RITCHIE BROS AUCTIONEERS INC : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

Cautionary Note Regarding Forward-Looking Statements


Forward-looking statements may appear throughout this Quarterly Report on Form
10-Q, including the following section "Management's Discussion and Analysis of
Financial Condition and Results of Operations". Forward-looking statements are
typically identified by such words as "aim", "anticipate", "believe", "could",
"continue", "estimate", "expect", "intend", "may", "ongoing", "plan",
"potential", "predict", "will", "should", "would", "could", "likely",
"generally", "future", "long-term", or the negative of these terms, and similar
expressions intended to identify forward-looking statements. Forward-looking
statements are based on current expectations and assumptions that are subject to
risks and uncertainties that may cause actual results to differ materially, and
include, among others, statements relating to:

 ? our future strategy, objectives, targets, projections and performance;

? potential growth and market opportunities;

? potential future mergers and acquisitions, including the proposed acquisition

of IAA, Inc. (“IAA”)

? our expected indebtedness in connection with the proposed acquisition of IAA

? our ability to integrate potential acquisitions;

? the impact of our new initiatives, services, investments, and acquisitions on

us and our customers;

? our future capital expenditures and returns on those expenditures; and

financing available to us from our credit facilities or other sources, our

? ability to refinance borrowings, and the sufficiency of our working capital to

meet our financial needs.

While we have not described all potential risks related to our business and
owning our common shares, the important factors discussed in "Part I, Item 1A:
Risk Factors" of our Annual Report on Form 10-K for the year ended December 31,
2021, and in "Part II, Item 1A: Risk Factors" of our subsequent quarterly report
on Form 10-Q, which are available on our website at
https://investor.ritchiebros.com, on EDGAR at www.sec.gov, or on SEDAR at
www.sedar.com, are among those that we consider may affect our performance
materially or could cause our actual financial and operational results to differ
significantly from our expectations. Except as required by applicable securities
law and regulations of relevant securities exchanges, we do not intend to update
publicly any forward-looking statements, even if our expectations have been
affected by new information, future events or other developments.

We prepare our consolidated financial statements in accordance with United
States generally accepted accounting principles ("US GAAP"). Except for Gross
Transaction Value ("GTV")1, which is a measure of operational performance and
not a measure of financial performance, liquidity, or revenue, the amounts
discussed below are based on our consolidated financial statements.

In the accompanying analysis of financial information, we sometimes use
information derived from consolidated financial data but not presented in our
financial statements prepared in accordance with US GAAP. Certain of these data
are considered "non-GAAP financial measures" under the SEC rules. The
definitions of and reasons we use these non-GAAP financial measures and the
reconciliations to their most directly comparable US GAAP financial measures are
included either with the first use thereof or in the Non-GAAP Measures section
within the Management's Discussion and Analysis of Financial Condition and
Results of Operations (Please see pages 54-56).

Overview


Ritchie Bros. Auctioneers Incorporated ("Ritchie Bros.", the "Company", "we", or
"us") (NYSE & TSX: RBA) was founded in 1958 in Kelowna, British Columbia, Canada
and is a world leader in asset management technologies and disposition of
commercial assets, selling $5.5 billion of used equipment and other assets
during 2021. Our expertise, unprecedented global reach, market insights, and
trusted portfolio of brands provide us with a unique position within the used
equipment market.

1 GTV represents total proceeds from all items sold at our auctions and online
marketplaces. GTV is not a measure of financial performance, liquidity, or
revenue, and is not presented in our consolidated financial statements.

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Through our unreserved auctions, online marketplaces, listings, and private
brokerage services, we sell a broad range of primarily used commercial and
industrial assets as well as government surplus. Construction and commercial
transportation assets comprise the majority of the equipment sold by GTV dollar
value. Customers selling equipment through our sales channels include end users
(such as construction companies), equipment dealers, original equipment
manufacturers ("OEMs") and other equipment owners (such as rental companies).
Our customers participate in a variety of sectors, including construction,
commercial transportation, agriculture, energy, and natural resources.

