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 ~~March 31,~~June 30, 2021

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: ~~110,280,611~~110,371,456 common shares, without par value, outstanding as of ~~May 7,~~August 4, 2021.

Table of Contents

RITCHIE BROS. AUCTIONEERS INCORPORATED

FORM 10-Q

For the quarter ended ~~March 31,~~June 30, 2021

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

March 31,


2021

2020

Revenue:





Service revenue

$
206,030

$
183,123

Inventory sales revenue

125,525

90,132

Total revenue

331,555

273,255

Operating expenses:





Costs of services

36,027

39,355

Cost of inventory sold

110,747

81,585

Selling, general and administrative expenses

116,078

98,385

Acquisition-related costs

2,922

—

Depreciation and amortization expenses

21,070

19,293

Gain on disposition of property, plant and equipment

(68)

(47)

Foreign exchange loss

277

602

Total operating expenses

287,053

239,173

Operating income

44,502

34,082

Interest expense

(8,946)

(9,182)

Other income, net

1,002

3,577

Income before income taxes

36,558

28,477

Income tax expense

8,419

5,648

Net income

$
28,139

$
22,829

Net income attributable to:





Stockholders

$
28,188

$
22,809

Non-controlling interests

(49)

20

Net income

$
28,139

$
22,829

Earnings per share attributable to stockholders:





Basic

$
0.26

$
0.21

Diluted

$
0.25

$
0.21

Weighted average number of shares outstanding:





Basic

109,972,997

109,248,880

Diluted

111,267,392

110,482,837


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenue:
Service revenue	$	252,748	$	234,139	$	458,778	$	417,262
Inventory sales revenue		143,613		154,911		269,138		245,043
Total revenue		396,361		389,050		727,916		662,305

Operating expenses:
Costs of services		39,042		39,448		75,069		78,803
Cost of inventory sold		131,023		143,134		241,770		224,719
Selling, general and administrative expenses		111,819		100,632		227,897		199,017
Acquisition-related costs		3,049		—		5,971		—
Depreciation and amortization expenses		21,935		17,857		43,005		37,150
Gain on disposition of property, plant and equipment		(175)		(1,213)		(243)		(1,260)
Foreign exchange loss		151		392		428		994
Total operating expenses		306,844		300,250		593,897		539,423
Operating income		89,517		88,800		134,019		122,882

Interest expense		(8,867)		(8,882)		(17,813)		(18,064)
Other income, net		1,196		857		2,198		4,434
Income before income taxes		81,846		80,775		118,404		109,252

Income tax expense		21,065		27,656		29,484		33,304
Net income	$	60,781	$	53,119	$	88,920	$	75,948

Net income attributable to:
Stockholders	$	60,749	$	53,043	$	88,937	$	75,851
Non-controlling interests		32		76		(17)		97
Net income	$	60,781	$	53,119	$	88,920	$	75,948

Earnings per share attributable to stockholders:
Basic	$	0.55	$	0.49	$	0.81	$	0.70
Diluted	$	0.55	$	0.49	$	0.80	$	0.69

Weighted average number of shares outstanding:
Basic		110,311,615		108,387,490		110,144,229		108,818,903
Diluted		111,334,184		109,323,343		111,302,711		109,903,808

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


March 31,

2021

2020

Net income

$
28,139

$
22,829

Other comprehensive loss, net of income tax:



Foreign currency translation adjustment

(10,360)

(15,868)

Total comprehensive income

$
17,779

$
6,961

Total comprehensive income (loss) attributable to:





Stockholders

$
17,844

$
6,949

Non-controlling interests

(65)

12

$
17,779

$
6,961


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income	$	60,781	$	53,119	$	88,920	$	75,948
Other comprehensive income (loss), net of income tax:					��
Foreign currency translation adjustment		1,468		10,764		(8,892)		(5,105)
Total comprehensive income	$	62,249	$	63,883	$	80,028	$	70,843

Total comprehensive income (loss) attributable to:
Stockholders	$	62,215	$	63,795	$	80,059	$	70,743
Non-controlling interests		34		88		(31)		100
	$	62,249	$	63,883	$	80,028	$	70,843

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)


	March 31,		December 31,		June 30,		December 31,
	2021		2020		2021		2020
Assets

Cash and cash equivalents	$	294,380	$	278,766	$	301,757	$	278,766
Restricted cash		147,240		28,129		140,966		28,129
Trade and other receivables		294,291		135,001		271,980		135,001
Less: allowance for credit losses		(5,576)		(5,467)		(5,348)		(5,467)
Inventory		72,314		86,278		85,930		86,278
Other current assets		32,802		27,274		27,776		27,274
Income taxes receivable		8,224		6,797		10,524		6,797
Total current assets		843,675		556,778		833,585		556,778

Property, plant and equipment		483,981		492,127		482,732		492,127
Other non-current assets		148,882		147,608		146,890		147,608
Intangible assets		296,480		300,948		292,444		300,948
Goodwill		840,632		840,610		838,798		840,610
Deferred tax assets		13,044		13,458		12,534		13,458
Total assets	$	2,626,694	$	2,351,529	$	2,606,983	$	2,351,529

Liabilities and Equity

Auction proceeds payable	$	517,521	$	214,254	$	445,090	$	214,254
Trade and other payables		227,679		243,786		221,738		243,786
Income taxes payable		3,215		17,032		4,240		17,032
Short-term debt		25,933		29,145		35,213		29,145
Current portion of long-term debt		10,517		10,360		10,657		10,360
Total current liabilities		784,865		514,577		716,938		514,577

Long-term debt		626,202		626,288		625,832		626,288
Other non-current liabilities		159,266		153,000		156,636		153,000
Deferred tax liabilities		45,753		45,265		46,150		45,265
Total liabilities		1,616,086		1,339,130		1,545,556		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: 110,253,056 (December 31, 2020: 109,876,428)		210,765		200,451
Common stock; 0 par value, unlimited shares authorized, issued and outstanding shares: 110,366,808 (December 31, 2020: 109,876,428)						215,666		200,451
Additional paid-in capital		43,612		49,171		51,800		49,171
Retained earnings		795,781		791,918		832,037		791,918
Accumulated other comprehensive loss		(44,639)		(34,295)		(43,173)		(34,295)
Stockholders' equity		1,005,519		1,007,245		1,056,330		1,007,245
Non-controlling interest		5,089		5,154		5,097		5,154
Total stockholders' equity		1,010,608		1,012,399		1,061,427		1,012,399
Total liabilities and equity	$	2,626,694	$	2,351,529	$	2,606,983	$	2,351,529

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 June 30, 2021	shares	Amount		("APIC")		earnings		loss		("NCI")		equity

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 loss	—		—		—		—		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 combination	—		—		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


Three months ended June 30, 2020

Balance, March 31, 2020	108,198,739	$	153,801	$	46,147	$	714,816	$	(74,959)	$	5,166	$	844,971
Net income	—		—		—		53,043		—		76		53,119
Other comprehensive loss	—		—		—		—		10,752		12		10,764
	—		—		—		53,043		10,752		88		63,883
Stock option exercises	431,831		15,457		(3,086)		—		—		—		12,371
Issuance of common stock related to vesting of share units	(33)		(3)		(7)		—		—		—		(10)
Stock option compensation expense	—		—		1,543		—		—		—		1,543
Equity-classified share units expense	—		—		3,231		—		—		—		3,231
Equity-classified share units dividend equivalents	—		—		130		(130)		—		—		—
Cash dividends paid	—		—		—		(21,681)		—		—		(21,681)
Balance, June 30, 2020	108,630,537	$	169,255	$	47,958	$	746,048	$	(64,207)	$	5,254	$	904,308

��


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													Attributable to stockholders
				Additional				Accumulated		Non-							Additional				Accumulated		Non-
	Common stock			paid-In				other		controlling				Common stock			paid-In				other		controlling
	Number of			capital		Retained		comprehensive		interest		Total		Number of			capital		Retained		comprehensive		interest		Total
Three months ended March 31, 2021	shares	Amount		("APIC")		earnings		loss		("NCI")		equity
Six months ended June 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	109,876,428	$	200,451	$	49,171	$	791,918	$	(34,295)	$	5,154	$	1,012,399
Net income	—		—		—		28,188		—		(49)		28,139	—		—		—		88,937		—		(17)		88,920
Other comprehensive loss	—		—		—		—		(10,344)		(16)		(10,360)
Other comprehensive income (loss)														—		—		—		—		(8,878)		(14)		(8,892)
	—		—		—		28,188		(10,344)		(65)		17,779	—		—		—		88,937		(8,878)		(31)		80,028
Stock option exercises	197,863		8,268		(1,549)		—		—		—		6,719	311,153		13,157		(2,458)		—		—		—		10,699
Issuance of common stock related to vesting of share units	234,275		2,046		(11,347)		—		—		—		(9,301)
Issuance (forfeiture) of common stock related to business combination	(55,510)		—		—		—		—		—		—
Issuance (forfeiture) of common stock related to vesting of share units														234,737		2,058		(11,377)		—		—		—		(9,319)
Share-based continuing employment costs related to business combination	—		—		2,553		—		—		—		2,553	(55,510)		—		5,231		—		—		—		5,231
Stock option compensation expense	—		—		1,861		—		—		—		1,861	—		—		3,770		—		—		—		3,770
Equity-classified share units expense	—		—		2,779		—		—		—		2,779	—		—		7,182		—		—		—		7,182
Equity-classified share units dividend equivalents	—		—		144		(144)		—		—		—	—		—		281		(281)		—		—		—
Cash dividends paid	—		—		—		(24,181)		—		—		(24,181)	—		—		—		(48,537)		—		(26)		(48,563)
Balance, March 31, 2021	110,253,056	$	210,765	$	43,612	$	795,781	$	(44,639)	$	5,089	$	1,010,608
Balance, June 30, 2021														110,366,808	$	215,666	$	51,800	$	832,037	$	(43,173)	$	5,097	$	1,061,427

Three months ended March 31, 2020
Six months ended June 30, 2020

Balance, December 31, 2019	109,337,781	$	194,771	$	52,110	$	714,051	$	(59,099)	$	5,154	$	906,987	109,337,781	$	194,771	$	52,110	$	714,051	$	(59,099)	$	5,154	$	906,987
Net income	—		—		—		22,809		—		20		22,829	—		—		—		75,851		—		97		75,948
Other comprehensive loss	—		—		—		—		(15,860)		(8)		(15,868)	—		—		—		—		(5,108)		3		(5,105)
	—		—		—		22,809		(15,860)		12		6,961	—		—		—		75,851		(5,108)		100		70,843
Stock option exercises	247,446		8,684		(1,630)		—		—		—		7,054	679,277		24,141		(4,716)		—		—		—		19,425
Issuance of common stock related to vesting of share units	138,824		3,516		(7,445)		—		—		—		(3,929)	138,791		3,513		(7,451)		—		—		—		(3,938)
Stock option compensation expense	—		—		1,187		—		—		—		1,187	—		—		2,730		—		—		—		2,730
Equity-classified share units expense	—		—		1,786		—		—		—		1,786	—		—		5,017		—		—		—		5,017
Equity-classified share units dividend equivalents	—		—		139		(139)		—		—		—	—		—		268		(268)		—		—		—
Change in fair value of contingently redeemable PSUs	—		—		—		—		—		—		—
Cash dividends paid	—		—		—		(21,905)		—		—		(21,905)	—		—		—		(43,586)		—		—		(43,586)
Shares repurchased	(1,525,312)		(53,170)		—		—		—		—		(53,170)	(1,525,312)		(53,170)		—		—		—		—		(53,170)
Balance, March 31, 2020	108,198,739	$	153,801	$	46,147	$	714,816	$	(74,959)	$	5,166	$	844,971
Balance, June 30, 2020														108,630,537	$	169,255	$	47,958	$	746,048	$	(64,207)	$	5,254	$	904,308

See accompanying notes to the condensed consolidated financial statements.


Ritchie Bros.	45

Table of Contents

Condensed Consolidated Statements of Cash Flows

(Expressed in thousands of United States dollars)

(Unaudited)

Three months ended March 31,

2021

2020

Cash provided by (used in):





Operating activities:





Net income

$
28,139

$
22,829

Adjustments for items not affecting cash:







Depreciation and amortization expenses

21,070

19,293

Stock-based compensation expense

7,193

2,973

Deferred income tax expense

963

1,331

Unrealized foreign exchange loss

459

782

Gain on disposition of property, plant and equipment

(68)

(47)

Amortization of debt issuance costs

720

756

Amortization of right-of-use assets

3,172

3,343

Gain on contingent consideration from equity investment

—

(1,700)

Other, net

1,184

1,282

Net changes in operating assets and liabilities

117,855

(46,710)

Net cash provided by operating activities

180,687

4,132

Investing activities:



Property, plant and equipment additions

(1,556)

(3,495)

Proceeds on disposition of property, plant and equipment

66

333

Intangible asset additions

(8,769)

(7,220)

Issuance of loans receivable

—

(2,984)

Repayment of loans receivable

224

180

Distribution from equity investment

—

4,212

Proceeds on contingent consideration from equity investment

—

1,700

Net cash used in investing activities

(10,035)

(7,274)

Financing activities:



Share repurchase

—

(53,170)

Dividends paid to stockholders

(24,181)

(21,905)

Proceeds from exercise of options and share option plans

6,719

7,054

Payment of withholding taxes on issuance of shares

(7,542)

(2,984)

Net increase (decrease) in short-term debt

(2,886)

29,069

Repayment of long-term debt

(2,626)

(4,236)

Repayment of finance lease obligations

(2,629)

(2,189)

Net cash used in financing activities

(33,145)

(48,361)

Effect of changes in foreign currency rates on cash, cash equivalents, and restricted cash

(2,782)

(12,828)

Increase (decrease)

134,725

(64,331)

Beginning of period

306,895

420,256

Cash, cash equivalents, and restricted cash, end of period

$
441,620

$
355,925


Six months ended June 30,	2021		2020
Cash provided by (used in):
Operating activities:
Net income	$	88,920	$	75,948
Adjustments for items not affecting cash:
Depreciation and amortization expenses		43,005		37,150
Stock-based compensation expense		16,183		7,747
Deferred income tax expense		1,719		6,657
Unrealized foreign exchange loss		(65)		1,129
Gain on disposition of property, plant and equipment		(243)		(1,260)
Amortization of debt issuance costs		1,443		1,577
Amortization of right-of-use assets		6,280		6,318
Gain on contingent consideration from equity investment		—		(1,700)
Other, net		1,568		1,934
Net changes in operating assets and liabilities		52,577		62,824
Net cash provided by operating activities		211,387		198,324
Investing activities:
Acquisition of Rouse, net of cash acquired		728		—
Property, plant and equipment additions		(4,616)		(6,140)
Proceeds on disposition of property, plant and equipment		342		16,106
Intangible asset additions		(17,361)		(13,244)
Issuance of loans receivable		(2,622)		(2,985)
Repayment of loans receivable		226		203
Distribution from equity investment		—		4,212
Proceeds on contingent consideration from equity investment		—		1,700
Net cash used in investing activities		(23,303)		(148)
Financing activities:
Share repurchase		—		(53,170)
Dividends paid to stockholders		(48,537)		(43,586)
Dividends paid to NCI		(26)		—
Proceeds from exercise of options and share option plans		10,699		19,425
Payment of withholding taxes on issuance of shares		(9,155)		(3,321)
Net increase (decrease) in short-term debt		6,842		15,858
Repayment of long-term debt		(5,328)		(8,633)
Repayment of finance lease obligations		(5,355)		(4,384)
Net cash used in financing activities		(50,860)		(77,811)
Effect of changes in foreign currency rates on cash, cash equivalents, and restricted cash		(1,396)		(2,608)
Increase		135,828		117,757
Beginning of period		306,895		420,256
Cash, cash equivalents, and restricted cash, end of period	$	442,723	$	538,013

See accompanying notes to the condensed consolidated financial statements.


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Table of Contents

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

1. General information

Ritchie Bros. Auctioneers Incorporated and its subsidiaries (collectively referred to as the “Company”) 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, included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”). 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, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which ~~continues to~~quickly spread throughout the world. The extent of the ongoing impact of the COVID-19 pandemic on ~~the~~our operational and financial performance, ~~of the Company,~~ including ~~the~~our ability to execute onour business strategies and initiatives, will depend on future developments, including the duration and spread of the pandemic in light of new variants, time of mass vaccine distribution, and any related restrictions placed by respective global governments, as well as supply and demand impacts driven by ~~the Company’s~~our consignor and buyer base, ~~and our ability to move equipment to and from our auction sites,~~ all of which are uncertain and cannot be easily predicted. Given the dynamic nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on its business operations, results of operations, cash flows or financial performance.

