RB GLOBAL INC. (RBA) FY 2023 MD&A

ITEM 7:    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section of the Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. This discussion and analysis should be read in conjunction with the “Cautionary Note Regarding Forward-Looking Statements” and the consolidated financial statements and the notes thereto included in “Part II, Item 8. Financial Statements and Supplementary Data” presented in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those expressed or implied in any forward-looking statements due to various factors, including those set forth under “Part I, Item 1A: Risk Factors” in this Annual Report on Form 10-K.

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“US GAAP”). Except for GTV, 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. Unless indicated otherwise, all tabular dollar amounts, including related footnotes, presented below are expressed in millions of United States (“U.S.”) dollars.

In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial data but not presented in our consolidated financial statements prepared in accordance with US GAAP. Certain of these data are considered “non-GAAP financial measures” under the SEC rules. The definitions 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 “Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Overview

Established in 1958, RB Global, Inc., formerly known as Ritchie Bros. Auctioneers Incorporated (NYSE and TSX: RBA), is a leading, omnichannel marketplace that provides value-added insights, services and transaction solutions for buyers and sellers of commercial assets and vehicles worldwide. Through our auction sites and digital platform, we have a wide global presence and serve customers across a variety of asset classes, including automotive, commercial transportation, construction, government surplus, lifting and material handling, energy, mining and agriculture. Our marketplace brands include Ritchie Bros., the world's largest auctioneer of commercial assets and vehicles offering online bidding, and IAA, Inc. ("IAA"), a leading global digital marketplace connecting vehicle buyers and sellers. Our portfolio of brands also includes Rouse Services ("Rouse"), which provides a complete end-to-end asset management, data-driven intelligence and performance benchmarking system; SmartEquip Inc. ("SmartEquip"), an innovative technology platform that supports customers' management of the equipment lifecycle and integrates parts procurement with both OEMs and dealers; and VeriTread LLC ("VeriTread"), an online marketplace for heavy haul transport.

On March 20, 2023, we completed the acquisition of IAA for a total purchase price of approximately $6.6 billion. IAA's stockholders received $12.80 per share in cash and 0.5252 shares of the Company for each share of IAA common stock they owned. As such, we paid approximately $1.7 billion in cash consideration and issued 70.3 million shares of our common stock. In addition, we repaid $1.2 billion of IAA's net debt. IAA facilitates the marketing and sale of total loss, damaged and low-value vehicles for a full spectrum of sellers, including insurance companies, dealerships, fleet lease and rental car companies and charitable organizations. IAA serves a global buyer base with vehicles, vehicle rebuild requirements, replacement part inventory or scrap demand. IAA maintains operations in the United States, Canada and the United Kingdom, with more than 210 facilities. We believe the acquisition of IAA will accelerate our journey to become the trusted global marketplace for insights, services and transaction solutions, as well as diversify our customer base by providing us with a significant presence in the automotive vertical, an industry with strong fundamentals and proven secular growth.

Performance Overview and Consolidated Results

In 2023, we achieved a record-breaking $13.9 billion in GTV, primarily driven from the acquisition of IAA and strong organic growth from our strategic accounts.

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Net income available to common stockholders for 2023 decreased 45% to $174.9 million, compared to $319.7 million in 2022. Diluted earnings per share (“EPS”) available to stockholders decreased 64% to $1.04 from $2.86 per share. Diluted adjusted EPS available to stockholders increased 24% to $2.99 per share in 2023 as compared to $2.41 per share in 2022.

For the year ended December 31, 2023, as compared to the year ended December 31, 2022:

•Total GTV increased 131% to $13.9 billion, mainly due to the inclusion of $7.0 billion from IAA

•Total revenue increased 112% to $3.7 billion, mainly due to the inclusion of $1.8 billion from IAA.

◦Service revenue increased 160% to $2.7 billion, mainly due to the inclusion of $1.5 billion from IAA.

◦Inventory sales revenue increased 39% to $947.1 million, mainly due to the inclusion of $246.9 million from IAA.

•Net income decreased 36% to $206.0 million.

•Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) increased 122% to $1.0 billion.

•Cash on hand at December 31, 2023 was $747.9 million, of which $576.2 million was unrestricted.

Operational Highlights

In March 2023, we completed the acquisition of IAA, which was a key part of our growth strategy and vision of becoming the trusted global marketplace for transaction solutions, insights and services for commercial assets and vehicles. IAA has accelerated our expansion into an attractive, adjacent vertical, broadening our global footprint. We believe our combined yard footprint, marketplace infrastructure and comprehensive suite of innovative solutions will allow us to better serve our customers effectively and efficiently. In January 2023, we also acquired a controlling interest in VeriTread, a transportation technology company in the United States experienced in building heavy haul transportation platforms and solutions for industrial equipment, vehicles, and other assets. VeriTread adds to our suite of value-added services, supporting the needs of equipment owners throughout the equipment lifecycle by integrating transportation solutions directly into our marketplace technology.

In the beginning of August 2023, we appointed Jim Kessler, who was previously the Company's President and Chief Operating Officer as Chief Executive Officer ("CEO") and in December 2023, we announced the appointment of Eric J. Guerin as Chief Financial Officer ("CFO"), effective January 15, 2024.

In addition to our growth through two acquisitions this year, below are some other notable operational highlights during 2023:

•Ritchie Bros. had strong operating results and record growth, resulting in a 15% year-over-year increase in total GTV and 11% year-over year increase in total revenues.

•Since its acquisition at the end of March 2023, IAA contributed $7.0 billion to our total GTV and $1.8 billion to our total revenues in 2023, benefiting from higher average selling prices and higher volumes as a result of a higher number of vehicles declared as total losses.

•In October 2023, the Company, along with Nations Capital, LLC (“Nations”), received bankruptcy court approval to be the agent and liquidator of Yellow Corporation’s transportation assets. The Company and Nations intend to utilize the expansive footprint of RB Global to manage the relocation, transportation, refurbishment, inventory, storage and sale of the rolling stock assets, including approximately 60,000 units of trucks, trailers and miscellaneous equipment located across the United States and Canada at over 300 terminal locations. The Company and Nations intend to implement a multi-faceted sales strategy, including private treaty and strategic bulk sales, as well as live and fully digital formats

•SmartEquip released a major enhancement to its digital parts commerce product in September 2023. The new SmartEquip e-Commerce Store 2.0 platform helps dealers, fleet owners and authorized distributors in the industrial goods industry to set up a branded, digital parts shop quickly and easily and help them manage inventory, product support, sales and customers in one easy-to-use self-serve platform.

•In August 2023, IAA released three product enhancements to its selling platform, IAA Vehicle Score™, IAA Vehicle Value™ and the IAA Sales Decision Center™, which all work together to provide vehicle sellers with information that is critical in helping to optimize their auction strategies for greater returns.

•In April 2023, we made strategic real estate investments in the states of New York, Indiana, Connecticut and Delaware in the United States to meet growing demand and to secure our presence in prime locations. Accordingly, we opened two new IAA auction sites in Staten Island, New York, and Fort Wayne, Indiana.

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Results of Operations

Foreign exchange gain (loss) for the years ended 2022 and 2021 have been reclassified from operating income to a separate line below operating income, refer to our consolidated financial statements in "Part II, Item 8: Financial Statements and Supplementary Data - Note 2 Significant Accounting Policies" of this document.

The following table presents the selected results of Ritchie Bros. and IAA during the year ended December 31, 2023, and includes the financial results of IAA since its acquisition on March 20, 2023:

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Total GTV

Total GTV increased 131% to $13.9 billion as compared to 2022, of which IAA accounted for 88% of the increase. Excluding IAA, total GTV increased 15% to $7.0 billion as compared to 2022, and increased 16% when excluding the impact of foreign exchange.

In 2023, total GTV increased primarily due to the inclusion of IAA since its acquisition on March 20, 2023. IAA contributed $7.0 billion, or 50%, of total GTV, generating strong volumes and higher average selling prices in the automotive sector primarily across North America. Excluding IAA, the increase in total GTV was driven by higher lot volumes, mainly from rental and transportation customers, as the supply chain continues to normalize post-pandemic, partially offset by lower realized auction prices and an unfavorable asset mix. Total GTV increased across all regions, most notably in the United States as a result of strong execution by our strategic accounts team, as well as from positive year-over-year performances at our regional events and the addition of several new auction events. In Canada, GTV volume growth was driven by favorable year-over-year performances at our auction events in Western Canada mainly in the oil and gas sector, benefiting from higher performance from our regional sales team and increased imports from Asia Pacific and the United States. In International, we saw GTV volume growth primarily in Europe at its auction events.

