021 were:~~

~~Recognized in the third quarter of 2021~~

●

$~~10.3~~9.7 million ~~($8.3~~loss on redemption of the 2021 Notes and certain related interest expense includes (a) $4.8 million ~~after tax, or $0.07 per diluted share)~~ of ~~acquisition-related~~loss on redemption of the 2021 Notes due to a difference between the reacquisition price of the 2021 Notes and the net carrying amount of the extinguished debt (primarily the write off of the unamortized debt issuance costs), (b) $0.7 million of deferred debt issuance costs ~~related~~written off due to the ~~acquisitions~~expiry of ~~Rouse,~~the undrawn $205.0 million DDTL Facility in the quarter, and (c) non-recurring interest expense of $4.2 million incurred in the quarter relating to the 2021 Notes, which were redeemed as a result of the discontinued Euro Auctions ~~and SmartEquip.~~acquisition in April 2022.

~~Recognized in the second quarter of 2021~~

●

~~There were no adjusting items recognized~~$1.1 million of non-recurring advisory, legal and restructuring costs, which include $0.6 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.3 million of severance and retention costs in connection with the restructuring of our information technology team driven by our strategy to build a new digital technology platform, and $0.2 million of advisory costs relating to a cybersecurity incident detected in the ~~second~~fourth quarter of 2021.

Recognized in the first quarter of ~~2021~~

●

~~There were no adjusting items recognized in the first quarter of 2021.~~

~~Recognized in the fourth quarter of 2020~~2022

●

$~~5.2~~5.4 million ~~($3.9~~share based payments expense.

●

$8.5 million ~~after tax, or $0.04 per diluted share)~~amortization of acquired intangible assets primarily from the acquisitions of Iron Planet, SmartEquip, and Rouse.

●

$169.8 million gain recognized on the disposition of property, plant and equipment of which $169.1 million related to the sale of a property located in Bolton, Ontario.

●

$9.6 million of acquisition-related costs related to the proposed acquisition of Euro Auctions and the completed acquisitions of SmartEquip and Rouse.

●

$~~1.5~~1.3 million ~~($0.01 per diluted share)~~gain due to the change in fair value of ~~current income tax expense recognized~~derivatives to manage our exposure to foreign currency exchange rate fluctuations on the purchase consideration for the proposed acquisition of Euro Auctions.

●

$2.3 million of non-recurring advisory, legal and restructuring costs, which include $0.9 million related to ~~an unfavourable adjustment~~severance and retention costs in connection with the restructuring of our information technology team driven by our strategy to ~~reflect final regulations published~~build a new digital technology platform, $0.5 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.4 million of SOX remediation costs, and $0.6 million of advisory costs relating to a cybersecurity incident detected in ~~Q2 2020 regarding hybrid financing arrangements.~~the fourth quarter of 2021.


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~~Additional adjusting items during the trailing 12-months ended September 30, 2020 were:~~

Recognized in the ~~third~~fourth quarter of ~~2020~~2021

●

$4.3 million ($3.2 million after tax, or $0.03 per diluted share) of severance costs related to the realignment of leadership to support the new global operations organization, in line with strategic growth priorities led by the new CEO, of which $364,000 has been retrospectively recognized within share-based payments expense as an adjusting item.

~~Recognized in the second quarter of 2020~~

●

$6.2 million ($0.06 per diluted share) tax expense related to an unfavourable adjustment to reflect final regulations published regarding hybrid financing arrangements, of which $0.8 million relates to current income taxshare based payments expense.

~~Recognized in the first quarter of 2020~~

●

~~There were no adjusting items~~$7.9 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet, SmartEquip, and Rouse.

●

$14.0 million of acquisition-related costs related to the proposed acquisition of Euro Auctions and the completed acquisitions of SmartEquip and Rouse.

●

$0.1 million gain recognized on the disposition of property, plant and equipment

●

$1.3 million loss due to the change in fair value of derivatives to manage our exposure to foreign currency exchange rate fluctuations on the purchase consideration for the proposed acquisition of Euro Auctions.