We also provide our customers with a wide array of value added services aligned
with our growth strategy to create a global marketplace for used equipment
services and solutions. Our other services include access to equipment
financing, asset appraisals and inspections, online equipment listing,
logistical services, and ancillary services such as equipment refurbishment. We
offer our customers asset technology solutions to manage the end to end
disposition process of their assets and provide market data intelligence to make
more accurate and reliable business decisions. Additionally, we offer our
customers an innovative technology platform that supports equipment lifecycle
management and parts procurement integration with both original equipment
manufacturers and dealers, as well as software as a service platform for
end-to-end parts procurement and digital catalogs and diagrams.

We operate globally with locations in 12 countries, including the United States,
Canada, the Netherlands, Australia, and the United Arab Emirates, and maintain a
presence in 48 countries where customers are able to sell from their own yards.
In addition, we employ more than 2,700 full-time employees worldwide.

Proposed Acquisition of IAA


On November 7, 2022, we entered into an Agreement and Plan of Merger and
Reorganization (the "Merger Agreement") with IAA, Ritchie Bros. Holdings Inc., a
Washington corporation and a direct and indirect wholly owned subsidiary of the
Company ("US Holdings"), Impala Merger Sub I, LLC, a Delaware limited liability
company and a direct wholly owned subsidiary of US Holdings ("Merger Sub 1"),
and Impala Merger Sub II, LLC, a Delaware limited liability company and a direct
wholly owned subsidiary of US Holdings ("Merger Sub 2"), providing for our
acquisition of IAA for total consideration as of the date hereof of
approximately $7.3 billion, including the assumption of approximately $1.0
billion of net debt. Upon completion of the acquisition, our stockholders will
own approximately 59% of the common shares of the combined company on a fully
diluted basis and IAA's stockholders will own approximately 41%. During the
three months and nine months ended September 30, 2022, we incurred a total of
$0.9 million and $1.4 million, respectively, in acquisition-related costs
related to the proposed acquisition, recognized in selling, general and
administrative expenses. If completed, the acquisition of IAA will have a
significant impact on our results of operations, financial condition and
liquidity. For additional information regarding the proposed acquisition with
IAA, see Note 24 to our condensed consolidated financial statements included in
Part I - Item I of this report. Unless otherwise specifically noted, the
following discussion and analysis of our results of operations and liquidity and
capital resources focuses on our existing operations exclusive of the impact of
the proposed acquisition of IAA, and any forward-looking statements contained
herein do not take into account the impact of such proposed acquisition.

In connection with the proposed Mergers, on November 7, 2022, we entered into
(A) a commitment letter (the "Commitment Letter") with Goldman Sachs Bank USA
(acting through such of its affiliates or branches as it deems appropriate, "GS
Bank"), Bank of America, N.A. ("BANA"), BofA Securities, Inc. (or any of its
designated affiliates, "BofA Securities", and, together with BANA, "BofA"),
Royal Bank of Canada ("Royal Bank"), RBC Capital Markets, LLC ("RBCCM", and,
together with Royal Bank through such of its affiliates and branches as it deems
appropriate, "RBC", and, together with GS Bank and BofA, each, an "Initial
Lender", and collectively, the "Initial Lenders"), pursuant to which the Initial
Lenders are committing to provide (i) a backstop senior secured revolving credit
facility in an aggregate principal amount of up to $750 million (the "Backstop
Revolving Facility") and (ii) a senior secured 364-day bridge loan facility in
an aggregate principal amount of up to $2.8 billion (the "Bridge Loan Facility,"
and together with the Backstop Revolving Facility, the "Facilities") and (B) an
engagement letter (the "Engagement Letter") with Goldman, Sachs & Co. (acting
through such of its affiliates or branches as it deems appropriate), BofA
Securities and RBCCM (collectively, the "Investment Banks"), pursuant to which
the Investment Banks agree, subject to the terms and conditions set forth in the
Engagement Letter, to serve as lead arrangers and bookrunners in connection with
an amendment to our existing credit facility, a Term Loan A facility, a Term
Loan B facility and/or any other loan facilities, credit facilities, commercial
bank financings or other bank or institutional facilities, and as lead placement
agents for, or lead underwriters or initial purchasers of, any senior secured or
unsecured

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notes and any and all secured or unsecured debt, equity or equity-linked
securities of the Company or any of our subsidiaries, in each case, incurred or
issued to finance the proposed Mergers or refinance any amounts borrowed under
the Bridge Loan Facility.

