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Ritchie Brothers Auctioneers Inc (RBA 0.18%)
Q2Â 2020 Earnings Call
Aug 7, 2020, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by and welcome to the Ritchie Brothers Auctioneers Canada Call. [Operator Instructions]
I would now like to hand the conference over to your first presenter, Mr Zaheed Mawani. The floor is yours. You may begin.
Zaheed Mawani -- Vice President, Investor Relations
Thank you, Eva and good morning. And thank you for joining us on today's call to discuss our Second Quarter 2020 results. Joining me today are Ann Fandozzi, our Chief Executive Officer and Sharon Driscoll, our Chief Financial Officer, along with other members of management, who will be available for the Q&A portion of the call.
The following discussion will include forward-looking statements. Comments that are not a statement of fact including projections of future earnings, revenue, gross transaction value and other items are considered forward-looking and involve risks and uncertainties. The 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 our Investor Relations website at investor.ritchiebrothers.com. We encourage you to review our earnings release and 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 U.S. dollars unless otherwise indicated.
I'll now turn the call over to Ann Fandozzi.
Ann Fandozzi -- Chief Executive Officer
Thank you and good morning to everyone joining our call today. I would like to start by once again extending our gratitude to all the people who continue to selflessly serve our communities during these unprecedented times and are providing essential services to those that are in need. I also want to thank our employees, all over the world, that are providing outstanding service to our customers each and every day. I'm deeply grateful to all of them.
Yesterday, we reported our Q2 results and posted a very strong quarter. Sharon will walk you through the details shortly, but I am so proud of our teams and the way in which they led the way through extreme uncertainty and executed flawlessly for our customers, delivering record second quarter adjusted earnings per share of $0.54, together with solid cash generation. The strong financials are a testament to the resiliency and talent of our organization, our global omnichannel platform and the True North, of our company, being there for our customers when they need us most.
Now turning to Slide 5, I would like to share our progress against our Q2 priorities, which we outlined in our last earnings call. Our number one priority was the health and safety of our employees and our customers. As a continuation of our COVID response efforts from Q1 we stay vigilant in sustaining hygiene and disinfection protocols as well as adhering the social distancing guidelines.
The vast majority of our employees continue to work-from-home. But for those that needed to comes to one of our officers, our auction sites or were visiting customers, they were provided with full personal protective equipment packages.
We are taking every opportunity to reinforce safety protocols and guidelines at our town-hall meetings, company communications and local forums, so we have a consistent and sustained drumbeat around health and safety. Second, a key focus area for us was to ensure our customers were receiving a world-class experience during these unprecedented times. With all of our auctions moving online, our digital platform and Big Data led the way. We coupled the platform with demand driving digital marketing to deliver a very strong outcome for our customers. RBA.com saw a tremendous lift, with online traffic up 44%, search conversions up 89%, new accounts up a 109% and online registrations up 81%. Our live sites also played an integral role in our second quarter results.
Despite 100% of our auctions being held on-line, the sites allowed our customers a single place to bring products, so we could take care custody and control on their behalf, getting the equipment ready for sales, inspecting it, marketing the items and finally closing the transaction.
Furthermore, our sales professionals took the role as trusted advisors to a whole new level. Using our data analytics tools, now embedded in our best products to help our customers make the best decisions of what, when and how to sell their product. These growth numbers and metrics punctuate the confidence that we are giving our customers in our ability to facilitate, a two-sided marketplace and drives solid outcomes for buyers and sellers even under this pandemic condition.
Finally, our third priority was to focus on the strength of our balance sheet and maintain our financial flexibility in very unpredictable time. Sharon will go through our balance sheet and liquidity in tighter details shortly, but I'm very proud of the team's focused on cost control, together with tremendous stewardship of our capital.
We were able to leverage our balance sheet intelligently and mitigate risk, while meeting the needs of our customers looking for liquidity via at risk contracts. And now, over to Ritchie Brothers CFO, Sharon Driscoll.
Sharon Driscoll -- Chief Financial Officer
Thank you, Ann, and good morning, everyone. Despite very challenging pandemic- imposed operating conditions and coupled with cycling over a large nonrecurring U.S. auction event in Columbus, Ohio during Q2 of 2019, we were able to deliver $1.5 billion in GTV, equal to last year's GTV performance. This was a very positive outcome and a clear testament to the level of execution from all our employees across the enterprise. Our cautious tones going into the quarter was warranted. Given the uncertain nature of the pandemic and potential operating challenges we faced, resulting from movement restrictions of both people and equipment.
And while we did experience some sizable headwinds due to COVID in our international region, the government sector and in our Ritchie Brothers Financial Services business unit, we were also met with better than expected equipment supply with consignors actively seeking liquidity, primarily due to the depression in oil and gas prices and continued pressure within the transportation sector.
As Ann mentioned, we managed our costs with a high degree of discipline and also experienced some incremental cost efficiencies as a result of our shift to online. Through this strong cost performance, we were able to generate significant operating leverage and delivered 10% earnings growth, with adjusted earnings per share of $0.54, together with operating income growth of 14% and a 24% year-to-date improvement in operating cash flow.