(b) Revenue recognition

Revenues are comprised of:

●	Service revenue, including the following:

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


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~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

2. Significant accounting policies (continued)

(b) Revenue recognition (continued)

The Company recognizes revenue when control of 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 complete and the Company has determined that the sale proceeds are collectible. Revenue is measured at 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 stimulating buyer interest through professional marketing techniques and matches 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 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 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 are 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.


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~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

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.

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, 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.


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~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

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.

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.

~~This~~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 using the Black-Scholes option pricing model. 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.


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~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

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 are 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 over the fair value of the asset or asset group. Fair value is based on valuation techniques or third party appraisals. Significant estimates and judgments are applied in determining these cash flows and fair values.


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~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

2. Significant accounting policies (continued)

(h) Impairment of long-lived 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 amount of the indefinite-lived intangible 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 impairment loss is recognized as the difference between the indefinite-lived intangible asset’s carrying amount and its fair value.

(i) Goodwill

Goodwill represents the excess of the purchase price of an acquired enterprise over the fair value assigned to the assets acquired and liabilities assumed in a business combination.

Goodwill is not amortized, but it is tested annually for impairment 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 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 amount of the goodwill allocated to the reporting unit.

(j) Business combinations

Business combinations are accounted for using the acquisition method. The purchase price is determined based on the fair value of the assets transferred, liabilities incurred, and equity interest issued, 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 as goodwill. The fair value determinations require judgment and may involve the use of significant estimates and assumptions, especially with respect 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 to the assets and liabilities assumed, with the corresponding offset to goodwill, in the period in which the adjustment amounts are determined. Acquisition-related costs associated with the acquisition are expensed as incurred.


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~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

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 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 generally accepted accounting principles 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. As a result, we have assessed the impact of the expected reference rate reform on our consolidated financial statements. Currently, the Company has one contract, the Credit Agreement (see Note 16) that references LIBOR. Our Credit Agreement was modified on August 14, 2020 which included the addition of LIBOR-successor rate language related to the reference rate reform. The Credit Agreement’s modified reference rate reform language does not specify the LIBOR-successor rates to be used, however, it does allow the parties to agree on a successor rate once LIBOR ceases being published, without the requirement for the contract to be modified. 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. However, if applicable, the Company will use the optional expedients available when reference rate changes occur.

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 the recoverable amounts of goodwill and indefinite-lived intangible assets, the useful lives of long-lived assets and finite-lived intangible assets, share-based compensation, share-based continuing employment costs, the determination of lease term 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 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 ~~March 31,~~June 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.


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~~Table of Contents~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

4. Seasonality

The Company’s operations are both seasonal and event driven. Revenues tend 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 may continue to impact these trends.


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Table of Contents

5. Business combinations

Rouse acquisition

On December 8, 2020, the Company acquired all of the issued and outstanding units of Rouse for a total purchase price of $251,724,000. The Company paid cash consideration 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 as of June 30, 2021.

Rouse is a leading provider of construction equipment market data intelligence and performance benchmarking solutions. Rouse provides appraisals to asset backed lenders, market intelligence and software to rental companies, contractors and dealers to optimize the used equipment sales process, and comparisons of rental rates, utilization, and other key performance metrics to industry benchmarks for rental companies 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 of consideration transferred at the date of acquisition, as well as ~~our preliminary~~the final purchase price allocation of ~~the purchase price to~~ the fair value of assets acquired and liabilities assumed.


	December 8, 2020		December 8, 2020
Cash consideration paid on closing	$	250,265
Total cash consideration paid			$	249,537
Equity consideration paid for pre-combination services		1,459		1,459
Purchase price	$	251,724
Final purchase price			$	250,996

Rouse purchase price allocation

December 8, 2020
Purchase price

$
251,724


Assets acquired:


Cash and cash equivalents

$
226
Trade and other receivables

4,601
Other current assets

159
Property, plant and equipment

1,171
Other non-current assets

3,741
Deferred tax assets

7,584
Intangible assets

79,300


Liabilities assumed:


Trade and other payables

7,307
Other non-current liabilities

3,188
Deferred tax liabilities

936

Fair value of identifiable net assets acquired

85,351
Goodwill acquired on acquisition

$
166,373


	December 8, 2020
Purchase price	$	250,996

Assets acquired:
Cash and cash equivalents	$	226
Trade and other receivables		4,601
Other current assets		159
Property, plant and equipment		1,171
Other non-current assets		3,741
Deferred tax assets		7,584
Intangible assets		79,300

Liabilities assumed:
Trade and other payables		5,630
Other non-current liabilities		3,188
Deferred tax liabilities		936

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


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Table of Contents

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

5. Business combinations (continued)

Rouse purchase price allocation (continued)

The following table summarizes the fair values of the identifiable intangible 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

The amounts included in the Rouse 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 certain assets and liabilities will be completed within the measurement period of up to one year from the acquisition date and will be finalized upon the determination of closing working capital. During the quarter ended March 31, 2021 the Company recorded an adjustment ~~which was not significant,~~of $603,000 to increase the liabilities assumed and increase the goodwill acquired on acquisition. ~~Additional adjustments~~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 ~~preliminary values during the~~liabilities assumed on acquisition. These measurement period ~~may impact the amounts recorded as assets and liabilities with~~adjustments, since acquisition, resulted in a ~~corresponding adjustment~~total net decrease to goodwill ~~and will~~of $1,802,000.

The purchase price allocation has been finalized as of June 30, 2021. As at Q2, 2021, $1,169,000 continues to be ~~recognized~~held in escrow until December 4, 2021 or until such date that a joint decision is made for the ~~period in which the adjustments are determined.~~funds to be released.

Goodwill

Goodwill has been ~~preliminarily~~ 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 business, its assembled workforce and associated technical expertise, as well as anticipated synergies from the Company’s auction expertise and transactional capabilities to Rouse’s existing customer base. The transaction is considered a taxable business combination and all of the goodwill is deductible for tax purposes.

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

At the date of acquisition, the Company issued 312,193 common shares to certain previous unitholders of Rouse in return for their continuing employment service. The common shares are expected to vest at various vesting dates 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 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 ~~quarter~~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, as at ~~March 31,~~June 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 ~~$14,576,000~~$11,898,000 (Note 18).

During the quarter ended ~~March 31,~~June 30, 2021, the Company recorded ~~$2,922,000~~$3,049,000 acquisition-related costs for legal, advisory, integration and other professional fees, which included ~~$2,553,000~~$2,678,000 of share-based continuing employment costs.


Ritchie Bros.	1415

Table of Contents

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

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 auctions, its online auctions and marketplaces, and its brokerage service;

●

Other includes the results of Rouse, Ritchie Bros. Financial Services (“RBFS”), Mascus online services, 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 March 31, 2021						Three months ended June 30, 2021						Six months ended June 30, 2021
	A&M		Other		Consolidated		A&M		Other		Consolidated		A&M		Other		Consolidated
Service revenue	$	170,755	$	35,275	$	206,030	$	211,475	$	41,273	$	252,748	$	382,230	$	76,548	$	458,778
Inventory sales revenue		125,525		—		125,525		143,613		—		143,613		269,138		—		269,138
Total revenue	$	296,280	$	35,275	$	331,555	$	355,088	$	41,273	$	396,361	$	651,368	$	76,548	$	727,916
Costs of services		21,590		14,437		36,027		21,985		17,057		39,042		43,575		31,494		75,069
Cost of inventory sold		110,747		—		110,747		131,023		—		131,023		241,770		—		241,770
Selling, general and administrative expenses ("SG&A")		104,345		11,733		116,078		101,417		10,402		111,819		205,762		22,135		227,897
Segment profit	$	59,598	$	9,105	$	68,703	$	100,663	$	13,814	$	114,477	$	160,261	$	22,919	$	183,180
Acquisition-related costs						2,922						3,049						5,971
Depreciation and amortization expenses ("D&A")						21,070						21,935						43,005
Gain on disposition of property, plant and equipment ("PPE")						(68)						(175)						(243)
Foreign exchange loss						277						151						428
Operating income					$	44,502					$	89,517					$	134,019
Interest expense						(8,946)						(8,867)						(17,813)
Other income, net						1,002						1,196						2,198
Income tax expense						(8,419)						(21,065)						(29,484)
Net income					$	28,139					$	60,781					$	88,920


	Three months ended March 31, 2020						Three months ended June 30, 2020						Six months ended June 30, 2020
	A&M		Other		Consolidated		A&M		Other		Consolidated		A&M		Other		Consolidated
Service revenue	$	154,743	$	28,380	$	183,123	$	199,648	$	34,491	$	234,139	$	354,391	$	62,871	$	417,262
Inventory sales revenue		90,132		—		90,132		154,911		—		154,911		245,043		—		245,043
Total revenue		244,875		28,380		273,255	$	354,559	$	34,491	$	389,050	$	599,434	$	62,871	$	662,305
Costs of services		25,095		14,260		39,355		22,190		17,258		39,448		47,285		31,518		78,803
Cost of inventory sold		81,585		—		81,585		143,134		—		143,134		224,719		—		224,719
SG&A expenses		91,585		6,800		98,385		94,559		6,073		100,632		186,144		12,873		199,017
Segment profit	$	46,610		7,320		53,930	$	94,676	$	11,160	$	105,836	$	141,286	$	18,480	$	159,766
Acquisition-related costs						—
D&A expenses						19,293						17,857						37,150
Gain on disposition of PPE						(47)						(1,213)						(1,260)
Foreign exchange loss						602						392						994
Operating income						34,082					$	88,800					$	122,882
Interest expense						(9,182)						(8,882)						(18,064)
Other income, net						3,577						857						4,434
Income tax expense						(5,648)						(27,656)						(33,304)
Net income						22,829					$	53,119					$	75,948

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.


Ritchie Bros.	1516

Table of Contents

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

6. Segmented information (continued)

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


	United										United
	States		Canada		Europe		Other		Consolidated		States		Canada		Europe		Other		Consolidated
Total revenue for the three months ended:
March 31, 2021	$	207,414	$	48,478	$	47,176	$	28,487	$	331,555
March 31, 2020		190,530		35,643		26,338		20,744		273,255
June 30, 2021											$	183,391	$	98,690	$	55,467	$	58,813	$	396,361
June 30, 2020												204,588		97,990		47,430		39,042		389,050
Total revenue for the six months ended:
June 30, 2021											$	390,805		147,168	$	102,643	$	87,300	$	727,916
June 30, 2020												395,118		133,633		73,768		59,786		662,305

7. Revenue

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


	Three months ended				Three months ended				Six months ended
	March 31,				June 30,				June 30,
	2021		2020		2021		2020		2021		2020
Service revenue:
Commissions	$	103,975	$	93,484	$	129,334	$	125,465	$	233,309	$	218,950
Fees		102,055		89,639		123,414		108,674		225,469		198,312
		206,030		183,123		252,748		234,139		458,778		417,262
Inventory sales revenue		125,525		90,132		143,613		154,911		269,138		245,043
	$	331,555	$	273,255	$	396,361	$	389,050	$	727,916	$	662,305

8. Operating expenses

Costs of services


	Three months ended				Three months ended				Six months ended
	March 31,				June 30,				June 30,
	2021		2020		2021		2020		2021		2020
Ancillary and logistical service expenses	$	12,269	$	12,758	$	14,819	$	16,060	$	27,088	$	28,818
Employee compensation expenses		12,691		12,304		12,694		11,311		25,385		23,615
Buildings, facilities and technology expenses		2,701		4,039		2,304		2,076		5,005		6,115
Travel, advertising and promotion expenses		4,518		6,575		5,299		6,161		9,817		12,736
Other costs of services		3,848		3,679		3,926		3,840		7,774		7,519
	$	36,027	$	39,355	$	39,042	$	39,448	$	75,069	$	78,803

SG&A expenses


	Three months ended				Three months ended				Six months ended
	March 31,				June 30,				June 30,
	2021		2020		2021		2020		2021		2020
Wages, salaries and benefits	$	78,796	$	60,088	$	70,191	$	64,453	$	148,987	$	124,541
Share-based compensation expense		3,778		2,407		7,540		6,354		11,318		8,761
Buildings, facilities and technology expenses		17,343		15,591		17,479		14,616		34,822		30,207
Travel, advertising and promotion expenses		5,162		10,269		6,824		4,817		11,986		15,086
Professional fees		5,032		4,447		5,202		4,577		10,234		9,024
Other SG&A expenses		5,967		5,583		4,583		5,815		10,550		11,398
	$	116,078	$	98,385	$	111,819	$	100,632	$	227,897	$	199,017

~~Depreciation and amortization expenses~~

Three months ended

March 31,

2021

2020

Depreciation expense

$
7,837

$
8,037

Amortization expense

13,233

11,256

$
21,070

$
19,293


~~Ritchie Bros.~~	16

~~Table of Contents~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~


Ritchie Bros.	17

Table of Contents

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~8. Operating expenses (continued)

Depreciation and amortization expenses


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Depreciation expense	$	8,345	$	7,536	$	16,182	$	15,573
Amortization expense		13,590		10,321		26,823		21,577
	$	21,935	$	17,857	$	43,005	$	37,150

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 ~~March 31,~~June 30, 2021, income tax expense was ~~$8,419,000,~~$21,065,000 compared to an income tax expense of ~~$5,648,000~~$27,656,000 for the same period in 2020. The effective tax rate was ~~23%~~26% in the ~~first~~second quarter of 2021, compared to ~~20%~~34% in the ~~first~~second quarter of 2020.

The effective tax rate ~~increased~~decreased in the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily due toa decrease in the estimate of non-deductible expenses. Partially offsetting this decrease was a higher estimate ~~of non-deductible expenses, an increased proportion~~ of income taxed in jurisdictions with higher tax ~~rates, and write off of a deferred tax asset upon departure of a management employee of Rouse. The higher estimate of non-deductible expenses are primarily due to final regulations published on~~rates.

On April 8, 2020 by the United States Department of Treasury and the Internal Revenue Service (“IRS”) ~~that~~ clarified income tax benefits related to hybrid financing arrangements would not be deductible (“Hybrid Interest”). ~~Partially offsetting these increases~~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 and $1,072,000 in the three months ended March 31, 2020 which were no longer deductible and accordingly were reversed in the three months ended June 30, 2020.

For the six months ended June 30, 2021, income tax expense was $29,484,000, compared to an income tax expense of $33,304,000 for the same period in 2020. The effective tax rate was 25% for the six months ended June 30, 2021, compared to 30% for the six months ended June 30, 2020.

The effective tax rate decreased in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due to the reasons described above. In addition, there was a higher tax deduction for ~~PSU and RSU~~ share unit expenses ~~which were settled~~ in ~~the quarter, that exceeded the related~~excess of compensation expense.


Ritchie Bros.	18

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.