Impact of COVID-19 to our Business

In March 2020, the World Health Organization declared the outbreak of COVID-19 a
global pandemic (“COVID-19”).

In response, we transitioned all of our traditional live onsite auctions to
online bidding utilizing our existing online bidding technology. As restrictions
continue to ease, the health and welfare of our employees, customers and
suppliers continues to be a top priority and we continue to operate with
precautionary measures in place, as appropriate.

In the first nine months of 2022, our ability to move equipment to and from our
auction sites and across borders has improved as travel restrictions and
quarantine requirements continue to lift, but with certain countries within Asia
still continuing to experience lockdowns. In the United States and Canada,
COVID-19 has not materially impacted our ability to operate our businesses and
move equipment. Globally, we continue to see heightened shipping, fuel and
freight costs, partly attributable to the Russia-Ukraine conflict, combined with
extended lead times, making equipment transportation more costly and
challenging, negatively impacting the buying and selling behaviors of our
customers. Additionally, COVID-19, in combination with various macro economic
factors, impacted the supply chains of new equipment production, which in turn
negatively affected the supply of used equipment being sold throughout our
regions, most predominantly in North America.

For a further discussion of risks to our business and operating results arising
from COVID-19, please refer to the "Risk Factors" section of our Annual Report
on Form 10-K for the year ended December 31, 2021.

Impact of RussiaUkraine conflict on our Business

On February 24, 2022, the geopolitical situation in Eastern Europe intensified
with Russia’s invasion of Ukraine, sharply affecting economic and global
financial markets. Subsequent economic sanctions on Russia have exacerbated
ongoing economic challenges, including issues such as rising inflation,
disruption to global supply chains and increases in hydrocarbon prices.

The rise in transportation costs, in part driven by higher fuel costs, has
globally impacted both costs and timing of import and export of commercial
assets between countries and has contributed to higher costs in operating our
equipment. Further, increases in natural gas prices in Europe may also lead to a
slowdown in its economy and as a result may negatively impact the import and
export of equipment in Eastern Europe, which could affect our operations.

We do not have any operations in Russia or Ukraine, or any material operations
in neighboring countries and only have a limited number of direct customers in
the effected region. However, we cannot estimate the extent of the ongoing
impacts of the conflict, other unforeseen conditions, future developments,
including the continued evolvement of military activity and sanctions imposed
with Russia's invasion of Ukraine, which could adversely affect the domestic
economy generally and our business specifically.

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Impact of Inflation on our Business


We began to see inflation impacting our business operations in early 2022 with
the rise of costs in freight, fuel, supplies, non-durable goods and consumables
at our yards and in our operations. Travel costs have also increased partly due
to higher travel activity post COVID-19 as well as due to inflation. In
addition, we have seen an increase in labor costs with the labor market
remaining fairly strong. We expect inflationary pressures to continue to drive
up costs for the remainder of 2022.

The United States Federal Reserve is also continuing to raise interest rates,
which has contributed to a stronger U.S. dollar, which has had an unfavorable
impact on the translation of some of our operations to a U.S. dollar
presentation currency, particularly in Canada, Europe and Australia.

Service Offerings


We offer our equipment seller and buyer customers multiple distinct,
complementary, multi-channel brand solutions that address the range of their
needs. Our global customer base has a variety of transaction options, breadth of
services, and the widest selection of used equipment available to them. For a
complete listing of channels and brand solutions available under our Auctions &
Marketplace ("A&M") segment, as well as our Other Services segment, please refer
to our Annual Report on Form 10-K for the year ended December 31, 2021, which is
available on our website at www.rbauction.com, on EDGAR at www.sec.gov, or
on
SEDAR at www.sedar.com.

Contract options

We offer consignors several contract options to meet their individual needs and
sale objectives. Through our A&M business, options include:

? Straight commission contracts, where the consignor receives the gross proceeds

from the sale less a pre-negotiated commission rate;

? Guarantee contracts, where the consignor receives a guaranteed minimum amount

plus an additional amount if proceeds exceed a specified level; and

? Inventory contracts, where we purchase, take custody, and hold used equipment

and other assets before they are resold in the ordinary course of business.