To deliver this level of performance in this pandemic environment is just exceptional and I could not be prouder of the entire team. Our U.S. team had a very strong quarter. Once again, both our regional and strategic accounts teams executed through uncertain market dynamics to deliver positive GTV growth across all channels and posted its strongest online quarter ever.
This U.S. team delivered these results despite cycling the non-recurring $94 million Columbus, Ohio auction last year and softer GovPlanet business, due to military base closures. Normalizing for these two events, the U.S. team delivered mid-teen levels of GTV growth. Underpinning the U.S. team's exceptional performance was higher sales team productivity, as all our U.S. divisions continued to build momentum and achieved improved performance against our internal stage targets.
The Canadian team also delivered a remarkable quarter with solid positive GTV growth across all regions. Our Eastern Canada team drove strong growth, led by transportation sector volume, the addition of the rescheduled Montreal auction from Q1 and solid growth in our Marketplace-E format.
Our agriculture team had a very strong quarter, with the online hosting of 95 on-the-farm auctions plus two offsite events, and the team received tremendous positive reception to the TAL, or Timed Auction Lots format. As a result of the strong performance using TAL, our agriculture team will be retaining the TAL format for the remainder of 2020.
GTV in our international group was down significantly again in the quarter, but did show improvement over first quarter results. The majority of our international regions were still in various forms of lock-down or managing through border restrictions and the resulting quarantine implications, thus making equipment delivery in and out of our sites challenging.
All our live events have now transitioned to a 100% online through our TAL offering, along with our IronPlanet and Marketplace E solutions. The TAL solution is delivering a very positive buyer experience, based on customer feedback and our ability to quickly pivot to a 100% online, has not only shown the international market our online capabilities, but proven that we can deliver exceptional price realization on this platform during these uncertain times.
We are also seeing early signs of reaching a whole new type of customer, both buyers and sellers, as a result of utilizing the TAL solution, which is an encouraging sign and one we are monitoring closely. Overall, we continue to deliver positive operational metrics despite a reduction in the number of listed items resulting primarily from the government shutdowns and softer international volumes.
Buyer demand metrics surged in the quarter, with prices holding well in those categories. Our marketing team is doing an exceptional job of bringing buyers in and driving strong interest and participation across our global buyer base.
Moving now to the financial highlights. Our total revenue decline of 1% was attributable to our inventory sales revenue being down 2%, partially offset by flat service revenue. Commission revenues decreased 7% on flat service GTV, primarily due to softer commission rate performance from a higher proportion of GTV sourced from strategic accounts and lower revenues from our government operations.
Total fees were up 9%, driven primarily by the mix of small value lots, the harmonization of buyer fees and higher fees from services within our U.S. operations, which was partially offset by fees we waived for Canadian on-the-farm auctions as part of our COVID-19 pandemic response.
Operating income increased 14% to $89 million, primarily related to lower cost of service expenses. These lower expenses were the result of changes we made to our operations due to COVID, which included our transition from live on-site auctions to a 100% online bidding. Transitioning over to Timed Auction Lots solutions for selected international and on-the-farm agricultural events and adhering to impose travel restrictions. These operational changes resulted in significant cost reductions in employee compensation, travel, advertising and promotion expenses. In addition, we incurred lower year-over-year referral fees which are fees we pay from time to time to third parties for referral business.
Reported net income decreased 2% to $53 million, primarily related to the increase in the effective tax rate due to a one-time $6.2 million tax adjustment, partially offset by the higher operating income and lower interest expenses in the quarter. On an adjusted basis, excluding the $6.2 million income tax expense in the quarter, our net income was up 9.7%. As a reminder, the one-time tax adjustment was primarily due to final regulation published on April 8, 2020 by the United States Department of Treasury and the IRS, that clarified the income tax treatment related to hybrid financing arrangements, which the company recorded in 2019 and in the first quarter of 2020 and that they would not be deductible.
We had recorded income tax benefits of approximately $6.2 million in the 12 months ended December 31, 2019 and an additional $1.1 million in the three months ended March 31, 2020 which are no longer deductible.
Turning to our Auctions and Marketplaces segment, service revenue was essentially flat in the quarter. On a regional basis U.S. service revenues increased 5% primarily due to an increase in fee revenue driven by the mix of smaller lots, the harmonization of buyers fees, higher volume of GTV and inspection service fee revenues resulting from the increase in our online platform volume. The increase in fees was partially offset by lower commissions due to softer rate performance, driven by a higher proportion of services GTV sourced from strategic accounts and lower revenues from our government sector.
Canada service revenues were up 2%, primarily due to higher fee revenue driven by the buyer fee harmonization and higher total GTV, including the shift in the Montreal auction coming into Q2, partially offset by the waiving of the buyer fees for Canadian on-the-farm auctions, as they move to the TAL format. Our International service revenue decreased 33% primarily due to lower commissions and fees on lower overall services GTV. The lower total GTV was due to softness in the international region driven by pandemic related equipment mobility issues due to lockdown and general economic uncertainty.