●

$2.6 million of non-recurring advisory, legal and restructuring costs, which include $1.4 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.7 million of SOX remediation costs relating to our efforts to remediate the material weaknesses identified in 2020, and $0.5 million of advisory costs relating to a cybersecurity incident detected in the ~~first~~fourth quarter of ~~2020.~~2021.

Recognized in the ~~fourth~~third quarter of ~~2019~~2021

●

$~~4.1~~5.6 million ~~($3.4~~share based payments expense.

●

$6.6 million ~~after tax, or $0.03 per diluted share) in share-based payment expense recovery~~amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.

●

$10.3 million of acquisition-related costs related to the ~~departure~~acquisitions of Rouse, and SmartEquip and proposed acquisition of Euro Auctions.

●

$1.1 million gain recognized on the sale of a property in Denver, Colorado.

●

$0.7 million of non-recurring advisory, legal and restructuring costs related to SOX remediation costs relating to our ~~former CEO,~~efforts to remediate the material weaknesses identified in 2020, which has been ~~included in share-based payments expense adjusting item retrospectively.~~retrospectively applied to the third quarter of 2021.

Recognized in the second quarter of 2021

●

$7.5 million share based payments expense.

●

$6.8 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.

●

$3.0 million of acquisition-related costs related to the acquisition of Rouse.

●

$0.2 million gain recognized on the disposition of property, plant and equipment

●

$0.2 million of non-recurring advisory, legal and restructuring costs related to SOX remediation costs relating to our efforts to remediate the material weaknesses identified in 2020, which has been retrospectively applied to the second quarter of 2021.


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Adjusting items during the trailing 12-months ended June 30, 2021 were:

Recognized in the first quarter of 2021

●

$3.8 million share based payments expense.

●

$6.6 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.

●

$2.9 million of acquisition-related costs related to the acquisition of Rouse.

Recognized in the fourth quarter of 2020

●

$4.6 million share based payments expense.

●

$5.6 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.

●

$6.0 million of acquisition-related costs related to the acquisition of Rouse.

●

$1.5 million of current income tax expense recognized related to an unfavourable adjustment to reflect final regulations published in the second quarter of 2020 regarding hybrid financing arrangements.

Recognized in the third quarter of 2020

●

$8.6 million share based payments expense.

●

$5.0 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet.

●

$0.3 million gain recognized on the disposition of property, plant and equipment

●

$3.9 million of severance costs, recognized in non-recurring advisory, legal and restructuring costs, related to the realignment of leadership to support the new global operations organization, in line with strategic growth priorities led by the new CEO. These severance costs were reclassified to non-recurring advisory, legal and restructuring costs in 2021.


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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our market risk during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from those disclosed in Item 7A in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which is available on our website at www.rbauction.com, on EDGAR at www.sec.gov, or on SEDAR at www.sedar.com.

ITEM 4: CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Management of the Company, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), have evaluated the effectiveness of the Company’s disclosure controls and procedures as at ~~September~~June 30, ~~2021.~~2022. The term “disclosure controls and procedures” means controls and other procedures established by the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Based upon their evaluation of the Company’s disclosure controls and procedures, the CEO and the CFO concluded that, as ~~at September~~of June 30, ~~2021, as a result of the material weaknesses described in Item 9A of the Form 10-K filed with the SEC on February 18, 2021 not having been remediated by the third quarter of 2021,~~2022, the disclosure controls are ~~not~~ effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and are ~~not~~ effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

~~The~~On November 2, 2021, the Company completed the acquisition of ~~Rouse on December 8, 2020 and Rouse’s~~SmartEquip. SEC guidance permits management to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition. The Company is in the process of incorporating SmartEquip into its system of internal control over financial reporting. SmartEquip’s total assets and revenues constituted ~~10.1%~~6.8% and ~~1.7%~~1.0%, respectively, of the Company’s total assets and revenues as shown in its consolidated financial statements ~~as of and~~ for the ~~nine~~three month period ended ~~September~~June 30, 2021. As the acquisition occurred in the fourth quarter of 2020, the Company excluded Rouse from the scope of its assessment over the effectiveness of its internal control over financial reporting. This exclusion is in accordance with the guidance issued by the Staff of the Securities and Exchange Commission that an assessment of a recently-acquired business may be omitted from its scope in the year of acquisition, if specified conditions are satisfied.2022.

