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Ritchie Brothers Auctioneers Inc (NYSE:RBA)
Q1 2019 Earnings Call
May. 10, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, my name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ritchie Brothers. Auctioneers' First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

I will now turn the call over to Mr. Zaheed Mawani of Investor Relations to open the conference call. Mr, Mawani, you may begin your conference.

Zaheed Mawani -- Investor Relations

Thank you, Ken. Good morning, and thank you for joining us on today's call to discuss our first quarter 2019 results. I'm joined this morning by Ravi Saligram, our Chief Executive Officer and Sharon Driscoll, our Chief Financial Officer. Also with us today for the Q&A portion of the call will be other members of the leadership team.

The following discussion will include forward-looking statements as defined by the SEC and Canadian rules and regulations. Comments that are not a statement of fact including projections of future earnings revenue, gross transaction value or other items are considered forward-looking and involve risks and uncertainties. These risks and uncertainties that could cause our actual financial and operating results to differ significantly from our forward-looking statements are detailed in our SEC and Canadian securities filings available on the SEC and SEDAR websites, as well as our Investor Relations website at investor.ritchiebrothers.com.

Our definition of gross transaction value may differ from those used by other participants in our industry. It's not a measure of financial performance, liquidity or revenue and is not presented in our statement of operations. Our first quarter results were made available yesterday evening after market close. We encourage you to review our earnings release in Form 10-Q which are available on our website as well as EDGAR and SEDAR.

On this call, we will discuss certain non-GAAP financial measures, for the identification of non-GAAP financial measures, the most directly comparable GAAP financial measure and a reconciliation between the two, see our earnings release and Form 10-Q. Presentation slides accompany our commentary today. These slides can be viewed through the live or recorded webcast or downloaded from our website. All figures discussed on today's call are in US dollars unless otherwise indicated, I'll now turn the call over to Ravi Saligram, our Chief Executive Officer.

Ravi Saligram -- Chief Executive Officer

Thank you Zaheed. Good morning everyone and thank you for joining our first quarter earnings call. We delivered 3% GTV growth on a constant currency basis, our reported revenue growth of 17% was driven by a higher mix of inventory sales revenue compared to last year and our earnings per share improved 6%. In particular, we are proud of the performance of Ritchie Brothers Financial Services, which achieved 32% revenue growth, that's 28th consecutive quarter of double-digit growth.

We're also very pleased with our significant improvements in operating free cash flow and excellent ongoing capital discipline, and cost control.

From a channel perspective, our online business led the way, up 9% of GTV growth. The IronPlanet weekly featured option up 4% including strong GovPlanet growth and Marketplace-E up 14%. Our live business finished up pretty fast for the quarter, which was unfavorably impacted by the non-repeat of last year's $37 million US temporary auction. Regionally across all our channels our US business posted 6% GTV growth, led by the strong volume in Orlando together with another solid performance from our Strategic Accounts Group, delivering double-digit GTV growth and strong new customer acquisition. It's heartening to see solid GTV growth in the US after two years of supply constraints.

Moving on, our Canadian GTV was significantly lower than last year, but the super majority of that decline was driven by the non-repeat of last year's Grande Prairie auction and uncertainty stemming from both Alberta provincial elections, and oil and gas sector. The overhang from the pending elections in Alberta concluded in April and hence helped create some renewed energy and positive (inaudible) flow in the west.

The Canadian team is off to a very good start in Q2. Notably, with our flagship Edmonton auction last week posting solid results of CAD207.6 million for very strong (inaudible) performance. We also had a record auction in Toronto this week, achieving GTV of CAD46 million. Our international GTV was up 8% on our forward basis and nearly 16% on a constant currency basis, driven by higher atmos (ph) business and significant online volume growth led by Marketplace-E. International has led the very good Marketplace-E platform and in Q1, the group doubled it's volume over last year.

A salient feature of the first quarter was an inflection pricing in certain asset classes such as excavators and dealers. Excavators pricing has flattened out while (inaudible) have begun to decline. On the other hand articulated dump trucks continue to material handling continues to be soft, while tractors continued to show strength with nearly 10% inflation in first quarter of 2019. (inaudible) Equipment in our sweet spot of three to five years went from 25.3% of GTV in 2019 to 24.7% of GTV, a reduction of 60 basis points. Price inflection in certain asset classes, age of equipment(ph), combined with competitive pressures in a no (ph) supply high demand market costs are far larger underwritten access packages, both inventory deals and performance guarantees to underperform, took up (ph) this in perspective there. We had just five large deals out of a total of 373 global assets deal in the first quarter 2019 that did not perform up to expectations, and in particular affected our Orlando and Moerdijk auction.

Recognized a few of these deals for important strategic deals to act as start-up act (ph) just to see these big auctions. Many of the other deals in particular those that comprise lower hour (ph) late model equipment performed extremely well. While we're not happy about these five deals underperforming, we take it in our stride. Ritchie Brothers have successfully underwritten billions and billions of dollars of deals in the last 10 years and in aggregate, we have delivered outstanding performance and have been profitable in our underwritten portfolio as a whole every single year. Our teams are best in class in the industry.

Market and pricing infractions periodically occurr due to the cyclical nature of our industry. Also we often purchase inventory deals are offered guaranteed two to three months ahead of first sale. Consequently, we cannot always predict what pricing will do when the hammer drops at the auction. That is the nature of the underwritten business but as pricing inflects, we inflect based on the dynamics of the asset classes and age of equipment. In 2018, the sales heads and I exhorted our teams to chase volume aggressively given supply constraints.

Our goal was to grow GTV, rate was not a problem. In light of the recent inflection we've already pivoted, in fact we walked away from a few deals last month where the economics did not make sense. We have tightened approval criteria for deals and are striking a better balance between achieving rate and volume. We are also piloting algorithmic predictor parsing data (ph) based on machine learning for our (inaudible) deals in the second half of 2019. We have already seen the benefits of our algo pricing model when applied again straight commission deals to achieve better shoot prices. We're confident we'll be back on track with our at-risk rates as we go forward.

