Liquidity Services (NASDAQ: LQDT; www.liquidityservices.com), a
leading global commerce company powering the circular economy,
today announced the following financial results as of the quarter
ended March 31, 2023, as compared to the applicable prior year
periods:
- Gross Merchandise Volume (GMV) of $282.7 million, up 2%, and
Revenue of $81.5 million, up 19%
- GAAP Net Income of $4.2 million1 and GAAP Diluted Earnings Per
Share (EPS) of $0.131
- Non-GAAP Adjusted EBITDA of $9.9 million, up $0.7 million, and
Non-GAAP Adjusted Diluted EPS of $0.20, up $0.03
- Cash balances of $101.2 million2 with zero financial debt;
repurchased 750 thousand shares for $9.8 million during the
quarter
"Our strong Q2 financial results demonstrate
that we continue to deliver strong value for our customers and
shareholders. We continued to grow our business in a challenging
economic environment and set new records in Q2 for quarterly GMV in
our Retail Supply Chain Group (RSCG) segment and the number of
sellers and assets sold in our GovDeals segment. Despite some
persistent macro-headwinds, we continue to expand the reach and
relevance of our marketplaces with improving vehicle metrics and
continued strong buyer demand. Our resilient business model
continues to deliver strong free cash flow and we have continued to
repurchase shares as we see opportunity in our long-term prospects
for growth and profitability," said Bill Angrick, Liquidity
Services CEO.
Recent Business Highlights
- Liquidity Services was named the
2023 Innovation Solutions Partner Award Winner by Reverse Logistics
Association which recognized RSCG's Automated Sell In Place
Solution for innovative use of technology that delivers its
customers measurable improvements in efficiency and return on
investment.
- RSCG expanded its consumer
marketplace presence by opening a second All Surplus Deals location
in Cincinnati, Ohio, giving local consumers access to unique or
hard-to-find products that may no longer be available in
traditional retail stores.
Second Quarter Financial
Highlights
GMV for the second fiscal quarter of 2023 was
$282.7 million, a 2% increase from $276.9 million in the second
fiscal quarter of 2022.
- GMV in our GovDeals segment
decreased 7%, driven by lower volumes of foreclosed real estate
properties available for auction, partially offset by record
marketplace activity in the numbers of sellers and assets sold and
improved availability of vehicles.
- GMV in our RSCG segment increased
24% and set a new quarterly record, driven by a strong holiday
returns and liquidations season, primarily from purchase model
programs, and continued diversification into new client programs
with its expanded sales channels and distribution network.
- GMV in our CAG segment increased
11%, led by the energy and heavy equipment categories, while global
macroeconomic uncertainty continued to impact project
timelines.
- Company-wide, consignment sales
were 83% of total GMV.
Revenue for the second fiscal quarter of 2023
was $81.5 million, a 19% increase from $68.3 million in the second
fiscal quarter of 2022.
- Revenue in our GovDeals segment
increased 4%, as volumes increased in key categories and pricing
improvements benefited the results, despite lower GMV from lower
take-rate foreclosed real estate sales.
- Revenue in our RSCG segment
increased 28%, as the seasonal holiday returns and liquidations
volumes were higher in several purchase model programs.
Macro-changes in consumer sentiment affected product mix during the
quarter, with a higher proportion of lower value purchased products
and related selling prices, resulting in a lower segment direct
profit margin percentage.
- Revenue in our CAG segment
increased 5%, despite delays in sellers’ project timelines.
- Revenue in our Machinio segment
increased 13% with continued increases in subscriptions.
GAAP Net Income was $4.2 million, or $0.13 per
share, for the fiscal second quarter of 2023, a decrease from $12.0
million1, or $0.35 per share1, for the same quarter last year.
Non-GAAP Adjusted Net Income for the fiscal
second quarter of 2023 was $6.4 million, or $0.20 per share, an
increase from $5.8 million, or $0.17 per share last year.
Non-GAAP Adjusted EBITDA for the fiscal second
quarter of 2023 was $9.9 million, a $0.7 million increase from $9.2
million in the fiscal second quarter of 2022, reflecting increased
GMV and revenue results, partially offset by year-over-year
increases in operations, sales, and technology expenses to support
market share expansion, diversification and longer-term growth.