We collectively refer to guarantee and inventory contracts as underwritten or
“at-risk” contracts.


Value-added services

We also provide a wide array of value-added services to make the process of
selling and buying equipment convenient for our customers, including repair and
refurbishment services, financial services through Ritchie Bros. Financial
Services ("RBFS"), logistical services through RB Logistics, end-to-end asset
management and disposition services through RB Asset Solutions, as well as other
services such as appraisals, insights, data intelligence and performance
benchmarking solutions. We offer equipment listing services under the
RitchieList brand in North America and Mascus brand in Europe to make private
selling more efficient and safe for customers, including a secure transaction
management service, complete with invoicing. We also provide an innovative
technology platform that supports customers' management of the equipment
lifecycle and integrates parts procurement with both original equipment
manufacturers and dealers.

Seasonality


Our GTV and resulting A&M segment revenue are affected by the seasonal nature of
our business. GTV and our A&M segment revenue tend to increase during the second
and fourth calendar quarters, during which time we generally conduct more
business than in the first and third calendar quarters. Given the operating
leverage inherent in our business model, the second and fourth quarter also tend
to produce higher operating margins, given the higher volume and revenue
generated in those quarters.

Revenue Mix Fluctuations


Our revenue is comprised of service revenue and inventory sales revenue. Service
revenue from A&M segment activities includes commissions earned at our auctions,
online marketplaces, and private brokerage services, and various auction-related
fees, including listing and buyer transaction fees. We also recognize revenue
from our Other Services segment as fees within service revenue. Inventory sales
revenue is recognized as part of our A&M activities and relates to revenues
earned through our inventory contracts.

Inventory sales revenue can fluctuate significantly, as it changes based on
whether our customers sell using a straight or guarantee commission contract, or
an inventory contract at time of selling. Straight or guarantee commission
contracts will result in the commission being recognized as service revenue,
while inventory contracts will result in the gross transaction value of the
equipment sold being recorded as inventory sales revenue with the related cost
recognized in cost of inventory sold. As a result, a change in the revenue mix
between service revenues and inventory sales revenue can have a significant
impact on revenue growth percentages.

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Performance Overview

Net income attributable to stockholders increased 33% to $42.9 million, compared
to $32.3 million in the third quarter of 2021. Diluted earnings per share
("EPS") attributable to stockholders increased 31% to $0.38 per share in the
third quarter of 2022 as compared to $0.29 per share in the third quarter of
2021. Diluted adjusted EPS attributable to stockholders increased 18% to $0.53
per share in the third quarter of 2022 compared to $0.45 per share in the third
quarter of 2021.

For the third quarter of 2022 as compared to the third quarter of 2021:

Consolidated results:

? Total revenue increased 25% to $411.5 million

o Service revenue increased 15% to $246.7 million

o Inventory sales revenue increased 43% to $164.8 million

? Operating income increased 19% to $64.0 million

? Adjusted operating income increased 13% to $85.4 million

? Net income increased 33% to $42.9 million

? Adjusted earnings before interest, taxes, depreciation and amortization

(“adjusted EBITDA”) increased 12% to $102.5 million

? Cash provided by operating activities decreased 13% to $263.9 million for the

first nine months of 2022

? Cash on hand at the end of the third quarter of 2022 was $515.1 million, of

which $438.8 million was unrestricted

Auctions & Marketplaces segment results:

? GTV increased 7% to $1.4 billion and increased 10% when excluding the impact of

foreign exchange

? A&M total revenue increased 22% to $358.7 million

o Service revenue increased 8% to $193.9 million

o Inventory sales revenue increased 43% to $164.8 million

Other Services segment results:

? Other Services total revenue increased 49% to $52.8 million

o RBFS revenue increased 47% to $16.6 million

o SmartEquip revenue of $5.2 million was recognized in the third quarter of 2022,

which was its third full quarter since its acquisition in November 2021

In addition, the total number of organizations activated on our business
inventory management system (“IMS”), a gateway into our marketplace, increased
by 42% as compared to the second quarter of 2022.