Now turning to our Q1 auction highlights, our overall GTV mix between live and online continues to reflect our focus on growing penetration within our online Marketplace-E channel. Our online Marketplace-E GTV grew from 16% of total GTV in Q1 2018 to slightly about 17%. In our live on site channel 48% of our live industrial auctions posted comparable increases over 2018. Some notable performances in the quarter saw Houston up 11%, just days before our massive Orlando sale in February. Los Angeles was up 25% and internationally Moerdijk was up 70%. We have 47 total live industrial and ag auctions events in the quarter, which was five fewer than last year.

Across all our channels. Our buyers continue to leverage and embrace auction technologies and take advantage of the unprecedented access and flexibility as 60% of our GTV was purchased by online buyers versus 56% last year. Looking at our online marketplaces, new buyers on IronPlanet grew 54% in Q1, the highest ever. Our Marketplace-E GTV was underpinned by 40% increase in buyers and significant growth in both listed items and bids up nearly threefold. Finally, our government business and specifically our non-rolling stock program is building momentum, and while we don't have account last year it is still a new program, we delivered strong growth across number of bids, listed items and buyers despite some sell-through challenges resulting from the US shutdown, government shutdown, during first quarter.

We're seeing more instances of our base of buyers beginning to leverage the scale and breadth of our platform, regardless of the channel which they entered into our ecosystem. Our diversification strategy, starting to generate tangible network effects. Purpose (ph), couple of examples to share with you,

In example one, we had a buyer register on the RBA (ph) site in February, and over the subsequent 45 day period the customer transacted across Ritchie Brothers Marketplace-E and GovPlanet. In example two, a buyer registered in 2015 on GovPlanet was active in '16 and again in '17, but (ph) making the same customer double their purchase volume across GovPlanet and TruckPlanet channels. These are good examples. But it's not meant to suggest that all our customers behave like this, but obviously when they do the multiplier effect is enormous.

Now, you can see why the focus on new business, because the lifetime value of customers is enormous. Let me leave you with a couple of interesting statistic of all active buyers on IronPlanet property since 2016, approximately 20% of buyers purchased on two or more IronPlanet properties, but that 20% of buyers purchasing on multiple platforms the GTV per buyer on average is over five times the level of buyers purchasing on just one platform. You can see why we're so excited that now Ritchie Brothers is truly a powerful multi-channel platform generating strong network effects.

A final comment on multi-channel. In order to make both sellers and buyers completely channel agnostic, we will be implementing full harmonization of buyers fees starting in Q3 this year. Specifically, the one remaining fee structure in our live auction pertaining to smaller lots will be made identical to IronPlanet's fee structure. With that, let me pass on the call to Sharon.

Sharon Driscoll -- Chief Financial Officer

Thank you. Ravi, and good morning everyone. Total revenues for the quarter was up 17% driven by 56% growth in inventory sales revenue, partially offset by a 2% decline in total services revenue. Services revenue was impacted by a 9% decline in commission revenues resulting from the combination of lower services GTV volume as well as lower guarantee contract rate performance in the US. The decline in commission revenues was partially offset by a 7% improvement in fees and other services segment revenue growth. The fee increase was driven by higher mix of lower value live auction lots, growth in our GovPlanet channel as well as volume driven growth at RBFS, the revenue growth from inventory sales was primarily due to a higher level of inventory deals transacted in Europe and the US, partially offset by significantly lower volume in Canada.

Overall, the strong inventory contract growth in the quarter resulted in an inventory sales revenue mix of 43% of total revenue versus 32% of total revenue in the prior year. Our operating profit improved 2% to $33.6 million. The improvement was driven by the growth in total revenue, a 2% decline in SG&A expenses and lower acquisition costs. Offsetting these improvements was the higher cost of inventory sold resulting from our software (inaudible) great performance in Orlando and Moerdijk and higher GovPlanet operating cost versus last year as the new surplus contracts started up only in Q1 of 2018.

Additionally, our depreciation amortization expenses increased 6%, reflecting the continued investment in technology CapEx for Mars (ph) and other strategic projects. All in, we improved our net income by 6% driven by our operating income growth together with lower interest expenses resulting from our diligent focus on debt repayment, partially offset by a higher tax rate in the quarter of 26.8%, primarily due to a greater proportion of income being taxed in jurisdictions with higher tax rates.

Moving on, as you will recall, we implemented the new accounting revenue standard Topic 606 in Q1 2018, and we want to remind investors that this presentation of revenue is highly sensitive and volatile to fluctuations in inventory sales mix. As you can see on this slide, it highlights the last nine quarters of year-over-year revenue growth broken out by service revenues, inventory sales revenue and total revenue, and clearly demonstrates the relative volatility on total revenue growth resulting from fluctuations in inventory sales revenue mix.

As you can see over the last three quarters, total revenue growth has been up 8%, up 22% and up 17% in the current quarter. And we felt it was important for you to understand how the inventory sales mix can swing total revenue making forecasting extremely challenging. Overall to frame the next two slides, our auction and marketplace segment total revenues were up 18%, primarily due to this 56% increase in inventory sales revenue, partially offset by a 3% decline in service revenues.

Further breaking down the 3% decline in our A&M service revenue, the US is flat versus last year with a lower volume of commission revenues and lower guaranteed rate performance, offset by higher fee revenue. Canada was down 9% primarily due to a lower volume of commission contracts and international was down 12% driven by the change in revenue mix between service revenues and inventory sales revenue. To measure revenue rate performance for the A&M segments, we look at two key A&M rate measures, a service revenue rate and an implied rate of return on inventory deals, which I will discuss in a moment.