1 The prior year results included an $8.5
million, or $0.25 per share, non-cash benefit from a reduction in
the fair value of the Bid4Assets earn-out liability. For further
information, see Note 11, Fair Value Measurement, to our quarterly
report on Form 10-Q for the period ended March 31, 2023.
2 Includes $95.6 million of Cash and cash
equivalents and $5.6 million of Short-term investments.
Second Quarter Segment Financial
Results
We present operating results in four reportable
segments: GovDeals, RSCG, CAG and Machinio. Segment direct profit,
previously referred to as segment gross profit, continues to be
calculated as total revenue less cost of goods sold (excluding
depreciation and amortization).
Our Q2-FY23 segment results are as follows (unaudited, in
millions):
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
GovDeals: |
|
|
|
|
|
|
|
|
|
|
|
GMV |
$ |
167.9 |
|
|
$ |
180.3 |
|
|
$ |
329.0 |
|
|
$ |
337.2 |
|
Total revenue |
$ |
15.1 |
|
|
$ |
14.6 |
|
|
$ |
28.7 |
|
|
$ |
28.5 |
|
Segment direct profit |
$ |
14.3 |
|
|
$ |
13.9 |
|
|
$ |
27.2 |
|
|
$ |
27.1 |
|
% of Total revenue |
|
95 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RSCG: |
|
|
|
|
|
|
|
|
|
|
|
GMV |
$ |
73.3 |
|
|
$ |
59.1 |
|
|
$ |
138.2 |
|
|
$ |
112.5 |
|
Total revenue |
$ |
53.7 |
|
|
$ |
41.8 |
|
|
$ |
99.7 |
|
|
$ |
80.5 |
|
Segment direct profit |
$ |
16.7 |
|
|
$ |
16.6 |
|
|
$ |
32.7 |
|
|
$ |
30.9 |
|
% of Total revenue |
|
31 |
% |
|
|
40 |
% |
|
|
33 |
% |
|
|
38 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
CAG: |
|
|
|
|
|
|
|
|
|
|
|
GMV |
$ |
41.5 |
|
|
$ |
37.5 |
|
|
$ |
86.3 |
|
|
$ |
87.4 |
|
Total revenue |
$ |
9.4 |
|
|
$ |
9.0 |
|
|
$ |
18.8 |
|
|
$ |
20.2 |
|
Segment direct profit |
$ |
7.0 |
|
|
$ |
6.1 |
|
|
$ |
15.5 |
|
|
$ |
14.8 |
|
% of Total revenue |
|
75 |
% |
|
|
68 |
% |
|
|
83 |
% |
|
|
73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Machinio: |
|
|
|
|
|
|
|
|
|
|
|
GMV |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Total revenue |
$ |
3.3 |
|
|
$ |
2.9 |
|
|
$ |
6.6 |
|
|
$ |
5.7 |
|
Segment direct profit |
$ |
3.1 |
|
|
$ |
2.7 |
|
|
$ |
6.2 |
|
|
$ |
5.4 |
|
% of Total revenue |
|
94 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated: |
|
|
|
|
|
|
|
|
|
|
|
GMV |
$ |
282.7 |
|
|
$ |
276.9 |
|
|
$ |
553.5 |
|
|
$ |
537.0 |
|
Total revenue |
$ |
81.5 |
|
|
$ |
68.3 |
|
|
$ |
153.7 |
|
|
$ |
135.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter Operational Metrics
- Registered Buyers — At the end of
Q2-FY23, registered buyers totaled approximately 5.0 million,
representing a 5% increase over the approximately 4.8 million
registered buyers at the end of Q2-FY22.
- Auction Participants — Auction
participants, defined as registered buyers who have bid in an
auction during the period (a registered buyer who bids in more than
one auction is counted as an auction participant in each auction in
which he or she bids), was approximately 797,000 in Q2-FY23, a 4%
decrease from the approximately 829,000 auction participants in
Q2-FY22.
- Completed Transactions — Completed
transactions were approximately 209,000 in Q2-FY23, a 15% decrease
from the approximately 245,000 completed transactions in
Q2-FY22.
Business Outlook
Our expertise in diverse sectors, a strong buyer
base across numerous asset categories, and global reach are
continuing to provide advantages as our clients navigate economic
change and look to us for valuable solutions.