On a rate basis, our Auctions and Marketplaces service revenue rate came in at 13.4%, which was essentially flat till last year. Moving on to our Auctions & Marketplaces segment inventory sales revenue. The 2% decline in our inventory sales revenue was primarily driven by cycling over non-repeating large inventory deals in the U.S. during Q2 of 2019 and lower sales of government surplus inventory due to COVID related government shutdowns. While our U.S. region inventory sales were down 18%, primarily due to last year's Columbus event and this year's GovPlanet declines, our Canadian and total International regions inventory sales revenue was notably up 43% and 11%, respectively over last year. On a rate basis, our implied rate of return on inventory deals in the quarter was 7.7%, which was up over 200 basis points better than our second quarter of 2019.
Each of our major regions posted strong positive year-over-year rate growth, with our Canadian business leading the way with over 900 basis points of improvement, partially offset by lower GovPlanet rate performance. Our at-risk portfolio of business continues to be active and we are very pleased with the overall performance during the quarter, where we faced unprecedented uncertainty as we were pricing and underwriting guarantee and inventory purchase contracts. We have done an exceptional job of finding that right balance to support our sellers in search of downside risk protection, while applying appropriate rigor in our valuations to mitigate our risk.
Moving on to SG&A expenses. As we continue to operate in this unpredictable environment, we have continue to rigorously manage our costs across the company and actively manage our expenses as we apply companywide efforts to control discretionary spending where possible. Overall, our SG&A increased 3%, primarily driven by higher incentive compensation based on our stronger operating performance together with a special one-time bonus accrual, we took in the quarter earmarked to recognize front-line employees for their above-and-beyond efforts to keep our business running and continuing to look after our customers without missing a beat. Partially offsetting those increases were lower overall operating costs.
The pandemic has undoubtedly resulted in lower expenses in the form of reduced travel and entertainment costs as well as other operating expenses as the majority of our employee base is still working from home. Excluding the higher incentive compensation, special bonus and share-based compensation elements, our SG&A declined 5.6% versus last year. Keeping mind, some of these costs are expected to come back over time as we are a sales organization and when it is safe to do so, our sales team will be back on the road, developing and nurturing customer relationships that have been and will continue to be integral to our success as a trusted advisor.
We are pleased with our overall expense discipline during this period of uncertainty and will continue to apply a high level of diligence as we manage our cost structure and day-to-day expense management going forward. Our disciplined capital allocation continues to be the cornerstone for our ability to navigate the current macroeconomic challenges. We remain confident that we have sufficient liquidity and access to capital to not only weather this health and economic crisis, but to invest and strengthen our company for the long term.
Our strong second quarter cash flow generation and disciplined capital allocation enabled us to strengthen our capital structure. At the end of the second quarter, we had $538 million in cash, cash equivalents and restricted cash in addition to available credit facilities of $640 million, of which $470 million was unused at the end of the quarter. We continue to be comfortably within our debt covenant thresholds and don't have any material debt maturities until October of 2021. Our treasury team has already started the process of renewing our existing revolving credit facility and term loan with the intention of extending the maturity by a further two years and we expect to close on this agreement at some point in August.
Our capital allocation priorities in this environment are still focused on disciplined cash management and investing wisely to support our business operations, while continuing to prioritize our dividend, and where appropriate, offsetting dilution with share repurchases. Given our strong capital and liquidity position, we are very pleased today to announce a 10% increase to our dividend, raising our quarterly dividend to $0.22, underscoring the Board's and management's confidence in continuing cash flow generation and our commitment to rewarding shareholders through dividend growth. Also, 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.
Finally, at the end of the second quarter, our adjusted net debt to adjusted EBITDA ratio was 0.9 times, continuing to be well inside our target ceiling of 2.5 times. We are now through the second quarter under the pandemic conditions and continue to believe that we are well positioned with a strong balance sheet and liquidity position to navigate a multitude of economic scenarios. And we plan to maintain our disciplined approach to investing capital to enhance the long-term value of our company.
Turning to our balance sheet and liquidity metrics. Our operating cash flow of a $198 million for the six-months ended June 30th, improved 24% over last year. The improvement was driven by higher net income and improvements in working capital, partially offset by changes in inventory levels and the timing of auctions versus Q2 of last year.
On a trailing 12-month basis, our operating free cash flow increased a 112% to $349 million, which is the highest level of free cash in the second quarter in the history of our company. Our year-to-date capex spend of $19.3 million is currently tracking within our full range estimate for 2020 of $35 million to $45 million.
We continue to focus our capital spend on supporting our technology programs and essential property investments. Lastly, our return on invested capital measure of 10.1% is showing good improvement from 8.3% in Q2 of last year. As a reminder, as we stated during our Q1 earnings call, pre COVID-19, we were on track to achieve our stated Evergreen ROIC target of 15% by the end of 2021. However, with our priority shifting to preserving optionality in this dynamic period and maintaining access to cash and capital, we can no longer commit that this target will be achieved during this time frame.
To conclude my remarks, I would like to thank our entire Ritchie Brothers global team for their enduring commitment to serving our customers. Our front-line teams have demonstrated tremendous heart and character as they have gone above and beyond to support our customers at these difficult times. And our people enabled with technology are the reason why we have been able to deliver such stellar operating performance for the quarter.
With that, let me turn the call back to Ann.
