Q2 Adj. EBITDA ahead of estimates; 2024 GTV guide modestly lower, Adj. EBITDA guide modestly higher
NYSE: RBA | USD 71.77 | Outperform | Price Target USD 93.00
Sentiment: Positive
Q2 initial take – Positive: Q2 Adjusted EBITDA and EPS were well ahead of RBC/consensus forecasts, while 2024 Adjusted EBITDA guidance was revised higher for the 2nd quarter in a row. GTV was $4,104MM vs. RBC/consensus estimates of $3,994MM/
$4,222MM, with the 1% YoY decline driven by 4% and 14% declines in the Automotive and Other sectors, respectively, partially offset by 9% growth in Commercial Construction & Transportation. By number of lots sold (i.e., volume) the Automotive sector declined by 4% (implying ~flat pricing), which compares to 40% growth in Commercial Construction & Transportation (implying pricing was a meaningful offset in the quarter, which we believe in part reflects the disposition of Yellow assets; see our note here for additional information) and flat growth in Other. For additional context on industry trends, see the link here for our read- through note following LKQ's Q2/24 results.
RBA's Service revenue take rate expanded +140bps YoY to 20.9%, driven by a higher average buyer fee rate and growth in marketplace services revenue (due to an increase in transportation services, primarily due to the disposition of Yellow assets, in our view). This in part drove Revenue of $1,096MM, which was largely in line with RBC $1,084MM and modestly short of consensus of $1,124MM (Service revenue was well ahead of RBCe, Inventory revenue was below). Adjusted EBITDA of $342.0MM was well ahead of RBC/consensus of $309.8MM/$325.0MM, reflecting a margin of 31.2% (+338bps YoY vs. RBCe/consensus of 28.6%/28.9%). The strong Service revenue take rate improvement and more favorable mix (i.e., lower Inventory revenue) likely contributed to the strong margin performance. Adjusted EPS was $0.94 vs. RBC/consensus of $0.80/$0.89. Exiting Q2, pro-forma leverage was 1.8x (vs. 2.0x exiting Q1; recall the company achieved its 2.0x target following the IAA acquisition one year ahead of schedule).
Making progress on IAA cost synergies – RB Global noted that it has now actioned $110MM in annualized cost synergies related to IAA (vs. $70MM as of Q4/23 reporting, which was the last update before today) and expects to achieve the full run-rate synergy target ($100MM-$120MM) ahead of the timeline communicated when IAA was acquired (2025). Recall that any revenue synergies ($350MM-$900MM of potential EBITDA contribution) would be upside to the above-noted cost synergies.
2024 Adjusted EBITDA guidance revised higher, GTV guide lowered – RB Global's 2024 guidance reflects: 1) GTV growth of 0% to +2% (vs. +1% to +4% previously and +9.7% YoY growth in 2023 on a pro-forma basis), with the reduction reflecting weaker- than-expected ASPs in the Commercial Construction and Transportation sector; 2) Adjusted EBITDA of $1,220MM-$1,270MM (vs. $1,200MM-$1,260MM previously and $1,033MM in 2023, or ~$1,142MM on a pro-forma basis), with the increase reflecting continued operating leverage; 3) full-year tax rate of 25%-27% (unchanged); and, 4) capex of $275MM-$325MM (unchanged; vs. $314MM in 2023).