Our fiscal third quarter 2023 guidance range is
expected to be consistent with the same period last year. The GMV
outlook reflects expected growth over the prior year period in most
of our segments. Core results remain strong, despite some continued
headwinds across the global economy, including the availability of
used vehicles and foreclosed real estate. While RSCG will be coming
off its seasonal peak this past fiscal second quarter, which
featured a higher proportion of purchase transactions with a higher
proportion of lower value products for sale, it is expecting solid
year-over-year fiscal third quarter growth in GMV and revenue. The
RSCG segment direct profit margin as a percent of revenue is
expected to improve sequentially this coming fiscal third quarter
compared to our second quarter, mainly from changes in the mix of
products anticipated for sale. GovDeals is expected to experience a
seasonal peak in its personal property categories, yet we expect
its total segment GMV, inclusive of Bid4Assets, to be challenged by
real estate foreclosure headwinds. CAG expects to deliver
year-over-year growth led by heavy equipment, industrial sales, and
projects in EMEA, many of which have been delayed from prior
quarters.
We currently anticipate our consolidated revenue
as a percentage of GMV in the mid twenty percent range, reflecting
our mix of business and expected products sold, with our segments'
direct profits in total as a percentage of total revenues similar
to the same quarter last year. We anticipate continuing to invest
in our sales and technology initiatives in support of long-term
growth.
For Q3-FY23 our guidance is as follows:
GMV - We expect GMV to range from $300 million to $330
million.
GAAP Net Income - We expect GAAP Net Income to range from $3.0
million to $5.5 million.
GAAP Diluted EPS - We expect GAAP Diluted EPS to range from
$0.09 to $0.16.
Non-GAAP Adjusted EBITDA -We expect Non-GAAP Adjusted EBITDA to
range from $10.0 million to $13.0 million.
Non-GAAP Adjusted Diluted EPS - We expect Non-GAAP Adjusted EPS
to range from $0.16 to $0.24.
Our Business Outlook includes forward-looking
statements which reflect these trends and assumptions for Q3-FY23
as compared to the prior year's period:
- Global supply chain uncertainties,
including impacts from the Russian invasion of Ukraine and the
increasing tensions between the United States and China, are
disrupting international trade and energy markets, and resulting in
macroeconomic trends such as inflation, increased interest rates,
fluctuations in foreign currency exchange rates, reduced consumer
sentiment, and retailer inventory levels. These macroeconomic
conditions could adjust the volume, timing, and pricing of assets
made available for auction or sale in any quarterly period, which
could affect our actual Q3-FY23 performance relative to our current
outlook;
- market disruptions impacting banks
used by its buyers and sellers that transact using its
marketplaces, could have a negative effect on the Company’s
financial position and results of operations;
- continued R&D spending to
support omni-channel behavioral marketing, analytics, and
buyer/seller payment optimization;
- spending in business development
activities to capture market opportunities, targeting efficient
payback periods;
- longer-term trend of continued mix
shift to consignment pricing model, which may lower revenue as a
percent of GMV but can improve segment direct profit as a
percentage of revenue;
- variability in the inventory
product mix handled by our RSCG segment, which can cause a change
in revenues and/or segment direct profit as a percentage of
revenue, including variability from changes in consumer sentiment,
retailers increasing product flows to us on an episodic basis to
solve capacity constraints at retailer warehouse or distribution
centers and retailers decreasing product flows as they solve
capacity constraints and return more product to store shelves or
fulfillment centers;
- as growth in the government real
estate category within the GovDeals segment occurs, take rates as a
percentage of GMV are expected to become lower without
significantly affecting segment direct profit as a percentage of
revenue. GMV from real estate transactions can be subject to
significant variability due to changes that include postponements
or cancellations of scheduled or expected auction events, the value
of properties to be included in the auction event, and the value of
the properties that may be withdrawn due to the property holder
curing their delinquency or taking other legal actions to delay the
sale of their property.
- continued variability in project
size and timing within our CAG segment, especially as global macro
uncertainty, influenced by the Russian invasion of Ukraine and
increasing tensions between the United States and China continue to
impact the global economy and the ability to conduct
transactions;
- continued growth and expansion
resulting from the continuing acceleration of broader market
adoption of the digital economy, particularly in our GovDeals and
RSCG seller accounts and programs, including the execution by RSCG
on its business plans for AllSurplus Deals and its expanded
distribution network;
- continued growth in our Machinio
advertising subscription service and acceptance of other Machinio
service offerings;
- successful integration of
Bid4Assets and execution by Bid4Assets on planned real estate
auction activity and its business plan, including efforts underway
with local and state governments to advance legislation that allows
for online auctions for foreclosed and tax foreclosed real
estate;
- our annual FY23 effective tax rate
(ETR) is expected to range from approximately 25% to 31%. This
range excludes any potential impacts from legislative changes to
U.S. corporate tax rates that may be enacted during Q3-FY23; and
potential impacts from items that have limited visibility and can
be highly variable, including effects of stock compensation due to
participant exercise activity and changes in our stock price.