~~Remediation Plan and Status of Material Weaknesses in Internal Control Over Financial Reporting~~

As previously disclosed in the Company’s Annual Report on Form 10-K filed with the SEC for the year ending December 31, 2020, the Company identified a material weakness over the review of the recording of manual journal entries in one of its geographies; specifically, controls were not operating effectively to ensure that journal entries were prepared with appropriate supporting documentation. Additionally, the Company identified a material weakness over the completeness and accuracy of key reports used in the performance of controls to address the occurrence and measurement of revenue.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The Company is committed to maintaining a strong internal control environment. In order to address the material weaknesses in internal control over financial reporting noted above, management with oversight and direction from the Audit Committee and the Board of Directors, have implemented remediation steps and initiatives in 2021 to remediate the material weaknesses. These efforts have included the following actions:

engaged a third-party advisor, hired a Senior Sarbanes-Oxley (SOX) Consultant, and created a SOX program Steering Committee to support management with performing a root-cause analysis and implementing a remediation plan;

provided training over the execution and review of manual journal entries across all geographies, which included a focus on ensuring that accurate and appropriate documentation is retained to support the journal entry;


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conducted a series of revenue learning sessions to thoroughly review the business processes surrounding the occurrence and measurement of revenue, including the use of key reports, to drive the design and implementation of improved processes and controls;

~~implemented a series of new tools, checklists and control owner certifications, and improved our controls documentation, to enhance accountability and execution of controls;~~

designed, implemented and are testing improved processes and controls over the recording of manual journal entries, as well as over the completeness and accuracy of key reports used in the performance of controls to address the occurrence and measurement of revenue;

~~increased capacity and resources by hiring additional experienced accounting personnel and making changes to certain control owners impacted by the material weaknesses; and~~

~~implemented additional monitoring procedures over the controls impacted~~

As we continue to develop and implement our remediation plan, additional remediation steps will be identified and adopted. We have also performed additional post-closing procedures and financial statement analysis while our disclosure controls and procedures are not effective.

We will consider the material weaknesses remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.

As part of our continuous control improvement initiatives, and with the support of our advisors, we are also in the process of re-assessing and re-evaluating the design of our internal controls over financial reporting, which includes identifying ways in which we can automate some of our current manual processes.

The Company, including its CEO and CFO, does not expect that its internal controls and procedures will prevent or detect all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Changes in Internal Control over Financial Reporting

Management, with the participation of the CEO and CFO, concluded that there were no changes in our internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~We are continuing to take steps to remediate the material weaknesses in our internal control over financial reporting, as discussed above~~.


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PART II – OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

We have no material legal proceedings pending, other than ordinary routine litigation incidental to the business, and we do not know of any material proceedings contemplated by governmental authorities.

ITEM 1A: RISK FACTORS

Our business is subject to a number of risks and uncertainties, and our past performance is no guarantee of our performance in future periods. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks and uncertainties discussed in “Part I, Item 1A: Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which is available on our website at www.rbauction.com, on EDGAR at www.sec.gov, or on SEDAR at www.sedar.com, before purchasing our common shares. Our business could also be affected by additional risks not currently known to us or that we currently deem to be immaterial. If any of the risks actually occur, our business, financial condition and results of operations could materially suffer. As a result, the trading price of our common shares could decline, and you may lose all or part of your investment.

There were no material changes in risk factors during the three months or ~~nine~~six months ended ~~September~~June 30, ~~2021, except as outlined below.~~2022.

Significant costs have been incurred and are expected to be incurred in connection with the consummation of the acquisition and integration of acquisition targets, including Euro Auctions, including legal, accounting, financial advisory and other costs.

We expect to incur one-time costs in connection with integrating our operations, products and personnel with those of acquisition targets, including the Euro Auctions, in addition to costs related directly to completing the acquisition. We would expect similar costs to be incurred in connection with any future acquisition. These costs may include expenditures for:

~~reorganization or closures of facilities;~~

~~employee redeployment, relocation or severance; and~~

~~integration of operations and information systems.~~

In addition, we expect to incur a number of non-recurring costs associated with combining our operations with those of acquisition targets. Additional unanticipated costs may be incurred as we integrate our business with acquisition targets. Although we expect the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of our operations with acquisition targets, may offset incremental transaction and transaction-related costs over time, this net benefit may not be achieved in the near term.