Let's start with service revenue rate. Calculated as A&M service revenue as a percentage of total GTV. We have used this method of calculation because A&M service revenues include straight commission revenues, guaranteed contract proceeds and consignor and buyer fees related to both service and inventory contracts. The A&M service revenue rate in Q1 was 12.2%, roughly 60 basis points lower than last year, but on a sequential basis similar to Q4 performance. We saw consistent rate performance in our straight commission contracts but experienced lower rates on our guarantee contracts as Ravi has discussed earlier. Our fee growth positively affected rates in the quarter due primarily to the increase in mix of lower value (inaudible)

Moving onto our auction and marketplaces segment inventory sales revenue. Regionally, the US was up 248% over Q1 of last year, primarily driven by the strong growth of inventory contracts at our larger live US auction and through our GovPlanet channel. Conversely, our Canadian inventory sales revenue was down 90%, as Q1 2018 included one large insolvency inventory deal that seeded (ph) our Grande Prairie auction event last year. Our international region was up 116%, driven by a higher mix of overall inventory deals with some volume resulting from macroeconomic conditions in parts of Europe, Asia, Middle East and Australia.

This further highlights the impact in volatility that large nonrecurring inventory deals can have by region, particularly when looked at on a single quarter basis. And in inventory sales revenue mix our volume measure on GTV was up 11.2% in the quarter, down slightly on a sequential basis from Q4 but nearly 400 basis points higher than Q1 of last year.

Looking at our implied rate of return on inventory deals calculated as inventory sales revenue, less cost of inventory sold, over inventory sales revenue. In Q1, this rate was 8.1%, which was lower than the 10% rate we achieved both sequentially in Q4 and in Q1 of last year. Again the rate compression this quarter was primarily a function of the softer price realization on a few of our larger underwritten inventory packages.

Moving onto our costs. Our total cost of services declined 2%, which was favorable considering our GTV growth and overall lot growth in the quarter. Our core cost of services decreased as a result of fewer live auction events in the quarter, partially offset by an increase in digital marketing and shipping cost to support our government business related to the ongoing non-rolling stock program.

Ancillary cost of services declined 6% in line with lower repair, hauling and paint revenue services provided in the quarter. SG&A costs declined 2% or $2.3 million over last year. SG&A costs are virtually flat year-on-year when you remove the higher share unit expenses in Q1 2018. Due to the mark-to-market impact of the PSU amendments. This flat result is still very positive when considered in light of SG&A investments made to support our growth businesses, particularly Ritchie Brothers Financial Services, GovPlanet and our technology platforms. We had seen reductions in controllable costs such as travel, advertising, promotion and professional fees through disciplined cost control and efficient spending.

Turning to our balance sheet and liquidity metrics, our Q1 operating cash flow of $72 million improved 7% over last year. The improvement was driven by higher net income and improvements in working capital from a decrease in inventory balances in the quarter as we sold through a significant amount of inventory in Orlando and Europe. On a trailing 12-month basis, our operating free cash flow was up 170% from 43 million last year to 117 million this year, which underpins the tremendous cash generation characteristics of our business model.

Effective 2019, we will be discontinuing our EverGreen CapEx rate measure and are replacing it with annual CapEx dollars guidance range. For the full year, we expect our CapEx investments to be in the range of $45 million to $65 million. Our CapEx spend will continue to be focused on technology investments, led by our MARS platform initiatives and other technology driven growth imperatives in addition to our site maintenance capital and continuing investments to support our GovPlanet business.

Our debt reduction continues to be well ahead of schedule with an additional voluntary repayment this quarter of $10 million. Our positive operating results in the quarter together with our debt repayment progress has resulted in an adjusted net debt to adjusted EBITDA ratio of 1.7 times on a trailing 12 month basis which is well within our evergreen target range of below 2.5 times.

Based on our strong cash flow performance and current leverage ratios, we are reinstating our pre-acquisition capital allocation priorities. We intend to continue to pay down current debt levels and we'll evaluate an increase in dividends on our normal annual cycle. As announced yesterday, our Board of Directors authorized a share repurchase program for the repurchase of up to $100 million worth of common shares of the company over the next 12 months, subject to exchange approvals. Share repurchases under our normal course issuer bid are aimed principally to offset option dilution.

In the quarter, we also implemented the new accounting standard Topic 842, and recognized a right of use assets and operating lease liability of $103.9 million as of January 1, 2019 as disclosed in our financial statement Note 1J. This present value of future lease payments under US GAAP affects the balance sheet but has no significant impact on the P&L, cash flow statement debt covenants or return on invested capital. We continue to see positive progress with our ROIC measure improving on a trailing 12 month basis to 7.7% from 6.5% last year.

To sum up Q1, we continue to demonstrate progress against key strategic growth and technology initiatives and the financial health and fundamentals of our business model remain intact and continue to improve. We remain a strong cash flow generator and have made significant progress on cost control.

With that, I'll turn the call back to Ravi.

Ravi Saligram -- Chief Executive Officer

Thanks, Sharon. Now that most of the IT integration has been completed, we are excited about extending that growth journey beyond the auction segment. As a result of that, positions of IronPlanet, (inaudible) and Asset Nation (ph), we now have an unbeatable portfolio enabled by excellent technology that can cater to the different needs of customers to increase share of wallet of existing customers and acquire new customers.

We divide the used equipment market into three segments. The first the auction segment, which is $25 billion and we have approximately 20% market share. Our objective here is to protect our leadership position while growing share. Our key customer base in this segment are end-users and our principal products, other RB live auction and the weekly featured online auction.

We call the second segment midstream and it's over $140 billion. This segment is dominated by thousands of brokers, independent dealers and end users selling privately that is customer selling on their own through listing services or personal contacts and relationships.

Our objective here is to drive penetration of this segment. Our key product offering case are rapidly growing Marketplace-E which offers consignors complete control over pricing, who the buyer is, et cetera through a variety of reserve formats. On a trailing 12-month basis, Marketplace-E is already over $275 million in GTV just 15 months after launch. MPE (ph) that will offer consignors a strong alternative to selling on their own or (ph) leading brokers by achieving strong price value through leveraging the RB platforms, global reach and network effects.