Quarterly effective tax rates within FY23 can be affected by the
amount and timing of transactions considered discrete items for tax
accounting purposes. We are not expecting a substantial increase to
cash paid for income taxes due to our continued net operating loss
carryforward position; and
- our diluted weighted average number
of shares outstanding is expected to be approximately 33.5 million.
As of March 31, 2023, we have $6.0 million in remaining
authorization to repurchase shares of our common stock.
Reconciliation of GAAP to Non-GAAP Measures
Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA.
Non-GAAP EBITDA is a supplemental non-GAAP financial measure and is
equal to net income plus interest and other income, net; provision
for income taxes; and depreciation and amortization. Our definition
of Non-GAAP Adjusted EBITDA differs from Non-GAAP EBITDA because we
further adjust Non-GAAP EBITDA for stock compensation expense,
acquisition costs such as transaction expenses and changes in
earn-out estimates, business realignment expenses, and goodwill,
long-lived and other non-current asset impairment. A reconciliation
of Net Income to Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA is as
follows:
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net income |
$ |
4,245 |
|
|
$ |
11,970 |
|
|
$ |
8,211 |
|
|
$ |
15,572 |
|
Interest and other income,
net1 |
|
(634 |
) |
|
|
51 |
|
|
|
(937 |
) |
|
|
18 |
|
Provision for income
taxes |
|
1,573 |
|
|
|
1,059 |
|
|
|
2,723 |
|
|
|
2,071 |
|
Depreciation and
amortization |
|
2,803 |
|
|
|
2,603 |
|
|
|
5,567 |
|
|
|
4,906 |
|
Non-GAAP EBITDA |
$ |
7,987 |
|
|
$ |
15,683 |
|
|
$ |
15,564 |
|
|
$ |
22,567 |
|
Stock compensation
expense |
|
1,939 |
|
|
|
1,992 |
|
|
|
4,020 |
|
|
|
4,272 |
|
Acquisition costs and
impairment of long-lived and other non-current assets2 |
|
— |
|
|
|
40 |
|
|
|
184 |
|
|
|
252 |
|
Fair value adjustments to
acquisition earn-outs |
|
— |
|
|
|
(8,500 |
) |
|
|
— |
|
|
|
(8,500 |
) |
Non-GAAP Adjusted EBITDA |
$ |
9,926 |
|
|
$ |
9,215 |
|
|
$ |
19,768 |
|
|
$ |
18,591 |
|
|
1 Interest and
other income, net, per the Consolidated Statements of Operations,
excluding the non-service components of net periodic pension
(benefit). |
2 Acquisition
costs and impairment of long-lived and other non-current assets are
included in Other operating (income) expenses, net on the
Consolidated Statements of Operations. |
|
Non-GAAP Adjusted Net Income and Non-GAAP
Adjusted Basic and Diluted Earnings Per Share. Non-GAAP Adjusted
Net Income is a supplemental non-GAAP financial measure and is
equal to Net Income plus stock compensation expense, acquisition
related costs such as transaction expenses and changes in earn-out
estimates, amortization of intangible assets, business realignment
expenses, goodwill, long-lived and other non-current asset
impairments, and the estimated impact of income taxes on these
non-GAAP adjustments as well as non-recurring tax adjustments.