	Net income		WA	Per		Three months ended					Six months ended
	attributable to		number	share		June 30, 2021					June 30, 2021
Three months ended March 31, 2021	stockholders		of shares	amount
						Net income		WA	Per		Net income		WA	Per
						attributable to		number	share		attributable to		number	share
						stockholders		of shares	amount		stockholders		of shares	amount
Basic	$	28,188	109,972,997	$	0.26	$	60,749	110,311,615	$	0.55	$	88,937	110,144,229	$	0.81
Effect of dilutive securities:
Share units		—	579,133		—		—	322,371		—		—	450,752
Stock options		—	715,262		(0.01)		—	700,198		—		—	707,730		(0.01)
Diluted	$	28,188	111,267,392	$	0.25	$	60,749	111,334,184	$	0.55	$	88,937	111,302,711	$	0.80


	Net income		WA	Per		Three months ended					Six months ended
	attributable to		number	share		June 30, 2020					June 30, 2020
Three months ended March 31, 2020	stockholders		of shares	amount
						Net income		WA	Per		Net income		WA	Per
						attributable to		number	share		attributable to		number	share
						stockholders		of shares	amount		stockholders		of shares	amount
Basic	$	22,809	109,248,880	$	0.21	$	53,043	108,387,490	$	0.49	$	75,851	108,818,903	$	0.70
Effect of dilutive securities:
Share units		—	586,074		—		—	424,812		—		—	505,443		—
Stock options		—	647,883		—		—	511,041		—		—	579,462		(0.01)
Diluted	$	22,809	110,482,837	$	0.21	$	53,043	109,323,343	$	0.49	$	75,851	109,903,808	$	0.69


Ritchie Bros.	1819

Table of Contents

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

11. Supplemental cash flow information


Three months ended March 31,	2021		2020
Six months ended June 30,					2021		2020
Trade and other receivables	$	(160,435)	$	(113,115)	$	(134,522)	$	(191,182)
Inventory		12,420		1,297		(2,207)		1,447
Advances against auction contracts		(1,085)		4,923		(761)		5,207
Prepaid expenses and deposits		(2,569)		(597)		3,157		1,980
Income taxes receivable		(1,624)		(1,217)		(3,847)		2,873
Auction proceeds payable		304,261		72,687		230,309		222,006
Trade and other payables		(16,623)		(3,138)		(20,686)		19,769
Income taxes payable		(13,720)		(5,030)		(12,723)		8,852
Operating lease obligation		(2,274)		(2,310)		(6,329)		(6,167)
Other		(496)		(210)		186		(1,961)
Net changes in operating assets and liabilities	$	117,855	$	(46,710)	$	52,577	$	62,824


Three months ended March 31,	2021		2020
Six months ended June 30,					2021		2020
Interest paid, net of interest capitalized	$	14,914	$	15,171	$	16,387	$	16,524
Interest received		303		778		635		1,265
Net income taxes paid		23,681		12,442		43,249		13,850

Non-cash purchase of property, plant and equipment under finance lease		2,084		3,502		4,568		5,930
Non-cash right of use assets obtained (reassessed) in exchange for new lease obligations		6,234		(1,001)		9,451		(139)


	March 31,		December 31,		June 30,		December 31,
	2021		2020		2021		2020
Cash and cash equivalents	$	294,380	$	278,766	$	301,757	$	278,766
Restricted cash		147,240		28,129		140,966		28,129
Cash, cash equivalents, and restricted cash	$	441,620	$	306,895	$	442,723	$	306,895

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.	1920

Table of Contents

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

12. Fair value measurement (continued)


		March 31, 2021				December 31, 2020					June 30, 2021				December 31, 2020
		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	$	294,380	$	294,380	$	278,766	$	278,766	Level 1	$	301,757	$	301,757	$	278,766	$	278,766
Restricted cash	Level 1		147,240		147,240		28,129		28,129	Level 1		140,966		140,966		28,129		28,129
Loan receivables	Level 2		5,658		6,238		5,798		6,438	Level 2		8,355		8,849		5,798		6,438
Short-term debt	Level 2		25,933		25,933		29,145		29,145	Level 2		35,213		35,213		29,145		29,145
Long-term debt
Senior unsecured notes	Level 1		493,177		513,450		492,734		514,219	Level 1		493,625		514,075		492,734		514,219
Term loan	Level 2		96,734		97,279		97,812		98,420	Level 2		95,425		95,910		97,812		98,420
Long-term revolver loan	Level 2		46,808		46,882		46,102		46,184	Level 2		47,439		47,506		46,102		46,184

The carrying value of the 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 is determined by estimating discounted cash flows using market rates. The carrying value of the term loan and long-term revolver loan, before deduction of deferred debt issue costs, approximates their fair value as the interest rates on the loans are short-term in nature. The fair value of the senior unsecured notes is determined by reference to a quoted market price.

13. Trade 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 ~~March 31,~~June 30, 2021:


Balance, December 31, 2020		(5,467)
Current period provision		~~(501)~~(557)
Write-offs charged against the allowance		~~392~~676
Balance, ~~March 31,~~June 30, 2021	$	~~(5,576)~~(5,348)

14. Other current assets


	March 31,		December 31,		June 30,		December 31,
	2021		2020		2021		2020
Advances against auction contracts	$	7,396	$	6,487	$	7,117	$	6,487
Assets held for sale						242		—
Prepaid expenses and deposits		25,406		20,787		20,417		20,787
	$	32,802	$	27,274	$	27,776	$	27,274


~~Ritchie Bros.~~	20

~~Table of Contents~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

15. Other non-current assets


	March 31,		December 31,		June 30,		December 31,
	2021		2020		2021		2020
Right-of-use assets	$	119,958	$	116,503	$	119,592	$	116,503
Tax receivable		10,842		11,050		9,717		11,050
Loans receivable		4,569		4,870		4,241		4,870
Deferred debt issue costs		2,065		2,263		1,865		2,263
Other		11,448		12,922		11,475		12,922
	$	148,882	$	147,608	$	146,890	$	147,608

Loans receivable

As at ~~March 31,~~June 30, 2021, the Company held ~~one~~two non-recourse financing lending ~~arrangement,~~arrangements, with a term of one to four years, which isare fully collateralized and secured by certain equipment. In the event of default under these agreements, the Company ~~is obligated to~~will take possession of the equipment ~~under the agreements~~as collateral to recover its loans receivable balance. The loans receivable balance ~~of such financing lending arrangement~~ as at ~~March 31,~~June 30, 2021 was ~~$5,658,000~~$8,355,000 of which ~~$1,089,000~~$4,114,000 is recorded in trade and other ~~current assets~~receivables (December 31, 2020: $5,797,000, of which $927,000 was recorded in trade and other ~~current assets)~~receivables). The expected credit loss allowance is not significant.

~~16. Debt~~

Carrying amount

March 31,

December 31,


2021

2020
Short-term debt

$
25,933

$
29,145

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 2.68%, due in monthly installments of interest only and quarterly installments of principal, maturing in October 2023

97,279

98,420
Long-term revolver loan denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 2.68%, due in monthly installments of interest only, maturing in October 2023

46,882

46,184
Less: unamortized debt issue costs

(619)

(690)
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
Less: unamortized debt issue costs

(6,823)

(7,266)
Total long-term debt

636,719

636,648

Total debt

$
662,652

$
665,793

Long-term debt:




Current portion

$
10,517

$
10,360
Non-current portion

626,202

626,288
Total long-term debt

$
636,719

$
636,648

~~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 2.5% (December 31, 2020: 2.3%).~~


Ritchie Bros.	21

Table of Contents

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~16. Debt


	Carrying amount
	June 30,		December 31,
	2021		2020
Short-term debt	$	35,213	$	29,145

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 2.66%, due in monthly installments of interest only and quarterly installments of principal, maturing in October 2023		95,910		98,420
Long-term revolver loan denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 2.66%, due in monthly installments of interest only, maturing in October 2023		47,506		46,184
Less: unamortized debt issue costs		(552)		(690)
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
Less: unamortized debt issue costs		(6,375)		(7,266)
Total long-term debt		636,489		636,648

Total debt	$	671,702	$	665,793

Long-term debt:
Current portion	$	10,657	$	10,360
Non-current portion		625,832		626,288
Total long-term debt	$	636,489	$	636,648

~~16. 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 2.3% (December 31, 2020: 2.3%).

Long-term debt

a)	Term loan and long-term revolver loan

On August 14, 2020, the Company entered into an amendment of the Credit Agreement dated October 27, 2016, totaling US$~~630.0~~630 million with a syndicate of lenders comprising:

(1)

Multicurrency revolving facilities of up to US$530 Million (the “Revolving Facilities”), and,

(2)

A delayed-draw term loan facility of up to US$100 Million (the “Delayed-Draw Facility” and together with the Revolving Facilities, the “Facilities”).

b)	Senior unsecured 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”). Interest on the Notes is payable semi-annually. The Notes are jointly and severally guaranteed on an unsecured basis, subject to certain exceptions, by certain of the Company’s subsidiaries. IronPlanet, Rouse, and certain of their respective subsidiaries were added as additional guarantors in connection with the acquisitions of IronPlanet and Rouse, respectively.

As at ~~March 31,~~June 30, 2021, the Company had unused committed revolving credit facilities aggregating ~~$461,115,000~~$448,349,000 of which ~~$456,115,000~~$443,349,000 is available until October 27, 2023 subject to certain covenant restrictions. The Company was in compliance with all financial and other covenants applicable to the credit facilities at ~~March 31,~~June 30, 2021.

17. Other non-current liabilities

March 31,

December 31,

2021

2020
Operating lease liability

$
116,342

$
112,818
Tax payable

19,888

19,706
Finance lease liability

16,624

17,109
Other

6,412

3,367

$
159,266

$
153,000


Ritchie Bros.	22

Table of Contents


	June 30,		December 31,
	2021		2020
Operating lease liability	$	115,130	$	112,818
Tax payable		18,624		19,706
Finance lease liability		16,265		17,109
Other		6,617		3,367
	$	156,636	$	153,000

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

18. 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

In connection with the acquisition of Rouse, the Company issued 312,193 common shares on December 8, 2020. These shares were issued to certain previous unitholders and employees 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 based on the fair market value of the Company’s common shares on the date of acquisition. During the ~~quarter ended March 31,~~first half of 2021, 55,510 common shares were forfeited.

As at ~~March 31,~~June 30, 2021, the unrecognized share-based continuing employment costs were ~~$14,576,000, (March 31,~~$11,898,000, (June 30, 2020: $nil), which is expected to be recognized over a weighted average period of ~~1.8~~1.7 years. As at ~~March 31,~~June 30, 2021, the number of common shares which had not yet vested was 256,683.

Share repurchase

There were no0 common shares repurchased during the three months ended ~~March 31,~~June 30, 2021 (three months ended ~~March 31,~~June 30, 2020: nil) and during the six months ended June 30, 2021 (six months ended June 30, 2020: 1,525,312 common shares repurchased for $53,170,000).

Dividends

Declared and paid

The Company declared and paid the following dividends during the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020:

Dividend

Total

Dividend

Total

Declaration date

per share

Record date

dividends

Payment date

Declaration date

per share

Record date

dividends

Payment date

Six months ended June 30, 2021:

Fourth quarter 2020

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

Fourth quarter 2020

January 22, 2021

0.2200

February 12, 2021

24,181

March 5, 2021

Six months ended June 30, 2020:

Fourth quarter 2019

January 24, 2020

0.2000

February 14, 2020

21,905

March 6, 2020

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


Ritchie Bros.	23

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18. Equity and dividends (continued)

Declared and undistributed

Subsequent to ~~March 31,~~June 30, 2021, the Company’s Board of Directors declared a quarterly dividend of ~~$0.22~~$0.25 cents per common share, payable on ~~June 16,~~September 15, 2021 to stockholders of record on ~~May 26,~~August 25, 2021. This dividend payable has not been recognized as a liability in the financial statements. The payment of this dividend will 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 gain of $1,095,000 and a net loss of ~~$3,654,000~~$2,559,000 for the three and six months ended ~~March 31,~~June 30, 2021 (2020: net gain of $5,158,000 and net loss of ~~$7,492,000)~~$2,334,000).


~~Ritchie Bros.~~	23

~~Table of Contents~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

19. Share-based payments

Share-based payments consist of the following compensation costs:


	Three months ended				Three months ended				Six months ended
	March 31,				June 30,				June 30,
	2021		2020		2021		2020		2021		2020
SG&A expenses:
Stock option compensation expense	$	1,861	$	1,187	$	1,909	$	1,543	$	3,770	$	2,730
Equity-classified share units		3,153		1,786		4,404		3,231		7,557		5,017
Liability-classified share units		(1,915)		(1,156)		526		971		(1,389)		(185)
Employee share purchase plan - employer contributions		679		590		701		610		1,380		1,199
		3,778		2,407		7,540		6,355		11,318		8,761
Acquisition-related costs:
Share-based continuing employment costs		2,553		—		2,678		—		5,231		—
		2,553		—		2,678		—		5,231		—
	$	6,331	$	2,407	$	10,218	$	6,355	$	16,549	$	8,761

Stock option plans

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

Stock option activity for the ~~three~~six months ended ~~March 31,~~June 30, 2021 is presented below:

WA

Common

WA

remaining

Aggregate

shares under

exercise

contractual

intrinsic


option

price

life (in years)

value
Outstanding, December 31, 2020

1,985,754

$
34.95

7.7

$
68,717
Granted

684,761

54.83




Exercised

(197,863)

33.96

4,538
Forfeited

(6,533)

35.39




Outstanding, March 31, 2021

2,466,119

40.54

8.0

44,460
Exercisable, March 31, 2021

1,046,861

$
31.27

6.3

$
28,557

The significant assumptions used to estimate the fair value of stock options granted during the three months ended March 31, 2021 and 2020 are presented in the following table on a weighted average basis:

Three months ended March 31,

2021

2020

Risk free interest rate

0.5
%
0.8
%
Expected dividend yield

1.66
%
2.02
%
Expected lives of the stock options

4
years
5
years
Expected volatility

32.3
%
27.3
%

As at March 31, 2021, the unrecognized stock-based compensation cost related to the non-vested stock options was $11,000,000, which is expected to be recognized over a weighted average period of 2.7 years.


				WA
	Common	WA		remaining		Aggregate
	shares under	exercise		contractual		intrinsic
	option	price		life (in years)		value
Outstanding, December 31, 2020	1,985,754	$	34.95		7.7	$	68,717
Granted	690,353		54.88
Exercised	(311,153)		34.38				7,623
Forfeited	(23,808)		46.88
Outstanding, June 30, 2021	2,341,146		40.78		7.9		43,379
Exercisable, June 30, 2021	980,404	$	31.33		6.3	$	27,402


Ritchie Bros.	24

Table of Contents

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

19. Share-based payments (continued)

The significant assumptions used to estimate the fair value of stock options granted during the six months ended June 30, 2021 and 2020 are presented in the following table on a weighted average basis:


Six months ended June 30,	2021		2020
Risk free interest rate	0.5	%	0.7	%
Expected dividend yield	1.66	%	1.98	%
Expected lives of the stock options	4	years	5	years
Expected volatility	32.3	%	27.8	%

As at June 30, 2021, the unrecognized stock-based compensation cost related to the non-vested stock options was $8,979,000, which is expected to be recognized over a weighted average period of 2.4 years.

Share unit plans

Share unit activity for the ~~three~~six months ended ~~March 31,~~June 30, 2021 is presented below:


	Equity-classified awards						Liability-classified awards				Equity-classified awards						Liability-classified awards
	PSUs			RSUs			DSUs				PSUs			RSUs			DSUs
		WA grant			WA grant				WA grant			WA grant			WA grant				WA grant
		date fair			date fair				date fair			date fair			date fair				date fair
	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	542,676	$	38.09	134,937	$	39.14		137,514	$	32.06
Granted	137,848		56.81	28,560		56.45		4,525		52.08	140,455		56.69	29,525		56.59		9,362		56.33
Vested and settled	(161,248)		31.14	(87,409)		33.14		—		—	(161,248)		31.14	(88,157)		33.20		—		—
Forfeited	(10,750)		48.54	(4,089)		64.32		—		—	(13,765)		48.33	(5,357)		60.16		—		—
Outstanding, March 31, 2021	508,526	$	45.14	71,999	$	51.87	$	142,039	$	32.70
Outstanding, June 30, 2021											508,118	$	45.16	70,948	$	52.21		146,876	$	33.61

The total market value of liability-classified share units vested and released during the ~~quarter ended March 31,~~first half of 2021 was ~~$NaN~~NaN (December 31, 2020: ~~$NaN)~~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 shares on the open market on the employee’s behalf based on the cash value that otherwise would be delivered, or (ii) to issue a number of shares equal to the number of units that vest.

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

As at ~~March 31,~~June 30, 2021 the unrecognized share unit expense related to equity-classified PSUs was ~~$15,976,000,~~$14,431,000, which is expected to be recognized over a weighted average period of ~~2.3~~2.1 years.

RSUs

The Company has 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 price of the Company's common shares listed on the New York Stock Exchange.

As at ~~March 31,~~June 30, 2021, the unrecognized share unit expense related to equity-classified RSUs was ~~$2,818,000,~~$2,323,000, which is expected to be recognized over a weighted average period of ~~1.8~~1.6 years.


Ritchie Bros.	25

Table of Contents

19. Share-based payments (continued)

DSUs

The Company has DSU plans that are cash-settled and not subject to market vesting conditions.

Fair values of DSUs are estimated on grant date and at each reporting date. 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.