Finally, the largest segment is upstream commonly referred to as retail and dominated by OEMs, OEM dealers, strategic accounts and rental companies. We made a clear decision that we're not in the business of competing head on with these players in this segment since they're very important long-term customers. Instead, our objective is to create enduring partnerships by embedding ourselves in their infrastructure through value-added enablers to pay to keep relationships. Our key product offering here is RB asset solutions, which includes inventory management systems, pricing tools, inspection apps, et cetera. We're confident that this three-pronged go-to-market segments will be a key driver of growth in the next several years. Consequently, we have realigned our organization structure to ensure we have strong sales leadership focus on each of these segments. Given upstream is our largest long-term market opportunity. Jeff Jeter will now focus on overseeing our upstream go-to-market strategy and Overseas Strategic accounts as North America's President.

Our Strategic Accounts team while continuing to sell all our product offerings will be the exclusive channel to sell our (inaudible). Our regional teams will handle all our core products, including MPE , RBA and IP to protect and increase our share in auctions and penetrate midstream.

The other key change is that we brought in Kari Taylor as our Chief Sales Officer, US Regions. In this newly created role, Kari will assume responsibility for the US field-based regional sales organization and initially focus on successfully implementing a new stage initiative to accelerate new business growth and enhance territory manager sales productivity. She will also work closely with the field teams to accelerate online momentum and take multi-channel selling to the next level.

On that note, let me take a couple of minutes to help you better understand SAGE. At the heart of it, this is an enterprisewide sales effectiveness program, which is the hallmark of any world-class sales organization. SAGE stands for Sales Activity Generation Engine and it's an activity and behavioral focused sales process overlaid with the data driven mindset that provides our teams with the tools to succeed our multi-channel environment even in the difficult supplier market conditions.

We will be using SAGE to focus on the key outcomes of new customer acquisition, multi-channel growth and creating a common global measurement and KPR framework that sets clear expectations and generates timely feedback to our sales team. SAGE will allow our TMs to have increased customer face time as they pursue new business. We've already loaded lists of existing consignors and new customer acquisition targets by territory on salesforce.com, which we call sales (inaudible) created a special new business incentive. SAGE will be launched later this month and globally in the second half of 2019.

Looking ahead to the rest of the year, we expect gradual easing of supply constraints as the year progresses, while recognizing that we remain in a highly demanding environment for equipment with high utilization rates, especially in the US. We're off to a good start in Q2. Edmonton and Toronto performed well and it's, excuse me, and it's pleasing to see that Canada is regaining momentum. GTV growth in the first six weeks of Q2, is trending positively we also have a large insolvency pipeline deal ahead of us in the United States, which we're building in partnership with Gordon Brothers in Q2 and we press released that a few days ago. Given the new revenue presentation combined with the discontinuation of reporting agency proceeds, we recognize the difficulties that analysts and investors will have in modeling our business. However we want to categorically state that nothing has changed in terms of the fundamentals of our business or the key drivers. We continue to hold ourselves accountable to all the same measure of Evergreen Model as previously stated, and continue to be incentivized on that basis. On the key measures and Evergreen model that has not been affected in presentation by the discontinuation of agency proceeds is EPS growth. And to refresh your memory, that was in the range of low double digits to mid-teens.

Although we do not provide annual guidance, we have a strong conviction in our ability to execute against our five key 2019 priorities, normalize at-risk rates and generate new business volumes and consequently, we expect to deliver strong earnings-per-share growth for the full year of 2019. Before we conclude, I want to thank our entire Ritchie Brothers' team across the globe for all their hard work and dedication.

And with that we are ready to take questions. Operator, please open the line to questions and let's limit it to two per person.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from Derek Spronck from RBC. Your line is open.

Derek Spronck -- RBC -- Analyst

Yes, thank you for taking my questions. Are there any indications that the used equipment supply constraints are starting to loosen, because looking at the age of equipment, it looks like it continues to age. So I would assume that would indicate the opposite, but are you seeing any other metrics that would suggest that it's starting to loosen?

Ravi Saligram -- Chief Executive Officer

Derek, hi, thank you for that. Few things, it depends, one on geography. For sure we're seeing loosening internationally and rather it's places like Turkey and other parts of Europe. We're definitely seeing some loosening of supply, which is why we are also seeing more inventory deals in the US and in Canada for sure kind of-there is a pause button in first quarter, primarily because of sort of, as my friend (inaudible) says politics and provinces, with -- as people waited for the elections, suddenly the pause button has been unpaused and we're seeing really -- that's why we have a tremendous Edmonton auction, tremendous Toronto auction and we're beginning to really see things flowing back in Canada, which is very encouraging.

And in the US, the fact that we had 6% GTV growth after two years of real constraint, I mean that 6% is and that's on the core business, that's pretty damn good. So those are definitely indications.

Secondly, when we talk to dealers, we are beginning to sense and now it's going to be gradual. It's not like a secured (ph) surge in the US that a tsunami is hitting us. But definitely we're seeing step by step, and when we look at production levels. I think there is a demand -- supply demand harmonization that is going on. So I'd say all in all, gradual improvement, definitely, it's not as bad as '17 or '18. What I can say is, if you don't have tailwinds for sure, at least the headwinds that will (inaudible)

Derek Spronck -- RBC -- Analyst

Okay, that's helpful. And just quickly the full fee harmonization, when you move to that harmonization fee, I don't know if I am allowed to say this, but the agency proceed rates went higher. Could we expect the same once you include the smaller lots that we'll see a little bit of a pickup in agency proceed rates or commission rates?