Ann Fandozzi -- Chief Executive Officer
Thank you, Sharon. We are excited to continue our journey of delivering a true global omnichannel marketplace for products and services. It is through our customer lens, with which we view our business. Using our data analytics to advise not only asset valuation, but optimized timing of sales. Offering liquidity solutions with span listings, reserved auctions and unresolved auction platform to meet our customers' needs and service offering which span data and analytics and include critical elements of product care, custody and controls, to facilitate the best value creation for our customers. Before I close out the prepared remarks, I would like to share some considerations on our third quarter.
From a priority standpoint, they remain unchanged from Q2, as we stay focused on the health and safety of our employees and customers, continue to improve and optimize our customer experience and maintain our advantage position by continuing to focus on our balance sheet and strong liquidity position. As we look forward, we are taking a balanced approach as the pandemic will undoubtedly continue to cloud the outlook. And while we see a number of upside opportunities, we need to be considerate of the uncertainty and risks those involve.
From an opportunity standpoint, we are coming out of Q2 executing well, and July is off to a strong start. Auction comps are coming in well versus last year, including the addition of four auctions in July, that shifted from Q2 last year into Q3 this year, plus a new Moerdijk, Netherlands auction this year, which didn't occur in July of 2019. We are also seeing positive improvement in our international regions ability to move equipment across jurisdictions and we are optimistic, we will see further improvement in our international performance. But we are aware that any resurgence in the virus could quickly close things down again.
Additionally, consignors are focused on cash flow and inventory management, which should continue to drive liquidity needs. We are also watching for both timing and magnitude of potential of government stimulus packages to begin driving infrastructure spend as well as the potential the consignors currently taking a wait and see approach could decide to act in terms of equipment dispersals and fleet realignment.
Looking at some of the factors that are driving the risks or uncertainty, we are very mindful of the surge in new COVID cases in the U.S. and there is a risk broadly that things can take a step-back and restrictions may be reinstated in the U.S. and potentially in other jurisdictions globally. Also, we may see a negative impact on equipment financing, with recovery taking a longer duration.
Lastly, we continue to carefully monitor any potential changes in the sentiment, which could impact equipment demand and softened the current pricing environment as we progressed through the quarter. All in all, there are a number of puts and takes, but we remain cautiously optimistic about the near-term. We will continue to focus on those things that are within our controls and look to build off of Q2 results.
In closing, I want to once again thank our employees for their dedication and hard work in delivering a very strong quarter and serving our customers safely. With that, operator, please open the line for questions.
Questions and Answers:
Operator
[Operator Instructions] First question comes from Cherilyn Radbourne with TD Securities.
Cherilyn Radbourne -- TD Securities -- Analyst
Thanks very much and good morning. So strategically, these results would seem to beg the question of whether Ritchie Brothers could move more of the business online permanently and retain some of the current cost efficiencies without sort of losing the community and crowd atmosphere of the live auctions that I think has been an important part of the franchise over time.
So just curious to get your early thoughts on that.
Ann Fandozzi -- Chief Executive Officer
Hi Cherilyn, this is Ann. Good to hear your voice, hoping everybody is staying safe out there. We are super proud of the results the team has achieved and are really monitoring the balance of the live experience as well as the online experience. So just to, kind of, reiterate a point we made during the last call, 100% of the auctions have shifted online and our secret all along has been that we were a digital company.
That said, our live sites continue to be busier than ever taking care custody and control of the equipment, so we can get ready to for sale, inspected, marketed for our customers and obviously then realized the highest possible value for them during the online transactions.
So we're really taking this opportunity as customers get more and more used to the actual transaction happening online. We evaluate the entire live experience, first and foremost through the customer lens, the employee lens as well as any operational efficiencies to be gained over the long term.
I think as Sharon said in the beginning, we are a sales first organization. And we are benefiting from 60 years of relationships and investments our sales organization has made with the customer base, like any relationship, those will require a reinvestment over time. And we will continue to do those prudently when it's safe to do so.
Cherilyn Radbourne -- TD Securities -- Analyst
Okay. And then, you did make reference in your comments to lower fees paid to an unrelated party who makes referrals on large disparcels of equipment, that was new to me. I was just hoping to get some color on those arrangements.
Sharon Driscoll -- Chief Financial Officer
So Cherilyn that's-it's Sharon here. That particular comment related to the large deal that we did a year ago. We do frequently go into partnership type agreements or referral type arrangements, particularly on large insolvency deals, where there are aspects to the close out of that business that we can't handle. So that really was not totally unusual but it was a larger amount than normal a year ago, just simply because of the one transaction that basically seeded that Columbus Ohio event.
Cherilyn Radbourne -- TD Securities -- Analyst
Okay, that's helpful. I'll get back in queue. Thank you for the time.
Operator
Next question comes from Craig Kennison with Baird.
Craig Kennison -- Robert W. Baird -- Analyst
Yeah, good morning. Thank you for taking my question. Kind of a follow-up to the prior question, but I'm curious how you think of your moat and going forward, with the shift to online activity, do you think that accrues to your moat and your differentiation and in some ways, do you think that this pandemic, might -- I guess widen that moat over time.