As at ~~March 31,~~June 30, 2021, the Company had a total share unit liability of ~~$7,900,000~~$8,699,000 (December 31, 2020: $9,597,000) in respect of share units under the DSU plans.


~~Ritchie Bros.~~	25

~~Table of Contents~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

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

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.

20. Leases

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


Three months ended March 31,	2021		2020
					Three months ended				Six months ended
					June 30,				June 30,
					2021		2020		2021		2020
Operating lease cost	$	4,600	$	4,501	$	4,392	$	3,969	$	8,992	$	8,470
Finance lease cost
Amortization of leased assets		2,588		2,114		2,815		2,195		5,403		4,309
Interest on lease liabilities		221		233		205		229		426		462
Short-term lease cost		2,661		2,880		1,922		2,151		4,583		5,031
Sublease income		(15)		(148)		(15)		(148)		(30)		(296)
	$	10,055	$	9,580	$	9,319	$	8,396	$	19,374	$	17,976

Operating leases

The Company has entered into commercial leases for various auction sites and offices located in North America, Europe, the Middle East, Australia and Asia. The majority of these leases are non-cancellable. The Company also has further 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.

The majority of the Company’s operating leases have a fixed term with a remaining life between one month and 20 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

$
12,478
2022

14,843
2023

12,784
2024

10,769
2025

10,647
Thereafter

107,826
Total future minimum lease payments

$
169,347
less: imputed interest

(41,586)
Total operating lease liability

$
127,761
less: operating lease liability - current

(11,419)
Total operating lease liability - non-current

$
116,342

~~At March 31, 2021 the weighted average remaining lease term for operating leases is 14.6 years and the weighted average discount rate is 3.9%.~~


Ritchie Bros.	26

Table of Contents

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

20. Leases (continued)

Operating leases (continued)

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


Remainder of 2021	$	7,344
2022		15,542
2023		13,986
2024		10,855
2025		10,711
Thereafter		108,715
Total future minimum lease payments	$	167,153
less: imputed interest		(40,780)
Total operating lease liability	$	126,373
less: operating lease liability - current		(11,243)
Total operating lease liability - non-current	$	115,130

At June 30, 2021 the weighted average remaining lease term for operating leases is 14.6 years and the weighted average discount rate is 3.8%.

Finance leases

The Company has entered into finance lease arrangements for certain vehicles, computer and yard equipment and office furniture. The majority of the 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, the Company has the option to purchase the leased asset at fair market value or a stated residual value at the end of the lease term. For certain leases such as vehicle leases the Company has included renewal options in the determination of its lease liabilities.

As at ~~March 31,~~June 30, 2021, the net carrying amount of computer and yard equipment and other assets under capital leases is ~~$25,222,000~~$24,927,000 (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				Accumulated		Net book
As at March 31, 2021	Cost		depreciation		value
As at June 30, 2021							Cost		depreciation		value
Computer equipment	$	16,161	$	(7,936)	$	8,225	$	15,820	$	(8,660)	$	7,160
Yard and others		29,275		(12,278)		16,997		31,670		(13,903)		17,767
	$	45,436	$	(20,214)	$	25,222	$	47,490	$	(22,563)	$	24,927


			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

$
7,702
2022

8,545
2023

6,272
2024

3,759
2025

821
Thereafter

24
Total future minimum lease payments

$
27,123
less: imputed interest

(1,243)
Total finance lease liability

$
25,880
less: finance lease liability - current

(9,256)
Total finance lease liability - non-current

$
16,624

~~At March 31, 2021 the weighted average remaining lease term for finance leases is 3.1 years and the weighted average discount rate is 3.7%.~~


Ritchie Bros.	27

Table of Contents

20. Leases (continued)

~~Notes to the Condensed Consolidated Financial Statements~~Finance leases (continued)

~~(Tabular amounts expressed in thousands of United States dollars, except where noted)~~

~~(Unaudited)~~

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


Remainder of 2021	$	5,291
2022		9,073
2023		6,743
2024		4,221
2025		1,275
Thereafter		170
Total future minimum lease payments	$	26,773
less: imputed interest		(1,049)
Total finance lease liability	$	25,724
less: finance lease liability - current		(9,459)
Total finance lease liability - non-current	$	16,265

At June 30, 2021 the weighted average remaining lease term for finance leases is 3.1 years and the weighted average discount rate is 3.6%.

21. Commitments

Commitment for inventory purchase

In December 2017, the Company entered into a two-year non-rolling stock surplus contract with the U.S. Government Defense Logistics Agency (the “DLA”), the term of which ~~has been~~was extended until June 1, 2021 at which point the contract ~~will terminate.~~was terminated. Under this contract, the Company ~~has~~ committed to purchase between 150,000 and 245,900 assets with an expected minimum value of $11,104,000 and up to $51,028,000 annually to the extent that goods are available from the DLA. From January 1, 2021 to the end of the contract term, June 1, 2021, the Company purchased $18,390,000 under the contract. As at ~~March 31,~~June 30, 2021, the Company has ~~purchased $28,355,000 pursuant to~~no further commitments under the ~~12-month period of this~~ contract ~~which commenced in April 2020.~~as it has been terminated.

On April 1, 2021, the DLA awarded two new contracts to the Company. 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 ~~commence~~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 new 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 June 30, 2021, the Company has purchased 19,813 assets with a total value of $4,244,000 pursuant to the two year period of this contract which commenced on June 1, 2021.

22. 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 ~~March 31,~~June 30, 2021, there were ~~$56,257,000~~$131,872,000 of assets guaranteed under contract, of which ~~83%~~90% is expected to be sold prior to ~~June~~September 30, 2021, with the remainder to be sold by December 31, ~~2021~~2022 (December 31, 2020: $22,773,000 of which 23% was expected to be sold prior to the end of March 31, 2021 with the remainder to be sold by December 31, 2021).

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

~~23. Subsequent Events~~

On April 30, 2021, the Company entered into a non-binding letter of intent (“LOI”) to purchase approximately 104.5 acres of land in Canada for the purpose of relocating an existing auction site. A purchase agreement has not yet been executed.


Ritchie Bros.	28

Table of Contents

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 report, 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.~~materially

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, which is available on our website at www.rbauction.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.

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 (“U.S.”) 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 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 MD&A. Non-GAAP financial measures referred to in this report are labeled as “non-GAAP measure” or designated as such with an asterisk (*). Please see pages ~~42-47~~45-49 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 $5.41 billion of used equipment and other assets during 2020. Our expertise, unprecedented 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 ~~live,~~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, and private brokerage services, we sell a broad range of used and unused commercial assets, including earthmoving equipment, truck tractors, truck trailers, government surplus, oil and gas equipment and other industrial assets. Construction and heavy machinery comprise the majority of the equipment sold. 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.

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

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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We operate globally with locations in more than 12 countries, including the U.S., Canada, Australia, the United Arab Emirates, and the Netherlands, and employ more than 2,600 full time employees worldwide.

Impact of COVID-19 to our Business

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which ~~continues to~~quickly spread throughout the world ~~with new variants of the virus recently emerging. The COVID-19 pandemic has resulted~~resulting in significant global economic disruption ~~and has~~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.

~~Our~~In Q2, 2021, our ability ~~during the COVID-19 pandemic~~ to move equipment to and from our auction sites, and across borders ~~varies~~continues to vary regionally with Asia and ~~the Middle East~~Australia continuing to be negatively impacted as regional governments continue to enforce travel restrictions and quarantine requirements. ~~Despite other~~In these regions, ~~having various levels of~~the restrictions have also resulted in some challenges in customer interactions and challenges for our customers to complete equipment inspections. In our International region, travel and quarantine restrictions itare slowly being lifted as people become vaccinated, which is slowly driving up our auction volumes as equipment can be moved between borders more easily. In the United States and Canada, COVID-19 has not materially impacted on our ability to operate our businesses and move equipment. Globally, a recent surge in shipping and freight costs combined with extended lead times is making transportation of equipment both more costly and challenging which is negatively impacting the buying and selling behaviours of our customers. Additionally, COVID-19 is still impacting the supply chains of new equipment production which is negatively affecting the supply of used equipment being sold through all our regions, most predominantly in North America.

Our top priority regarding the COVID-19 pandemic remains the health and welfare of our employees, customers, suppliers and others with whom we partner to run our business activities. We ~~are strictly enforcing~~continue to adhere to all local government and jurisdictional safety guidelines, and, in some instances, we are applying additional over-and-above safety measures. ~~In the first quarter of 2020, we implemented our business continuity plans and instructed employees at many~~Many of our ~~offices across the globe (including our corporate headquarters)~~employees continue to work from home on a temporary basis and ~~implemented~~travel continues to be quite limited given ongoing travel restrictions. ~~These work-from-home orders and travel restrictions introduced in March 2020 continue to be enforced in 2021.~~

Since the beginning of the COVID-19 pandemic, ~~and during the first quarter of 2021,~~ we continue to be able to operate and serve our customers’ equipment 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 operations 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 in advance of the auctions to conduct inspections and pick up equipment post auction, but we ~~are no longer~~have not been holding live auction events in our theatres. ~~We are enforcing rigid guidelines for equipment drop off, buyer inspections~~As restrictions ease in the US and ~~post~~elsewhere we will be considering a transition back to some measure of in-person attendance at our on site auction ~~pickup of equipment to ensure the highest regard for the safety of our employees and customers. In addition, we have implemented Time Auctioned Lots (TAL) solution for selected events since Q1 2020.~~events.

We have taken and actively continue to take steps to be prudent on expenses and other cash outflows since the start of the COVID-19 pandemic, while taking steps to maximize our positive cash flows while still investing for future growth. Our priority is to continue to support our employees, and we are actively monitoring the situation and changing dynamics in each of our respective regions and adjusting our operations as necessary. To this date, layoffs or furlough activities related to the COVID-19 pandemic have been limited in scope. As at the end of the first quarter, we held a solid balance sheet and strong liquidity position. As of March 31, 2021, we have $294.4 million of unrestricted cash and $461.1 million of unused committed capacity under our long term revolving credit facilities. ~~We have also developed comprehensive contingency plans should the COVID-19 pandemic have a prolonged adverse impact on our business impeding our ability to generate revenue.~~

The extent of the ongoing impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives, will depend on future developments, including the duration and spread of the pandemic in light of new variants, time of mass vaccine distribution, and any related restrictions placed by respective global governments, 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 at the time of this filing, we continue to operate our auctions in all regions, there is no assurance that our operations could not be impacted in the future.

We ~~are~~continue to actively ~~monitoring~~monitor the evolving impact COVID-19 is having in the world and remain ready to take ~~additional~~further actions or adjust our response based on any new governmental guidance or recommendations. ~~We continue to review and assess the pandemic’s impacts on our customers, our suppliers and our business so that we can address the effect on our business and service our customers.~~ 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, it is still not easily discernable to understand the real 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. Additionally, there is a level of uncertainty over the long-term impact the COVID-19 pandemic may have on our third party vendors, partners and the service providers with whom we currently do business with today. Their ability to partner with us may be temporarily or permanently constrained and for some, the business terms under which they continue to partner with us could change as they manage their business through these unprecedented times. As such, given the ongoing nature of the COVID-19 pandemic, we are not able to reasonably estimate the future impacts on our business operations, results of operations, cash flows, financial performance or our ability to pay dividends.


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~~estimate the future impacts on our business operations, results of operations, cash flows, financial performance or our ability to pay dividends.~~

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, 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.

Seasonality

Our GTV and associated A&M segment revenues are affected by the seasonal nature of our business. GTV and A&M segment revenues 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.

Revenue Mix Fluctuations

Our revenue is comprised of service revenue and inventory sales revenue. Service revenue from A&M segment activities include 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 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 can have a significant impact on revenue growth percentages.


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Performance Overview

Net income attributable to stockholders increased ~~24%~~15% to ~~$28.2~~$60.7 million, compared to ~~$22.8~~$53.0 million in Q1Q2 2020. Diluted earnings per share (“EPS”) attributable to stockholders increased ~~19%~~12% to ~~$0.25~~$0.55 per share in Q2 2021 as compared to $0.49 per share in Q2 2020. Diluted adjusted EPS attributable to stockholders* increased 2% to $0.55 per share in Q1 2021 compared to $0.54 per share in Q2 2020.

For the second quarter of 2021 as compared to ~~$0.21 per share in Q1 2020.~~the second quarter of 2020:

Consolidated results:

●	Total revenue in Q1Q2 2021 increased ~~21%~~2% to ~~$331.6~~$396.4 million ~~as compared to Q1 2020~~

Service revenue in Q1Q2 2021 increased ~~13%~~8% to ~~$206.0~~$252.7 million ~~as compared to Q1 2020~~

Inventory sales revenue in Q1Q2 2021 ~~increased 39%~~decreased 7% to ~~$125.5~~$143.6 million ~~as compared to Q1 2020~~

●	Total selling, general and administrative expenses (“SG&A”) in Q1Q2 2021 increased ~~18%~~11% to ~~$116.1~~$111.8 million ~~as compared to Q1 2020~~

●	Operating income in Q1Q2 2021 increased ~~31%~~1% to ~~$44.5~~$89.5 million ~~as compared to Q1 2020~~

●	Net income in Q1Q2 2021 increased ~~23%~~14% to ~~$28.1~~$60.8 million ~~as compared to Q1 2020~~

●	Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization* (“EBITDA”) (non-GAAP measure) in Q1Q2 2021 increased ~~18%~~5% to ~~$66.3~~$112.3 million ~~as compared to Q1 2020~~

●	Cash provided by operating activities was ~~$180.7~~$211.4 million for the first ~~three months~~half of 2021

●	Cash on hand at Q1Q2 2021 was ~~$441.6~~$442.7 million, of which ~~$294.4~~$301.8 million was unrestricted

Auctions & Marketplaces segment results:

●	GTV in Q1Q2 2021 increased ~~11%~~2% to ~~$1.3~~$1.5 billion and ~~increased 8%~~decreased 3% when excluding the impact of foreign exchange ~~compared to Q1 2020~~

●	A&M total revenue in Q1Q2 2021 ~~increased 21% to $296.3~~remained flat at $355.1 million ~~as compared to Q1 2020~~

Service revenue in Q1Q2 2021 increased ~~10%~~6% to ~~$170.8~~$211.5 million ~~as compared to Q1 2020~~

Inventory sales revenue in Q1Q2 2021 ~~increased 39%~~decreased 7% to ~~$125.5~~$143.6 million ~~as compared to Q1 2020~~

Other Services segment results:

●	Other Services total revenue in Q1Q2 2021 increased ~~24%~~20% to ~~$35.3~~$41.3 million ~~as compared to Q1 2020~~

RBFS revenue in Q1Q2 2021 increased ~~27%~~39% to ~~$9.2~~$11.8 million ~~as compared to Q1 2020~~

Rouse revenue of ~~$5.6~~$6.2 million was recognized in Q1Q2 2021, which was its ~~first~~second full quarter since its acquisition on December 8, 2020

●	Total number of organizations activated on our business management system “IMS” increased by 34%

Other Company developments:

●

On March 11, 2021, the Company announced that it was awarded the support of the U.S. Department of Defense with new surplus term sale contracts as the Company was declared the apparent high bidder for two new East and West contracts, covering the consolidated surplus rolling stock and non- rolling stock assets. These contracts were formally awardedIncreased quarterly cash dividend by 14% to ~~the Company on April 1, 2021 and commence on June 1, 2021.~~$0.25 per share