Ravi Saligram -- Chief Executive Officer

So Derek, you can say agency proceeds, i just can't. By all means say all that you want, you are not governed by the NCC, I think but yes, we do -- look, the fee harmonization ultimately is done by -- to really make sure that they are channel agnostic. That's really the key reason we do it and we're very conscious, we want to make sure that we still are at competitive rates for buyers. But yes, I think we did experience improvements on our top line due to the harmonization and one can expect that similar effects, but maybe not to the same extent because the first one was really the big one. This was the last few piece, but yes, it should have a positive impact, especially the smaller lots continue.

Derek Spronck -- RBC -- Analyst

Okay, thank you. Thank you for the time.

Operator

Your next question comes from Ben Cherniavsky from Raymond James, your line is open.

Ben Cherniavsky -- Raymond James -- Analyst

Morning, guys.

Ravi Saligram -- Chief Executive Officer

Hello, Ben.

Sharon Driscoll -- Chief Financial Officer

Morning.

Ben Cherniavsky -- Raymond James -- Analyst

I just want to clarify the commentary around the Evergreen. So what components of that are still relevant or have they all changed, are they all being pulled or what? And in particular, I know you emphasized that the EPS growth target is still intact. But I would assume ROIC is something that's been unimpacted by the agency proceeds, is that correct?

Ravi Saligram -- Chief Executive Officer

Yeah, Ben, let me, and then Sharon can add. All we're talking that --any add -- the tenets of the Evergreen are completely unchanged or the objectives are sort of the five to seven year on average sort of tenants that we had set forth all absolutely intact. Because we cannot talk about agency proceeds in our presentation, so we cannot present it as a percent of that and if you start doing things against revenue because the volatility of inventory, sometimes those are meaningless. But clearly things like EPS, dividend payout ratio, ROIC are all things that we will be tracking and talking about.

The one thing that Sharon did mention was that CapEx, because we used to express that as a percent of agency proceeds that we felt, -- and that has nothing to do with the presentation now. We just felt that people didn't think it was very relevant to do it as a percent. So we've just said, hey, we've adjusted (ph) to give you annual guidance on sort of a range on that.

Sharon, is there anything you want to add there?

Sharon Driscoll -- Chief Financial Officer

Well, I think the comment too that we made was internally we are all still incentivized on kind of the original Evergreen Model metrics as previously presented. So for our standpoint, we still are very committed to those targets and we'll work to deliver them.

Ravi Saligram -- Chief Executive Officer

And our incentive still go on that basis. And so -- and those calculations, for instance one of the key tenets was also EBITDA margins and we're very committed to all of those. It's just we cannot talk about the former presentation and expression but certainly you can all look at our statements and come to your own views on how we're doing against those all measures, because you have all the information.

Ben Cherniavsky -- Raymond James -- Analyst

Can you remind me what the ROIC target is and maybe just, sorry, I know it's new disclosure, but just what was it for the first quarter trailing 12 months?

Sharon Driscoll -- Chief Financial Officer

And, so, for the trailing first quarter was 7.7% and the Evergreen target is 15% by the end of 2021.

Ben Cherniavsky -- Raymond James -- Analyst

And you think -- like there's a wide gap there, you think that's still achievable, is that in your sights?

Sharon Driscoll -- Chief Financial Officer

We're doing a very good job of reducing debt, so getting the kind of capital in the right shape and it's predicated on earnings growth and certainly our estimates today is that it's still certainly within reach.

Ben Cherniavsky -- Raymond James -- Analyst

And the technology investments that you're going to be making in GovPlanet and some of these other initiatives that's all part of the equation because that'll -- obviously you guys generate a lot of cash and appreciate your debt will come down, but you've also got some capital investments that, I'm not sure, were sort of part of the original plan when that target was set three or four years ago.

Sharon Driscoll -- Chief Financial Officer

The capital investments are still within our Evergreen model CapEx range that we'd said originally and certainly all of the investments in technology are covered in that range estimate that we just provided for overall total dollar guidance. So that should not be an issue. And also on an EBITDA margin basis, the depreciation attached to that does -- is not impacting the number.

Ravi Saligram -- Chief Executive Officer

In fact, that capital, I'd say is below the range even with the guidance we gave, well below the range. So we are very careful on capital expenditures then and clearly not investing any new sites, other than when you have to make a change or you have to do a lease in (inaudible) in UK because the lease expired and then also systematically trying to monetize global sites and so we have -- that ROIC is something the EBITDA margins the EPS, those are the things, we are very laser focused on.

Ben Cherniavsky -- Raymond James -- Analyst

Okay, great. That's what I want to clarify. Thanks very much.

Ravi Saligram -- Chief Executive Officer

Thank you.

Operator

Your next question comes from John Healy from Northcoast Research. Your line is open.

John Healy -- Northcoast Research -- Analyst

Thank you. Wanted to ask you guys a little bit about the ancillary offerings in the business, continue to be amazed that the growth at RBF as continuous proposed, I was curious if you could lend some comments on the penetration rate of RBFS and what is the customer base as well as some of the other ancillary services, just so we can assess how much more runway in terms of potential there, is there. And then secondly, as you move to the omni channel offering, does RBFS or the other service line, do those get helped in terms of penetration rates or those kind of neutral or do you see those maybe lag to be able to attach those products to different ways you can help your customer base?

Sharon Driscoll -- Chief Financial Officer

Yes, so I'll start and Ravi can certainly add color. Certainly, we are very pleased with RBFS and how it has grown. Certainly the penetrations that we've talked to previously we kind of view it internally almost like capable of reaching kind of captive credit card type rates within our business model. And so we're currently kind of in, correct me if i am wrong here, Ravi, but I think 17% overall penetration and private card with kind of the amount 20 to mid-20 rates.

So we still see fairly significant opportunity just in the addressable GAAP of servicing our existing customers and items that are sold through auctions. But equally, we have to follow the customer program, so that basically as a customer is approved, if they are unsuccessful at auction, we will help them fund purchases that are outside of our channel. And so as a result that opens up the potential to even more and the team is very entrepreneurial in nature in looking at ways of continuing driving into other types of financial service products that can accelerate growth and to your point, also add value to our existing customer base.

