RB Global, Inc. (RBA)

Executive Summary / Key Takeaways

• Operational leverage is emerging as the central story: RB Global delivered 16% Adjusted EBITDA growth on just 7% GTV growth in Q3 2025, expanding margins from 7.8% to 8.4%—a 60 basis point improvement that demonstrates the new leadership team's transformation initiatives are taking hold despite macro headwinds.

• Automotive salvage is gaining share with secular tailwinds: The automotive segment's 9% unit volume growth for three consecutive quarters, combined with wins like the 35,000-vehicle GSA contract and Direct Line Group (DLG.L) sole provider status, shows RB Global is capturing market share while benefiting from a persistent inflation gap between repair costs and used vehicle values that drives total loss ratios higher.

• CC&T weakness masks underlying strength: While Commercial Construction and Transportation segment volumes declined 15% due to customer "wait and see" behavior amid tariff uncertainty, the 14% GTV growth excluding the Yellow Corporation bankruptcy impact reveals resilient pricing power and positions the segment for a sharp rebound when capital spending normalizes.

• Capital allocation reflects disciplined transformation: The $239 million J.M. Wood acquisition strengthens geographic moats, the LKQ SYNETIQ JV monetizes non-core assets, and the DDI divestiture streamlines focus—while management's commitment to debt reduction has lowered net leverage from 1.7x to 1.4x, creating flexibility for opportunistic growth.

• Valuation balances execution premium against macro risks: At $98.20 per share, RBA trades at 17.8x EV/EBITDA and 33.6x free cash flow—reasonable for a business demonstrating operating leverage, but fully pricing in successful navigation of tariff uncertainty and CC&T cyclical recovery.

Setting the Scene: The Omnichannel Marketplace for Hard Assets

RB Global, founded in 1958 and headquartered in Westchester, Illinois, operates the world's leading omnichannel marketplace for commercial assets and vehicles—a business that sounds straightforward until you grasp the complexity of what "omnichannel" actually means in the physical economy. Unlike pure digital platforms, RB Global combines 14 countries of physical auction sites with digital reach across 170 countries, creating liquidity for assets ranging from crushed salvage vehicles to million-dollar mining excavators. This hybrid model generates revenue through two streams: service revenue (commissions, buyer fees, and value-added services) and inventory sales (where RB Global takes principal risk on assets).

The company's strategic position sits at the intersection of two distinct markets. The Automotive segment, anchored by the IAA salvage auction business, serves insurance companies processing total loss vehicles. The Commercial Construction and Transportation (CC&T) segment, built around the Ritchie Bros. brand, caters to fleet owners, contractors, and equipment dealers managing asset lifecycles. This diversification is not merely a portfolio strategy—it creates a competitive moat that pure-play rivals like Copart (CPRT) (vehicle salvage only) or regional equipment dealers cannot replicate.

In 2024, a strategic review under new CEO Jim Kessler and CFO Eric Guerin marked a clear inflection point. The leadership team recognized that years of acquisition-driven growth had created complexity without commensurate operational leverage. Their response: modernize the technology stack, rationalize the portfolio, and extract efficiency from the existing footprint. This matters because it signals a shift from "growth at any cost" to "profitable growth"—a transition that typically unlocks significant shareholder value when executed well.

Technology, Products, and Strategic Differentiation: The Efficiency Engine

The launch of rbauction.com on a modern technology stack in 2024 represents more than a website refresh—it is the foundation for scalable growth in the CC&T sector. Why? Because legacy auction systems were built for episodic, event-driven sales, while modern equipment owners demand continuous, data-driven disposition decisions. The new platform enables real-time pricing intelligence, predictive analytics on asset values, and seamless integration with customer fleet management systems. This translates directly into higher service revenue take rates, which expanded 20 basis points year-over-year to 21.7% in Q3 2025.

In the automotive segment, the IAA total loss predictor AI tool addresses a critical pain point for insurance partners: deciding whether to repair or total a vehicle. By leveraging machine learning to classify vehicles accurately, RB Global reduces cycle times and improves yard utilization. The results are tangible—sign-to-settle cycle time reductions have effectively added 25% incremental capacity in yards compared to pre-transaction levels. This matters because it means RB Global can grow volumes without proportional capital investment, a key driver of the margin expansion investors are beginning to see.