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Results of Operations

Financial overview


	Three months ended March 31,									Three months ended June 30,									Six months ended June 30,
							% Change									% Change									% Change
(in U.S. $000's, except EPS and percentages)	2021			2020			2021 over 2020			2021			2020			2021 over 2020			2021			2020			2021 over 2020
Service revenue:
Commissions	$	103,975		$	93,484			11	%	$	129,334		$	125,465			3	%	$	233,309		$	218,950			7	%
Fees		102,055			89,639			14	%		123,414			108,674			14	%		225,469			198,312			14	%
Total service revenue		206,030			183,123			13	%		252,748			234,139			8	%		458,778			417,262			10	%
Inventory sales revenue		125,525			90,132			39	%		143,613			154,911			(7)	%		269,138			245,043			10	%
Total revenue		331,555			273,255			21	%		396,361			389,050			2	%		727,916			662,305			10	%
Costs of services		36,027			39,355			(8)	%		39,042			39,448			(1)	%		75,069			78,803			(5)	%
Cost of inventory sold		110,747			81,585			36	%		131,023			143,134			(8)	%		241,770			224,719			8	%
Selling, general and administrative expenses		116,078			98,385			18	%		111,819			100,632			11	%		227,897			199,017			15	%
Operating expenses		287,053			239,173			20	%		306,844			300,250			2	%		593,897			539,423			10	%
Operating income		44,502			34,082			31	%		89,517			88,800			1	%		134,019			122,882			9	%
Operating income as a % of total revenue		13.4	%		12.5	%		90	bps		22.6	%		22.8	%		(20)	bps		18.4	%		18.6	%		(20)	bps
Net income attributable to stockholders		28,188			22,809			24	%		60,749			53,043			15	%		88,937			75,851			17	%
Adjusted net income attributable to stockholders*		28,188			22,809			24	%		60,749			59,271			2	%		88,937			82,079			8	%
Diluted earnings per share attributable to stockholders	$	0.25		$	0.21			19	%	$	0.55		$	0.49			12	%	$	0.80		$	0.69			16	%
Diluted adjusted EPS attributable to stockholders*	$	0.25		$	0.21			19	%	$	0.55		$	0.54			2	%	$	0.80		$	0.75			7	%
Effective tax rate		23.0	%		19.8	%		320	bps		25.7	%		34.2	%		(850)	bps		24.9	%		30.5	%		(560)	bps

Total GTV		1,274,539			1,147,025			11	%		1,527,642			1,493,982			2	%		2,802,182			2,641,006			6	%
Service GTV		1,149,014			1,056,893			9	%		1,384,029			1,339,071			3	%		2,533,044			2,395,963			6	%
Service revenue as a % of total GTV		16.2	%		16.0	%		20	bps		16.5	%		15.7	%		80	bps		16.4	%		15.8	%		60	bps
Inventory GTV		125,525			90,132			39	%		143,613			154,911			(7)	%		269,138			245,043			10	%

Service revenue as a % of total revenue		62.1	%		67.0	%		(490)	bps		63.8	%		60.2	%		360	bps		63.0	%		63.0	%		—	bps
Inventory sales revenue as a % of total revenue		37.9	%		33.0	%		490	bps		36.2	%		39.8	%		(360)	bps		37.0	%		37.0	%		—	bps
Cost of inventory sold as a % of operating expenses		38.6	%		34.1	%		450	bps		42.7	%		47.7	%		(500)	bps		40.7	%		41.7	%		(100)	bps
Service GTV as a % of total GTV - Mix		90.2	%		92.1	%		(190)	bps		90.6	%		89.6	%		100	bps		90.4	%		90.7	%		(30)	bps
Inventory sales revenue as a % of total GTV - Mix		9.8	%		7.9	%		190	bps		9.4	%		10.4	%		(100)	bps		9.6	%		9.3	%		30	bps

Total GTV

Total GTV increased ~~11%~~2% to ~~$1.3~~$1.5 billion in Q2 2021 and increased 8%6% to $2.8 billion in the first half of 2021. Total GTV decreased 3% in Q2 2021 and increased 2% in the first half of 2021, when excluding the impact of foreign ~~exchange~~exchange.

In Q2 2021, GTV grew primarily in ~~Q1 2021. GTV volumes rose partly due to significant auction calendar shifts from the delay in auctions in prior year from the impact of COVID-19 which included (1) Montreal,~~International and Canada, ~~(2) Los Angeles, US and (3) Caorso, Italy, which were~~ offset by lower ~~volumes at~~volume in the ~~Las Vegas, US auction partly impacted by the non-repeat of a large North American trade show occurring at the same time, and the non-repeat of a collector car event. In addition, all~~US. All regions ~~experienced~~continued to experience very strong mix adjusted auction price performance due to high demand for used equipment, in part aided by our digital marketing efforts. ~~In Canada,~~However, despite higher mix adjusted pricing, we ~~saw strong results~~experienced headwinds due to negative mix impacts driven in part by older aged equipment in the ~~Canadian agricultural market,~~transportation and inconstruction sectors. This combined with auction calendar shifts of $52 million from the ~~US we benefited from combining several regional events. We also saw positive year-over-year performance in International as a result of a soft prior quarter in Europe due to the direct~~ impact of the COVID-19 pandemic that were shifted from Q1 into Q2 2020 that did not repeat in Q2 2021 led to lower GTV. In International, the increased volumes were driven by an improved economic climate and ~~early benefits~~the benefit from the use of new ~~test~~ satellite yards in France, Germany and ~~Australia. These were~~Australia coupled with a favourable foreign exchange impact partially offset by the auction shift of Caorso, Italy. In Canada, we benefited from a favourable foreign exchange impact, higher performance at our Toronto auction, and increased volume from providing escrow services for private brokered transactions in RBFS, offset by lower overall volumes in Edmonton and Grand Prairie as well as the shift of our Montreal auction. In the US, we saw lower volumes due to the shift of our Los Angeles auction, the non-repeat of a large supply contract, lower activity due to supply constraints mainly in our Fort Worth auction and Denver regional combined events. In addition, lower volumes in our US strategic accounts in the finance, OEM and transportation sectors also contributed to lower GTV, partially offset by positive online performance.


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For the first half of 2021, total GTV increased 6% in line with favourable impact of foreign exchange, higher volumes in International partially offset by lower volumes ~~realized~~in Canada and the US for the same reasons as discussed above. In addition, we saw lower volumes at the Orlando and Las Vegas, US ~~auction due to~~auctions, and the non-repeat of a ~~dynamic supply environment.~~collector car event.

Total revenue

Total revenue increased ~~21%~~2% to ~~$331.6~~$396.4 million in Q1Q2 2021, with ~~inventory sales revenue increasing significantly by 39% mainly as a result of a change in GTV mix, and~~ total service revenue increasing by ~~13%~~8%, offset by a decrease in inventory sales revenue by 7%. Total revenue increased 10% to $727.9 million for the first half of 2021.

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

Service Revenue

Q2 2021

In Q1Q2 2021, total service revenue increased ~~13%~~8% with fees revenue increasing 14% and commissions revenue increasing ~~11%~~3%. Service revenues comprise of commissions which are earned on Service GTV, and 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.

~~In Q1 2021,~~ Service GTV increased 9%3% to ~~$1.1~~$1.4 billion in line with ~~increases across all regions, most notably~~strong pricing, favourable foreign exchange, partially offset by unfavourable mix. By region, we saw higher GTV mainly in International and Canada due to higher activity, offset by lower volumes in the US due to equipment supply constraints and ~~International.~~mix. International saw significantly higher volumes in Australia, the Middle East, Spain and Italy, primarily as a result of improved market economic conditions and the lifting of border and travel restrictions from the recovery of the COVID-19 pandemic. The ~~increase~~region also benefited from the shifting of the Polotitlan, Mexico auction and new satellite yards in Europe, slightly offset by the shifting of the Caorso, Italy auction. In Canada, Service GTV ~~was primarily~~grew due to a strong foreign exchange impact, positive year-over-year performance in our Toronto auction, offset by the shifting of our Montreal auction and overall softer performance in Edmonton and Grand Prairie. In addition, Canada service GTV grew as a result of increased escrow services provided by RBFS for private brokered transactions through our Marketplace-E platform. In the US, Service GTV decreased due to the shifting of our Los Angeles auction, lower volumes in the ~~Montreal~~Denver combined regional auction events as well as in our Fort Worth auction, and ~~strong year-over-year performance~~the non-repeat of a large supply contract. These decreases were partially offset by higher Service GTV sold through our online platform and in our GovPlanet business.

Fees revenue increased 14%, mainly due to fee revenue from the acquisition of Rouse, higher fees driven by higher funded volume in RBFS, and higher buyer fees in line with higher GTV of 2%. Buyer fees also increased from the revised global buyer-fee structure implemented on May 1, 2021, the re-instatement of fees at the Canadian on-the-farm auctions which were waived in Q2 2020 as part of our COVID-19 pandemic response, as well as higher buyer fee structures in both Australia and in our GovPlanet business. These increases were partially offset by lower fees as a result of lower activity in our Ancillary services, lower fees on mix of lower proportion of small value lots and lower document fees in the US driven by a decline in the total number of titled lots sold.

Commissions revenue increased 3%, in line with the increase in Service GTV of 3%.

First half of 2021

For the first half of 2021, total service revenue increased 10% with fees revenue increasing 14% and commissions revenue increasing 7%.

Service GTV increased 6% to $2.5 billion with increases in International and Canada offsetting lower performances in the US for the same reasons as discussed above. In addition, lower Service GTV in the US was driven by lower volumes at our Orlando and Las Vegas auctions, and the non-repeat of a collector car event.

Fees revenue increased 14%, partially related to the increase in total GTV of 6%. The remaining increase was due to the same reasons as discussed above, and partially offset by the reduction in fees revenue in the US resulting from the non-repeat of a collector car event.

Commissions revenue increased 7%, largely driven by the increase in Service GTV of 6%.


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at our Canadian agricultural auctions driven by an increase in the number of auctions held. In International, Service GTV grew as a result of the addition of an auction event in the Netherlands which included GTV sold from a satellite yard in Germany, the shifting of the Caorso auction and a new auction held in France where new test satellite yards created some positive momentum. In US, Service GTV increased driven by strong price performance and increased volumes as a result of the combination of several regional auction events, the shifting of the Los Angeles auction, and higher volumes at the Fort Worth, US auction. This increase was primarily offset by a lower performance at the Orlando auction, lower volumes at our Las Vegas auction and the non-repeat of a collector car event.

In Q1 2021, fees revenue increased 14%, primarily due to the increase in total GTV of 11%. The remaining increase in fees revenue was due to the growth in our services in the Other Segment as a result of the acquisition of Rouse on December 8, 2020, an increase in fees from higher funded volumes in RBFS, and higher online listing fees. The increase in fees was partially offset by the type of asset mix in the US with fewer sales of collector cars, small value lots, and titled lots.

In Q1 2021, commissions revenue increased 11%, largely driven by the increase in Service GTV of 9%. The remaining increase in commission revenue was driven by improved rates and strong performances on guarantee commission contracts across all regions, but most notably in the US, and in particular in the construction and transportation sectors. We also saw improved rates in the straight commission contracts within the GovPlanet business and higher straight commission revenue earned on low value assets sold in Canada.~~These increases were partially offset by softer straight commission rate performance from a higher proportion of GTV sourced from US strategic accounts.~~

Inventory Sales Revenue

Inventory sales revenue as a percentage of total GTV decreased to 9.4% from 10.4% in Q2 2021 and increased to 9.6% from 9.3% in ~~Q1 2021 to 9.8% from 7.9% in Q1 2020.~~the first half of 2021.

In Q1Q2 2021, inventory sales revenue decreased 7% representing a lower mix of volumes of inventory contracts, partially offset by higher pricing. In both the US and Canada, an unfavourable supply environment impacted the volumes at our auctions in Fort Worth, US and Orlando, US and Edmonton, Canada. These decreases were partially offset by strong year-over-year performance in our International region primarily driven by large private treaty transactions in Australia, and in the Middle East due to higher volumes benefiting from overall improved economic conditions from the recovery of the COVID-19 pandemic. In addition, we saw increased 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 prior year in response to the COVID-19 pandemic.

For the first half of 2021, inventory sales revenue increased ~~39%, predominantly in International and the US. Some of this positive year-over-year performance is a result of a soft prior quarter in Europe~~10% primarily due to ~~the direct impact of COVID-19. In Europe, there was~~ a ~~significant increase in the volume~~higher mix of inventory contracts, as ~~a result~~well as strong performances in International as discussed above and the addition of ~~improved economic conditions and climate which has increased our ability to move equipment across borders, attract more customers, and hold~~ several new auctions held across various countries in the period compared to Q1 2020. International inventory sales revenue also grew in Australia from a large private treaty deal and higher overall activity. In the US, the inventory sales revenue increase was mainly driven by a higher volume of inventory packages in the construction sector at our Fort Worth, Texas auction and positive year-over-year improvement in both inventory volume and the rate performance selling through our GovPlanet business.

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

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 includes inventory and guarantee contracts ~~remained flat at 15%~~decreased to 17.6% in Q1Q2 2021 compared to Q124.6% in Q2 2020. For the first half of 2021, our underwritten contracts were 16.3% compared to 20.4% in the prior period.

Operating Income

For Q1Q2 2021, operating income increased ~~31%~~1% or ~~$10.4~~$0.7 million to ~~$44.5~~$89.5 million, primarily ~~related~~due to a ~~21% increase in revenue and a strong~~favourable impact of foreign exchange fluctuation, flow through tofrom higher service revenues, partially offset by higher selling, general and administrative expenses, and incremental acquisition-related costs and depreciation and amortization associated with the acquisition of Rouse in Q4 2020. For the first half of 2021, operating income ~~combined with a 20% increase in total operating expenses. Operating expenses included~~increased 9% or $11.1 million to $134.0 million, primarily for the same reasons above, as well as higher revenue rates on inventory sales offset by higher severance costs relating to ~~the~~ ongoing operations of the ~~business, as well as acquisition related costs incurred for the acquisition of Rouse.~~business.

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.

For Q1Q2 2021, income tax expense ~~increased by 49%~~decreased 24% to ~~$8.4~~$21.1 million and our effective tax rate ~~increased 320~~decreased 850 bps to ~~23.0%~~25.7% as compared to Q1Q2 2020. ~~The increase~~For the first half of 2021, income tax expense decreased 11% to $29.5 million and our effective tax rate decreased 560 bps to 24.9% as compared to the first half of 2020.

Decrease in the effective tax rate for Q1Q2 2021 was primarily due toa decrease in the estimate of non-deductible expenses. Partially offsetting this decrease was a higher estimate ~~of non-deductible expenses, an increased proportion~~ of income taxed in jurisdictions with higher tax rates, and write off of a deferred tax asset upon departure of a previous unitholder of Rouse who became an employee of the Company after acquisition. The higher estimate of non-deductible expenses are primarily due to final regulations published onrates.

On April 8, 2020 by 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 and $1.1 million in the three months ended March 31, 2020 which were no longer deductible and accordingly were reversed in the three months ended June 30, 2020.

Decrease in the first half of 2021 was primarily due to the reasons described above. In addition, there was a higher tax deduction for share unit expenses in excess of compensation expense.


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Internal Revenue Service (“IRS”) that clarified income tax benefits related to hybrid financing arrangements would not be deductible (“Hybrid Interest”). Partially offsetting these increases was a higher tax deduction for PSU and RSU share unit expenses, which were settled in the quarter, that exceeded the related compensation expense.

Net income

In Q1Q2 2021, net income attributable to stockholders increased ~~24%~~15% to ~~$28.2~~$60.7 million, primarily related to ~~higher operating income, offset partly by~~ the ~~non-repeat of $1.7 million contingent consideration received related to the disposition of an equity investment in Q1 2020. Net income~~ ~~was also partially offset by the increase~~decrease in the effective tax rate, as discussed above, and higher operating income. For the first half of 2021, net income attributable to stockholders increased 17% to $89.0 million, primarily for the same reasons noted above.

Diluted EPS

Diluted EPS attributable to stockholders increased ~~19%~~12% to ~~$0.25~~$0.55 per share for Q1Q2 2021 ~~from $0.21~~and increased 16% to $0.80 per share ~~in Q1 2020.~~for the first half of 2021.

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						% Change
					2021 over						2021 over
Value of one local currency to U.S dollar	2021		2020		2020		2021		2020		2020
Period-end exchange rate
Canadian dollar		0.7961		0.7097	12	%		0.8067		0.7367	10	%
Euro		1.1726		1.1025	6	%		1.1857		1.1235	6	%
Australian dollar		0.7595		0.6118	24	%		0.7499		0.6902	9	%

Average exchange rate -Three months ended March 31,
Average exchange rate -Three months ended June 30,
Canadian dollar		0.7896		0.7453	6	%		0.8139		0.7210	13	%
Euro		1.2059		1.1031	9	%		1.2046		1.1009	9	%
Australian dollar		0.7728		0.6575	18	%		0.7698		0.6557	17	%

Average exchange rate -Six months ended June 30,
Canadian dollar								0.8139		0.7334	11	%
Euro								1.2046		1.1021	9	%
Australian dollar								0.7698		0.6572	17	%

For Q1Q2 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 Australian dollar, Canadian dollar, and the Euro 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 non-recurring items that we do not consider to be part of our normal operating results, such as acquisition-related costs, management reorganization costs, severance, retention, gains/losses on sale of an equity accounted for investment, plant and equipment, impairment losses, and certain other items, which we refer to as ‘adjusting items’. There were no adjusting items in Q1Q2 2021 or Q1Q2 2020.