Ann Fandozzi -- Chief Executive Officer
Hi, Craig. Yeah, we are super proud of our platform. we can call it a moat and really the omnichannel nature of what we do is being showcased during COVID. So let me explain what I meant by that statement and the fact that yes, to your question, that will only continue. So we allow customers, what I would call the best of both worlds. There is an online transaction experience and to remind folks on the phone, IronPlanet had always been fully online for the transactions, Ritchie Brothers even before COVID was two-thirds online. So our pivot has more to do with going from that two-third kicking it to a 100% and that was more about back-end technology systems being able to handle the bandwidth, the load and really driving demand, to a level we've never seen before in terms of online.
In terms of our operations, there's always been a balance of live and online and the live sites are, during COVID, proving more important than ever before for our customers with the need to provide liquidity so quickly, they're desperate for an opportunity to kind of drop their products off with us, knowing, we've got it. We've got the optimum care customer control for them, we'll take the product, we will spiff it up when it needs it, we will inspect it properly. We will market it properly and we will extract the best value for them where that's needed.
In terms of, is that a moat, we certainly believe so and the early performance would indicate that it is being very well received by our customer base and they're getting the optimum value for what we provide and similarly, it gives us the wherewithal to continue those investments, to continue to drive that performance and the experience higher and higher, both in the digital landscape as well as providing the best care customer control of the product itself.
Craig Kennison -- Robert W. Baird -- Analyst
Thank you. And then could you comment on RB Asset Solutions. How is that product evolving and what does your adoption curve look like today, are you satisfied with it?
Ann Fandozzi -- Chief Executive Officer
Yeah. So we are, we are very, very excited about Ritchie Brothers' Asset Solutions. So the way to think about where we are in that journey, anytime you're inventing, right, we go to phases. Initially, our plan was to have 15 accounts in which we kind of proved the value of what is big data, what is analytics, what do insights bring to our customers. We are now over 80 such accounts. In terms of demand, the customers are super strong and we are viewing it as a long-term platform, first and foremost to provide customers with critical data and analytics they need to drive their business and then ultimately to use it as a platform by which to provide other services, some of which we're currently in the business of today and some that will come along because only the technology platform can facilitate them coming into being. So we are super excited and moving cautiously and appropriately from the invention phase of RBAS beginning a scaling phase of RBAS.
Craig Kennison -- Robert W. Baird -- Analyst
Thank you. I'll get back in the queue.
Operator
Next question comes from Michael Doumet with Scotiabank.
Michael Doumet -- Scotiabank -- Analyst
Hey, good morning, great quarter. Just wondering if you guys could elaborate on the increased GTV momentum exiting Q2 and this is always been a business that's getting apples to apples comparison is difficult due to the shift in the auction calendar. So I'm assuming you saw consistent momentum in the weekly and daily auctions. Just wondering if you're seeing -- or what type of momentum you're seeing on the outside auctions, and if that's more pronounced from region to region and any numbers would be helpful.
Ann Fandozzi -- Chief Executive Officer
Yes, Michael. So very, very proud of the business and certainly the $1.5 billion GTV headline is a very strong outcome, but we need to unpack it to really explain what's happening under the surface and put it into context. So the first thing is we cycled a very large nonrecurring Columbus event, as Sharon stated earlier in the call. And we had significant headwinds in our international business as well as in our government business with base closures, both of these, of which were obviously out of our control. So if you peel that back, the U.S. business, net of those effects was up very healthy mid-digits, year-on-year in terms of GTV. And North America, in general, just saw an incredible incredible amount of momentum, strong demand, confidence from the consignors and kind of a digital and live experience that magic of the two, that really facilitated that from happening as well as the very, very strong at-risk performance, specifically, notably in our Canadian and international business, kind of, came together to provide that $1.5 billion, but in these unique pieces with a headline really doesn't definitely tell the story of what happened underneath. So we are incredibly proud of what the organization was able to achieve.
Michael Doumet -- Scotiabank -- Analyst
And then on international GTV. I mean, you've given the backdrop, I would think that there are a number of consignors who at least have the desire to sell down equipments. As you mentioned, border restrictions obviously an obstacle. I mean the story her is that equipment supplies pent-up or have you seen consignors go through other channels may be disposing assets through more local channels?
Ann Fandozzi -- Chief Executive Officer
Karl, you want to, I think, Karl is on the line with us. So hard when you can't see the people in person. If you are, you want to comment?
Karl Werner -- President, International
Sure, this is Karl Werner. We are seeing a bit of pent-up supply. We're not seeing it move to other channels right now, but as you noted, the lockdown border closures, travel restrictions have been much more intense than in North America. But the good news is Q1 appears to be our our low watermark for international, Q2 was better as Ann noted, in Q3 and Q4, we're seeing that start to loosen up.
Michael Doumet -- Scotiabank -- Analyst
Okay great, guys, great quarter again. Thanks for the answers, appreciate it.
Operator
Next question comes from Scott Fromson with CIBC.
Scott Fromson -- CIBC Capita Markets -- Analyst
Thanks and good morning. Just a follow-up question on RB Asset Solutions. Are you seeing increases in customer activity levels in the use of the services, as well as interest from potential customers?
Ann Fandozzi -- Chief Executive Officer
Hi, Scott, Ann again and hoping Matt Ackley, our Chief Marketing Officer and the most-passionate about RBAS wants to answer that.
