RB Global Inc.
Q4 Adjusted EBITDA/EPS well ahead of estimates; 2024 guidance in line to ahead
NYSE: RBA | USD 68.40 | Outperform | Price Target USD 75.00
Sentiment: Positive
Q4 initial take – Positive: Q4 results were in line on the revenue line, while Adjusted EBITDA was well ahead of RBC and consensus estimates. 2024 guidance is also in line to ahead, while capex brackets consensus. Leverage is improving quickly and the company is well positioned to meet/exceed the leverage target of 2.0x within 24 months following the closing of the IAA acquisition (i.e., Q1/25).
GTV of $4,012MM came in ahead of RBC estimate of $3,890MM, driven by better-than-expected results at the “legacy” Ritchie Bros. business (IAA was in line). GTV was +13.1% YoY on a pro-forma combined basis, with strength in lot volumes across automotive (+7% YoY) and commercial construction & transportation (+28%), partially offset by other (-8%), as well as higher average price per lot sold in automotive and other, partially offset by lower pricing in the commercial construction and transportation sector. For context on industry trends, see the link here for our read-through note following Copart's Q2/F24 results last night.
Revenue of $1,041MM was in line with RBC/consensus estimates of $1,036MM/$1,047MM (Service revenue was ahead of RBCe, Inventory revenue below), while Adjusted EBITDA of $307.5MM was well ahead of RBC/consensus estimates of $275.2MM/ $280.6MM. Adjusted EPS was $0.82 vs. RBC/consensus estimates of $0.65/$0.70. Exiting Q4, pro-forma leverage was 2.2x, which compares to the company’s target of 2.0x 24 months following the close of the IAA acquisition (closed in March 2023).
Good progress on IAA synergies – The company noted that it realized $17MM of synergies in Q4 (vs. $12MM in Q3 and $7MM in Q2) and has actioned $70MM in annualized run-rate cost synergies since the deal close (vs. $52MM as of Q3 reporting and $36MM as of Q2). Recall that RB Global expects to generate $100MM-$120MM of cost synergies by 2025. This indicates good progress ahead of our (and likely the Street's) expected cadence. The contribution from synergies likely contributed to the significant Adjusted EBITDA outperformance in Q4.
2024 guidance initiated: in line to better than Street forecasts – RB Global initiated 2024 guidance, which includes: 1) GTV growth of 1%-4% (vs. +9.7% YoY growth in 2023 on a pro-forma basis; RBC forecast: 3%), driven by market share gains and strength in the commercial construction and transportation sector, with moderating growth in the automotive sector; 2) Adjusted EBITDA of $1,170MM-$1,230MM (vs. $1,033MM in 2023 or ~$1,142MM on a pro-forma basis, consensus of $1,186MM coming into Q4 reporting); 3) full-year tax rate of 25%-28%; and, 4) capex of $275MM-$325MM (vs. $314MM in 2023, consensus of $284MM). The notable progress on leverage reduction gives us comfort with the planned capex as the company appears to be generating ample cash to fund it growth/integration efforts.
On the 8:30am ET call this morning, we will be looking for color on GTV trends in early-2024, expected contribution from the Yellow disposition in 2024, broader capital allocation priorities, and an update on synergies/integration efforts.