John Healy -- Northcoast Research -- Analyst

Good.

Sharon Driscoll -- Chief Financial Officer

With respect to the other ancillary, a couple of other key growth factors there is we've launched RB logistics, which is in our international region, which is a shipping and hauling brokerage offer which is assisting and growing with a lot of these inter-country inventory type deals that we're doing that are moving equipment through different places in the international network.

Ravi Saligram -- Chief Executive Officer

So the only thing I'd add to what Sharon said and she gave the very urgent answer was, look, captive OEMs who have their finance companies et cetera, anywhere between 20% to 25%. So we still think we have run rate, but it's also an issue of addressable GTV as you pointed out, we now are offering financing to all our infinite customers for addressable and now the RBFS team is making real good progress in that front.

Sharon also touched on follow the customers, so we allow now people who actually could not buy something at our auctions, and if they want to go buy a (inaudible) it's not a direct competitor, but if they want to go and buy with their OEM dealer et cetera, we'll allow them to take the financing approvals. So I think, over time the Gov thing will also help. So as we build our addressable GTV it is the part of the network effect that really helped. But RBFS is also a launching pad for us to do a lot of other things and connecting it more and more how do you get to supply before it ever comes to the market, because as we work closely with our lender partners learning if things are leased for three years, pay at the two-year mark and go out and start getting to those people to say if you're going to replenish your equipment, why don't we take the used, and so there is a lot -- this is a gem and that team (inaudible) Jim Case (ph) do an amazing job with their teams. I'm very proud, 28 quarters of double-digit growth is just fantastic and very, very proud of their efforts.

John Healy -- Northcoast Research -- Analyst

Great. And just one last question on the buyback announcement. I just wanted to make sure I understood the wordings. So you've gotten Board authorization for up to $100 million worth of stock to be repurchased, is that expected over the next 12 months or is just that authorization end within 12 months or do you expect to exhaust that whole $100 million by this time next year? And then secondly are there any nuances to the pace in which you can do buyback with the dual-listing, I was just hoping that I'd get some color there.

Sharon Driscoll -- Chief Financial Officer

Yeah, certainly, it is our expectation that we will do it, but we will do it over a period of time and certainly we are still subject, we're just applying for it now through the exchanges. So we are waiting for their approval. When we -- we've done this before, this is no different than what we've done before. So I don't think there's any intricacies related to the dual listings. We are doing it through the NCIB which is TSX base, so that is the route that we are taking that, but we will be able to purchase on both exchanges.

Ravi Saligram -- Chief Executive Officer

And, John, just to add, clearly to be very clear, this is really to offset option dilution. So one shouldn't be on -- we get the blanket authorization and to the extent that we need it to cover auction dilution. So it may be couple of tranches because for this year, whatever is needed to offset the option dilution we will do it and then next year some more. So, but we want to just get the authorization so that we have the NCIB in place. So, but we have to be -- it's very much tailored for the capital allocation, burdens that offset option dilution and it's just that, and nothing more, nothing less.

John Healy -- Northcoast Research -- Analyst

Excellent. Thank you so much.

Operator

Your next question comes from Larry De Maria from William Blair. Your line is open.

Larry De Maria -- William Blair -- Analyst

Hi, good morning, everybody. Question, as it relates to the auction marketplace, service revenue and revenue rates. I wanted to understand your comments. I know you're -- you are taking some actions and you said, you're back on track going forward. So is that implying that 12.2% is probably the bottom that we should trend toward the mid upper 12% range? And then secondly that the actual service revenue, given the kind of weaker performance in the first quarter, should be reversible for (inaudible) up moving forward?

Sharon Driscoll -- Chief Financial Officer

Yes, so. We've given you a historic perspective because this is a new measure. One we want to make sure there's an understanding of how it's calculated, so that it is service revenue divided by total GTV's, to just mention there is clarity on the calculation. Based on the graph that we presented, we are operating at a low level with the focus that we expect to achieve in terms of improvement guaranteed type contracts. It may be safe to assume that range will be kind of in the 12% to 13% mark going forward, but again this is a relatively new metric, we're -- we will continue to show it and you can draw your own conclusions on how best to estimate (inaudible).

Ravi Saligram -- Chief Executive Officer

And as we get more experience with this metric we'll give you our perspectives as we go along, but as Sharon said, its a good starting point.

Larry De Maria -- William Blair -- Analyst

Well, I know the actions you guys are taking, Ravi, are they designed more around raising the revenue rate back to where it was, or we are trying to get this service revenue to comping up again.

Sharon Driscoll -- Chief Financial Officer

Yeah. So all -- if when I look back at our historical ranges that we've guided at, this quarter's performance is actually still at relatively the top end of that previous range. So certainly, we're not looking at a major correction that's necessary. I think it was just, we had cautioned the market that kind of the lofty (ph) rates we experienced inside of 2018 we're not necessarily going to repeat.

I think what we're doing is we're now looking at how we're managing on that price inflection that we've now experienced in Q1 and looking to improve the rate of performance and this matter does not pick up the inventory piece of our business that only relates to our guaranteed commission contract.

Ravi Saligram -- Chief Executive Officer

If I can just reiterate what Sharon said, it's pretty important point because all along we have been very consistent with the previous rate guidance and have cautioned against over-egging it because we do have something which is fundamental to our business. Call underwritten business, which can fluctuate, sometimes you can really bounce up, sometimes you can bounce down, but overall we adhere to that, including why we can't talk about on the previous basis, we have adhered even this quarter to that rate range and lot also depends. If you get more strategic accounts growth -- strategic accounts are usually at a lower rate. If we get more ag business that tends to be lower, if you get more international business that's lower rates. So it all depends -- the Gov -- the Gov rates tend to be higher. So the mix -- we have to view, but we feel we're -- even in the past given a very clear range and we've not really come off it. It's just be caution about either over exuberance or getting overly pessimistic. We think that the past -- the way we have guided has always been a pretty good marker for us.