Total Revenue

Total revenue increased 112% to $3.7 billion as compared to 2022, with total service revenue increasing by 160% and inventory sales revenue increasing by 39%. IAA contributed $1.8 billion, or 48% of total revenues in 2023 since its acquisition on March 20, 2023. Excluding IAA, total revenue increased 11% to $1.9 billion in 2023, with total service revenue increasing by 16% and inventory sales revenue increasing by 2%.

Service Revenue

Service revenue is comprised of commissions earned on service GTV, buyer fees earned on total GTV, as well as revenues earned from our marketplace services. Commissions include revenue earned from consignors or sellers from the sale of assets from straight, fixed or guarantee commission contracts. Buyer fees include buyer fees earned from purchasers on the sale of inventory or consigned assets. Marketplace services revenue includes fees earned from value-added services provided to customers such as refurbishment, parts procurement, data, transportation and logistics, inspection, appraisals, online listing, financing, title and liens processing, as well as other auction-related fees.

In 2023, total service revenue increased 160% in line with higher service GTV increase of 143%, with buyer fees increasing 383%, commissions increasing 66% and marketplace services revenue increasing 61%.

Buyer fees increased 383%, significantly exceeding the 131% increase in total GTV, mainly due to higher buyer fee rates and lot volumes with the inclusion of IAA. IAA contributed $1.1 billion, or 95% of the increase in buyer fees. Excluding IAA, the increase in buyer fees were driven by an increase in minimum buyer fee rates implemented in early 2023.

Commissions revenue increased 66%, less than the 143% increase in Service GTV, mainly due to the inclusion of IAA as IAA earns lower commission rates on Service GTV through its fixed fee commission contracts with its consignors. IAA contributed $276 million, or 86% of the increase in total commissions revenue. Excluding IAA, commissions revenue was also impacted by softer straight commission and guarantee performances across all regions, most notably in the United States. In the United States, these softer performances were mainly due to higher volumes sold from our strategic accounts team in the rental and transportation sectors. In Canada, we also saw several large strategic contracts contribute to softer guarantee and straight commissions revenues.

Marketplace services revenue increased 61%, driven partly by the inclusion of IAA, which contributed 60% of the increase from its auction-related buyer services and subscription fees and title and liens processing fees. Excluding IAA, marketplace services revenue increased across all regions due to higher ancillary revenue, in line with higher GTV volume, and higher document fees from rate increases introduced in early 2023 and from rate harmonization in our online marketplaces. We also benefited from the inclusion of

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transportation services revenue from the acquisition of VeriTread and higher listing fee revenue from increased online volumes in the United States.

Inventory Sales Revenue

In 2023, inventory sales revenue increased 39% primarily due to the inclusion of IAA, which contributed 94% of the increase. Excluding IAA, inventory sales revenue increased mainly due to higher volumes of inventory packages in the United States, sourced through our strategic accounts, and the addition of several new auction events. Despite the volume growth, we saw softer price realization on various inventory packages due to macroeconomic pressures on pricing. In International, we saw lower inventory volumes in Australia, partly due to a shift in its revenue mix and an auction event that did not repeat, partially offset by positive performances in Europe driven by an increase in locally sourced inventory packages.

Costs of Services

Costs of services increased 499% to $1.0 billion mainly due the inclusion of IAA, which accounted for 95% of the increase. IAA's cost of services includes direct expenses incurred for regular weekly auction events, primarily relating to tow costs, employee compensation, and operating lease costs for auction sites, as well as costs to provide title search. Excluding IAA, we saw higher costs of services from increased volumes in our ancillary business, mainly in repairs and hauling, in line with total GTV growth. We also incurred higher employee labor costs to support the growth in our service GTV, partly driven by higher volume of online transactions. In addition, we also incurred higher transportation costs from the inclusion of VeriTread since its acquisition in the beginning of the year.

Cost of Inventory Sold

Inventory rate decreased to 5.6% from 10.9%, mainly driven by unfavorable pricing conditions in most regions, particularly across North America, where prices declined faster than anticipated between the purchase and sale dates of inventory.

Cost of inventory sold increased 47% to $893.6 million, while inventory sales revenue increased 39%. Cost of inventory sold increased at a higher rate than inventory sales revenue as a result of softer performances on our inventory contracts, primarily in North America. These softer performances were driven by a higher proportion of inventory packages with unfavorable pricing conditions, some of which were signed strategically due to the competitive landscape, particularly in Canada.

Selling, General and Administrative

Selling, general and administrative expenses increased 38% to $743.7 million primarily due to the inclusion of IAA, which contributed 74% of the increase, and includes mainly employee compensation expenses, technology costs and professional fees for technology development activities. Excluding IAA, the remaining increase was primarily driven by higher employee compensation costs due to an increase in headcount to support our sales, operations and strategic growth initiatives, and higher severance and settlement costs relating to the departures of certain former executives. We also incurred higher technology costs as we continue to shift to modernized payment solutions and cloud-based solutions to improve customer and employee experiences. Further, we saw higher advertising and promotion costs to promote new sales initiatives and higher global travel costs. These increases were partially offset by lower incentive-based compensation expense.

Acquisition-related and Integration Costs

Acquisition-related and integration costs increased 479% to $216.1 million, primarily given the significant investment banking, consulting, legal and financing costs incurred to effect the acquisition of IAA. Since the acquisition of IAA we have also incurred significant severance costs to employees of the combined business as a result of restructuring and integrating the various business functions, including severance costs to certain key executives. To support our integration activities and help us achieve cost synergies, we have also incurred integration costs to third-party advisors and consultants. In addition, for the benefit of the combined business, we also recorded a net $16.3 million expense as settlement for the termination of a non-compete agreement bound by IAA prior to the acquisition.

Operating Income

Operating income increased 4%, primarily driven by the inclusion of revenues less operating expenses from IAA. In addition, excluding IAA, we also saw higher flow through from higher service revenue, partially offset by higher depreciation and amortization costs driven by the amortization of the acquired intangible assets from acquisition of IAA, the $169.1 million gain on the Bolton property in 2022 that did not recur this year, and higher acquisition-related and integration costs as discussed above.

Income Tax Expense and Effective Tax Rate

We recorded an income tax expense of $76.4 million in 2023, compared to $86.2 million in 2022. Our effective tax rate was 27.1%, compared to 21.2% in 2022. The increase in the effective tax rate over the comparative period was primarily attributable to the non-taxable portion of the gain on sale of the Bolton property in 2022 that did not recur in 2023, and an increase in non-deductible expense

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in the current period. The increase in the effective tax rate was partially offset by a higher benefit related to Foreign-Derived Intangible Income ("FDII") in the current period when compared to prior period.

Net Income

Net income attributable to controlling interests decreased 35% to $206.5 million, compared to $319.7 million in 2022. The decrease was primarily due to higher interest expense from higher debt to fund the acquisition of IAA and a rise in interest rates, partially offset by higher interest income, also due to a rise in interest rates, and lower income tax expense, as discussed above.

Diluted EPS

Diluted EPS available to stockholders decreased 64% to $1.04 per share compared to $2.86 in 2022, primarily due to the increase in the number of shares issued for the acquisition of IAA and by the decrease in net income as described above.

In February 2023, we issued $485.0 million of Series A Senior Preferred Shares and $15.0 million of common shares to Starboard. As the Series A Senior Preferred Shares are considered a participating security, we calculate diluted EPS using the two-class method, which includes the effects of the assumed conversion of the Series A Senior Preferred Shares to common shares, as well as the effect of any shares issuable under the Company’s stock-based incentive plans, if such effect is dilutive. Under this method, earnings are allocated to holders of common stock and holders of Series A Senior Preferred Shares based on dividends declared and their respective participation rights in undistributed earnings. As a result, our net income available to common stockholders is lower by the cumulative dividends and allocated earnings to Series A Senior Preferred shareholders.

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 operating income increased 127% to $905.3 million, compared to $399.4 million in 2022.

Adjusted net income available to common stockholders increased 86%, to $502.2 million, compared to $269.9 million in 2022.

Diluted adjusted EPS available to common stockholders increased 24% to $2.99 per share, compared to $2.41 per share in 2022.

