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Ritchie Bros. Changes How It Calculates Profit, Adds $24.1 Million to Operating Income
Auctioneer unveils four new key metric calculations that, in total, increase profits $55.8 million.
November 5, 2021
Following a buying spree in which it spent $1.4 billion to acquire three businesses in ten months, Ritchie Bros. Auctioneers (RBA), an industrial equipment auctioneer, is changing the way it calculates four nkey profitability metrics. The changes exclude some of the costs associated with acquisitions and allow the company to report higher profitability than it otherwise might.
In its latest 10-Q, Ritchie revealed it’s changing how it calculates non-GAAP adjusted operating income, adjusted EPS, adjusted EBITDA, adjusted net debt/EBITDA. Ritchie does not consider the items it now adjusts for as part of normal operations and include:
-Share based compensation expense
-Acquisition related costs, including share-based continuing employment
-Amortization of acquired intangible assets
-Gain or loss on PPE disposition
Our analysis shows Ritchie’s new calculation methods adds $55.8 million to key profitability metrics:
-Adjusted Operating Income: +$24.1 million
-Adjusted EBITDA: +$14.8 million
-Adjusted Net Income: +$16.9 million
-Adjusted EPS: +$0.15 per share
Regardless, each of Ritchie’s adjusted metrics was down between 9-11% from the prior year’s quarter. The new calculation methods also have a significant impact on a key debt ratio. Ritchie’s former Net Debt/ EBITDA ratio was 3.8x. Under the new calculation methods, Ritchie’s Adjusted Net Debt/ EBITDA is 0.7x.
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