~~We may not realize the anticipated benefits of, and synergies from, acquisitions and may become responsible for certain liabilities and integration costs as a result.~~

Business acquisitions involve the integration of new businesses that have previously operated independently from us. The integration of our operations with those of acquisition targets, including the Euro Auctions, is expected to result in financial and operational benefits, including certain tax and run-rate synergies. There can be no assurance, however, regarding when or the extent to which we will be able to realize these and other benefits. Integration may also be difficult, unpredictable and subject to delay because of possible company culture conflicts and different opinions on future business development. We may be required to integrate or, in some cases, replace, numerous systems, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll and regulatory compliance, many of which may be dissimilar. Difficulties associated with the integration of acquired businesses could have a material adverse effect on our business.

In addition, in connection with acquisitions, we have assumed, and may assume in connection with future acquisitions, certain potential liabilities. To the extent such liabilities are not identified by us or to the extent indemnifications obtained from third parties are insufficient to cover such liabilities, these liabilities could have a material adverse effect on our business.

~~Integrating our business with the Euro Auctions and other acquisition targets may divert our management’s attention away from operations.~~


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Successful integration of the Euro Auctions’ and other acquisition targets’ operations, products and personnel with ours may place a significant burden on our management and other internal resources. The diversion of management’s attention, and any difficulties encountered in the transition and integration process, could adversely affect our business, financial condition and operating results.

~~Acquisitions are subject to a number of conditions and may not be completed on the terms or timeline currently contemplated, or at all.~~

The completion of the Euro Auctions acquisition is subject to certain conditions, including, among other things: (i) customary conditions relating to the obtaining of antitrust clearance in the United Kingdom, (ii) the vendors providing certain assistance and financial information, including in connection with the Company’s financing for the acquisition, and (iii) other customary closing conditions. The terms of the agreement also entitle the purchaser of the Euro Auctions (an indirect, wholly-owned subsidiary of the Company) to terminate the agreement in certain circumstances. The agreement may also terminate automatically if the closing conditions are not satisfied by the longstop date of February 28, 2022. In each such case, the acquisition would not proceed. Other acquisitions are, or may be, subject to similar or different conditions.

We cannot assure you that the Euro Auctions acquisition or any other acquisition will be consummated on the terms or timeline currently contemplated, or at all. Many of the conditions to completion of acquisitions are not within our control, and we cannot predict when or if these conditions will be satisfied. The failure to meet any or all of the required conditions could delay the completion of an acquisition for a significant period of time or prevent it from occurring. Any delay in completing an acquisition could cause Ritchie Bros. not to realize some or all of the benefits that it expects to achieve if the acquisition is successfully completed within its expected timeframe.

~~We will incur a substantial amount of debt to complete the Euro Auctions acquisition. This indebtedness could have a material adverse effect on our business and financial condition.~~

We will incur significant debt to complete the Euro Auctions acquisition. Our ability to make payments on our debt, fund our other liquidity needs and make planned capital expenditures will depend on our ability to generate cash in the future. Our historical financial results have been, and we anticipate that our future financial results will be, subject to fluctuations. Our ability to generate cash is subject in part to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot guarantee that our business will generate sufficient cash flow from our operations or that future borrowings will be available to us in an amount sufficient to enable us to make payments of our debt, fund other liquidity needs and make planned capital expenditures. If our cash flows and capital resources are insufficient to fund debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness.

We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternatives may not allow us to meet our scheduled debt service obligations.