Adjusted net income attributed to stockholders (non-GAAP measure) increased ~~24%~~2% to ~~$28.2~~$60.7 million in Q1Q2 2021 ~~from $22.8~~and increased 8% to $88.9 million ~~in Q1 2020.~~for the first half of 2021.

Diluted Adjusted EPS attributable to stockholders (non-GAAP measure) increased ~~19%~~2% to ~~$0.25~~$0.55 per share in Q1Q2 2021 ~~from $0.21~~and increased 7% to $0.80 per share ~~in Q1 2020.~~for the first half of 2021.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) (non-GAAP measure) increased ~~18%~~5% to ~~$66.3~~$112.3 million in Q1Q2 2021 ~~from $56.1~~and increased 9% to $178.6 million ~~in Q1 2020.~~for the first half of 2021.

Debt at the end of Q1Q2 2021, represented ~~3.8~~3.7 times net income as at and for the 12 months ended ~~March 31,~~June 30, 2021. This compares to debt at Q1Q2 2020, which represented 4.3 times net income as at and for the 12 months ended ~~March 31,~~June 30, 2020. The decrease in this debt/net income multiplier was primarily due to higher operating income driving higher net income as at ~~March 31,~~June 30, 2021 compared to ~~March 31,~~June 30, 2020. The adjusted net debt/adjusted EBITDA (non-GAAP measure) was 1.0 times as at and for the 12 months ended ~~March 31,~~June 30, 2021 compared to ~~1.3~~0.9 times as at and for the 12 months ended ~~March 31,~~June 30, 2020.


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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.


	Three months ended March 31, 2021						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		A&M		Other		Consolidated
Service revenue	$	170,755	$	35,275	$	206,030	$	211,475	$	41,273	$	252,748	$	382,230	$	76,548	$	458,778
Inventory sales revenue		125,525		—		125,525		143,613		—		143,613		269,138		—		269,138
Total revenue		296,280		35,275		331,555		355,088		41,273		396,361		651,368		76,548		727,916
Ancillary and logistical service expenses		—		12,269		12,269		—		14,819		14,819		—		27,088		27,088
Other costs of services		21,590		2,168		23,758		21,985		2,238		24,223		43,575		4,406		47,981
Cost of inventory sold		110,747		—		110,747		131,023		—		131,023		241,770		—		241,770
SG&A expenses		104,345		11,733		116,078		101,417		10,402		111,819		205,762		22,135		227,897
Segment profit		59,598		9,105		68,703		100,663		13,814		114,477		160,261		22,919		183,180


	Three months ended March 31, 2020						Three months ended June 30, 2020						Six months ended June 30, 2020
(in U.S $000's)	A&M		Other		Consolidated		A&M		Other		Consolidated		A&M		Other		Consolidated
Service revenue	$	154,743	$	28,380	$	183,123	$	199,648	$	34,491	$	234,139	$	354,391	$	62,871	$	417,262
Inventory sales revenue		90,132		—		90,132		154,911		—		154,911		245,043		—		245,043
Total revenue		244,875		28,380		273,255		354,559		34,491		389,050		599,434		62,871		662,305
Ancillary and logistical service expenses		—		12,758		12,758		—		16,060		16,060		—		28,818		28,818
Other costs of services		25,095		1,502		26,597		22,190		1,198		23,388		47,285		2,700		49,985
Cost of inventory sold		81,585		—		81,585		143,134		—		143,134		224,719		—		224,719
SG&A expenses		91,585		6,800		98,385		94,559		6,073		100,632		186,144		12,873		199,017
Segment profit		46,610		7,320		53,930		94,676		11,160		105,836	$	141,286	$	18,480	$	159,766

Auctions and Marketplaces Segment

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


	Three months ended March 31,								Three months ended June 30,								Six months ended June 30,
							% Change								% Change								% Change
							2021 over								2021 over								2021 over
(in U.S. $000's, except percentages)	2021			2020			2020		2021			2020			2020		2021			2020			2020
Service revenue	$	170,755		$	154,743		10	%	$	211,475		$	199,648		6	%	$	382,230		$	354,391		8	%
Inventory sales revenue		125,525			90,132		39	%		143,613			154,911		(7)	%		269,138			245,043		10	%
Total revenue		296,280			244,875		21	%		355,088			354,559		0	%		651,368			599,434		9	%
A&M service revenue as a % of total A&M revenue		57.6	%		63.2	%	(560)	bps		59.6	%		56.3	%	330	bps		58.7	%		59.1	%	(40)	bps
Inventory sales revenue as a % of total A&M revenue		42.4	%		36.8	%	560	bps		40.4	%		43.7	%	(330)	bps		41.3	%		40.9	%	40	bps
Costs of services		21,590			25,095		(14)	%		21,985			22,190		(1)	%		43,575			47,285		(8)	%
Cost of inventory sold		110,747			81,585		36	%		131,023			143,134		(8)	%		241,770			224,719		8	%
SG&A expenses		104,345			91,585		14	%		101,417			94,559		7	%		205,762			186,144		11	%
A&M segment expenses	$	236,682		$	198,265		19	%	$	254,425		$	259,883		(2)	%	$	491,107		$	458,148		7	%
Cost of inventory sold as a % of A&M expenses		46.8	%		41.1	%	570	bps		51.5	%		55.1	%	(360)	bps		49.2	%		49.0	%	20	bps
A&M segment profit	$	59,598		$	46,610		28	%	$	100,663		$	94,676		6	%	$	160,261		$	141,286		13	%
Total GTV		1,274,539			1,147,025		11	%		1,527,642			1,493,982		2	%		2,802,182			2,641,006		6	%
A&M service revenue as a % of total GTV- Rate		13.4	%		13.5	%	(10)	bps		13.8	%		13.4	%	40	bps		13.6	%		13.4	%	20	bps

Gross Transaction Value

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

To facilitate the live auction process transition to a virtual platform and under strict safety guidelines, we enabled 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 Auctioned Lots (TAL) solutions for selected International and on-the-farm agriculture events.


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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.


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GTV by Geography


	Three months ended March 31,					Three months ended June 30,						Six months ended June 30,
			% Change						% Change						% Change
(in U.S. $000's)	2021	2020	2021 over 2020			2021		2020	2021 over 2020			2021		2020	2021 over 2020
Total GTV by Geography
United States	881,653	862,442	2	%	$	740,826	$	792,450	(7)	%	$	1,622,479	$	1,654,891	(2)	%
Canada	210,611	149,311	41	%		551,075		529,432	4	%		761,687		678,743	12	%
International	182,275	135,272	35	%		235,741		172,100	37	%		418,016		307,372	36	%
Total GTV	1,274,539	1,147,025	11	%		1,527,642		1,493,982	2	%		2,802,182		2,641,006	6	%

Service GTV by Geography
United States	815,316	805,494	1	%		686,973		720,253	(5)	%		1,502,289		1,525,747	(2)	%
Canada	200,896	141,116	42	%		543,147		510,306	6	%		744,044		651,422	14	%
International	132,802	110,283	20	%		153,909		108,512	42	%		286,711		218,794	31	%
Total Service GTV¹	1,149,014	1,056,893	9	%		1,384,029		1,339,071	3	%		2,533,044		2,395,963	6	%

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

GTV by Sector

The following pie charts illustrate the breakdown of total GTV by sector for Q1Q2 2021 compared to Q1Q2 2020.

The construction sector includes heavy equipment such as trucks, excavators, cranes and dozers. 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 Q1Q2 2021, ~~there was no significant change~~total GTV in the ~~GTV~~transportation sector decreased by ~~sector~~3% compared to ~~Q1 2020.~~Q2 2020 and remained flat within the construction sector.


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Total auction metrics

We review a number of metrics including the following key metrics to evaluate our business, measure our performance, 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.


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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 March 31,

% Change


2021

2020

2021 over 2020

Number of auction sales days

93

87

7
%
Bids per lot sold

27

19

42
%
Total lots sold

116,259

100,805

15
%


	Three months ended June 30,				Six months ended June 30,
			% Change				% Change
	2021	2020	2021 over 2020		2021	2020	2021 over 2020
Number of auction sales days	240	226	6	%	333	313	6	%
Bids per lot sold *	27	25	9	%	28	23	19	%
Total lots sold *	148,206	148,957	(1)	%	263,035	249,754	5	%

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

~~In Q1 2021, we held six additional~~The number of auction sales days ~~compared~~increased 6% to ~~Q1 2020 which contributed~~240 in Q2 2021. Auction sales days increased at a higher rate than total GTV increase of 2% due to less average GTV sold per sale day. For the first half of 2021, the number of auction sales days increased 6% to 333 in line with a 6% increase in total ~~GTV and revenue.~~ GTV.

The total number of bids per lot sold increased ~~42%~~9% to 27 ~~representing an increase~~ in ~~bidding participations~~Q2 2021 and increased 19% to 28 for the first half of 2021 driven by higher demand from buyers ~~which also contributed~~partly due to ~~strong pricing realization in the quarter, particularly in the US.~~ our increased marketing efforts.

The total lots sold ~~also~~decreased slightly by 1% to 148,206 in Q2 2021, in line with the decrease in total GTV of 3% when excluding the impact of foreign exchange, partially offset by higher pricing. For the first half of 2021, the total lots sold increased ~~15%~~5% to ~~116,259~~263,035 primarily related to the increase in total GTV of 6% driven by a higher proportion of high value lots mainly in ~~Canada driven by an increase in~~ the ~~number of agricultural auctions held.~~US.

Online bidding

Across all channels, 100% of total GTV was purchased by online buyers in Q1Q2 2021 ~~compared to 75% in Q1 2020. The increase in internet bidders~~ and ~~online buyers~~Q2 2020 which is a direct impact of the COVID-19 pandemic as we pivoted to 100% online bidding at our traditional live on site auctions where ~~onsite~~on site attendance was not permitted. As COVID 19-pandemic restrictions ease we will be considering a transition back to some measure of in-person attendance at our on site auction events in certain regions and plan to reintroduce in-person bidding for select large events, primarily in the United States.

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 is comprised of Regional Sales Managers and Territory Managers.

Our Sales Force Productivity for the trailing 12-month period ended ~~March 31,~~June 30, 2021 was ~~$13.5~~$13.9 million per Revenue Producer compared to ~~$12.1~~$12.2 million per Revenue Producer for the trailing 12-month period ended ~~March 31,~~June 30, 2020.


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~~A&M revenue~~

~~Total A&M revenue increased 21% to $296.3 million in Q1 2021.~~

~~A&M revenue by geographical region are presented below:~~

Three months ended March 31,

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

2021

2020

2021 over 2020
A&M Revenue by Geography

United States



Service revenue

122,911

120,339

2
%
Inventory sales revenue

66,337

56,948

16
%
A&M revenue- United States

189,248

177,287

7
%
Canada







Service revenue

28,037

18,560

51
%
Inventory sales revenue

9,715

8,195

19
%
A&M revenue- Canada

37,752

26,755

41
%
International







Service revenue

19,807

15,844

25
%
Inventory sales revenue

49,473

24,989

98
%
A&M revenue- International

69,280

40,833

70
%
Total







Service revenue

170,755

154,743

10
%
Inventory sales revenue

125,525

90,132

39
%
A&M total revenue

296,280

244,875

21
%

~~United States~~

In Q1 2021, service revenue increased 2% primarily due to the 1% increase in Service GTV. This increase was mainly driven by higher commissions from strong pricing on guarantee contracts as well as improved rates on straight commission contracts in the GovPlanet business, and higher online listing fees. These were partially offset by softer straight commission rate performance from a higher proportion of GTV sourced from US strategic accounts, lower fees from the non-repeating collector car event, lower fees driven by a lower proportion of small value lots, and lower document and search fees as a result of decline in the total number of titled lots sold.

In Q1 2021, inventory sales revenue increased 16% resulting from a higher volume of inventory contracts at our Fort Worth auction and a higher volume of inventory with improved rate performance selling through our GovPlanet business.

~~Canada~~

In Q1 2021, service revenue increased 51% primarily due to the 42% increase in Service GTV. The increase in service revenue was also due to higher straight commission revenue earned on the sale of low value assets, and the re-instatement of fees waived in Q1 2020 at the Canadian on-the-farm auctions as part of our COVID-19 pandemic response.

Inventory sales revenue also increased 19% primarily due to two large new deals in the construction sector with strong rate performances and the shifting of our Montreal auction back into Q1 2021 which had significant inventory contracts.

~~International~~

In Q1 2021, service revenue increased 25% primarily due to the 20% increase in Service GTV. Some of this positive year-over-year performance is a result of a soft prior quarter in Europe due to the direct impact of COVID-19. The increase in service revenue was also due to higher fees driven by the increase in total GTV volume by 35% and improved rate performance on a relatively higher volume of guarantee commission contracts.

Inventory sales revenue increased 98% driven by very strong performance at our auctions across various countries in Europe driving higher volumes of inventory contracts. The increase was further driven by the addition of new auctions and a large private treaty deal in Australia. International also benefited significantly from improved economic conditions and the lift of border restrictions (which were imposed as a result of COVID-19) enabling us to move equipment more easily between countries and grow our business.


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A&M revenue

Total A&M revenue remained flat at $355.1 million in Q2 2021.

A&M revenue by geographical region are presented below:


		Three months ended June 30,					Six months ended June 30,
				% Change						% Change
(in U.S. $000's, except percentages)	��	2021	2020	2021 over 2020			2021		2020	2021 over 2020
A&M Revenue by Geography
United States
Service revenue		111,047	115,796	(4)	%	$	233,958	$	236,134	(1)	%
Inventory sales revenue		53,853	72,196	(25)	%		120,190		129,144	(7)	%
A&M revenue- United States		164,900	187,992	(12)	%		354,148		365,278	(3)	%
Canada
Service revenue		75,964	67,357	13	%		104,001		85,917	21	%
Inventory sales revenue		7,928	19,126	(59)	%		17,643		27,321	(35)	%
A&M revenue- Canada		83,892	86,483	(3)	%		121,644		113,238	7	%
International
Service revenue		24,464	16,496	48	%		44,271		32,340	37	%
Inventory sales revenue		81,832	63,588	29	%		131,305		88,578	48	%
A&M revenue- International		106,296	80,084	33	%		175,576		120,918	45	%
Total
Service revenue		211,475	199,648	6	%		382,230		354,391	8	%
Inventory sales revenue		143,613	154,911	(7)	%		269,138		245,043	10	%
A&M total revenue		355,088	354,559	0	%		651,368		599,434	9	%

United States

In Q2 2021, service revenue decreased 4% primarily due to the 5% decrease in Service GTV. The decrease was also due to lower fees driven by a lower proportion of small value lots, lower document fees as a result of the decline in the total number of titled lots sold and lower online listing fees. These decreases were primarily offset by higher buyer fees driven by the new buyer fee structure as well as positive rate performance in our GovPlanet business.

For the first half of 2021, service revenue decreased 1% primarily due to the 2% decrease in Service GTV for the same reasons as discussed above, as well as lower fees earned from a non-repeating collector car event in Q1 2020.

In Q2 2021, inventory sales revenue decreased 25% primarily from lower volumes of inventory contracts sourced at our Fort Worth and Orlando auctions driven by lower mix of volumes of inventory contracts and an unfavourable supply environment, partially offset by higher pricing. These decreases in our US region based auctions were partially offset by increased 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 prior year in response to COVID-19 pandemic.

For the first half of 2021, inventory sales revenue decreased 7% primarily due to lower volumes of inventory contracts at our Fort Worth and Orlando auctions, partially offset by positive performance at our Houston auction and higher activity with improved rates in our GovPlanet business.

Canada

In Q2 2021, service revenue increased 13% partially due to the 6% increase in Service GTV. The remaining increase was due to improved commission rates on both guarantee and straight commission contracts. In addition, the re-instatement of fees waived at the Canadian on-the-farm auctions in Q2 2020 as part of our COVID-19 pandemic response, higher buyer fees from the implementation of the new buyer fee structure and higher proportion of low value lots contributed to a positive performance.