Adjusted EBITDA increased 122% to $1.0 billion, compared to $465.2 million in 2022.

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:

In 2023, approximately 29% of our revenues and 30% of our operating expenses were denominated in currencies other than the U.S. dollar, compared to 42% and 34%, respectively, in 2022.

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We recognized $1.8 million in foreign exchange losses in 2023 and $1.0 million of gains in 2022. Foreign exchange had an unfavorable impact on total revenue and a favorable impact on expenses. These impacts were mainly due to the fluctuations in the Euro, Australian dollar and the Canadian dollar exchanges rates relative to the U.S. dollar during the year.

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.

Total service revenue take rate: Total service revenue divided by total GTV.

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

Inventory rate: Inventory return divided by inventory sales revenue.

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.”

Historically, we reported total lots sold excluding lots sold in our GovPlanet business. Commencing in the first quarter of 2023, as a result of a change in management organizational structure and the acquisition of IAA, management reviews all auction metrics of the combined businesses as a whole, which includes GovPlanet. In addition, the total bids per lot sold metric was historically used by management as a key metric. This metric has been discontinued since the first quarter of 2023 as it is no longer considered meaningful when reviewing the auction metrics of the combined business and of our one reportable segment.

We believe it is meaningful to consider revenue in relation to GTV. Total GTV and revenue by geography are presented below, along with comparative periods.

GTV by Geography

1Service GTV is calculated as total GTV less inventory sales revenue

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Revenue by Geography

United States

Service revenue increased 243% primarily due to a 218% increase in Service GTV, driven mainly from the inclusion of IAA, which contributed 91% of the increase, as well as higher volumes from strong execution by our strategic accounts, particularly in rental and transportation sectors, as well as from increased volumes sourced by our regional sales teams. The majority of the contribution from IAA was primarily driven by higher buyer fees, as well as fixed fee commissions earned from the sale of vehicles. Excluding IAA, we saw an increase in marketplace service revenue, buyer fees and commissions. Marketplace service revenue increased mainly from higher activity in our ancillary services, specifically for refurbishment and repairs, in line with higher GTV volume. We also saw higher document fees from rate increases and online document fee harmonization, higher transportation service revenue from the inclusion of VeriTread from its acquisition in the beginning of 2023, and higher online listing fees. Buyer fees also increased driven by higher minimum buyer fee rates implemented in early 2023 and a higher proportion of low value lots. These increases were partially offset by softer straight commission and guarantee rate performances, partly due to a higher proportion of GTV sourced from our strategic accounts team.

Inventory sales revenue increased 34% mainly due to the inclusion of IAA, which contributed 76% of the increase. Excluding IAA, we saw a higher volume of inventory contracts, partly sourced from our strategic accounts team, and from the addition of several new auction events. Despite volume growth, we also saw softer rate performances on various inventory contracts and the non-repeat of a large inventory package dispersal of construction equipment.

Canada

Service revenue increased 42%, in line with the 43% increase in Service GTV, mainly from the inclusion of IAA of 85%, as well as from a strong execution at our auction events in Western Canada. Excluding IAA, we saw higher buyer fees driven by an increase in our minimum buyer fee rates, offset by softer guarantee and straight commission rate performances due to higher GTV sourced from our strategic contracts, as well as due to softer performances on several large packages sourced strategically for competitive purposes.

Inventory sales revenue increased 69% primarily due to the inclusion of IAA, partially offset by softer year-over-year performances on several large inventory packages.

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International

Service revenue increased 41%, primarily due to a 36% increase in Service GTV. This increase was partly driven by the inclusion of IAA, which contributed 59% of the increase. Excluding IAA, we also saw higher marketplace service revenue driven by higher ancillary service revenue, in line with higher GTV volume and higher buyer fees from minimum fee rates increases.

Inventory sales revenue increased 37% primarily driven by the inclusion of IAA, which contributed 120% of the increase. Excluding IAA, we saw softer year-over-year performances in Australia driven by lower activity and a shift in revenue mix, as well as due to the non-repeat of an auction event. These decreases were partially offset by positive year-over-year performances in Europe, mainly driven by an increased volume of locally sourced inventory contracts.

GTV by Sector

The following table illustrates the breakdown of total GTV by sector for the year ended December 31, 2023, December 31, 2022, and December 31, 2021.

The automotive sector includes all consumer automotive vehicles. The commercial construction and transportation sector includes heavy equipment such as excavators, dozers, lift and material handling, vocational and commercial trucks and trailers. The other sector primarily includes assets and equipment sold in the agricultural, forestry and energy industries, and government surplus assets, as well as smaller consumer recreational transportation items. All sectors include salvage and non-salvage transactions.

In 2023, total GTV compared to 2022 increased by 3,422% in the automotive sector, due to the inclusion of IAA. GTV increased by 28% in the commercial construction and transportation sector mainly in the United States, primarily driven by volumes sourced from our strategic accounts and regional sales teams, partially offset by lower selling prices and an unfavorable asset mix. GTV increased 22% in the other sector mainly driven by an increase in volume of assets in consumer products and in the agricultural sector.

Total Lots Sold by Sector

The following table illustrates the breakdown of total lots sold by sector for the year ended December 31, 2023, December 31, 2022, and December 31, 2021.

In 2023, the total lots sold compared to 2022 increased by 8,424% in the automotive sector due to the inclusion of lots sold from IAA. Total lots sold increased by 73% in the commercial construction and transportation sector due to a higher proportion of low value lots sold primarily in the United States and from the inclusion of IAA. Total lots sold increased 20% in other sector mainly from the inclusion of IAA driven by an increase in volume of assets in consumer products.

Debt

Credit Facilities

We have a credit agreement (the "Credit Agreement"), which is comprised of multicurrency revolving facilities (the “Revolving

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Facilities”) and a delayed-draw term loan facility (the “DDTL Facility”), and the Term Loan A facility (the “TLA Facility” and together with the Revolving Facilities and DDTL Facility, the “Facilities”).

In connection with the IAA acquisition, the Company entered into a debt commitment letter with certain financial institutions that committed to provide, subject to its terms and conditions, a bridge loan facility in an aggregate principal amount of up to $2.8 billion and a backstop revolving facility in an aggregate principal amount of up to $750.0 million. The Company subsequently amended the terms of its Credit Agreement, which, among other things, permitted the acquisition of IAA and served to terminate the backstop commitments (including the revolving backstop facility and $88.9 million of bridge commitments that served as a backstop for its existing term loans under the credit agreement) and replaced an additional $1.8 billion of bridge commitments with the TLA Facility.

The Credit Agreement was amended in December 2022, which, among other things, (i) permitted the acquisition of IAA, (ii) provided commitments for the TLA Facility in an aggregate principal amount of up to $1.8 billion to be used to finance, in part, the IAA acquisition, and (iii) provided the Company the ability to borrow up to $200.0 million of the Revolving Facilities under the Credit Agreement on a limited conditionality basis to finance, in part, the IAA acquisition.

On March 20, 2023, the TLA Facility of $1.8 billion was funded with the acquisition of IAA. The TLA Facility is comprised of a facility denominated in US dollars (“USD TLA Facility”) and a facility denominated in Canadian dollars (“CAD TLA Facility”). The Company’s existing DDTL Facility of CAD $115.9 million was refinanced and converted to the CAD TLA Facility, an alternative currency term rate loan. During 2023, we made CAD $5.9 million of principal repayments on the CAD TLA Facility, all of which was mandatory, and $150.0 million of principal repayments on the USD TLA Facility, $68.4 million of which was mandatory and $81.6 million of which was voluntary, as permitted by the Credit Agreement.

Credit facilities at December 31, 2023 and 2022 were as follows:

Revolving Credit Facilities

At December 31, 2023, of the $755.0 million in revolving credit facilities, $750.0 million relates to our syndicated credit facility and $5.0 million relates to a foreign demand credit facility.

On December 31, 2023, we had $729.7 million of unused revolving credit facilities, which consisted of:

•$724.7 million under our Credit Agreement that expires on September 21, 2026; and

•$5.0 million under a foreign demand credit facility that has no maturity date.