Matt Ackley -- Chief Marketing Officer
Yeah, no, Scott, we are. And one of the ways we measure that is, assets under management. So we're seeing an increase of that. We currently have over one million assets under management in the inventory management system, which is really the key to the RB Asset Solutions platform. In addition, we also monitor the number of assets that we say get workflowed into our marketplaces. And we're seeing an increase in that activity as well. It was up over 10,000 asset to year-to-date. So that is in addition to users who start to use some of our various tools that we've layered in to RB Asset Solutions such as our new pricing tools, which we, which we've introduced some beta products, in Q2. We really start to measure the assets under management and how they are flowing to the various marketplaces.
Scott Fromson -- CIBC Capita Markets -- Analyst
So it sounds like you're working on expanding the the services on the platform. What kind of capital investment would that come with, please?
Matt Ackley -- Chief Marketing Officer
I think it would be --
Sharon Driscoll -- Chief Financial Officer
So it's Sharon here. You know, certainly it's technology based investment. It's relatively light spend, because the base and the foundation is there and certainly is already included in our current guidance range on overall capex spending for the year.
Scott Fromson -- CIBC Capita Markets -- Analyst
Perfect. I'll just close off with one quick question, on the financial health of your buyer and seller customers. Can you comment on these trends you're seeing both through Q2 and Q3? In other words, have you change -- have you seen a change in their financial health?
Ann Fandozzi -- Chief Executive Officer
Please go ahead Sharon.
Sharon Driscoll -- Chief Financial Officer
Okay. So it's, Sharon, I'll start and then others can add color. I think clearly in the regions that are affected by the downturn in oil prices, we are seeing an acceleration of distressed, albeit at this time under COVID conditions. What we're seeing with banks is they're not necessarily applying pressure yet to force distress sales. But they certainly, we certainly do expect that that could be coming. And that is we did experience some slowdown in performance inside of our own Ritchie Brothers Financial Service business. And really, what we saw is the syndicated banks in the background that support that business unit. It put up more administrative type roadblocks, which affected our overall ability for ease and convenience and speed in that sector.
So I do think, we are starting to see an escalation of distress, but we have not yet seen banks take firm action.
Scott Fromson -- CIBC Capita Markets -- Analyst
And I presume that would feed into your insolvency disposition pipeline?
Sharon Driscoll -- Chief Financial Officer
Yes, it would.
Analyst
Great. Thanks very much.
Operator
Next question comes from Ben Cherniavsky with Raymond James.
Ben Cherniavsky -- Raymond James -- Analyst
Good morning, guys.
Ann Fandozzi -- Chief Executive Officer
Good morning, Ben.
Sharon Driscoll -- Chief Financial Officer
Hey Ben.
Ben Cherniavsky -- Raymond James -- Analyst
I wanted to ask about, well, first of all, just trying to get a little more clarity on the nature of the quite dramatic increase in profits. Because the GTV was flat, which in the context of the market was, it was an accomplishment and that was very good performance. Nevertheless, it wasn't the source of increased profit per se. The same way, with the revenue mix was the same. The revenue itself was the same. The revenue mix was the same. G&A was actually up a little bit. So, it seems to me that it really all came down to while your inventory performance was a little better. But really the cost of services and you used to call the direct expenses were way lower.
First of all, Sharon, is that, like I know there were a lot of puts and takes and the commentary was very helpful understanding the various levers, but is that really what was the main driver here of the increase in the profit?
Sharon Driscoll -- Chief Financial Officer
Yeah. So clearly, I'd say, there's two real things that drove it. First, kind of, forced reductions in spending. So we were operating under distancing rules, you had a very limited attendance and we did allow customers on-site to inspect the days leading up to auction. But we didn't have anyone in the theater.
We were basically Manning customer queries and questions all online, all over telephones as opposed to in-person support. And we didn't ramp the equipment. We didn't put on the theater component of the events. So that's probably one driver of the spend reduction.
A second element would have been the lack of travel. So the restriction to people movement basically minimized the amount of spend that you could have in terms of people moving from one place to the other.
And I think, then the other thing we did call out in that cost of services bucket was the lack of a referral fee, that was related to last year's large deals in Columbus. But clearly, what I think you're also seeing is in the U.S. business that large volume increase really speaks to the flow through operational profit potential of our business, because not only do you get the coverage on those cost of services that you could not spend, you get that full advantage of that business performance against our SG&A performance. And so, that all combined is what really has led to the operating margin lift in my view.
Ben Cherniavsky -- Raymond James -- Analyst
Okay, that's helpful. But just to clarify, in the travel expenses, because you breakout travel in the SG&A disclosure and it does show a pronounced decrease. But are there travel expenses that go direct to, that go into the direct expenses, they will be auction if it's related to a specific event, is there separate cost that was lower in that component of it as well?
Sharon Driscoll -- Chief Financial Officer
Yeah. So, you'd have travel expenses in both buckets. If we have part-time ring man, or part-time bid catchers. And they are moving from event to event. They did not move. So SG&A travel is only picking up the travel associated with our full-time employee base, not our contractors and part-time workers.
Ben Cherniavsky -- Raymond James -- Analyst
Okay. Well, I'm sorry, I'm just -- not to belabor. But I'm a little surprised and maybe a bit curious on whether or not you guys were surprised by how much cost savings or at least how many costs were related to running those auctions.