The degree to which we are currently leveraged and will be leveraged following the completion of the Euro Auctions acquisition could have important consequences for shareholders. For example, it could:

●

~~limit our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;~~

●

require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividends and other corporate purposes;

●

~~increase our vulnerability to general adverse economic or industry conditions;~~

●

~~expose us to the risk of increased interest rates for any borrowings at variable rates of interest;~~

●

~~limit our flexibility in planning for and reacting to changes in our industry; and~~

●

~~place us at a competitive disadvantage compared to businesses in our industry that have less debt.~~

Additionally, our debt agreements contain a number of covenants that impose operating and financial restrictions on Ritchie Bros. and may limit our ability to engage in acts that may be in our long-term best interests. The debt agreements contain customary restrictions


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and limitations on the ability of Ritchie Bros. and its subsidiaries to take certain actions, including incurring additional indebtedness, granting liens, making certain investments and making dividend payments or other distributions, in each case subject to customary carve-outs and exceptions. The debt agreements also includes a requirement that Ritchie Bros. maintain certain leverage and interest coverage ratios. Any failure to comply with covenants in the instruments governing our debt could result in an event of default which, if not cured or waived, would have a material adverse effect on us.

In conjunction with the Euro Auctions acquisition, we may grant security interests in favor of our lenders over a substantial portion of the assets of Ritchie Bros. and certain of our subsidiaries, which may have a material adverse effect on us.

To secure our obligations under our debt agreements, as a result of the Euro Auctions acquisition we may enter into certain security agreements under which we will grant security interests in favor of our lenders over a substantial portion of the assets of Ritchie Bros. and certain of our subsidiaries. An event of default under such debt agreements may allow our lenders to accelerate their debt and terminate all commitments to extend further credit thereunder, including the right to proceed against the collateral securing the indebtedness. In any of these events, we may seek to refinance our indebtedness but be unable to do so on commercially reasonable terms. As a result, such event of default could result in the loss of our interests in the secured assets and have a material adverse effect on us, including by limiting our ability to conduct our business, to raise additional debt or equity financing and to compete effectively or take advantage of new business opportunities.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As discussed in the Current Report on Form 8-K filed on September 28, 2021 (the “SmartEquip 8-K”), we entered into an agreement to acquire SmartEquip, Inc., a Delaware corporation (“SmartEquip”), on September 24, 2021. A portion of the purchase price was payable in our common shares. At the closing of the acquisition on November 2, 2021, we issued a total of 63,971 common shares to certain of the former shareholders of SmartEquip. For further information, see the SmartEquip 8-K.None.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

None.


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ITEM 6: EXHIBITS

Exhibits

The exhibits listed in below are filed as part of this Quarterly Report on Form 10-Q and incorporated herein by reference.



Exhibit
Number		Document
~~2.1~~		Agreement and Plan of Merger dated September 24, 2021 among Ritchie Bros. Auctioneers Incorporated, Ritchie Bros. Holdings Inc., Lego Merger Sub, Inc., SmartEquip, Inc., the Key Securityholders, the Rollover Members and Fortis Advisors LLC ~~(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on September 28, 2021)~~
~~2.2~~		~~Share Purchase Agreement, dated August 9, 2021, by and among Ritchie Bros. Auctioneers Incorporated, Ritchie Bros. UK Holdings Ltd, Euro Auctions FZE and the Vendors listed therein~~ ~~(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 10, 2021)~~
10.1		~~Fourth Amendment to Credit~~Employment Agreement dated as of September 21, 2021, among the Company, certain of its subsidiaries, each as a borrower and/or a guarantor, the lenders party thereto, Bank of America, N.A., as administrative agent, U.S. swing line lender and letter of credit issuer and Royal Bank of Canada, as Canadian swing line lender and letter of credit issuer ~~(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 22, 2021)~~
~~10.2~~		~~Fourth Amended and Restated Commitment Letter, dated August 8, 2021, from Goldman Sachs Bank USA~~
~~10.3~~		~~Agreement of Purchase and Sale, dated August 13, 2021,~~ between Ritchie Bros. ~~Properties~~Auctioneers (Canada) Ltd. and ~~3 Manchester Court Holdings Inc.~~Eric Jacobs, dated May 31, 2022
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		Interactive Data Files Pursuant to Rule 405 of Regulation S-T , for the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2021,~~2022, formatted in Inline XBRL: (i) Condensed Consolidated Income Statements; (ii) Condensed Consolidated Balance Sheets; (iii) Condensed Consolidated Statements of Changes in Equity; (iv) Condensed Consolidated Statements of Cash Flows; and (v) Notes to the Condensed Consolidated Financial Statements
104		Cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2021,~~2022, formatted in Inline XBRL and contained in Exhibit 101