Term Loan Facility

The amendment to the Credit Agreement made in September 2021 (i) extended the maturity date of the Facilities from October 27, 2023 to September 21, 2026, (ii) increased the total size of the Facilities provided under the Credit Agreement to up to $1.045 billion, including $295.0 million of commitments under the DDTL Facility, (iii) reduced the applicable margin for base rate loans and LIBOR loans at each pricing tier level, (iv) reduced the applicable percentage per annum used to calculate the commitment fee in respect of the unused commitments under the Facilities at each pricing tier level, and (v) included customary provisions to provide for the eventual replacement of LIBOR as a benchmark interest rate. Under the terms of the September 2021 amendment, mandatory principal repayments began in the third quarter of 2022 and were subject to an annual amortization rate of 5%, payable in quarterly installments, with the balance payable at maturity. The remaining $205.0 million commitment under the DDTL Facility was not drawn and accordingly expired on June 28, 2022.

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On March 20, 2023, under the terms of the December 2022 amendment to the Credit Agreement, with the close of the acquisition of IAA, certain amended terms became effective. Specifically, the Credit Agreement amendment (i) increased the total size of the Facilities provided under the Credit Agreement to up to $2.7 billion, including $1.9 billion of commitments under the TLA Facility, (ii) increased the appropriate margin for base rate loans, and SOFR loans at each pricing tier level, and (iii) increased the applicable percentage per annum used to calculate the various fees such as the commitment fees and letter of credit fees under the Facilities at each pricing tier level. In addition, on March 20, 2023, the Company converted its existing CAD DDTL Facility into the CAD TLA Facility, which continues to be subject to an annual amortization rate of 5% payable in quarterly installments, with the balance also payable at maturity. Under the amended terms, mandatory principal repayments on the USD TLA Facility began in the second quarter of 2023 and are subject to quarterly installments of 1.25% of the initial $1.8 billion principal amount, with the balance payable at maturity. In 2023 we repaid $150.0 million of principal on the USD TLA Facility, and as such, the next mandatory principal repayment amount is due on December 31, 2024.

Senior Secured and Unsecured Notes

At December 31, 2022, we had senior unsecured notes (the “2016 Notes”) outstanding that were to expire on January 15, 2025 for an aggregate principal amount of $500.0 million, bearing an interest rate of 5.375% per annum. The proceeds of the offering of the 2016 Notes were used to finance the IronPlanet acquisition. The 2016 Notes were redeemed on March 20, 2023 at 100.0% of the original offering price of the notes, plus accrued and unpaid interest. The Company fully expensed the associated remaining unamortized debt issue costs of $3.3 million in interest expense in the consolidated income statement during the first quarter of 2023.

On March 15, 2023, to finance the acquisition of IAA, we completed the offering of two series of senior notes: (i) $550.0 million aggregate principal amount of 6.750% senior secured notes due March 15, 2028 and (ii) $800.0 million aggregate principal amount of 7.750% senior unsecured notes due March 15, 2031 (together the “2023 Notes”).

Debt Covenants

We were in compliance with all financial and other covenants applicable to our credit facilities at December 31, 2023.

Our ability to borrow under our syndicated revolving credit facility is subject to compliance with financial covenants of a consolidated leverage ratio and a consolidated interest coverage ratio. In the event of sustained deterioration of global markets and economies, we expect the covenants pertaining to our leverage ratio would be the most restrictive to our ability to access funding under our Credit Agreement. We continue to evaluate courses of action to maintain current levels of liquidity and compliance with our debt covenants.

Liquidity and Capital Resources

On March 20, 2023, the Company closed the acquisition of IAA for total fair value consideration of $6.6 billion. This included cash consideration of $1.7 billion and repayment of approximately $1.2 billion of IAA’s debt, which was not legally assumed as part of the transaction. The acquisition was funded through a combination of cash from our balance sheet, proceeds of $1.8 billion from the TLA Facility and $1.4 billion proceeds from the completed offering of the 2023 Notes. As we repaid IAA’s net debt at acquisition, which included all borrowings under its existing credit agreement and senior notes, IAA was acquired debt-free. During the first quarter of 2023, we also completed the acquisition of VeriTread and paid $28.2 million cash consideration.

On February 1, 2023, we issued $485.0 million Series A Senior Preferred Shares, a participating security, convertible into common shares at a price of $73.00 per share and $15.0 million of common shares to Starboard.

In addition, we redeemed our 2016 Notes of $500.0 million principal at 100.0% of its original offering price, plus accrued and unpaid interest at the closing of the IAA acquisition.

Our short-term cash requirements include (i) payment of quarterly dividends to common shareholders on an as-declared basis, and payment of participating dividends and preferential dividends to holders of Series A Senior Preferred Shares, (ii) settlement of contracts with consignors and other suppliers, (iii) personnel expenditures, with a majority of bonuses paid annually in the first quarter following each fiscal year, (iv) income tax payments, primarily paid in quarterly installments, (v) payments on short-term debt and long-term debt, (vi) payment of amounts committed under certain service agreements to build our modern IT architecture, (vii) payments on our operating and finance lease obligations, (viii) other capital expenditures and working capital needs, and (ix) advances against our auction contracts, as well as advance charges paid on a seller's behalf. In the current high interest rate environment, the Company intends to continue to evaluate and pursue the most financially beneficial arrangements to fund future capital expenditures, which may include lease agreements or cash purchases.

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We believe that our existing working capital and availability under our credit facilities are sufficient to satisfy our present operating requirements and contractual obligations.

Our long-term cash requirements include scheduled principal repayments of long-term debt relating to the TLA Facility of $1.8 billion and the 2023 Notes of $1.4 billion, repayment of any drawn funds under our revolving credit facilities, as well as scheduled repayments of operating and finance lease obligations relating to the Company’s commercial leases for various auctions sites, branches and offices, operating leases for computer equipment, software, motor vehicles and small office equipment, and finance lease arrangements for certain vehicles, computers, yard equipment, fixtures, and office furniture. In addition, we also have scheduled repayments due on our equipment financing obligations. For more information on our debt and leases, see "Part II, Item 8: Financial Statements and Supplementary Data - Note 15 Other Current Assets" and "Item 8: Financial Statements and Supplementary Data - Note 18 Intangible Assets" respectively, in our consolidated financial statements.

Cash provided by operating activities can fluctuate significantly from period to period. We assess our liquidity based on our ability to generate cash and secure credit to fund operating, investing, and financing activities. Our liquidity is primarily affected by fluctuations in cash provided by operating activities, significant acquisitions of businesses, payment of dividends, our net capital spending1, and repayments of debt. We are also committed under various letters of credit and provide certain guarantees in the normal course of business. We believe our principal sources of liquidity, which include cash flow from operations and our unused capacity under our revolving credit facilities of $729.7 million, is sufficient to fund our current and planned operating activities.

In our automotive sector, we use separate bank accounts to record vehicle loan payoff receipts and disbursements and these bank accounts do not have the right of offset. As a result, outstanding payments for vehicle loan payoffs to sellers are classified as book overdrafts. Additionally, we typically transfer most of our available cash from operating bank accounts to interest-bearing deposit accounts at other banks. The operating banks do not have the right of offset against the deposit accounts held at other banks, and accordingly, outstanding payments that exceed the operating bank account balances are considered book overdrafts as well. Book overdrafts are recognized on our consolidated balance sheet within trade and other liabilities.

If we were to consider further acquisitions to deliver on our strategic growth drivers, we may seek financing through equity markets or additional debt markets. The issuance of additional equity securities may result in dilution to our shareholders. Issuance of preferred equity securities could provide for rights, preferences or privileges senior to those of our common stock. Further, this additional capital may not be available on reasonable terms, or at all.

Cash Flows

Net cash provided by operating activities was $544.0 million in 2023, as compared to net cash provided by operating activities of $463.1 million in 2022. Net cash provided by operating activities increased $80.9 million mainly due to net cash generated by the inclusion of IAA income from operations, partially offset by a net cash outflow from the change in operating assets and liabilities of $294.9 million. The net cash outflow from the change in operating assets and liabilities was primarily driven by the timing, size, and number of auctions, as well as higher outflows for operating lease payments from the inclusion of IAA since its acquisition. We also saw higher tax payments relating to the timing of installments paid, as well as higher taxable income, and taxes paid in 2023 for the gain on the sale of the Bolton property. As a result of the inclusion of IAA, we also saw higher outflows relating to prepaid consigned vehicle charges. These outflows were partially offset by the change in book overdrafts, higher accrued interest on higher debt levels, timing of incentive-based employee compensation, higher accruals for severance, and the receipt of certain leasehold improvement reimbursements.

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1 We calculate net capital spending as property, plant and equipment additions plus intangible asset additions less proceeds on disposition of property, plant and equipment.