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Results of Operations

Financial overview

                                                   Three months ended September 30,                       Nine months ended September 30,
                                                                                % Change                                              % Change
(in U.S. dollars $000's, except EPS and
percentages)                                   2022             2021         2022 over 2021            2022           2021         2022 over 2021
Service revenue:
Commissions                                $     108,238     $   110,275                 (2) %     $    361,016    $   343,584                   5 %
Fees                                             138,458         103,918                  33 %          417,043        329,387                  27 %
Total service revenue                            246,696         214,193                  15 %          778,059        672,971                  16 %
Inventory sales revenue                          164,783         115,489   
              43 %          511,887        384,627                  33 %
Total revenue                                    411,479         329,682                  25 %        1,289,946      1,057,598                  22 %
Costs of services                                 41,521          35,108                  18 %          125,575        114,275                  10 %
Cost of inventory sold                           147,253         102,993                  43 %          455,006        344,763                  32 %
Selling, general and administrative              133,193         106,508                  25 %          404,077        330,307                  22 %
Total operating expenses                         347,858         277,131                  26 %        1,071,786        871,271                  23 %
Gain on disposition of property, plant
and equipment                                        333           1,068                (69) %          170,499          1,311              12,905 %
Operating income                                  63,954          53,619                  19 %          388,659        187,638                 107 %
Operating income as a % of total
revenue                                             15.5 %          16.3 %              (80) bps           30.1 %         17.7 %             1,240 bps
Adjusted operating income                         85,442          75,735                  13 %          302,281        240,483                  26 %
Adjusted operating income as a % of
total revenue                                       20.8 %          23.0 %             (220) bps           23.4 %         22.7 %                70 bps
Net income attributable to stockholders           42,909          32,336                  33 %          274,368        121,273                 126 %
Adjusted net income attributable to
stockholders                                      59,853          49,780                  20 %          193,889        160,320                  21 %
Adjusted EBITDA                                  102,544          91,247                  12 %          343,692        287,121                  20 %
Diluted earnings per share attributable
to stockholders                            $        0.38     $      0.29                  31 %     $       2.45    $      1.09                 125 %
Diluted adjusted earnings per share
attributable to stockholders               $        0.53     $      0.45   
              18 %     $       1.73    $      1.44                  20 %
Effective tax rate                                  25.5 %          28.8 %             (330) bps           20.9 %         26.0 %             (510) bps

Total GTV                                  $   1,358,242     $ 1,270,258                   7 %     $  4,481,622    $ 4,072,439                  10 %
Service GTV                                    1,193,459       1,154,769                   3 %        3,969,735      3,687,812                   8 %
Service revenue as a % of total GTV                 18.2 %          16.9 %               130 bps           17.4 %         16.5 %                90 bps
Inventory GTV                                    164,783         115,489                  43 %          511,887        384,627                  33 %

Inventory return                           $      17,530     $    12,496                  40 %     $     56,881    $    39,864                  43 %
Inventory rate                                      10.6 %          10.8 %              (20) bps           11.1 %         10.4 %                70 bps

Service GTV as a % of total GTV - Mix               87.9 %          90.9 %             (300) bps           88.6 %         90.6 %             (200) bps
Inventory sales revenue as a % of total
GTV - Mix                                           12.1 %           9.1 %               300 bps           11.4 %          9.4 %               200 bps


Certain amounts in the prior period have been reclassified from selling, general
and administrative expenses to costs of services, refer to note 2(a) of our
consolidated financial statements.

Total GTV

Total GTV increased 7% to $1.4 billion in the third quarter of 2022 and
increased 10% to $4.5 billion in the first nine months of 2022. Total GTV
increased 10% in the third quarter of 2022 and increased 13% in the first nine
months of 2022, when excluding the impact of foreign exchange.


In the third quarter of 2022, GTV increased year-over-year driven by a rebound
in lot volumes and continued strong pricing, partially offset by an unfavourable
impact of foreign exchange and an unfavorable asset mix. In the United States,
GTV increased due to strong execution by our strategic accounts team,
particularly in the finance and rental sectors, as well as positive performances
at several of our auctions. These increases were partially offset by the
non-repeat of a large dispersal of $99 million of pipeline construction
equipment in a single-owner auction event in the third quarter of 2021. In
Canada, we saw strong year-over-year performances at our auctions and
agricultural events and higher GTV generated by RBFS via PurchaseSafe which
provides escrow services for private brokered transactions. These increases were
partially offset by the delay of our Truro, Nova Scotia auction to Q4 2022 as a
result of the impact of Hurricane Fiona. In International, the decrease in GTV
volume was due to an unfavourable foreign exchange impact. Excluding foreign
exchange, we saw positive performance in Europe with higher activity, partially
due to the shift of an auction from the second quarter of 2022 to the third
quarter of 2022.