Non-GAAP Adjusted Basic and Diluted Income Per Share are determined
using Adjusted Net Income. For Q2-FY23 the tax rate used to
estimate the impact of income taxes on the non-GAAP adjustments was
26% compared to 23% used for the Q2-FY22 results. These tax rates
exclude the impacts of the charge to our U.S. valuation allowance
and the fair value adjustments to earn-out liabilities. A
reconciliation of Net Income to Non-GAAP Adjusted Net Income and
Non-GAAP Adjusted Basic and Diluted Income Per Share is as
follows:
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net income |
$ |
4,245 |
|
|
$ |
11,970 |
|
|
$ |
8,211 |
|
|
$ |
15,572 |
|
Stock compensation
expense |
|
1,939 |
|
|
|
1,992 |
|
|
|
4,020 |
|
|
|
4,272 |
|
Intangible asset
amortization |
|
981 |
|
|
|
984 |
|
|
|
1,963 |
|
|
|
1,751 |
|
Acquisition costs and
impairment of long-lived and other non-current assets* |
|
— |
|
|
|
40 |
|
|
|
184 |
|
|
|
252 |
|
Fair value adjustments to
acquisition earn-outs |
|
— |
|
|
|
(8,500 |
) |
|
|
— |
|
|
|
(8,500 |
) |
Income tax impact on the
adjustment items |
|
(759 |
) |
|
|
(684 |
) |
|
|
(1,603 |
) |
|
|
(1,425 |
) |
Non-GAAP Adjusted net
income |
$ |
6,406 |
|
|
$ |
5,802 |
|
|
$ |
12,775 |
|
|
$ |
11,922 |
|
Non-GAAP Adjusted basic
earnings per common share |
$ |
0.20 |
|
|
$ |
0.18 |
|
|
$ |
0.40 |
|
|
$ |
0.36 |
|
Non-GAAP Adjusted diluted
earnings per common share |
$ |
0.20 |
|
|
$ |
0.17 |
|
|
$ |
0.39 |
|
|
$ |
0.35 |
|
Basic weighted average shares
outstanding |
|
31,305,214 |
|
|
|
32,561,903 |
|
|
|
31,562,988 |
|
|
|
32,769,057 |
|
Diluted weighted average
shares outstanding |
|
32,124,188 |
|
|
|
34,004,568 |
|
|
|
32,544,953 |
|
|
|
34,382,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Acquisition
related costs and impairment of long-lived and other non-current
assets, which are excluded from Non-GAAP Adjusted Net Income, are
included in Other operating (income) expenses, net on the
Consolidated Statements of Operations. |
|
Conference Call Details
The Company will host a conference call to discuss this
quarter's results at 10:30 a.m. Eastern Time today. Investors and
other interested parties may access the teleconference by
registering here to receive the dial-in number and unique
conference pin. A live web cast of the conference call will be
provided on the Company's investor relations website at
https://investors.liquidityservices.com. An archive of the web cast
will be available on the Company's website until May 4, 2024 at
11:59 p.m. Eastern Time. The replay will be available starting at
1:30 p.m. Eastern Time on the day of the call.
Non-GAAP Measures
To supplement our consolidated financial
statements presented in accordance with generally accepted
accounting principles (GAAP), we use certain non-GAAP measures of
certain components of financial performance. These non-GAAP
measures include earnings before interest, taxes, depreciation and
amortization (EBITDA), Adjusted EBITDA, Adjusted Net Income (Loss)
and Adjusted Earnings (Loss) per Share. These non-GAAP measures are
provided to enhance investors’ overall understanding of our current
financial performance and prospects for the future. We use EBITDA
and Adjusted EBITDA: (a) as measurements of operating performance
because they assist us in comparing our operating performance on a
consistent basis as they do not reflect the impact of items not
directly resulting from our core operations; (b) for planning
purposes, including the preparation of our internal annual
operating budget; (c) to allocate resources to enhance the
financial performance of our business; (d) to evaluate the
effectiveness of our operational strategies; and (e) to evaluate
our capacity to fund capital expenditures and expand our business.
Adjusted Earnings (Loss) per Share is the result of our Adjusted
Net Income (Loss) and diluted shares outstanding.
We prepare Non-GAAP Adjusted EBITDA by
eliminating from Non-GAAP EBITDA the impact of items that we do not
consider indicative of our core operating performance. You are
encouraged to evaluate these adjustments and the reasons we
consider them appropriate for supplemental analysis. As an
analytical tool, Non-GAAP Adjusted EBITDA is subject to all of the
limitations applicable to Non-GAAP EBITDA. Our presentation of
Non-GAAP Adjusted EBITDA should not be construed as an implication
that our future results will be unaffected by unusual or
non-recurring items.
We believe these non-GAAP measures provide
useful information to both management and investors by excluding
certain expenses that may not be indicative of our core operating
measures. In addition, because we have historically reported
certain non-GAAP measures to investors, we believe the inclusion of
non-GAAP measures provides consistency in our financial reporting.