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Net cash used in investing activities was $3.1 billion in 2023, as compared to net cash provided by investing activities of $77.2 million in 2022. Net cash used in investing activities increased $3.2 billion primarily due to approximately $2.8 billion of cash outflow for the acquisitions of IAA and VeriTread. We also saw higher cash outflows from property, plant and equipment additions of $195.9 million, primarily for the purchase of various parcels of land for our vehicle auction sites and operations in the United States, the purchase of a property under development in Canada, as well investments made in machinery, equipment, building and land improvements. In addition, we saw lower cash inflows in 2023 of $165.1 million due to the non-repeat of proceeds received for the sale of the Bolton property in 2022. We also continued to invest in software development to support our existing auction platforms and the development of a modern infrastructure, and therefore saw an increase in intangible asset additions of $78.3 million.

Net cash provided by financing activities was $2.7 billion in 2023, as compared to net cash used in financing activities of $1.3 billion in 2022. Net cash provided by financing activities increased $3.9 billion, mainly driven by financing raised through the TLA Facility for $1.8 billion and issuances of the 2023 Notes for $1.4 billion to fund the IAA acquisition in the first quarter of 2023. Further, we received $496.9 million of net proceeds from the issuance of $485.0 million of participating Series A Senior Preferred Shares and $15.0 million of common stock in the first quarter of 2023, net of issuance costs. We also repaid $654.4 million of long-term debt relating to the redemption of our 2016 Notes and repayment of $150.0 million on our USD TLA Facility, as compared to $1.1 billion of debt repaid in 2022. In addition, we received cash inflows from higher proceeds from the exercise of employee stock options, and from financing certain equipment purchases. These increases were partially offset by $213.2 million higher dividends paid during the year, primarily due to the payment of a special dividend, as well as due to a higher number of shares outstanding from the acquisition of IAA, and payment of quarterly dividends to holders of the Series A Senior Preferred Shares. We also incurred higher debt issuance costs in connection with the financing of the TLA Facility and the 2023 Notes compared to prior year.

Dividend Information

We declared and paid a regular cash dividend of $0.27 per common share for the quarters ended September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022. On March 7, 2023, we declared a special cash dividend of $1.08 per share, contingent on the closing of the acquisition of IAA, payable to stockholders of record at the close of business on March 17, 2023, excluding holders of Series A Senior Preferred Shares (the “Special Dividend”). The Special Dividend was paid in cash on March 28, 2023 following the acquisition of IAA. We also recorded Preferential Dividends of $24.3 million, of which $1.1 million was accrued and unpaid at December 31, 2023, and Participating Dividends of $7.3 million to the holders of the Series A Senior Preferred Shares. We have declared, but not yet paid, a dividend of $0.27 per common share for the quarter ended December 31, 2023. All dividends that we pay are “eligible dividends” for Canadian income tax purposes unless indicated otherwise.

Critical Accounting Policies, Judgments, Estimates and Assumptions

In preparing our consolidated financial statements in conformity with US GAAP, we must make decisions that impact the reported amounts and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgments based on our understanding and analysis of the relevant circumstances and historical experience.

The following discussion of critical accounting policies and estimates is intended to supplement the significant accounting policies presented in the notes to our consolidated financial statements included in “Part II, Item 8: Financial Statements and Supplementary Data” presented in this Annual Report on Form 10-K, which summarize the accounting policies and methods used in the preparation of those consolidated financial statements. The policies and the estimates discussed below are included here because they require more significant judgments and estimates in the preparation and presentation of our consolidated financial statements than other policies and estimates. Actual amounts could differ materially from those estimated by us at the time our consolidated financial statements are prepared.

Business Combinations

Accounting for business combinations requires estimates with respect to the fair value of the assets acquired and liabilities assumed. Such estimates of fair value require valuation methods, which rely on significant estimates and assumptions, especially for intangible assets. In connection with the IAA purchase price allocation, the valuation of intangible assets required significant estimates and assumptions, and the valuations of property, plant, and equipment, and operating lease right-of-use assets also required estimates and assumptions.

The valuation of customer relationship intangible assets was performed using the multi-period excess earnings method of the income approach and required significant estimates and assumptions regarding revenue growth rates and discount rates, and the valuation of other acquired intangible assets was performed using the relief from royalty method of the income approach and required estimates and assumptions regarding revenue growth rates, royalty rates, customer attrition rates, and discount rates, as applicable. The Company based these estimates on historical and anticipated results, industry trends, economic analysis, and various other assumptions, including assumptions as to the occurrence of future events. The discount rates used to discount expected cash flows to

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present values were derived from a weighted average cost of capital analysis and adjusted to reflect inherent risks. The valuation of most acquired property, plant, and equipment, other than land, was performed using the replacement cost method of the cost approach and required certain estimates and assumptions regarding estimates of replacement cost and adjustments to account for physical deterioration and obsolescence. The fair value of most acquired land and the off-market component of right-of-use assets were estimated using sales comparison method of the market approach and included certain estimates and assumptions with respect to market value or market rents, growth rates, and discount rates, as applicable.

The IAA purchase price allocation is preliminary at December 31, 2023 and will be finalized in the first quarter of 2024. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, we may record adjustments to the purchase price allocation. In addition, unanticipated market or macroeconomic events and circumstances may occur that could affect the accuracy or validity of the estimates and assumptions. If the estimates do not reflect future results or assumptions utilized in the valuation are inaccurate, then the estimated fair value of property, plant, and equipment, intangible assets, operating lease right-of-use assets, and goodwill could be misstated, or could result in future impairment.

Goodwill

Goodwill is not amortized, but it is tested annually for impairment at the reporting unit level as of December 31, and between annual tests if indicators of potential impairment exist. We determined our reporting units to be Ritchie Bros, IAA, Listings Services (includes Mascus and RitchieList brands), Rouse, SmartEquip and VeriTread.

We have the option of performing a qualitative assessment of a reporting unit to determine whether a quantitative impairment test is necessary. This involves an assessment of qualitative factors to determine the existence of events or circumstances that would indicate whether it is more likely than not that the fair value of the reporting unit to which goodwill belongs is less than its carrying value. If the qualitative assessment indicates it is not more likely than not that the reporting unit’s fair value is less than its carrying value, a quantitative impairment test is not required.

In the quantitative assessments performed, if estimates for future cash flows, which are driven by reporting units’ ability to generate revenue growth were to decline, the overall reporting units’ fair value would decrease, resulting in potential goodwill impairment charges. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions. As a result, there can be no assurance that the estimates and assumptions made for purposes of impairment tests will prove to be an accurate prediction of the future.

If a quantitative impairment test is required, the procedure is to identify potential impairment by comparing the reporting unit’s fair value with its carrying amount, including goodwill. The reporting unit’s fair value is determined using various valuation approaches and techniques that involve assumptions based on what management believes a hypothetical marketplace participant would use in estimating fair value on the measurement date. An impairment loss is recognized as the difference between the reporting unit’s carrying amount and its fair value. If the difference between the reporting unit’s carrying amount and fair value is greater than the amount of goodwill allocated to the reporting unit, the impairment loss is restricted by the amount of the goodwill allocated to the reporting unit.

Ritchie Bros. reporting unit goodwill

For the year ended December 31, 2023, we performed a qualitative assessment of the Ritchie Bros. reporting unit and we concluded there were no indicators of impairment.

IAA reporting unit goodwill

For the year ended December 31, 2023, we performed a quantitative assessment of the IAA reporting unit using an income approach based on future estimated discounted cash flows. The fair value of the IAA reporting unit was measured based on the present value of the cash flows that we expect the reporting unit to generate. In estimating the IAA reporting unit's future cash flows, we estimated annual revenue growth rates of 4% to 8% and operating margins of 29% to 31% during 2024 to 2033, based on our best estimate of the reporting unit’s growth trajectory. Based on a weighted average cost of capital analysis we estimated a discount rate of 10.25% reflecting the risk premium, including company specific risk, on this reporting unit, and a terminal growth rate of 3% for the period beyond ten years, based on our best estimate of the cash flows and using market comparatives. As the estimated fair value of the IAA reporting unit was greater than its carrying amount, we concluded that IAA goodwill was not impaired at December 31, 2023. An increase of 0.25% to the discount rate used would not have resulted in a goodwill impairment.

Listings Services reporting unit goodwill

For the year ended December 31, 2023 we performed a qualitative assessment of the Listings Services reporting unit and we concluded there were no indicators of impairment.