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For the first nine months of 2022, total GTV increased 10% driven by strong
pricing, aided by inflation, and higher lot counts, partially offset by an
unfavourable impact of foreign exchange and an unfavorable asset mix. We saw
growth across all regions. In Canada, GTV growth was driven by strong
performances across several agricultural and auction events, strong execution by
our Canadian strategic accounts teams, higher volume from RBFS, and a higher
number of inventory packages sold. In the United States, GTV volume increased
primarily from positive performances across numerous auctions and strong results
from our strategic accounts. We also saw growth from several of our strategic
initiatives, including from our local yards and investments made by our sales
teams in Texas. These increases were partially offset by the non-repeat of a
large dispersal pipeline construction equipment package as discussed above. In
International, Australia has driven significant growth from improved market
conditions and the lifting of border restrictions, as well as from a higher mix
of inventory packages and strong performances at several auction events,
including a new national auction, a new event in Corio, Victoria and at two
agricultural events. These increases were partially offset by softer
performances in Europe and an unfavorable foreign exchange impact.

Total revenue

Total revenue increased 25% to $411.5 million in the third quarter of 2022, with
total service revenue increasing by 15% and inventory sales revenue increasing
by 43%. Total revenue increased 22% to $1.3 billion for the first nine months of
2022, with total service revenue increasing by 16% and inventory sales revenue
increasing by 33%.

Foreign currency fluctuation also had an unfavourable impact on our revenue
primarily due to the depreciation of the Euro, the Australian dollar and the
Canadian dollar relative to the U.S. dollar.

Service Revenue

Service revenue is comprised of commissions that are earned on service GTV, and
fees which are earned on total GTV, as well as from our other services such as
Ancillary Services, RBFS, Rouse, Mascus, RB Logistics, RB Asset Solutions and
SmartEquip. In the third quarter of 2022, Service GTV increased 3% to $1.2
billion mainly in Canada, and for the first nine months increased 8% to $4.0
billion across all regions with increases most notably in Canada and the United
States.

In the third quarter of 2022, total service revenue increased 15% with fees
revenue increasing 33%, while commissions decreased by 2%. Fees revenue
increased 33% with buyer fees growing faster than the GTV increase of 7%,
reflecting the increase in certain buyer fee rates implemented in early 2022.
Fees revenue also increased due to higher RBFS revenues on higher funded
volumes, the inclusion of fees from SmartEquip since its acquisition on November
2, 2021 and higher revenue from our Rouse business. In addition, we also saw
higher fees as a result of increased activity from our Ancillary services.
Commissions revenue decreased 2%, despite a 3% increase in service GTV,
primarily driven by lower straight commission rate performances in the United
States attributable to a higher volume sold from our strategic accounts. Canada
also saw lower commissions revenue from a higher proportion of GTV contributed
by RBFS from facilitating financing arrangements. These decreases were partially
offset by improved guarantee rate performances in the United States.

For the first nine months of 2022, total service revenue increased 16% with fees
revenue increasing 27% and commissions revenue increasing 5%. Fees revenue
increased 27% with buyer fees growing faster than GTV of 10% for the same
reasons as discussed above.


Commissions revenue increased 5%, slightly less than the 8% increase in service
GTV, primarily for the same reason as discussed above, as well as the non-repeat
of several high performing guarantee contracts in Canada.

Inventory Sales Revenue


Inventory sales revenue as a percentage of total GTV increased to 12.1% from
9.1% in the third quarter of 2022 and increased to 11.4% from 9.4% in the first
nine months of 2022.

In the third quarter of 2022, inventory sales revenue increased 43%
predominantly in the United States, with an increased number of inventory
packages sourced from our strategic accounts group, primarily in the finance and
rental sectors. We also saw increased volumes selling through our auctions as
well as through our GovPlanet non-rolling and rolling stock contracts. In
Canada, we saw improved year-over-year performances from inventory sold mainly
in the construction sector. Partially offsetting these increases was softer
year-over-year performances in International, primarily from the non-repeat of
several inventory contracts in Europe and lower private treaty transactions in
Australia.