Larry De Maria -- William Blair -- Analyst

Okay, understand. Thank you very much.

Operator

Your next question comes from Maxim Sytchev from National Bank Financial. Your line is open.

Maxim Sytchev -- National Bank Financial -- Analyst

Hi, good morning.

Ravi Saligram -- Chief Executive Officer

Hi, Max.

Maxim Sytchev -- National Bank Financial -- Analyst

Ravi, just a question in terms of at-risk contracts. And I think when you started at RBA, there was a thought process to maybe dial it down, then that kind of got ramped up, right now it's seems to be a bit lower. So in terms of the overall exposure, and I mean, obviously, Q1 was not very productive from a term perspective at risk. What can you do objectively to improve the performance in that bucket, if you can maybe point to some initiatives or internal analytics that you guys are generating?

Ravi Saligram -- Chief Executive Officer

Yeah, Max. I think, look, here's the thing to be very clear about it, this team is very good at this stuff and we do, as I said, billions of dollars of underwritten business historically and we continue to go -- we really like underwritten business because that is a pretty critical area. It is ironic that lot of people ask this question when the supply constraints were there-hey, why don't you give up on rate and go more after GTV? And occasionally when we try to do that, you will have a few deals that'll go south when the pricing inflects. And but as I said, out of 373 deals, if you are at five and they weren't large and depended on the asset classes. So, and there are number of factors that go in.

So I think the -- but I think the big pivot has been last year, we told our teams, look, we don't have (inaudible) problem, we have a volume goal here to try and go volume, really be aggressive, and it was not just us, the whole -- we have 200 competitors in the US alone. We're all going after volume. So that sometimes strategic deals that you need to take to seed auctions. So now that we have realized in certain asset classes there is a pivot, and I don't want to give the impression that all pricing is an issue, but we've now pivoted back and we're just going back to kind of how we were running things in 2015-2016 whether there's a tremendous amount of focus, and we've just gone through that pivot.

Doug Oleg (ph) my head of pricing who was sitting right here, Tommy (ph) with all his valuation people are now clamping down a bit, gain a little bit more into making sure that their valuations -- they are taking a look at that to make sure that both the downside and the upside, but I don't know, this is fundamental to our business but if there are deals that don't make economic sense right now, we'll walk away from them. And as I mentioned in the prepared remarks, we actually walked away from a few deals that some part (inaudible) and good luck to them becuase -- but knowing that a deal will lose money. we really don't want to go after. So I think that's essentially it.

And the last thing I'll say is we are piloting this thing and one of the issues has been all the taxonomies and stuff to get it together. But in July we're going into piloting a whole algo pricing model, which came from IronPlanet has been refined and refined by the data analytics team and we'll use that for (inaudible) to have one more voice, if you will, with machine learning to aid our judgment.

But overall I see this as a temporary phenomenon, and we are not too worked up about it, -- hey (inaudible) the fact that we lost, we had a little under performance in a few deals and it affected rates a bit. Yes. But am I saying, oh my god that's end of the world, no because this is what we do, we are good at it.

Maxim Sytchev -- National Bank Financial -- Analyst

Yeah, for sure, no that's very helpful. And last question, just in terms of, if you can provide an update on if there are any unusuals on versus Q2 of last year in terms of the auctions pacings anything that we should be aware of for the upcoming quarter?

Ravi Saligram -- Chief Executive Officer

So if can you put that up on the recent share and, why don't we just put that on the website and will because we're just going through that and let's get that put together

Maxim Sytchev -- National Bank Financial -- Analyst

Okay, thank you.

Operator

Your next question comes from Craig Kennison from Baird. Your line is open.

Craig Kennison -- Baird -- Analyst

Good morning. I wanted to ask about your sales leadership changes in SAGE and that conversation. In the last few years, you have asked your sales force to embrace a lot of change with IronPlanet and other changes and now you're introducing this SAGE. just how receptive has the team been to all of this change and has it -- had any impact on turnover or productivity? Just trying to get a sense of the pulse of the team here.

Ravi Saligram -- Chief Executive Officer

Craig. I'll -- let me give a quick view on that. And then I think you should hear directly from Jeff and Brian who are both on the call who really are close to the (inaudible) and Carl.

Look, I think ultimately our sales people want to win, and they've got amazing sales people around the world are very committed, very passionate and so, yeah, the multi-channel is new, but they are all taking onto us whether it's an IronPlanet person who's trying sell now live or a Ritchie Brothers person trying to sell online. You can see the tremendous success we have had with Marketplace-E on our new brand. $275 million plus in just one year, I mean I think that's fantastic.

So SAGE is just -- look at the end of the day, this is what -- this is the next evolution of our sales force and it is essentially, we are the world's best deal makers and what we need though is to make this business more predictable, you need a very routinized, regular way to go to market. And so we've done this whole program in conjunct with [inaudible) TM Council to get their inputs, we have created RSMs, it's all been as much top down as bottom up and we're launching this with the full support. I think they're looking at this fairly enthusiastically becuase at the end of the day, our sales people want more customer face time and so we're just trying to take all of the things that come in the way, because the old Ritchie Brothers' they used to be trade (inaudible).

We're now saying look spend all of your time on the road plus face time and how can we enable you to do that and we're putting a lot of enablers in place. So and productivity is improving. So all in all, I feel pretty good, but why don't you hear directly from the guys who manage the sales forces. Jeff, you want to have a quick comment, and then Brian?

Jeff Jeter -- President, Sales US

Yeah, sure. Craig, I think a key thing that Ravi mentioned and why I feel good about this is, look, we've been very thoughtful about this initiative from the standpoint of really listening to the sales organization, the territory managers, the sales leadership team, as you know, what we can do for them, how we can simplify, how the enterprise can support their efforts, so they have more selling time, right. So I don't look at this as something that we at corporate have come down and are instituting. I look at this as, this is what the organization is asking for, that's how we've built it and constructed it and that is the intent to make it -- tools and the ability for them to have more time, for them to be more productive, for them to make more money by being in the market more.