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Rouse reporting unit goodwill

For the year ended December 31, 2023, we performed a quantitative assessment of the Rouse reporting unit using an income approach based on future estimated discounted cash flows. The fair value of the Rouse reporting unit was measured based on the present value of the cash flows that we expect the reporting unit to generate. In estimating the Rouse reporting unit's future cash flows, we estimated annual revenue growth rates of 3% to 20% and operating margins of 40% to 49% from 2024 to 2033, based on our best estimate of the reporting units’ growth trajectory. Based on a weighted average cost of capital analysis, we estimated a discount rate of 13.5% reflecting the risk premium on this reporting unit, including company specific risk, and a terminal growth rate of 3% for the period beyond ten years based on our best estimate of the cash flows and using market comparatives. As the fair value of the Rouse reporting unit was greater than its carrying amount, we concluded that Rouse goodwill was not impaired at December 31, 2023. An increase of one percentage to the discount rate used would not have resulted in goodwill impairment.

SmartEquip reporting unit goodwill

For the year ended December 31, 2023, we performed a quantitative assessment of the SmartEquip reporting unit using an income approach based on future estimated discounted cash flows. The fair value of the SmartEquip reporting unit was measured based on the present value of the cash flows that we expect the reporting unit to generate. In estimating the SmartEquip reporting unit's future cash flows, we estimated annual revenue growth rates of 3% to 20% and operating margins of 40% to 50% from 2024 to 2033, based on our best estimate of the reporting units’ growth trajectory. Based on a weighted average cost of capital analysis, we estimated a discount rate of 14.5% reflecting the risk premium on this reporting unit, including company specific risk, and a terminal growth rate of 3% for the period beyond ten years based on our view of the cash flows and using market comparatives. As the fair value of the SmartEquip reporting unit was greater than its carrying amount, we concluded that SmartEquip goodwill was not impaired at December 31, 2023. An increase of one percentage to the discount rate used would not have resulted in goodwill impairment.

VeriTread reporting unit goodwill

For the year ended December 31, 2023, we performed a performed a quantitative assessment of the VeriTread reporting unit using an income approach based on future estimated discounted cash flows. The fair value of the VeriTread reporting unit was measured based on the present value of the cash flows that we expect the reporting unit to generate. In estimating the VeriTread reporting unit's future cash flows, we estimated annual revenue growths rates of 4% to 67% and operating margins of 8% to 52% from 2024 to 2028, based on our best estimate of the reporting unit's growth trajectory. Based on a weighted average cost of capital analysis, we estimated a discount rate of 13% reflecting the risk premium on this reporting unit, including company specific risk and a terminal growth rate of 3% for the period beyond five years based on our best estimate of the cash flows and using market comparatives. As the fair value of the VeriTread reporting unit was greater than its carrying amount, we concluded that VeriTread goodwill was not impaired at December 31, 2023. An increase of one percentage to the discount rate used would not have resulted in goodwill impairment.

Indefinite-lived Intangible Assets

Indefinite-lived intangible assets are tested at least annually for impairment, and between annual tests if indicators of potential impairment exist. To test our indefinite-lived intangible assets for impairment, we first perform a qualitative assessment to determine if it is more likely than not that the carrying amount of our indefinite-lived intangible assets exceeds its fair value. If it is, a quantitative assessment is required. Based on our qualitative assessment, we determined there were no potential indicators of impairment of our indefinite-lived intangible assets at December 31, 2023.

Long-lived Assets

We test long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of impairment testing, long-lived assets are grouped and tested for recoverability at the lowest level that generates independent cash flows. Our assessment concluded that the carrying amounts of our long-lived assets are recoverable at December 31, 2023.

Adoption of New Standards

For a discussion of our new and amended accounting standards refer to "Part II, Item 8: Financial Statements and Supplementary Data - Note 2 Significant Accounting Policies" of this Annual Report on Form 10-K.

Recent Accounting Pronouncements

Recent accounting pronouncements that significantly impact our accounting policies or the presentation of our consolidated financial position or performance have been disclosed in the notes to our consolidated financial statements included in "Part II, Item 8: Financial Statements and Supplementary Data - Note 2 Significant Accounting Policies" of this Annual Report on Form 10-K.

Non-GAAP Measures

We reference various non-GAAP measures throughout this Annual Report on Form 10-K. These measures do not have a standardized

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meaning and are, therefore, unlikely to be comparable to similar measures presented by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with US GAAP.

In connection with the acquisition of IAA, the Company adjusts for the amortization of acquired intangible assets, consistent with past practice, and for the impact of purchase accounting on prepaid consigned vehicle charges, which is not expected to continue after the first year of IAA's acquisition.

Adjusted Operating Income Reconciliation

We believe that adjusted operating income provides useful information about the growth or decline of our operating income for the relevant financial period and eliminates the financial impact of adjusting items that we do not consider to be part of our normal operating results. Adjusted operating income enhances our ability to evaluate and understand ongoing operations, underlying business profitability, and facilitate the allocation of resources.

Adjusted operating income eliminates the financial impact of adjusting items from operating income, which are significant items that we do not consider to be part of our normal operating results, such as share-based payments expense, acquisition-related and integration costs, amortization of acquired intangible assets, gain on disposition of property, plant and equipment and related costs, prepaid consigned vehicle charges, executive transition costs, and certain other items, which we refer to as “adjusting items.”

The following table reconciles adjusted operating income to operating income, which is the most directly comparable GAAP measure

in our consolidated financial statements.

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(1)Please refer to pages 60-63 for a summary of adjusting items during the years ended December 31, 2023, 2022, and 2021.

(2)Adjusted operating income represents operating income excluding the effects of adjusting items.

Adjusted Net Income Attributable to Common Stockholders and Diluted Adjusted EPS Attributable to Common Stockholders Reconciliation

We believe that adjusted net income available to common stockholders provides useful information about the growth or decline of our net income available to common stockholders for the relevant financial period and eliminates the financial impact of adjusting items we do not consider to be part of our normal operating results. Diluted adjusted EPS available to common stockholders eliminates the financial impact of adjusting items from net income available to common stockholders that we do not consider to be part of our normal operating results, such as share-based payments expense, acquisition-related and integration costs, amortization of acquired intangible assets, executive transition costs and certain other items, which we refer to as “adjusting items.”

On February 1, 2023, we sold $485.0 million of participating Series A Senior Preferred Shares, convertible into common shares of the Company at an initial conversion price of $73.00 per share, and $15.0 million of common shares of the Company. The Series A Senior Preferred Shares are considered a participating security, and as a result, beginning in the first quarter of 2023, the Company calculated diluted EPS using the two-class method, which includes the effects of the assumed conversion of the Series A Senior Preferred Shares to common shares, as well as the effect of any shares issuable under the Company’s stock-based incentive plans, if such effect is dilutive. Under this method, earnings are allocated to holders of common stock and holders of Series A Senior Preferred Shares based on dividends declared and their respective participation rights in undistributed earnings. As a result, during the year ended December

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31, 2023, our net income available to common stockholders was lower by the cumulative dividends and allocated earnings to Series A Senior Preferred shareholders.

The following table reconciles adjusted net income available to common stockholders and diluted adjusted EPS available to common stockholders to net income available to common stockholders and diluted EPS available to common stockholders, which are the most directly comparable GAAP measures in our consolidated financial statements.

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(1)Please refer to pages 60-63 for a summary of adjusting items during the years ended December 31, 2023, 2022, and 2021.

(2)Net income available to common stockholders is computed as: net income attributable to controlling interests less cumulative dividends on Series A Senior Preferred Shares and allocated earnings to participating securities.

(3)Adjusted net income available to common stockholders represents net income available to common stockholders, excluding the effects of adjusting items.

(4)Diluted adjusted EPS available to common stockholders is calculated by dividing adjusted net income available to common stockholders by the weighted average number of dilutive shares outstanding, except that it is computed based upon the lower of the two-class method or the if-converted method, which includes the effects of the assumed conversion of the Series A Senior Preferred Shares and the effect of shares issuable under the Company’s stock-based incentive plans, if such effect is dilutive.

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Adjusted EBITDA

We believe adjusted EBITDA provides useful information about the growth or decline of our net income when compared between different financial periods. We use adjusted EBITDA as a key performance measure because we believe it facilitates operating performance comparisons from period to period and it provides management with the ability to monitor its controllable incremental revenues and costs.