I mean, as you point out, you still have to have yard everyone's storms backs, you need onsite access, you mean delay the yeard out efficiently, etc. etc. By not, by simply not hosting an event and having a big catcher and running things over the ramp, is that -- is it really that pronounced on the cost side, because I'm just trying to understand if the model does migrate more in that direction, how much of a lift you got versus the other things like reduced travel that's going to come back and referral fees and things that were, sort of, maybe more one-time in nature in accordance.
Ann Fandozzi -- Chief Executive Officer
Ben, this is Ann. So fantastic questions and we're evaluating that right now. So I just want to take your question into two parts. So one is where we surprised, surprise would indicate kind of it happened kind of to us. And I think as Sharon said, a 100% -- COVID happened to us. But how we reacted the rigor with which we controlled costs across the buckets was 100% a testament to the team understanding the uncertain nature of the environment we were going to be operating in and the fact that they needed to do their part across the globe to ensure that we stay very financially viable and healthy, really to support our customers. So that's the first thing.
The second thing is, I think, you're getting the question that Cherilyn kind of asked a little bit in the beginning as well, which is around, how much of this is sustainable? And we are going through that evaluation right now, as we take the learnings from COVID. So obviously our business starts and stops with the customer experience. And we are evaluating the gamut of that experience starting with obviously the relationships with our sales professionals, but then taking it all the way through every element, if you will of our operations.
So whether it's how equipment has dropped off at the sites, whether it's how it inspected, the pickup procedures, everything. One element of which is the live auction itself. As you know it, and Sharon spoke to you, not an insignificant element. But it's just one element of our live sites and the purpose they serve. Obviously with the flip of 100% online, it allows us a very clean way to look at each of those levers and understand what they mean.
But we are very much in evaluation phase right now, understanding which of those actually come out of COVID are truly ones that we can take to the bottom line and which ones are investments we need to make back into, for example, the relationships with our sellers and buyers.
So we're not being coy here. We are very much in the stake of the evaluation.
Ben Cherniavsky -- Raymond James -- Analyst
No, that's a good answer. And if I could squeeze one more in, just because your timing was very -- well, unique to coming to Ritchie Brothers. And earlier you equipped, it's hard to -- it's hard when can't see someone in the room.
What's it has been like for you to try to get a sense of the Ritchie Brothers people, the hearts online if you will and as you sort of size-up the culture and where you want to take this business from a Zoom screening, how has that majored your assessment more difficult or maybe easier, I don't know.
Ann Fandozzi -- Chief Executive Officer
Yeah, Ben. So, as you know, I started in January. So I think I had a solid 10 weeks under my belt before border shutdown. I will tell you though, Ritchie Brothers is a jam packed action packed place. So in the 10 weeks, I got a chance to spend quite a bit of time obviously in our Burnaby office, in our Pleasanton office, at our Orlando auction, with our employees and customers in Vegas, these were kind of jam packed, full tilt events and I'm so grateful I had that because it gave me a bird's eye view about what we do, how we do it, but really the passion that our employees have for the customer and the business. Honestly it is unlike anything I've ever seen before. For me, the words I've used with our Board of Directors is magical.
This is a magical business made up of people whose heart, whose minds are customer first, business first, wanting to be there at all times and all things with our customers. So my personal sadness has been coming out of Vegas. Karl Werner, Head of International and I were about to set off on our kind of global tour, if you will, so that I could have spent more in person time with our international team. And then my -- one of my, that's my very favorite thing to do is spend time with our team, and then a close second or maybe a first is spending time with our customers, which again I was only able to do briefly in Orlando and Vegas and haven't been able to do in person. So then, everything has transitioned to Zoom and I'm grateful the technology has been there, so they could put a name to a face as could I. But I am anxious to be able to meet people face to face, share a meal and really thank them for the magic that is this business from our employees, our team members and our customers.
Ben Cherniavsky -- Raymond James -- Analyst
Okay, thanks very much on the good quarter.
Ann Fandozzi -- Chief Executive Officer
Thank you.
Operator
Next question comes from Michael Feniger with Bank of America.
Michael Feniger -- Bank of America Merrill Lynch -- Analyst
Yes, thanks for squeezing me in and taking my call. I mean, can we just level-set on the big picture, the addressable market for used equipment transaction is massive. Over the years. Investors have doubted if you could really penetrate this market. If there is a risk of cannibalization. But in this call, you mentioned a few times that you're seeing some new customers with some of your initiatives. So in the last few months, you must have learned a lot about pain points with certain channels, the competitive landscape, push and pull factors on why someone is selling a piece of equipment online to another channel or just a private sale. So just based on what you've observed in Q2 and some of the June metrics you shared, are you bringing in a lot of new customers, do you believe you're finally penetrating some areas that Ritchie struggled with over the years with everything that's taken place?
Ann Fandozzi -- Chief Executive Officer
So, Michael, hi. It's Ann again. So absolutely, the TAM is very large, as you say, something that obviously I -- the Board shared with me even in early days of new learning about the business and we have ascertain since then. Let me just give you some headlines of the things we're seeing. So undoubtedly, through this pandemic and the shift online, we are seeing quite a bit more end-customer penetration than we've ever seen before. So they're not new to industry, they are new to us. And as a result, obviously growing the base in terms of the buyer side and you see it with the stats that I quoted early on in the prepared remarks when you see the number of new accounts, so on and so forth.