For the first half of 2021, service revenue increased 21% partially due to 14% increase in Service GTV and also for the same reasons as discussed above.

In Q2 2021, inventory sales revenue decreased 59% primarily due to lower mix of inventory contracts and equipment supply constraints in the energy sector contributing to lower year-over-year performance in our Edmonton auction, lower rate performances and the non-repeat of several large energy inventory contracts.


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For the first half of 2021, inventory sales revenue decreased 35% primarily for the same reasons as discussed above, offset by several large new deals in the construction sector with strong rate performances in our Montreal auction in Q1 2021.

International

In Q2 2021, service revenue increased 48% primarily due to the 42% increase in Service GTV. The remaining increase was due to higher buyer fees from the implementation of the new buyer fees structure and a higher buyer fee structure in Australia. These increases were partially offset by lower rates on our straight commission contracts.

For the first half of 2021, service revenue increased 37% primary due to the 31% increase in Service GTV primarily for the same reasons as discussed above.

In Q2 2021, Inventory sales revenue increased 29% driven by improved economic conditions, lifting of border restrictions, and easing of quarantine and travel requirements in Australia, Middle East and across several countries in Europe. We also saw improved performances in our auctions and an increase in the number of large private treaty deals in Australia.

For the first half of 2021, inventory sales revenue increased 48% primarily driven by the increases in Australia as discussed above, strong performances at our auctions across various countries in Europe with the addition of several new auctions. Improved economic conditions from the recovery of COVID-19 pandemic also contributed to the higher inventory revenue volumes.

Costs of services

A&M costs of services decreased ~~14%~~1% to ~~$21.6~~$22.0 million in Q1Q2 2021 compared to Q1Q2 2020. This decrease was primarily driven by lower activity in line with lower GTV in the US, partially offset by higher costs to support the increased activity in our GovPlanet business and incremental costs to introduce the new satellite yards in Europe.

For the first half of 2021, A&M costs of services decreased 8% to $43.6 million primarily driven by cost ~~reductions~~savings in travel, advertising and promotion ~~expenses~~expense as a result of lower activity at our ~~response to the COVID-19 pandemic. Our response included transitioning our traditional live~~ on site auctions due to the transition to online bidding, utilization of TAL solution and ~~implementing~~implementation of travel ~~restrictions. We also saw~~restrictions due to COVID-19 pandemic. The decrease was further driven by lower activity in the US and cost reductions in building, facilities and technology expenses ~~as a result of~~due to the non-repeat of ~~site preparation~~ costs ~~relating~~incurred to asupport our Q1 2020 collector car ~~event~~event. Offsetting these decreases were higher costs in ~~Q1 2020.~~our GovPlanet business and in International in line with increased activity.

Cost of inventory sold

A&M cost of inventory sold ~~increased 36%~~decreased 8% to ~~$110.7~~$131.0 million in Q1Q2 2021 compared to Q1Q2 2020 primarily in line with the 7% decrease in inventory sales revenue. Cost of inventory sold decreased at a higher ~~activity~~rate than the decrease in inventory sales revenue, indicating a slight increase in the revenue rates, primarily in our GovPlanet business.

For the first half of 2021, A&M cost of inventory sold increased 8% to $241.8 million primarily in line with the 10% 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. The improved inventory revenue~~ rates, ~~were~~ primarily ~~a result of strong auction price realization across all regions.~~in our GovPlanet business and the US region, partially offset by the International region.

SG&A expenses

A&M SG&A expenses increased ~~14%~~7% to ~~$104.3~~$101.4 million in Q1Q2 2021 compared to Q1Q2 2020. The increase was primarily due to ~~higher short-term and long-term incentive costs driven by strong performance,~~an unfavourable impact of foreign exchange fluctuation, higher wages, salaries and ~~benefits~~benefit expenses ~~due to~~driven by higher headcount to support our growth ~~initiatives,~~initiatives. We also incurred higher advertising and promotion expenses to promote our global digital marketing efforts, and higher travel and entertainment costs as a result of increased travel as border and quarantine restrictions have started to ease. These increases were partially offset by lower short-term and long-term incentive costs including the non-repeat of a prior year one-time incentive accrual to employees during the COVID-19 pandemic.

For the first half of 2021, A&M segment SG&A expenses increased 11% to $205.8 million primarily due to an unfavourable impact of foreign exchange, higher wages, salaries and benefit expenses, and an increase in short-term and long-term incentive costs due to strong performance. We also saw increases in share based payments and severance costs. These increases were partially offset by lower travel, advertising and ~~promotion costs~~entertainment expenses as wetravel restrictions for the most part continued to be implemented ~~travel restrictions.~~since the beginning of Q2 2020.


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Other Services Segment

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


	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
					% Change						% Change						% Change
(in U.S. $000's, except percentages)	2021		2020		2021 over 2020		2021		2020		2021 over 2020		2021		2020		2021 over 2020
Service revenue	$	35,275	$	28,380	24	%	$	41,273	$	34,491	20	%	$	76,548	$	62,871	22	%
Ancillary and logistical service expenses		12,269		12,758	(4)	%		14,819		16,060	(8)	%		27,088		28,818	(6)	%
Other costs of services		2,168		1,502	44	%		2,238		1,198	87	%		4,406		2,700	63	%
SG&A expenses		11,733		6,800	73	%		10,402		6,073	71	%		22,135		12,873	72	%
Other services profit	$	9,105	$	7,320	24	%	$	13,814	$	11,160	24	%	$	22,919	$	18,480	24	%

In Q1Q2 2021, Other Services revenue increased ~~24%~~20% to ~~$35.3~~$41.3 million primarily due to the increase in revenue from Rouse of ~~$5.6~~$6.2 million, and higher RBFS revenues of ~~$1.9~~$3.3 million, offset by lower ancillary revenue of ~~$1.6~~$3.3 million mainly due to lower fees earned on refurbishment, transportation and redeployment of assets in the US.

In the first half of 2021, Other Services revenue increased 22% to $76.5 million due to the increase in revenue from Rouse of $11.8 million, higher RBFS revenues of $5.2 million, and RB Logistics revenues of $1.3 million driven by higher inventory sales in Europe requiring logistics as border restrictions have slowly been lifted. This increase was partially offset by lower ancillary revenue of $4.9 million and lower asset appraisal services revenue of $1.2 million.

Rouse was acquired on December 8, 2020 and this is the ~~first~~second full quarter of revenue recognized since acquisition. As a result, our costs of services and SG&A expenses have also increased.

RBFS revenue increased ~~27%~~39% in Q1Q2 2021, driven by ~~an increase in~~higher funded volume and improved rate on fees earned from facilitating financing ~~arrangements.~~arrangements as well as the growth in our PurchaseSafe service to provide escrow services to private brokered transactions. Some 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 half of 2020. In Q1Q2 2021, our funded volume, which represents the amount of lending brokered by RBFS, increased ~~26%~~41% to ~~$147.2~~$197.4 million, ~~due~~and increased 25% when excluding the impact of foreign exchange. In the first half of 2021, our funded volume increased 34% to ~~a larger sales team driving an increase in~~$344.0 million, and increased 22% when excluding the ~~number~~impact of ~~credit applications compared to Q1 2020. RBFS also benefited from a favourable impact due to exchange rates.~~foreign exchange.

In Q1Q2 2021, Other Services profit increased 24% to ~~$9.1~~$13.8 million driven by our Rouse, RBFS, and Mascus operations. In the first half of 2021, Other Services profit increased 24% to $22.9 million primarily due to the same reasons.

Additionally, in the first quarter of 2021 we launched a business version of our inventory management system (“ IMS”) which offers our customers an 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 the best possible returns. We continue to grow the number of organizations activated on IMS. During the second quarter of 2021, the number of organizations activated on our IMS increased by 34% compared to the first quarter of 2021.

As we evolve to a marketplace, we will also facilitate retail and peer-to-peer auction events and equipment sale transactions via our online technology in exchange for hosting fees. During the second quarter of 2021, customers that used this service disposed of $36.3 million of assets, which is an increase of 155% from Q2 2020. For the first half of 2021, this service facilitated transactions of $79.3 million, a 102% increase as compared to prior year.


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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 August 14, 2020.

In Q1the first half of 2021, our operational liquidity was not materially impacted by the COVID-19 pandemic. Today we believe that our existing working capital and availability under our credit facilities are sufficient to satisfy our present operating requirements and contractual obligations. With future uncertainty due to COVID-19, we will continue to evaluate the nature and extent of any impacts to our liquidity as events unfold. Our future growth strategies continue to include but are not limited to the development of our A&M, RBFS, Rouse, and Mascus operating segments, as well as other growth opportunities including mergers and acquisitions.


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We assess our liquidity based on our ability to generate cash 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 term debt.

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.

Cash flows


	Three months ended March 31,
					% Change		Six months ended June 30,
					2021 over						% Change
(in U.S. $000's, except percentages)	2021		2020		2021 over 2020		2021		2020		2021 over 2020
Cash provided by (used in):
Operating activities	$	180,687	$	4,132	4,273	%	$	211,381	$	198,324	7	%
Investing activities		(10,035)		(7,274)	38	%		(23,303)		(148)	15,645	%
Financing activities		(33,145)		(48,361)	(31)	%		(50,861)		(77,811)	(35)	%
Effect of changes in foreign currency rates		(2,782)		(12,828)	(78)	%		(1,389)		(2,608)	(47)	%
Net increase in cash, cash equivalents, and restricted cash	$	134,725	$	(64,331)	(309)	%	$	135,828	$	117,757	15	%

Net cash provided by operating activities increased ~~$176.6~~$13.1 million in the first ~~three months~~half of 2021. This ~~increase~~change was primarily due to ~~a net positive impact in our operating assets and liabilities and an increase~~increases in our net income ~~over the comparative period. We saw~~and a net positive ~~cash flows from changes~~movement in our ~~operating assets and liabilities primarily driven by~~trade receivables related to the timing, size, and number of auctions over the comparative period. ~~A large percentage~~These increases were partially offset by negative cash flows driven by larger bonus payments, the timing of ~~our GTV was sold in the last 10 days of Q1 2021, whereas Q1 2020 was negatively impacted by the delay of the Los Angeles~~payments related to local payroll, consumption and ~~Montreal auctions due to COVID-19. Changes~~income taxes, and an increase in inventory ~~levels also generated net positive cash flows with increased turnover and fewer~~ purchases ~~of inventory~~related to our GovPlanet business over the comparative period. ~~These cash inflows were partially offset by a net negative movement in our payables related to larger bonus and income tax payments over the comparative period.~~

Net cash used in investing activities increased ~~$2.8~~$23.2 million in the first ~~three months~~half of 2021. This ~~increase~~change was ~~primarily~~ due to ~~more~~lower cash ~~inflows~~proceeds from land sales and equity investments ~~during~~in the first half of 2021 compared to the first half of 2020. In the comparative period, ~~including~~we recognized net proceeds of $15.5 million on the sale of land in the United States, $4.2 million of proceeds on the distribution of equity investments, and $1.7 million of proceeds on contingent consideration from equity investments in Q1 2020. The comparative period cash inflows were partially offset the issuance of $3.0 million of loans receivable under our non-recourse financing lending arrangements in Q1 2020. There were no similar transactions in Q1 2021.investments.

Net cash used in financing activities decreased ~~$15.2~~$27.0 million in the first ~~three months~~half of 2021. The primary driver of the change was that we did not do any share repurchases in Q1the first half of 2021, whereas we spent $53.2 million in ~~the prior year.~~Q1 2020. Partially offsetting this change was a $9.0 million decrease in ~~draws on our~~ short-term debt draws, a $8.7 million decrease in cash generated from the issuance of ~~$32.0 million~~share capital on exercise of stock options, and an increase of ~~$4.6~~$5.8 million in withholding tax payments on the issuance of shares.

Dividend information

We declared ~~and paid a regular cash dividend of $0.20 per common share for the quarter ended March 31, 2020. We declared~~ a dividend of $0.22 per common share for each of the ~~quarter~~quarters ended June 30, 2020, September 30, 2020, ~~and~~ December 31, ~~2020.~~2020, and March 31, 2021. We have declared, but not yet paid, a dividend of ~~$0.22~~$0.25 per common share for the quarter ended ~~March 31,~~June 30, 2021. All dividends that we pay are “eligible dividends” for Canadian income tax purposes unless indicated otherwise.

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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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 increased ~~110~~140 bps to ~~11.3%~~11.4% for the 12-month period ending ~~March 31,~~June 30, 2021 from ~~10.2%~~10.0% for the 12-month period ending ~~March 31,~~June 30, 2020. This increase is primarily due to an increase in net income attributable to stockholders over the comparative period. Return on invested capital (“ROIC”) (non-GAAP measure) increased ~~220~~180 bps to ~~12.2%~~11.9% during the 12 months ended ~~March 31,~~June 30, 2021 compared to ~~10.0%~~10.1% for the 12 months period ending ~~March 31,~~June 30, 2020.

Credit facilities

On August 14, 2020, we entered into the amended and extended Credit Agreement. The Credit Agreement matures on October 27, 2023 and provides credit facilities totaling US$630.0 million with a syndicate of lenders comprising:

(1)

Multicurrency revolving facilities of up to US$530 Million (the “Revolving Facilities”), and,

(2)

A delayed-draw term loan facility of up to US$100 Million (the “Delayed-Draw Facility” and together with the Revolving Facilities, the “Facilities”).

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


(in U.S. $000's, except percentages)	March 31, 2021		December 31, 2020		% Change		June 30, 2021		December 31, 2020		% Change
Committed
Term loan facility	$	97,279	$	98,420	(1)	%	$	95,910	$	98,420	(3)	%
Revolving credit facilities		540,000		540,000	—	%		540,000		540,000	—	%
Total credit facilities	$	637,279	$	638,420	(0)	%	$	635,910	$	638,420	(0)	%
Unused
Revolving credit facilities		461,115		455,124	1	%		448,348		455,124	(1)	%
Total credit facilities unused	$	461,115	$	455,124	1	%	$	448,348	$	455,124	(1)	%

Debt covenants

We were in compliance with all financial and other covenants applicable to our credit facilities at ~~March 31,~~June 30, 2021. Our debt covenants did not change as a result of amending our Credit Agreement.

Our ability to borrow under our syndicated revolving credit facility is subject to compliance with a consolidated leverage ratio covenant and a consolidated interest coverage ratio covenant. 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 May 8, 2019, our Board of Directors authorized a share repurchase program for the repurchase of up to $100 million worth of our common shares, approved by the Toronto Stock Exchange, over a total period of 12 months. In Q1, 2020, we repurchased 1,525,312 common shares for $53,170,000 as part of this program until it ended on May 8, 2020.

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 ~~three~~six months ended ~~March 31,~~June 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.


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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 takes into consideration the impact of COVID-19 pandemic related circumstances. As of ~~March 31,~~June 30, 2021, 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, 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 1, 2020, we adopted Topic 848, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and in March 2020, the FASB issued an update to the standard. The standard provides relief for companies preparing 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 and the recent updates have not and are not expected to have a material impact on our consolidated financial statements.

For a discussion of our new and amended accounting standards refer to Note 2 of the financial statements, Summary of 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 generally accepted accounting principles. Non-GAAP financial measures referred to in this report are labeled as “non-GAAP measure” or designated as such with an asterisk (*).

Adjusted Operating Income* Reconciliation

Adjusting operating income* eliminates the financial impact of adjusting items which are significant non-recurring items that we do not consider to be part of our normal operating results, such as acquisition-related costs, management reorganization costs, and certain other items, which we refer to as ‘adjusting items’.

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

~~There were no adjusting items in Q1 2021 or in the comparative prior period.~~


	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
					% Change						% Change						% Change
(in U.S. $000's, except percentages)	2021		2020		2021 over 2020		2021		2020		2021 over 2020		2021		2020		2021 over 2020
Operating income	$	44,502	$	34,082	31	%	$	89,517	$	88,800	1	%	$	134,019	$	122,882	9	%
Adjusted operating income*	$	44,502	$	34,082	31	%	$	89,517	$	88,800	1	%	$	134,019	$	122,882	9	%

(1)	Please refer to page 4749 for a summary of adjusting items during the three and six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020.

(2)	Adjusted operating income* represents operating income excluding the effects of adjusting items.