The following table reconciles adjusted EBITDA to net income, which is the most directly comparable GAAP measure in, or calculated from, our consolidated financial statements:

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(1)Please refer to pages 60-63 for a summary of adjusting items during the years ended December 31, 2023, 2022, and 2021.

(2)Adjusted EBITDA is calculated by adding back depreciation and amortization, interest expense, income tax expense, and subtracting interest income from net income, as well as adding back the adjusting items as described on pages 60-63.

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Adjusted Net Debt and Adjusted Net Debt/ Adjusted EBITDA Reconciliation

We believe that comparing adjusted net debt/adjusted EBITDA on a trailing twelve-month basis for different financial periods provides useful information about the performance of our operations as an indicator of the amount of time it would take us to settle both our short and long-term debt. We do not consider this to be a measure of our liquidity, which is our ability to settle only short-term obligations, but rather a measure of how well we fund liquidity. Measures of liquidity are noted under “Liquidity and Capital Resources.”

The following table reconciles adjusted net debt to debt, adjusted EBITDA to net income, and adjusted net debt/ adjusted EBITDA to debt/ net income, respectively, which are the most directly comparable GAAP measures in, or calculated from, our consolidated financial statements.

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(1)Please refer to pages 60-63 for a summary of adjusting items during the years ended December 31, 2023, 2022, and 2021.

(2)Adjusted EBITDA is calculated by adding back depreciation and amortization, interest expense, income tax expense, and subtracting interest income from net income, as well as adding back the adjusting items as described in pages 60-63.

(3)Adjusted net debt is calculated by subtracting cash and cash equivalents from short and long-term debt and long-term debt in escrow.

(4)Adjusted net debt/Adjusted EBITDA is calculated by dividing adjusted net debt by adjusted EBITDA.

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Operating Free Cash Flow (“OFCF”) Reconciliation

We believe OFCF, when compared on a trailing twelve-month basis to different financial periods, provides an effective measure of the cash generated by our business and provides useful information regarding cash flows remaining for discretionary return to stockholders, mergers and acquisitions, or debt reduction. OFCF is calculated by subtracting net capital spending from cash provided by operating activities. Our balance sheet scorecard includes OFCF as a performance metric. OFCF is also an element of the performance criteria for certain annual short-term and long-term incentive awards.

The following table reconciles OFCF to cash provided by operating activities, which is the most directly comparable GAAP measure in, or calculated from, our consolidated statements of cash flows:

Adjusted Return and Adjusted ROIC Reconciliation

We believe that comparing adjusted ROIC on a trailing twelve-month basis for different financial periods provides useful information about the after-tax return generated by our investments. Adjusted ROIC is a measure used by management to determine how productively the Company uses its long-term capital to gauge investment decisions.

ROIC is calculated as the reported return divided by average invested capital. Reported return is defined as net income available to common stockholders, excluding the impact of net interest expense and tax effected at the Company’s adjusted annualized effective tax rate. Adjusted ROIC is calculated as adjusted return divided by adjusted average invested capital. Adjusted return is defined as reported return, adjusted for items that we do not consider to be part of our normal operating results, and tax effected at the applicable tax rate. Adjusted average invested capital is calculated as average invested capital but excludes any long-term debt in escrow.

The following table reconciles adjusted return and adjusted ROIC to net income available to common stockholders and adjusted average invested capital to average invested capital, which are the most directly comparable GAAP measures in, or calculated from, our consolidated financial statements:

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(1)Please refer to pages 60-63 for a summary of adjusting items for the years ended December 31, 2023, 2022, and 2021.

(2)ROIC is calculated as reported return divided by average invested capital. We calculate average invested capital as the average short-term, long-term debt and average stockholders’ equity over a trailing twelve-month period.

(3)Adjusted ROIC is calculated as adjusted return divided by adjusted average invested capital.

(4)ASC 842 Leases requires lessees to recognize almost all leases, including operating leases, on the balance sheet through a right-of-use asset and a corresponding lease liability. The lease liability is not included in the calculation of debt.

Adjusting items for the year ended December 31, 2023:

Recognized in the fourth quarter of 2023

•$13.8 million share-based payments expense.

•$20.5 million of acquisition-related and integration costs primarily relating to the acquisition of IAA.

•$69.6 million amortization of acquired intangible assets, which includes $61.9 million of amortization relating to the acquired intangible assets from IAA since its acquisition, $0.7 million from the acquisition of VeriTread, as well as amortization of acquired intangible assets from past acquisitions of SmartEquip and Rouse, completed in 2022 and 2021, respectively.

•$0.2 million loss on disposition of property, plant and equipment and related costs, which primarily includes a $0.7 million non-cash cost in the quarter relating to the adjustment made to recognize the Bolton property sale proceeds at fair value when calculating the $169.1 million gain on the Bolton property in the first quarter of 2022, partially offset by a $0.5 million gain on the disposition of property, plant and equipment.

•$7.3 million relating to a fair value adjustment made to the prepaid consigned vehicle charges on the opening balance sheet of IAA, which do not have a future benefit at acquisition, and therefore has created a favorable reduction to our cost of services in the quarter.

•$0.7 million of other advisory, legal, and restructuring costs, including costs associated with the Canada Revenue Agency’s (“CRA”) investigation.

•$2.2 million of estimated executive transition costs associated with the departures of certain executives on August 1, 2023 and related costs.

Recognized in the third quarter of 2023

•$12.7 million share-based payments expense.

•$23.1 million of acquisition-related and integration costs primarily relating to the acquisition of IAA.

•$63.9 million amortization of acquired intangible assets, which includes $56.1 million of amortization relating to the acquired intangible assets from IAA since its acquisition, $0.7 million from the acquisition of VeriTread, as well as amortization of acquired intangible assets from past acquisitions of SmartEquip and Rouse, completed in 2022 and 2021, respectively.

•$0.5 million loss on disposition of property, plant and equipment and related costs, which primarily includes a $1.0 million non-cash cost in the quarter relating to the adjustment made to recognize the Bolton property sale proceeds at fair value when calculating the $169.1 million gain on the Bolton property in the first quarter of 2022, partially offset by a $0.5 million gain on the disposition of property, plant and equipment.

•$7.6 million relating to a fair value adjustment made to the prepaid consigned vehicle charges on the opening balance sheet of IAA, which do not have a future benefit at acquisition, and therefore has created a favorable reduction to our cost of services in the quarter.

•$0.6 million of other advisory, legal, and structuring costs, which includes $0.5 million of terminated and ongoing transaction costs and $0.1 million of legal and other consulting costs associated with the CRA's investigation.

•$9.8 million of estimated executive transition costs associated with the departures of certain executives on August 1, 2023, which includes severance, estimated settlement amounts, less recapture of previously expensed share-based compensation of the former CEO upon resignation.

Recognized in the second quarter of 2023

•$12.3 million share-based payments expense.

•$46.3 million of acquisition-related and integration costs primarily relating to the acquisition of IAA. Acquisition-related and integration costs includes a net $16.3 million settlement expense made to terminate a non-compete agreement to which IAA was bound, consulting and other costs incurred in integration of IAA, severance and related accelerated share-based payment expenses for employees as certain functions are integrated, and other legal and acquisition-related costs.

•$76.0 million amortization of acquired intangible assets, which includes $67.6 million of amortization relating to the acquired intangible assets from IAA since its acquisition, $0.7 million from the acquisition of VeriTread, as well as amortization of acquired intangible assets from past acquisitions of SmartEquip and Rouse, completed in 2022 and 2021, respectively.

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•$1.5 million gain on disposition of property, plant and equipment and related costs, which primarily includes a $2.0 million gain for the sale of a property in the United States, partially offset by a $1.2 million non-cash cost in the quarter relating to the adjustment made to recognize the Bolton property sale proceeds at fair value when calculating the $169.1 million gain on the Bolton property in the first quarter of 2022.

•$39.7 million relating to a fair value adjustment made to the prepaid consigned vehicle charges on the opening balance sheet of IAA, which do not have a future benefit at acquisition, and therefore has created a favorable reduction to our cost of services in the quarter.

•$0.5 million of legal and other consulting costs associated with the CRA's investigation.

Recognized in the first quarter of 2023

•$6.7 million share-based payments expense.