These measures should be considered in addition to financial
information prepared in accordance with GAAP, but should not be
considered a substitute for, or superior to, GAAP results. A
reconciliation of all historical non-GAAP measures included in this
press release, to the most directly comparable GAAP measures, may
be found in the financial tables included in this press
release.
We do not quantitatively reconcile our guidance
ranges for our non-GAAP measures to their most comparable GAAP
measures in the Business Outlook section of this press release. The
guidance ranges for our GAAP and non-GAAP financial measures
reflect our assessment of potential sources of variability in our
financial results and are informed by our evaluation of multiple
scenarios, many of which have interactive effects across several
financial statement line items. Providing guidance for individual
reconciling items between our non-GAAP financial measures and the
comparable GAAP measures would imply a degree of precision and
certainty in those reconciling items that is not a consistent
reflection of our scenario-based process to prepare our guidance
ranges. To the extent that a material change affecting the
individual reconciling items between the Company’s forward-looking
non-GAAP and comparable GAAP financial measures is anticipated, the
Company has provided qualitative commentary in the Business Outlook
section of this press release for your consideration. However, as
the impact of such factors cannot be predicted with a reasonable
degree of certainty or precision, a quantitative reconciliation is
not available without unreasonable effort.
Supplemental Operating Data
To supplement our consolidated financial
statements presented in accordance with GAAP, we use certain
supplemental operating data as a measure of certain components of
operating performance. We review GMV because it provides a measure
of the volume of goods being sold in our marketplaces and thus the
activity of those marketplaces. GMV and our other supplemental
operating data, including registered buyers, auction participants
and completed transactions, also provide a means to evaluate the
effectiveness of investments that we have made and continue to make
in the areas of seller and buyer support, value-added services,
product development, sales and marketing and operations. Therefore,
we believe this supplemental operating data provides useful
information to both management and investors. In addition, because
we have historically reported certain supplemental operating data
to investors, we believe the inclusion of this supplemental
operating data provides consistency in our financial reporting.
This data should be considered in addition to financial information
prepared in accordance with GAAP, but should not be considered a
substitute for, or superior to, GAAP results.
Forward-Looking Statements
This document contains forward-looking
statements made pursuant to the Private Securities Litigation
Reform Act of 1995. These statements are only predictions. The
outcome of the events described in these forward-looking statements
is subject to known and unknown risks, uncertainties and other
factors that may cause our actual results, levels of activity,
performance or achievements to differ materially from any future
results, levels of activity, performance or achievements expressed
or implied by these forward-looking statements. These statements
include, but are not limited to, statements regarding the Company’s
business outlook; expected future results; expected future
effective tax rates; and trends and assumptions about future
periods. You can identify forward-looking statements by terminology
such as “may,” “will,” “should,” “could,” “would,” “expects,”
“intends,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “continues” or the negative of these terms
or other comparable terminology. Our business is subject to a
number of risks and uncertainties, and our past performance is no
guarantee of our performance in future periods. Although we believe
that the expectations reflected in the forward-looking statements
are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.
There are several risks and uncertainties that
could cause our actual results to differ materially from the
forward-looking statements in this document. Important factors that
could cause our actual results to differ materially from those
expressed as forward-looking statements are set forth in our
filings with the SEC from time to time, and include, among others:
changes in political, business and economic conditions; the
duration and impact of shortages in supply of used vehicles, the
continuing impacts of the COVID-19 pandemic globally and their
impact on the ability to conduct cross-border transactions, the
Russian invasion of Ukraine, and inflation on the Company’s
operations, the operations of customers, project size and timing of
auctions, operating costs, and general economic conditions; adverse
developments affecting the financial services industry, including
events or concerns involving liquidity, defaults, or
non-performance by financial institutions; retail clients investing
in their warehouse operations capacity to handle higher volumes of
online returns resulting in retailers sending the Company a reduced
volume of returns merchandise or sending us a product mix lower in
value due to the removal of high value returns; the numerous
factors that influence the supply of and demand for used
merchandise, equipment and surplus assets; the Company’s need to
manage the attraction of sellers and buyers in a broad range of
asset categories with varying degrees of maturity and in many
geographies; economic and other conditions in local, regional and
global sectors; the Company’s ability to integrate acquired
companies, including its most recent acquisitions of Machinio Corp.