The omnichannel approach itself is a technological differentiator. While Copart operates a digital-only model and regional competitors run traditional live auctions, RB Global's hybrid system allows customers to choose their preferred transaction method. This flexibility proved decisive in winning the GSA contract—government agencies needed both physical inspection capabilities and digital reach to maximize proceeds. The "best venue concept" for cross-syndicating CC&T assets from insurance partners to Ritchie Bros. properties further leverages this advantage, creating liquidity that single-channel competitors cannot match.

Financial Performance: Evidence of Strategic Execution

RB Global's Q3 2025 results provide the first clear evidence that the transformation is working. Total revenue increased 11% to $1.09 billion, but the composition tells the real story. Service revenue grew 8% to $845 million, driven by a 12% surge in transactional buyer revenue from fee structure changes implemented in late 2024 and early 2025. This pricing power—raising buyer fees while maintaining volume growth—demonstrates the marketplace's stickiness and competitive positioning.

The margin story is even more compelling. Adjusted EBITDA jumped 16% on just 7% GTV growth, expanding the EBITDA margin from 7.8% to 8.4%. This 60 basis point expansion occurred despite a 22% increase in SG&A expenses that included $25 million in restructuring costs from the new operating model. The implication is clear: once restructuring savings fully flow through, margin leverage could accelerate dramatically. Management's target of $25 million in run-rate savings by Q2 2026 appears conservative given the early results.

Segment performance reveals divergent trends that support the overall thesis. The automotive segment's GTV grew 6% to $2.15 billion, with unit volumes up 9%—outpacing the market for the third consecutive quarter. The average price per lot declined due to a higher mix of remarketed vehicles, but this is actually positive: it shows RB Global is winning lower-value fleet business that competitors cannot process efficiently. The 2.5% increase in U.S. insurance ASP, even as overall ASP declined, proves pricing discipline in the core salvage market.

The CC&T segment's 9% GTV growth to $1.33 billion masks underlying strength. Lot volumes fell 15%, but excluding the Yellow Corporation bankruptcy impact from the prior year, volumes would have increased 2% and GTV would have grown 14%. More importantly, the average price per lot increased significantly due to improved asset mix. This demonstrates RB Global's ability to maintain pricing power even in a "wait and see" market where customers delay dispositions. When capital spending normalizes, this pricing discipline should drive substantial earnings leverage.

Segment Deep Dive: Automotive Salvage—Secular Tailwinds Meet Share Gains

The automotive segment's performance is the most compelling part of the RB Global story. Unit volume growth of 9% in Q3 2025 occurred against a backdrop of favorable secular trends. The total loss ratio—the percentage of accidents deemed a total loss—rose 70 basis points to 22.6% according to CCC Intelligent Solutions (CCC). This is driven by a persistent inflation gap between vehicle repair costs and used vehicle values. Simply put, as cars become more complex and expensive to repair, more vehicles are totaled rather than fixed, expanding the addressable market for salvage auctions.

RB Global is capturing more than its fair share of this growing market. The company gained market share globally in Q1 2025 and has now outperformed the market for three consecutive quarters. The GSA win is particularly significant—adding 35,000 remarketed vehicles annually with full run-rate by Q2 2026. This contract, valued at approximately $150-200 million in incremental GTV, was awarded based on RB Global's unmatched buyer base, efficient physical footprint, and proven execution. The 99.7% on-time tow performance and 99.8% total performance metrics are not just operational metrics—they are competitive weapons that win contracts.

The Direct Line Group sole provider contract in the UK, starting in Q3 2025, further demonstrates this competitive advantage. In an industry where insurers typically split business among multiple providers, becoming the exclusive partner requires exceptional service levels and pricing transparency. RB Global's practice of issuing SLA performance data to all insurance carriers, whether they are customers or not, creates a powerful marketing tool that reinforces its reputation for reliability.

The macro environment remains supportive. Management noted that tariff concerns are more acute for automotive parts than salvage vehicles themselves, insulating RB Global from the primary risk. The inflationary environment actually benefits the business by widening the repair-to-value gap. This creates a durable tailwind that should persist regardless of economic cycles, providing a stable foundation for the overall business.