•$126.2 million of acquisition-related and integration costs primarily relating to the acquisition of IAA. Acquisition-related and integration costs include financing, severance for certain IAA executives, related accelerated share-based payment expenses and other consulting, legal and other costs incurred to effect the acquisition or integration of the combined businesses.

•$16.6 million amortization of acquired intangible assets, which includes $7.7 million of amortization relating to the acquired intangible assets from IAA for the 11-day period since its acquisition, $0.7 million from the acquisition of VeriTread, as well as amortization of acquired intangible assets from past acquisitions of SmartEquip and Rouse, completed in 2022 and 2021 respectively.

•$4.0 thousand loss on disposition of property, plant and equipment and related costs includes a $1.2 million non-cash cost in the quarter relating to the adjustment made to recognize the Bolton property sale proceeds at fair value when calculating the $169.1 million gain on the Bolton property in the first quarter of 2022, primarily offset by $1.2 million gain related to a sale of a property located in Dubai, United Arab Emirates.

•$2.9 million remeasurements in connection with business combinations, which includes $1.4 million gain relating to the remeasurement of the Company’s previously held 11% interest in VeriTread, in connection with the acquisition of VeriTread in January 2023, and $1.5 million from the remeasurement of the Company’s US opening deferred tax balances driven by a recalculation of a new U.S. tax rate for the Company following the acquisition of IAA.

•$12.4 million relating to a fair value adjustment made to the prepaid consigned vehicle charges on the opening balance sheet of IAA, which do not have a future benefit at acquisition, and therefore has created a favorable reduction to our cost of services in the quarter.

•$3.3 million loss on redemption of the 2016 Notes due to the difference between the reacquisition price of the 2016 Notes and the net carrying amount of the extinguishment debt (primarily unrecognized deferred debt issuance costs).

•$0.2 million of legal and other consulting costs associated with the CRA’s investigation.

Adjusting items for the year ended December 31, 2022:

Recognized in the fourth quarter of 2022

•$9.1 million share-based payments expense.

•$22.2 million of acquisition-related and integration costs primarily relating to the proposed acquisition of IAA, and the share-based continuing employment costs for the acquisitions of Rouse and SmartEquip.

•$8.2 million amortization of acquired intangible assets primarily from the acquisitions of IronPlanet, SmartEquip, and Rouse.

•$0.9 million loss on disposition of property, plant and equipment and related costs includes a $1.3 million non-cash cost in the quarter relating to the adjustment made to recognize the Bolton property sale proceeds at fair value when calculating the $169.1 million gain on the Bolton property in the first quarter of 2022, partially offset by $0.3 million gain on disposition of property, plant and equipment in the quarter.

•$0.2 million of restructuring costs relating to retention costs in connection with the restructuring of our information technology team during the year.

Recognized in the third quarter of 2022

•$8.8 million share-based payments expense.

•$2.0 million of acquisition-related and integration costs primarily relating to the share-based continuing employment costs for the acquisitions of Rouse and SmartEquip.

•$8.2 million amortization of acquired intangible assets primarily from the acquisitions of IronPlanet, SmartEquip, and Rouse.

•$0.9 million loss on disposition of property, plant and equipment and related costs includes a $1.3 million non-cash cost in the quarter relating to the adjustment made to recognize the Bolton property sale proceeds at fair value when calculating the $169.1 million gain on the Bolton property in the first quarter of 2022, offset by $0.3 million gain on disposition of property, plant and equipment in the quarter.

•$1.5 million of other advisory, legal and restructuring costs, which include $1.1 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.3 million of severance and retention costs in connection with the

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restructuring of our information technology team during the first quarter of 2022, driven by our strategy to build a new digital technology platform, and $0.1 million of advisory costs relating to a cybersecurity incident detected in the fourth quarter of 2021.

Recognized in the second quarter of 2022

•$13.6 million share-based payments expense.

•$3.4 million of acquisition-related and integration costs related to the terminated acquisition of Euro Auctions and the completed acquisitions of SmartEquip and Rouse.

•$8.4 million amortization of acquired intangible assets primarily from the acquisitions of IronPlanet, SmartEquip, and Rouse.

•$1.2 million gain on disposition of property, plant and equipment and related costs includes a $1.3 million non-cash cost in the quarter relating to the adjustment made to recognize the Bolton property sale proceeds at fair value when calculating the $169.1 million gain on the Bolton property in the first quarter of 2022, and $0.1 million gain on disposition of property, plant and equipment in the quarter.

•$9.7 million loss on redemption of the 2021 Notes and certain related interest expense includes (a) $4.8 million of loss on redemption of the 2021 Notes due to a difference between the reacquisition price of the 2021 Notes and the net carrying amount of the extinguished debt (primarily the write off of the unamortized debt issuance costs), (b) $0.7 million of deferred debt issuance costs written off due to the expiry of the undrawn $205.0 million DDTL Facility in the quarter, and (c) interest expense of $4.2 million incurred in the quarter relating to the 2021 Notes, which were redeemed as a result of the terminated Euro Auctions acquisition in April 2022.

•$1.1 million of other advisory, legal and restructuring costs, which include $0.6 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.3 million of severance and retention costs in connection with the restructuring of our information technology team driven by our strategy to build a new digital technology platform, and $0.2 million of advisory costs relating to a cybersecurity incident detected in the fourth quarter of 2021.

Recognized in the first quarter of 2022

•$5.4 million share-based payments expense.

•$8.5 million amortization of acquired intangible assets primarily from the acquisitions of IronPlanet, SmartEquip, and Rouse.

•$169.8 million gain recognized on the disposition of property, plant and equipment of which $169.1 million related to the sale of a property located in Bolton, Ontario.

•$9.6 million of acquisition-related and integration costs related to the proposed acquisition of Euro Auctions and the completed acquisitions of SmartEquip and Rouse.

•$1.3 million gain due to the change in fair value of derivatives to manage our exposure to foreign currency exchange rate fluctuations on the purchase consideration for the proposed acquisition of Euro Auctions.

•$2.3 million of other advisory, legal and restructuring costs, which include $0.9 million related to severance and retention costs in connection with the restructuring of our information technology team driven by our strategy to build a new digital technology platform, $0.5 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.4 million of SOX remediation costs, and $0.6 million of advisory costs relating to a cybersecurity incident detected in the fourth quarter of 2021.

Adjusting items for the year ended December 31, 2021

Recognized in the fourth quarter of 2021

•$6.2 million share-based payments expense.

•$7.9 million amortization of acquired intangible assets primarily from the acquisitions of IronPlanet, SmartEquip, and Rouse.

•$14.0 million of acquisition-related and integration costs related to the proposed acquisition of Euro Auctions and the completed acquisitions of SmartEquip and Rouse.

•$0.1 million gain recognized on the disposition of property, plant and equipment

•$1.3 million loss due to the change in fair value of derivatives to manage our exposure to foreign currency exchange rate fluctuations on the purchase consideration for the proposed acquisition of Euro Auctions.

•$2.6 million of other advisory, legal and restructuring costs, which include $1.4 million of terminated and ongoing transaction and legal costs relating to mergers and acquisition activity, $0.7 million of SOX remediation costs relating to our efforts to remediate the material weaknesses identified in 2020, and $0.5 million of advisory costs relating to a cybersecurity incident detected in the fourth quarter of 2021.

Recognized in the third quarter of 2021

•$5.6 million share-based payments expense.

•$6.6 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.

•$10.3 million of acquisition-related costs related to the acquisitions of Rouse, and SmartEquip and proposed acquisition of Euro Auctions.

•$1.1 million gain recognized on the sale of a property in Denver, Colorado.

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•$0.7 million of non-recurring advisory, legal and restructuring costs related to SOX remediation costs relating to our efforts to remediate the material weaknesses identified in 2020, which has been retrospectively applied to the third quarter of 2021.

Recognized in the second quarter of 2021

•$7.5 million share-based payments expense.

•$6.8 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.

•$3.0 million of acquisition-related costs related to the acquisition of Rouse.

•$0.2 million gain recognized on the disposition of property, plant and equipment.

•$0.2 million of non-recurring advisory, legal and restructuring costs related to SOX remediation costs relating to our efforts to remediate the material weaknesses identified in 2020, which has been retrospectively applied to the second quarter of 2021.

Recognized in the first quarter of 2021

•$3.8 million share-based payments expense.

•$6.6 million amortization of acquired intangible assets primarily from the acquisitions of Iron Planet and Rouse.

•$2.9 million of acquisition-related costs related to the acquisition of Rouse.