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Adjusted Net Income Attributable to Stockholders* and Diluted Adjusted EPS Attributable to Stockholders* Reconciliation

We believe that adjusted net income attributable to 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. Diluted Adjusted EPS attributable to stockholders* eliminates the financial impact of adjusting items which are after-tax effects of significant non-recurring items that we do not consider to be part of our normal operating results, such as acquisition-related costs, management reorganization costs, and certain other items, which we refer to as ‘adjusting items’.

The following table reconciles adjusted net income attributable to stockholders* and diluted adjusted EPS attributable to 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 statements.


	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
					% Change						% 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		2021		2020		2021 over 2020
Net income attributable to stockholders	$	28,188	$	22,809	24	%	$	60,749	$	53,043	15	%	$	88,937	$	75,851	17	%
Current income tax adjusting item:
Change in uncertain tax provision								—		766	(100)	%		—		766	(100)	%
Deferred tax adjusting item:
Change in uncertain tax provision								—		5,462	(100)	%		—		5,462	(100)	%
Adjusted net income attributable to stockholders*	$	28,188	$	22,809	24	%	$	60,749	$	59,271	2	%	$	88,937	$	82,079	8	%
Weighted average number of dilutive shares outstanding		111,267,392		110,482,837	1	%		111,334,184		109,323,343	2	%		111,302,711		109,903,808	1	%

Diluted earnings per share attributable to stockholders	$	0.25	$	0.21	19	%	$	0.55	$	0.49	12	%	$	0.80	$	0.69	16	%
Diluted adjusted EPS attributable to Stockholders*	$	0.25	$	0.21	19	%	$	0.55	$	0.54	2	%	$	0.80	$	0.75	7	%

(1)	Please refer to page 4749 for a summary of adjusting items during the three and six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020.

(2)	Adjusted net income attributable to stockholders* represents net income attributable to stockholders excluding the effects of adjusting items.

(3)	Diluted adjusted EPS attributable to stockholders* is calculated by dividing adjusted net income attributable to stockholders*, net of the effect of dilutive securities, by the weighted average number of dilutive shares outstanding.

Adjusted EBITDA*

We believe adjusted EBITDA* provides useful information about the growth or decline of our net income when compared between different financial periods.

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


	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
					% Change						% Change						% Change
					2021 over						2021 over						2021 over
(in U.S. $000's, except percentages)	2021		2020		2020		2021		2020		2020		2021		2020		2020
Net income	$	28,139	$	22,829	23	%	$	60,781	$	53,119	14	%	$	88,920	$	75,948	17	%
Add: depreciation and amortization expenses		21,070		19,293	9	%		21,935		17,857	23	%		43,005		37,150	16	%
Add: interest expense		8,946		9,182	(3)	%		8,867		8,882	(0)	%		17,813		18,064	(1)	%
Less: interest income		(303)		(873)	(65)	%		(332)		(393)	(16)	%		(634)		(1,063)	(40)	%
Add: income tax expense		8,419		5,648	49	%		21,065		27,656	(24)	%		29,484		33,304	(11)	%
Adjusted EBITDA*	$	66,271	$	56,079	18	%	$	112,316	$	107,121	5	%	$	178,588	$	163,403	9	%

(1)	Please refer to page 4749 for a summary of adjusting items during the three and six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020.

(2)	Adjusted EBITDA* is calculated by adding back depreciation and amortization expenses, interest expense, and income tax expense, and subtracting interest income from net income excluding the pre-tax effects of adjusting items.


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Adjusted Net Debt* and Adjusted Net Debt/Adjusted EBITDA* Reconciliation

We believe that comparing adjusted net debt/adjusted 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 adjusted net debt* to debt, adjusted EBITDA* to net income, and adjusted net debt*/ adjusted 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 March 31,								As at and for the 12 months ended June 30,
							% Change								% Change
(in U.S. $millions, except percentages)	2021			2020			2021 over 2020		2021			2020			2021 over 2020
Short-term debt	$	25.9		$	33.1		(22)	%	$	35.2		$	22.0		60	%
Long-term debt		636.7			630.5		1	%		636.5			632.0		1	%
Debt		662.6			663.6		(0)	%		671.7			654.0		3	%
Less: Cash and cash equivalents		(294.4)			(290.1)		1	%		(301.8)			(389.7)		(23)	%
Adjusted net debt*		368.2			373.5		(1)	%		369.9			264.3		40	%
Net income	$	175.7		$	153.8		14	%	$	183.3		$	152.7		20	%
Add: depreciation and amortization expenses		76.7			72.7		6	%		80.8			73.4		10	%
Add: interest expense		35.3			39.6		(11)	%		35.3			38.4		(8)	%
Less: interest income		(1.8)			(3.8)		(53)	%		(1.7)			(3.1)		(45)	%
Add: income tax expense		68.3			40.6		68	%		61.7			52.9		17	%
Pre-tax adjusting items:
Share-based payment expense recovery		—			(4.1)		(100)	%		—			(4.1)		(100)	%
Acquisition-related costs		5.2			—		100	%		5.2			—		100	%
Severance		4.3			—		100	%		4.3			—		100	%
Adjusted EBITDA*	$	363.7		$	298.8		22	%	$	368.9		$	310.2		19	%
Debt/net income		3.8	x		4.3	x	(12)	%		3.7	x		4.3	x	(14)	%
Adjusted net debt/adjusted EBITDA		1.0	x		1.3	x	(23)	%		1.0	x		0.9	x	11	%

(1)	Please refer to page 4749 for a summary of adjusting items during the trailing 12-months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020.

(2)	Adjusted EBITDA* is calculated by adding back depreciation and amortization expenses, interest expense, and income tax expense, and subtracting interest income from net income excluding the pre-tax effects of adjusting items.

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

(4)	Adjusted net debt/adjusted EBITDA is calculated by dividing adjusted net debt* by adjusted EBITDA*.

Operating Free Cash Flow* (“OFCF”) Reconciliation

We believe 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* as a performance metric. OFCF* is also an element of the performance criteria for certain annual short-term and long-term incentive awards.

The following table reconciles 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 March 31,							12 months ended June 30,
					% Change							% Change
(in U.S. $ millions, except percentages)	2021		2020		2021 over 2020			2021		2020		2021 over 2020
Cash provided by operating activities	$	436.6	$	265.0		65	%	$	270.9	$	370.8		(27)	%
Property, plant and equipment additions		12.3		14.3		(14)	%		12.7		15.1		(16)	%
Intangible asset additions		30.4		29.0		5	%		33.0		28.5		16	%
Proceeds on disposition of property plant and equipment		(16.1)		(6.0)		168	%		(0.6)		(21.5)		(97)	%
Net capital spending	$	26.6	$	37.3		(29)	%	$	45.1	$	22.1		104	%
OFCF*	$	410.0	$	227.7		80	%	$	225.8	$	348.7		(35)	%

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


Ritchie Bros.	45

~~Table of Contents~~

~~Adjusted Net Income Attributable to Stockholders* and Adjusted Dividend Payout Ratio* Reconciliation~~

We believe that adjusted net income attributable to 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. We believe that disclosing our adjusted dividend payout ratio* for different financial periods provides useful information about how well our net income supports our dividend payments.

The following table reconciles adjusted net income attributable to stockholders* and adjusted dividend payout ratio* to net income attributable to stockholders, and dividend payout ratio, which are the most directly comparable GAAP measures in, or calculated from, our consolidated financial statements:

12 months ended March 31,



% Change

(in U.S. $millions, except percentages)

2021

2020

2021 over 2020


Dividends paid to stockholders

$
94.0

$
84.9

11
%

Net income attributable to stockholders

$
175.5

$
153.7

14
%

Pre-tax adjusting items:







Share-based payment expense recovery

—

(4.1)

(100)
%

Acquisition-related costs

5.2

—

100
%

Severance

4.3

—

100
%

Current income tax effect of adjusting items:







Acquisition-related costs

(1.3)

—

(100)
%

Severance

(1.1)

—

(100)
%

Deferred income tax effect of adjusting items:



Share-based payment expense recovery

—

0.7

(100)
%

Current income tax adjusting item:







Change in uncertain tax provision

2.3

—

100
%

Deferred tax adjusting item:







Change in uncertain tax provisions

5.5

—

100
%

Adjusted net income attributable to stockholders*

$
190.4

$
150.3

27
%

Dividend payout ratio

53.6
%

55.2
%

(160)
bps

Adjusted dividend payout ratio*

49.4
%

56.5
%

(710)
bps

~~(1)~~

~~Please refer to page~~ 47 ~~for a summary of adjusting items during the trailing 12-months ended March 31, 2021 and March 31, 2020.~~

~~(2)~~

~~Adjusted net income attributable to stockholders* represents net income attributable to stockholders excluding the effects of adjusting items.~~

~~(3)~~

~~Adjusted dividend payout ratio* is calculated by dividing dividends paid to stockholders by adjusted net income attributable to stockholders*.~~


~~Ritchie Bros.~~	46

Table of Contents

Adjusted Net Income Attributable to Stockholders* and ROIC* Reconciliation

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

The following table reconciles adjusted net income attributable to stockholders* and 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 March 31,									As at and for the 12 months ended June 30,

							% Change									% Change
(in U.S. $millions, except percentages)	2021			2020			2021 over 2020			2021			2020			2021 over 2020
Net income attributable to stockholders	$	175.5		$	153.7			14	%	$	183.2		$	152.7			20	%
Pre-tax adjusting items:
Share-based payment expense recovery		—			(4.1)			(100)	%		—			(4.1)			(100)	%
Acquisition-related costs		5.2			—			100	%		5.2			—			100	%
Severance		4.3			—			100	%		4.3			—			100	%
Current income tax effect of adjusting items:
Acquisition-related costs		(1.3)			—			(100)	%		(1.3)			—			(100)	%
Severance		(1.1)			—			(100)	%		(1.1)			—			(100)	%
Deferred income tax effect of adjusting items:
Share-based payment expense recovery		—			0.7			(100)	%
Current income tax adjusting item:
Change in uncertain tax provision		2.3			—			100	%		1.5			0.8			88	%
Deferred tax adjusting item:
Change in uncertain tax provisions		5.5			—			100	%		—			5.5			(100)	%
Adjusted net income attributable to stockholders*	$	190.4		$	150.3			27	%	$	191.8		$	154.9			24	%
Opening long-term debt	$	630.5		$	703.3			(10)	%	$	632.0		$	704.9			(10)	%
Ending long-term debt		636.7			630.5			1	%		636.5			632.0			1	%
Average long-term debt		633.6			666.9			(5)	%		634.3			668.5			(5)	%
Opening stockholders' equity	$	839.8		$	828.1			1	%	$	899.1		$	830.7			8	%
Ending stockholders' equity		1,005.5			839.8			20	%		1,056.3			899.1			17	%
Average stockholders' equity		922.7			834.0			11	%		977.7			864.9			13	%
Average invested capital	$	1,556.3		$	1,500.9			4	%	$	1,612.0		$	1,533.4			5	%

Return on average invested capital		11.3	%		10.2	%		110	bps		11.4	%		10.0	%		140	bps
ROIC*		12.2	%		10.0	%		220	bps		11.9	%		10.1	%		180	bps

(1)	Please refer to page 4749 for a summary of adjusting items during the trailing 12-months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020.

(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)	ROIC* is calculated as adjusted net income attributable to stockholders* 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.


Ritchie Bros.	4748

Table of Contents

Adjusting items during the trailing 12-months ended ~~March 31,~~June 30, 2021 were:

Recognized in the second quarter of 2021

●

There were no adjustment items recognized in the second quarter of 2021.

Recognized in the first quarter of 2021

●

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

Recognized in the fourth quarter of 2020

●

$5.2 million ($3.9 million after tax, or $0.04 per diluted share) of acquisition-related costs related to the acquisition of Rouse.

●

$1.5 million ($0.01 per diluted share) of current income tax expense recognized related to an unfavourable adjustment to reflect final regulations published in Q2 2020 regarding hybrid financing arrangements.

Recognized in the third quarter of 2020

●

$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.

Adjusting items during the trailing 12-months ended June 30, 2020 were:

Recognized in the second quarter of 2020

●

$6.2 million ($0.06 per diluted share) in current and deferred income tax expense related to an unfavourable adjustment to reflect final regulations published regarding hybrid financing arrangements.

~~Adjusting items during the trailing 12-months ended March 31, 2020 were:~~

Recognized in the first quarter of 2020

●

There were no adjustment items recognized in the first quarter of 2020.

Recognized in the fourth quarter of 2019

●

$4.1 million ($3.4 million after tax, or $0.03 per diluted share) in share-based payment expense recovery related to the departure of our former CEO.

Recognized in the third quarter of 2019

●

There were no adjustment items recognized in the third quarter of 2019.

~~Recognized in the second quarter of 2019~~

●

~~There were no adjustment items recognized in the second quarter of 2019.~~


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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 ~~three~~six months ended ~~March 31,~~June 30, 2021 from those disclosed in Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2020, 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 ~~March 31,~~June 30, 2021. 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 ~~March 31,~~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 ~~first~~second quarter of 2021, 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 Company completed the acquisition of Rouse on December 8, 2020 and Rouse’s total assets and revenues constituted 10.0% and ~~1.7%~~1.6%, respectively, of the Company’s total assets and revenues as shown in its consolidated financial statements as of and for the ~~three~~six month period ended ~~March 31,~~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.

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, ~~is developing a~~began the implementation of remediation ~~plan. We~~steps and initiatives in 2021 to remediate the material weaknesses. These efforts have ~~taken~~included the following ~~remediation steps:~~actions:

engaged a third-party advisor, hired a Senior Sarbanes-Oxley (SOX) Consultant, and created a ~~working group tasked~~SOX program Steering Committee to support management with performing a ~~comprehensive~~ root-cause analysis ~~of the control deficiencies contributing to the material weaknesses to determine corrective actions;~~and implementing a remediation plan;

~~implemented additional monitoring controls~~provided training over the ~~controls impacted;~~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;


Ritchie Bros.	4950

Table of Contents

~~identified~~began conducting a ~~third-party advisor~~series of revenue learning sessions to ~~assist with~~thoroughly review the ~~remediation plan~~business processes surrounding the occurrence and ~~continuous control improvement initiatives. We expect~~measurement of revenue, including the use of key reports, to ~~execute a signed engagement with this advisor in May 2021.~~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;

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 whilst 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 ~~March 31,~~June 30, 2021 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.


Ritchie Bros.	5051

Table of Contents

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, 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 six months ended ~~March 31,~~June 30, 2021.

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

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

None.


Ritchie Bros.	5152

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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


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 ~~March 31,~~June 30, 2021, 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 ~~March 31,~~June 30, 2021, 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: ~~May 10,~~August 5, 2021	By:	/s/ Ann Fandozzi
		Ann Fandozzi
		Chief Executive Officer

Dated: ~~May 10,~~August 5, 2021	By:	/s/ Sharon R. Driscoll
		Sharon R. Driscoll
		Chief Financial Officer


Ritchie Bros.	5354


PART I – FINANCIAL INFORMATION
ITEM 1:	Consolidated Financial Statements	1
ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
ITEM 3:	Quantitative and Qualitative Disclosures About Market Risk	4950
ITEM 4:	Controls and Procedures	4950

PART II – OTHER INFORMATION
ITEM 1:	Legal Proceedings	5152
ITEM 1A:	Risk Factors	5152
ITEM 2:	Unregistered Sales of Equity Securities and Use of Proceeds	5152
ITEM 3:	Defaults Upon Senior Securities	5152
ITEM 4:	Mine Safety Disclosures	5152
ITEM 5:	Other Information	5152
ITEM 6:	Exhibits	5253

SIGNATURES		5354


Remainder of 2021	$	12,478
2022		14,843
2023		12,784
2024		10,769
2025		10,647
Thereafter		107,826
Total future minimum lease payments	$	169,347
less: imputed interest		(41,586)
Total operating lease liability	$	127,761
less: operating lease liability - current		(11,419)
Total operating lease liability - non-current	$	116,342


Remainder of 2021	$	7,702
2022		8,545
2023		6,272
2024		3,759
2025		821
Thereafter		24
Total future minimum lease payments	$	27,123
less: imputed interest		(1,243)
Total finance lease liability	$	25,880
less: finance lease liability - current		(9,256)
Total finance lease liability - non-current	$	16,624