and Bid4Assets, Inc., and execute on anticipated business plans
such as the efforts underway with local and state governments to
advance legislation that allows for online auctions for foreclosed
and tax foreclosed real estate; the Company’s need to successfully
react to the increasing importance of mobile commerce and the
increasing environmental and social impact aspects of e-commerce in
an increasingly competitive environment for our business, including
not only risks of disintermediation of our e-commerce services by
our competitors but also by our buyers and sellers; the Company’s
ability to timely upgrade and develop our technology systems,
infrastructure and marketing and customer service capabilities at
reasonable cost while maintaining site stability and performance
and adding new products and features; the Company’s ability to
attract, retain and develop the skilled employees that we need to
support our business; and the risks and uncertainties set forth in
the Company’s Annual Report on Form 10-K for the year ended
September 30, 2022 and Quarterly Report on Form 10-Q for the
quarter ended March 31, 2023, which are available on the SEC and
Company websites. There may be other factors of which we are
currently unaware or which we deem immaterial that may cause our
actual results to differ materially from the forward-looking
statements.
All forward-looking statements attributable to
us or persons acting on our behalf apply only as of the date of
this document and are expressly qualified in their entirety by the
cautionary statements included in this document. Except as may be
required by law, we undertake no obligation to publicly update or
revise any forward-looking statement to reflect events or
circumstances occurring after the date of this document or to
reflect the occurrence of unanticipated events.
About Liquidity Services
Liquidity Services (NASDAQ:LQDT) operates the
world’s largest B2B e-commerce marketplace platform for surplus
assets with over $10 billion of completed transactions, to more
than 5 million qualified buyers worldwide and 15,000 corporate and
government sellers. It supports its clients' sustainability efforts
by helping them extend the life of assets, prevent unnecessary
waste and carbon emissions, and defer products from landfills.
Contact:Investor
Relationsinvestorrelations@liquidityservicesinc.com
|
Liquidity Services and
SubsidiariesUnaudited Condensed Consolidated
Balance Sheets(Dollars in Thousands, Except Par
Value) |
|
|
|
March 31, 2023 |
|
|
September 30, 2022 |
|
|
|
(Unaudited) |
|
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
95,583 |
|
|
$ |
96,122 |
|
Short-term investments |
|
|
5,615 |
|
|
|
1,819 |
|
Accounts receivable, net of allowance for doubtful accounts of $313
and $449 |
|
|
5,960 |
|
|
|
11,792 |
|
Inventory, net |
|
|
15,290 |
|
|
|
11,679 |
|
Prepaid taxes and tax refund receivable |
|
|
1,994 |
|
|
|
1,631 |
|
Prepaid expenses and other current assets |
|
|
6,135 |
|
|
|
6,551 |
|
Total current assets |
|
|
130,577 |
|
|
|
129,594 |
|
Property and equipment,
net |
|
|
18,245 |
|
|
|
19,094 |
|
Operating lease assets |
|
|
11,414 |
|
|
|
13,207 |
|
Intangible assets, net |
|
|
14,274 |
|
|
|
16,234 |
|
Goodwill |
|
|
89,464 |
|
|
|
88,910 |
|
Deferred tax assets |
|
|
11,104 |
|
|
|
13,628 |
|
Other assets |
|
|
8,019 |
|
|
|
7,437 |
|
Total assets |
|
$ |
283,097 |
|
|
$ |
288,104 |
|
Liabilities and
stockholders’ equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
42,915 |
|
|
$ |
41,982 |
|
Accrued expenses and other current liabilities |
|
|
24,755 |
|
|
|
23,304 |
|