Segment Deep Dive: CC&T—Positioning for the Inevitable Recovery

The CC&T segment's 15% volume decline reflects genuine macro headwinds, but the strategic positioning is improving. Customers are experiencing lower equipment utilization rates, weaker end-market demand, and higher financing costs—factors that typically lead to delayed asset dispositions. However, this "wait and see" behavior cannot persist indefinitely. Equipment ages, maintenance costs rise, and eventually replacement cycles must resume.

RB Global is using this downturn to strengthen its competitive position. The J.M. Wood acquisition, completed in July 2025 for $239 million, expands geographic coverage in Alabama and adjacent states while adding municipal customer relationships that are notoriously sticky. Municipal customers prioritize reliable service over price, creating stable, high-margin revenue streams. The acquisition's $170.9 million in tax-deductible goodwill suggests strong underlying asset value.

The "best venue concept" for cross-syndicating insurance partner assets to Ritchie Bros. properties represents a significant untapped opportunity. Insurance partners provided over 100,000 CC&T assets in the past 12 months, and early pilots show promising results. This initiative leverages RB Global's dual-marketplace structure in a way that pure-play competitors cannot replicate, creating incremental GTV with minimal marginal cost.

Pricing power remains intact. The 14% GTV growth excluding Yellow, achieved on flat volumes, demonstrates that RB Global can extract more value per transaction even in weak markets. This is critical because when volumes eventually recover—driven by infrastructure spending, reshoring trends, or interest rate cuts—the combination of higher volumes and maintained pricing will drive substantial earnings leverage. Management's decision to increase North American sales events by 15% in 2025, despite weak volumes, shows confidence that they are building capacity for the recovery.

Strategic Moves: Disciplined Capital Allocation

The J.M. Wood acquisition exemplifies RB Global's refined M&A strategy. At $239 million, it represents a tuck-in acquisition that strengthens regional moats without stretching the balance sheet. The deal brings a talented sales team with deep local relationships and a strong municipal footprint—assets that cannot be replicated organically. The fact that the goodwill is substantially tax-deductible enhances the effective return on investment.

The LKQ SYNETIQ joint venture, established in June 2025, demonstrates portfolio optimization. By contributing its UK automotive parts dismantling business for a 40% stake, RB Global monetized a non-core asset while retaining 100% of the higher-margin salvage auction business under the IAA brand. The $15.5 million loss on deconsolidation is a small price for focusing capital on core competencies.

The divestiture of Decision Dynamics, LLC (DDI) for $37.8 million in November 2025 further streamlines operations. Electronic lien and title services, while adjacent, do not leverage RB Global's core marketplace and logistics capabilities. Exiting this business eliminates management distraction and frees capital for higher-return investments in the Australian Greenfield expansion and technology platform.

These moves reflect a capital allocation framework that prioritizes returns over scale. CFO Eric Guerin's comment that M&A is "an end statement, not an ore" signals discipline—deals must complement core transaction processing capabilities and generate measurable returns. This approach reduces the risk of value-destructive acquisitions that plagued the company during its earlier growth phase.

Competitive Context: Diversification as a Moat

RB Global's competitive positioning is best understood through comparison. Copart dominates vehicle salvage with superior margins (34% net margin vs. RBA's 10%) and a pristine balance sheet (net cash vs. RBA's 0.75 debt-to-equity). However, Copart's pure-play focus limits its growth avenues and leaves it vulnerable to share loss in specific verticals. RB Global's 9% unit volume growth in automotive, while Copart's recent growth has slowed to low single digits, suggests RB Global is gaining ground.

OPENLANE (KAR) competes in wholesale vehicle remarketing but lacks RB Global's physical footprint and heavy equipment exposure. While OPENLANE's digital model generates higher asset turnover, its 1.4x price-to-sales multiple versus RB Global's 4.0x reflects lower barriers to entry and margin potential. RB Global's hybrid model creates stickier customer relationships.

ACV Auctions (ACVA) demonstrates the challenge of scaling a pure digital model—despite 16% revenue growth, it remains unprofitable with -9.9% net margins. RB Global's profitability and cash generation ($655 million TTM free cash flow) reflect the value of its integrated services and physical infrastructure.