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	RITCHIE BROS. AUCTIONEERS INCORPORATED


Dated: ~~November~~August 4, ~~2021~~2022	By:	/s/ Ann Fandozzi
		Ann Fandozzi
		Chief Executive Officer

Dated: ~~November~~August 4, ~~2021~~2022	By:	/s/ S~~haron R. Driscoll~~Eric Jacobs
		~~Sharon R. Driscoll~~Eric Jacobs
		Chief Financial Officer


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PART I – FINANCIAL INFORMATION
ITEM 1:	Consolidated Financial Statements	1
ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3328
ITEM 3:	Quantitative and Qualitative Disclosures About Market Risk	6154
ITEM 4:	Controls and Procedures	6154

PART II – OTHER INFORMATION
ITEM 1:	Legal Proceedings	6355
ITEM 1A:	Risk Factors	6355
ITEM 2:	Unregistered Sales of Equity Securities and Use of Proceeds	6555
ITEM 3:	Defaults Upon Senior Securities	6555
ITEM 4:	Mine Safety Disclosures	6555
ITEM 5:	Other Information	6555
ITEM 6:	Exhibits	6656

SIGNATURES		6757


	December 8, 2020
Total cash consideration paid	$	249,537
Equity consideration paid for pre-combination services		1,459
Final purchase price	$	250,996


	Three months ended September 30, 2020						Nine months ended September 30, 2020
	A&M		Other		Consolidated		A&M		Other		Consolidated
Service revenue	$	188,949	$	33,730	$	222,679	$	543,340	$	96,601	$	639,941
Inventory sales revenue		108,863		—		108,863		353,906		—		353,906
Total revenue	$	297,812	$	33,730	$	331,542	$	897,246	$	96,601	$	993,847
Costs of services		21,733		17,490		39,223		69,018		49,008		118,026
Cost of inventory sold		96,253		—		96,253		320,972		—		320,972
SG&A expenses		103,933		6,253		110,186		290,077		19,126		309,203
Segment profit	$	75,893	$	9,987	$	85,880	$	217,179	$	28,467	$	245,646
D&A expenses						18,436						55,586
Gain on disposition of PPE						(276)						(1,536)
Foreign exchange loss						336						1,330
Operating income					$	67,384					$	190,266
Interest expense						(8,737)						(26,801)
Other income, net						2,280						6,714
Income tax expense						(15,437)						(48,741)
Net income					$	45,490					$	121,438



Balance, December 31, 2020	$	—
Reclassified from property, plant and equipment		7,308
Disposal		(241)
Balance, September 30, 2021	$	7,067


Remainder of 2021	$	3,878
2022		16,285
2023		14,499
2024		11,004
2025		10,871
Thereafter		108,595
Total future minimum lease payments	$	165,132
less: imputed interest		(38,981)
Total operating lease liability	$	126,151
less: operating lease liability - current		(12,083)
Total operating lease liability - non-current	$	114,068


			Accumulated		Net book
As at December 31, 2020	Cost		depreciation		value
Computer equipment	$	16,597	$	(8,317)	$	8,280
Yard and others		28,234		(10,865)		17,369
	$	44,831	$	(19,182)	$	25,649


Remainder of 2021	$	2,651
2022		9,292
2023		6,988
2024		4,434
2025		1,482
Thereafter		281
Total future minimum lease payments	$	25,128
less: imputed interest		(1,163)
Total finance lease liability	$	23,965
less: finance lease liability - current		(9,156)
Total finance lease liability - non-current	$	14,809


					% Change
					2021 over
Value of one local currency to U.S dollar	2021		2020		2020
Period-end exchange rate
Canadian dollar		0.7886		0.7514	5	%
Euro		1.1581		1.1732	(1)	%
Australian dollar		0.7231		0.7171	1	%

Average exchange rate -Three months ended September 30,
Canadian dollar		0.7942		0.7506	6	%
Euro		1.1793		1.1686	1	%
Australian dollar		0.7351		0.7148	3	%

Average exchange rate -Nine months ended September 30,
Canadian dollar		0.7992		0.7391	8	%
Euro		1.1966		1.1242	6	%
Australian dollar		0.7592		0.6764	12	%