For the first nine months of 2022, inventory sales revenue increased 33%
predominantly in the United States partly due to a large dispersal of
construction equipment in our Phoenix, Arizona auction as well as for the same
reasons as discussed above. In addition, in

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both the United States and Canada, we saw and a higher dollar amount of
inventory sold across a number of our auctions. In International, we saw
positive performances in Australia, offset by a lower volume of inventory sold
in Europe.


Underwritten Contracts

We offer our customers the opportunity to use underwritten commission contracts
to serve their disposition strategy needs, entering into such contracts where
the risk and reward profile of the terms are agreeable. Our underwritten
contracts, as a percentage of total GTV, which include inventory and guarantee
contracts, decreased to 17.0% in the third quarter of 2022 compared to 22.5% in
the third quarter of 2021. For the first nine months of 2022, our underwritten
contracts were 18.5% compared to 18.3% in the prior period.

Operating Income


For the third quarter of 2022, operating income increased 19% or $10.3 million
to $64.0 million, primarily due to flow through from higher revenues partially
offset by higher selling, general and administrative expenses. Selling, general
and administrative expenses increased due to higher short-term incentive
expenses driven by strong performance. Wages, salaries and benefits expenses
also increased as a result of higher headcount to accelerate our growth
initiatives and our transformational journey to become a trusted global
marketplace and in part due to the acquisition of SmartEquip. Building,
facilities and technology costs also increased mainly due to the amortization of
the right-of-use asset of the Bolton property from the sale and lease back
arrangement completed in the first quarter of 2022, as well as higher costs as
we shift to cloud-based solutions to improve customer experiences. We also saw
higher travel, advertising and promotion costs from increased activity and
higher marketing costs to promote new initiatives. Share-based payments also
increased as a result of higher expense relating to share-based awards issued to
senior executives, and higher expense from the premium-priced options and PSU's
with market conditions granted in late 2021. Inflation also resulted in higher
personnel and travel costs.

For the first nine months of 2022, operating income increased 107% due to the
inclusion of a gain of $169.1 million on property, plant and equipment from the
sale of the Bolton property in the first quarter of 2022. Operating income
increased 17%, when excluding the impact of the gain, primarily due to flow
through from higher revenue, partially offset by higher selling, general and
administrative expenses mainly due the same reasons as discussed above, as well
as higher professional fees primarily driven by our investment in new modern
architecture to support our future marketplace and services strategy.

Income tax expense and effective tax rate


At the end of each interim period, we estimate the effective tax rate expected
to be applicable for the full fiscal year. The estimate reflects, among other
items, management's best estimate of operating results. It does not include the
estimated impact of foreign exchange rates or unusual and/or infrequent items,
which may cause significant variations in the customary relationship between
income tax expense and income before income taxes.

For the third quarter of 2022, income tax expense increased 13% to $14.7 million
and our effective tax rate decreased 330 bps to 25.5% as compared to the third
quarter of 2021. For the first nine months 2022, income tax expense increased
71% to $72.6 million and our effective tax rate decreased 510 bps to 20.9% as
compared to the first nine months of 2021.

The decrease in the effective tax rate for the third quarter of 2022 compared to
the third quarter of 2021 was primarily due to a lower estimate of
non-deductible expenses and lower income taxes related to tax uncertainties.
Partially offsetting this decrease was higher estimated expenses related to the
U.S. tax reform of 2017.

The decrease in the effective tax rate for the first nine months of 2022
compared to the first nine months of 2021 was primarily due to the non-taxable
gain portion on the sale of the Bolton property and a lower estimate of
non-deductible expenses. Partially offsetting this decrease was a higher
estimate of income taxed in jurisdictions with higher tax rates and a lower tax
deduction for PSU and RSU share unit expenses that exceeded the related
compensation expense.

Net income


In the third quarter of 2022, net income attributable to stockholders increased
33% to $42.9 million primarily due to higher operating income, higher interest
income from a rise in interest rates, and a lower effective tax rate as
discussed above. For the first nine months of 2022, net income attributable to
stockholders increased 126% to $274.4 million, primarily for the same reasons as
noted above, partially offset by a higher interest expense from our 2021 Notes
which included a loss on redemption.