The key differentiator is RB Global's ability to serve customers across the asset lifecycle. SmartEquip integration provides maintenance data, Veritread handles logistics, and Rouse Services offers valuation benchmarks. This ecosystem creates switching costs that pure auction competitors cannot match. When a fleet owner can manage disposition, transportation, and data analytics through a single platform, the convenience premium outweighs potential savings from using multiple point solutions.

Risks and Asymmetries: What Could Break the Thesis

The Canada Revenue Agency tax dispute represents a material financial risk. The C$79.1 million assessment for 2010-2015, with a C$39.5 million deposit already paid, could result in a $56.8 million liability if RB Global loses. More concerning is the CRA's request for information on 2016-2020, suggesting potential for additional assessments. While management believes the position is without merit, tax litigation can be unpredictable and expensive, creating a potential drag on cash flow.

Macroeconomic uncertainty poses a more immediate threat to the CC&T segment. CEO Jim Kessler's observation that "every time you turn around, something else is being said" about tariffs captures the challenge of planning in a volatile policy environment. If tariff uncertainty persists into 2026, the "wait and see" behavior could become a structural headwind rather than a cyclical pause. Higher-for-longer interest rates would further pressure equipment financing and delay replacement cycles.

The former CEO compensation arbitration is a wildcard. Management disclosed that any changes to the estimated payment "could be material," suggesting a potential liability that is not reflected in current guidance. While the amount is likely manageable given RB Global's scale, unexpected charges could disrupt the margin expansion narrative.

On the positive side, the asymmetry lies in the CC&T recovery. If infrastructure spending accelerates or interest rates decline, pent-up equipment replacement demand could drive volumes well above historical levels. RB Global's 15% increase in sales events and expanded geographic footprint would capture this upside efficiently. The company's 1.4x net debt-to-EBITDA ratio provides firepower for opportunistic acquisitions if smaller competitors struggle in the downturn.

Valuation Context: Pricing in Execution

At $98.20 per share, RB Global trades at 17.8x EV/EBITDA and 33.6x free cash flow. These multiples are not cheap, but they are justified by the emerging margin leverage and market share gains. The EV/Revenue multiple of 4.9x sits between Copart's 7.0x (reflecting its superior margins) and OPENLANE's 2.3x (reflecting its lower barriers).

The key valuation driver is the trajectory of Adjusted EBITDA margins. If the company can sustain 60 basis points of annual expansion while growing GTV in the mid-single digits, EBITDA could compound at 15-20% annually, making the current multiple reasonable. The 1.3% dividend yield, while modest, signals management's confidence in cash flow sustainability.

Comparing historical multiples is challenging due to the IAA acquisition, but the current 14.7% operating margin represents a significant improvement from pre-transaction levels. The market appears to be pricing in successful execution of the transformation, leaving little room for error. However, the 0.55 beta suggests the stock is less volatile than the market, providing some downside protection.

Conclusion: A Transformation Story Entering Its Leverage Phase

RB Global's investment thesis centers on a simple but powerful idea: a strategically focused, operationally disciplined marketplace leader can expand margins even in challenging macro conditions while positioning for accelerated growth when cycles turn. The Q3 2025 results provide the first concrete evidence that this transformation is working, with Adjusted EBITDA growing more than twice as fast as GTV and market share gains in the core automotive salvage business.

The company's competitive moats—physical footprint, omnichannel capabilities, and integrated service ecosystem—are strengthening through disciplined M&A and technology investment. While macro uncertainty creates near-term headwinds in CC&T, it also generates the conditions for a sharp recovery when capital spending resumes. The automotive segment's secular tailwinds and share gains provide a stable foundation that pure-play competitors lack.

The critical variables to monitor are CC&T volume recovery timing and the pace of margin expansion from the new operating model. If RB Global can deliver the targeted $25 million in run-rate savings while maintaining pricing discipline, the stock's current valuation will prove conservative. The tax dispute and macro risks are real but manageable, and the company's strengthened balance sheet provides flexibility to navigate challenges while investing in growth. For investors willing to look through near-term noise, RB Global offers a rare combination of defensive characteristics and cyclical upside, with operational leverage that should drive outperformance as the transformation matures.