So, I feel very good about it, my team feels very good about it. Like with any initiative, it will be a journey, it's not a light switch that's just flip on but I feel confident that will -- that it will get embraced because of the way we've approached it by really taking our cues from the people that will be living with it every day.

Thank you.

Ravi Saligram -- Chief Executive Officer

Brian?

Brian -- Sales

Yes. Craig, just I would say echo Jeff's statements. I mean we -- we went across our company and we took our team's best and brightest stars and we brought them in to help design and manufacture this to ultimately make our sales teams better and with the coming together of the two companies IronPlanet and Ritchie Brothers, there was a lot of learnings on both sides. And as we continue to refine and improve our processes, all of this is just simply designed to be able to capture more business. And from a turnover perspective no, that's not a concern that were faced with, and like I said, with with our brightest stars in the field helping design and refine some of these processes. I think it's going to be a great success.

Ravi Saligram -- Chief Executive Officer

Karl, did you have anything internationally to add on that?

Karl Werner -- President

Yes. Even in the international group, it's the same outlook. So it's the best practices of both companies and as Jeff said it's a field driven project, not a top down thing, but it's mainly a consistent proven approach for all -- from our top producers to share because our teams like to win, and this will definitely help support that.

Ravi Saligram -- Chief Executive Officer

Super. We'll take our next question by from Cherilyn I think, but before that I think the question was asked about number of auctions. So in Q2, we have a total of 152 auctions, 59 industrial, 93 ag and that's the same number as last year, which is 152 but this 50 industrial, 102 ag so the composition varies. So you have nine less ag auctions, but more industrial auctions and, but overall the numbers are the same in terms of we are talking about the live business so and this doesn't include Gov and IP and so on., Hope that answers the question.

Operator

Your next question comes from Cherilyn Radbourne from TD Securities. Your line is open.

Cherilyn Radbourne -- TD Securities -- Analyst

Thanks very much, and good morning. So wanted to ask, this is the second quarter in a row where GTV coming out of the live on site auctions has been relatively flat year-over-year and online has driven most of the growth. And I'm just wondering how we should interpret that?

Ravi Saligram -- Chief Executive Officer

Yeah, I think. Cherilyn, we are -- I would not look at that as that we're trying to drive a channel shift. We grow where the customers want and there are so many puts and takes in terms of that if you look at Q1, the primary reason why live was down was Grand Prairie which is $37 million, that's a huge number when you look at it on one quarter and that's really what brought live down. Online is growing a lot because of MTE as a new offering. So that's the reason why we are kind of channel agnostic and the good news is, hey, as long as we're getting overall growth, but I think and also recognize we had fewer options in our recent five fewer auctions in live in Q1, so that suddenly had an impact.

And Q1 is a soft quarter, and also you got this big Orlando auction, so everything kind of went in there and then the disquieting (ph) inflection which also affects GTV. There's also exchange rates that affected GTV. So it's a lot of things, but I think our large business, we feel very, very good. One of the things you should take some comfort is one is '18. I think 65% of our live sites comped positively. And I think in first quarter, we said 45% or 49%. So we feel that business is strong. We're just trying to make sure where we have auctions, we have bigger auctions and we also closed a few sites that definitely had an impact, but if you're picking that up on online. But overall, our thing is making sure we're growing overall GTV and overall revenues.

Cherilyn Radbourne -- TD Securities -- Analyst

Okay. And maybe just as a quick follow-up, of the 60% of GTV that I think you said was purchased by online buyers, do you have a sense for what percentage of those buyers actually come in physically, inspect the machine and then make their purchase online versus people who totally transact online without ever physically visiting your site?

Ravi Saligram -- Chief Executive Officer

Yeah, I think the last survey, we periodically do that survey with customers to get a sense of that Cherilyn. But historically, at least on the live auction business, lot of people do come at least two-thirds to 70% of people actually and if they don't -- the owner doesn't come, they send a mechanic or some definite prior to the auction.

One thing that has changed dramatically, right, is you could be in the auction theatre, but we have now made technology so prevalent those-that percent includes a simulcast portion. As you may have your smartphone, you maybe in the auction theatre and bidding, your smartphone and that in itself will show as online, but they may be actually in the live theater. So or they may have come inspected and for anonymity because buyers are bidding against each other. So they want anonymity, and online provides them that. So I think this is the advent of technology.

We still think having the live auctions creating the events, creating the quick community that (inaudible). I mean you just saw in Edmonton was a great example with -- where we had the live auction tremend -- I think it broke all sorts of records as with Toronto, at the same time we ran an MPE went in conjunction, the whole week and we actually had some MPE equipment parts in the lots that people could see and then they had the whole week. So we are using all of this about driving the network effect and using all three of our channels. We think all three of our channels are very valuable and they are interacting with each other to produce the best results.

Cherilyn Radbourne -- TD Securities -- Analyst

Thank you. That's all from me.

Ravi Saligram -- Chief Executive Officer

Thank you very much. We -- that was the last call -- last question. So with that, it is a wrap, we appreciate your support and we look forward to chatting with you next quarter onwards and upwards. Thank you.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 67 minutes

Call participants:

Zaheed Mawani -- Investor Relations

Ravi Saligram -- Chief Executive Officer

Sharon Driscoll -- Chief Financial Officer

Jeff Jeter -- President, Sales US

Brian -- Sales

Karl Werner -- President

Derek Spronck -- RBC -- Analyst

Ben Cherniavsky -- Raymond James -- Analyst

John Healy -- Northcoast Research -- Analyst

Larry De Maria -- William Blair -- Analyst

Maxim Sytchev -- National Bank Financial -- Analyst

Craig Kennison -- Baird -- Analyst

Cherilyn Radbourne -- TD Securities -- Analyst

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