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Diluted EPS

Diluted EPS attributable to stockholders increased 31% to $0.38 per share for
the third quarter of 2022 and increased 125% to $2.45 per share for the first
nine months of 2022, in line with net income.

U.S. dollar exchange rate comparison


We conduct global operations in many different currencies, with our presentation
currency being the U.S. dollar. The following table presents the variance in
select foreign exchange rates over the comparative reporting periods:

                                                                            

% Change

                                                                                     2022 over
Value of one local currency to U.S. dollar                     2022        2021        2021
Period-end exchange rate - September 30,
Canadian dollar                                                0.7227      0.7886          (8) %
Euro                                                           0.9801      1.1581         (15) %
Australian dollar                                              0.6398      0.7231         (12) %

Average exchange rate - Three months ended September 30,
Canadian dollar                                                0.7666      0.7942          (3) %
Euro                                                           1.0081      1.1793         (15) %
Australian dollar                                              0.6837      0.7351          (7) %

Average exchange rate - Nine months ended September 30,
Canadian dollar                                                0.7798      0.7992          (2) %
Euro                                                           1.0655      1.1966         (11) %
Australian dollar                                              0.7075      0.7592          (7) %

For the third quarter of 2022, foreign exchange had an unfavourable impact on
total revenue and a favourable impact on expenses. These impacts were primarily
due to the fluctuations in the Euro, Australian dollar and Canadian dollar
exchange rates relative to the U.S. dollar.

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Key Operating Metrics

We regularly review a number of metrics, including the following key operating
metrics, to evaluate our business, measure our performance, identify trends
affecting our business, and make operating decisions. We believe these key
operating metrics are useful to investors because management uses these metrics
to assess the growth of our business and the effectiveness of our operational
strategies.

We define our key operating metrics as follows:


Gross Transaction Value: Represents total proceeds from all items sold at the
Company's auctions and online marketplaces. GTV is not a measure of financial
performance, liquidity, or revenue, and is not presented in the Company's
consolidated financial statements.

Inventory return: Inventory sales revenue less cost of inventory sold.

Inventory rate: Inventory return divided by inventory sales revenue.

Inventory Management System activations: Number of organizations activated on
IMS. An organization is considered activated on IMS when a customer has signed
an annual multi-channel contract and has an IMS instance setup to allow for
equipment to be directed to one of our transaction solutions digitally.

Bids per lots sold: Each bid is completed electronically through our real-time
online bidding system. A lot is defined as a single asset to be sold, or a group
of assets bundled for sale as one unit. This metric calculates the total number
of bids received for a lot divided by the total number of lots sold. GovPlanet
business metrics are excluded from this metric as management reviews industrial
equipment auction metrics excluding GovPlanet.

Total lots sold: A single asset to be sold, or a group of assets bundled for
sale as one unit. Low value assets are sometimes bundled into a single lot,
collectively referred to as "small value lots". GovPlanet business metrics are
excluded from this metric as management reviews industrial equipment auction
metrics excluding GovPlanet.

Non-GAAP Measures

As part of management’s non-GAAP measures, we may eliminate the financial impact
of certain items that we do not consider to be part of our normal operating
results.


Adjusted net income attributed to stockholders increased 20% to $59.9 million in
the third quarter of 2022 and increased 21% to $193.9 million for the first nine
months of 2022.

Diluted adjusted EPS attributable to stockholders increased 18% to $0.53 per
share in the third quarter of 2022 and increased 20% to $1.73 per share for the
first nine months of 2022.

Adjusted EBITDA increased 12% to $102.5 million in the third quarter of 2022 and
increased 20% to $343.7 million for the first nine months of 2022.


Debt at the end of the third quarter of 2022 represented 2.1 times net income at
and for the twelve months ended September 30, 2022, compared to debt at the
third quarter of 2021, which represented 3.8 times net income at and for the
twelve months ended September 30, 2021. The adjusted net debt/adjusted EBITDA
was 0.5 times at and for the twelve months ended September 30, 2022, compared to
0.7 times at and for the twelve months ended September 30, 2021.

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