In terms of pinpoints. I would say this is where us stepping back and really understanding the role of the live site where may be arguably in the past they were linked with the live event and our ability to decouple that and really think through the benefit that a live site offers the customer, again much more about the care custody and control of their equipment, which is something unique to Ritchie Brothers' and that the organization does uniquely well. So this time it's given us an opportunity to really understand that, take that to the next level and as a result, we see our sites busier than before. I will give you one example of how that has really come to life. During this COVID environment that maybe we wouldn't have seen, and that is that we, couple of weeks ago or month ago, we did a Northeast sale where we brought together several sites from the Northeast including Maryland, Pittsburgh, Connecticut and we did an online, kind of, Northeast sale. We have never done that before. So the technology, so there is a couple of images here, the technology allowed us to bring that together seamlessly. Okay. So that's all about platform.
And then again that grew up a buyer base and a seller base, because we were able to bring a scale of supply and demand, we wouldn't have done before. So then that drove really a fantastic outcome for buyers and sellers. And then similarly the sites themselves in Pittsburgh, Maryland and Connecticut were very busy because customers were -- once they knew the magnitude of -- what was about to happen in the supply and demand side with the help of our sales professionals, that really acted as those trusted advisors, used the sites to drop equipment, we would get it ready for sale. We would market it and then the amount of demand for kind of coming in, kicking the tires really was very, very high and forced us to use technology to keep customers safe and our employees safe from scheduling and doing those things and in very different way in social distancing than we've ever done before.
I highlight that event to say, it really is the truest manifestation of this omnichannel platform, when we say the word. It's often overused, but in our case, it is really an exceptional go-to-market and solution for customers that anybody has. I think earlier somebody said moat, Greg, I would say that's it. And then the last piece, and this is the one that we're not where we're just kind of starting tip of the iceberg is this far back and data and utilizing the data to drive the underlying event and again in the case of any event, specifically the Northeast example that I used. We used the data and analytics to know what to do, how to advise our customers and how to drive demand. But then the product itself, the RBAS platform, the inventory management system therein allows that to become more and more of a tool that customers can use both for their own benefit, which is first and foremost, our goal, but then also eventually to either partake of our services or flow their equipment through our various channels that we provide for them.
So, in fact, both circle to your question, very long answer from me. We believe the TAM is significant and our ability to penetrate it has really showcased during this environment, and we'll continue to get better. Uncertainty of COVID is a real thing. And so that's why we say we're cautious, we're cautious because many of these things are out of our control. The things in our control, we are very proud of the way the team has stepped up, the technology has delivered and we are excited about what's to come although cautious about COVID.
Michael Feniger -- Bank of America Merrill Lynch -- Analyst
Thank you and thanks for that thoughtful answer, I guess just lastly on the underwriting, it ticked up a little bit and I'm curious how you're viewing the underwriting. Right now, people need liquidity but Ritchie does have a track record of every year, year and a half, you can get caught off sides especially if we start to see some liquidation, dispersal. So I'm curious how you're thinking of managing that going forward, especially as we're kind of in this uncertain back like you just mentioned.
Ann Fandozzi -- Chief Executive Officer
I believe we have Doug Olive with us and Sharon.
Sharon Driscoll -- Chief Financial Officer
Yes, I think Doug, why don't you take to the lead.
Doug Olive -- Senior Vice President, Pricing and Appraisals
Sure. Thanks, Michael. We do see a lot of opportunities coming at us right now for sure. And with the data we have, we've been fortunate, we had a real nice run through Q2. We're being cautious like anything else to Ann's point, we don't know what's down the road. So we're looking each -- each opportunity that comes out, as we're looking at independently, what's the makeup of the deals, what, where's the geography of the deals and making sure that we do our thorough investigation of such to end-up in a place that's mutually benefit both for the cosigner and ourselves.
Michael Feniger -- Bank of America Merrill Lynch -- Analyst
Thank you.
Operator
At this time, I will turn the call over to Mr. Mawani.
Zaheed Mawani -- Vice President, Investor Relations
Thanks Sharon. And thank you everyone for joining us today on our call. Please continue to stay safe and we look forward to speaking with you again in November at our Q3 earnings call. That concludes our call for today. Thank you.
Operator
[Operator Closing Remarks]
Duration: 64 minutes
Call participants:
Zaheed Mawani -- Vice President, Investor Relations
Ann Fandozzi -- Chief Executive Officer
Sharon Driscoll -- Chief Financial Officer
Sharon Driscoll -- Chief Financial Officer
Karl Werner -- President, International
Matt Ackley -- Chief Marketing Officer
Doug Olive -- Senior Vice President, Pricing and Appraisals
Cherilyn Radbourne -- TD Securities -- Analyst
Craig Kennison -- Robert W. Baird -- Analyst
Michael Doumet -- Scotiabank -- Analyst
Scott Fromson -- CIBC Capita Markets -- Analyst
Analyst
Ben Cherniavsky -- Raymond James -- Analyst
Michael Feniger -- Bank of America Merrill Lynch -- Analyst