Current portion of operating lease liabilities |
|
|
4,505 |
|
|
|
4,540 |
|
Deferred revenue |
|
|
4,530 |
|
|
|
4,439 |
|
Payables to sellers |
|
|
47,342 |
|
|
|
49,238 |
|
Total current liabilities |
|
|
124,047 |
|
|
|
123,503 |
|
Operating lease
liabilities |
|
|
7,776 |
|
|
|
9,687 |
|
Other long-term
liabilities |
|
|
200 |
|
|
|
378 |
|
Total liabilities |
|
|
132,023 |
|
|
|
133,568 |
|
Commitments and contingencies
(Note 13) |
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
Common stock, $0.001 par
value; 120,000,000 shares authorized; 36,049,719 shares issued and
outstanding at March 31, 2023; 35,724,057 shares issued and
outstanding at September 30, 2022 |
|
|
36 |
|
|
|
36 |
|
Additional paid-in capital |
|
|
262,118 |
|
|
|
258,275 |
|
Treasury stock, at cost; 5,096,341 shares at March 31, 2023, and
3,813,199 shares at September 30, 2022 |
|
|
(79,586 |
) |
|
|
(62,554 |
) |
Accumulated other comprehensive loss |
|
|
(8,769 |
) |
|
|
(10,285 |
) |
Accumulated deficit |
|
|
(22,725 |
) |
|
|
(30,936 |
) |
Total stockholders’ equity |
|
|
151,074 |
|
|
|
154,536 |
|
Total liabilities and
stockholders’ equity |
|
$ |
283,097 |
|
|
$ |
288,104 |
|
|
Liquidity Services and
SubsidiariesUnaudited Condensed Consolidated
Statements of Operations (Dollars in Thousands,
Except Per Share Data) |
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Purchase revenues |
|
$ |
47,273 |
|
|
$ |
37,384 |
|
|
$ |
85,907 |
|
|
$ |
73,602 |
|
Consignment and other fee
revenues |
|
|
34,180 |
|
|
|
30,891 |
|
|
|
67,829 |
|
|
|
61,381 |
|
Total revenue |
|
|
81,453 |
|
|
|
68,275 |
|
|
|
153,736 |
|
|
|
134,983 |
|
Costs and expenses from
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (excludes depreciation and amortization) |
|
|
40,366 |
|
|
|
28,968 |
|
|
|
72,139 |
|
|
|
56,730 |
|
Technology and operations |
|
|
14,791 |
|
|
|
13,872 |
|
|
|
29,495 |
|
|
|
27,790 |
|
Sales and marketing |
|
|
11,854 |
|
|
|
11,273 |
|
|
|
22,644 |
|
|
|
21,317 |
|
General and administrative |
|
|
6,404 |
|
|
|
7,053 |
|
|
|
13,789 |
|
|
|
15,284 |
|
Depreciation and amortization |
|
|
2,803 |
|
|
|
2,603 |
|
|
|
5,567 |
|
|
|
4,906 |
|
Fair value adjustment of acquisition earn-outs |
|
|
— |
|
|
|
(8,500 |
) |
|
|
— |
|
|
|
(8,500 |
) |
Other operating (income) expenses, net |
|
|
(11 |
) |
|
|
23 |
|
|
|
129 |
|
|
|
(10 |
) |
Total costs and expenses |
|
|
76,207 |
|
|
|
55,292 |
|
|
|
143,763 |
|
|
|
117,517 |
|
Income from operations |
|
|
5,246 |
|
|
|
12,983 |
|
|
|
9,973 |
|
|
|
17,466 |
|
Interest and other income,
net |
|
|
(572 |
) |
|
|
(46 |
) |
|
|
(961 |
) |
|
|
(177 |
) |
Income before provision for
income taxes |
|
|
5,818 |
|
|
|
13,029 |
|
|
|
10,934 |
|
|
|
17,643 |
|
Provision for income
taxes |
|
|
1,573 |
|
|
|
1,059 |
|
|
|
2,723 |
|
|
|
2,071 |
|
Net income |
|
$ |
4,245 |
|
|
$ |
11,970 |
|
|
$ |
8,211 |
|
|
$ |
15,572 |
|
Basic income per common
share |
|
$ |
0.14 |
|
|
$ |
0.37 |
|
|
$ |
0.26 |
|
|
$ |
0.48 |
|
Diluted income per common
share |
|
$ |
0.13 |
|
|
$ |
0.35 |
|
|
$ |
0.25 |
|
|
$ |
0.45 |
|
Basic weighted average shares
outstanding |
|
|
31,305,214 |
|
|
|
32,561,903 |
|
|
|
31,562,988 |
|
|
|
32,769,057 |
|
Diluted weighted average
shares outstanding |
|
|
32,124,188 |
|
|
|
34,004,568 |
|
|
|
32,544,953 |
|
|
|
34,382,149 |
|
|
Liquidity Services and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash
Flows (Dollars in Thousands) |
|
|
|
Six Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
Operating
activities |
|
|
|
|
|
|
Net income |
|
$ |
8,211 |
|
|
$ |
15,572 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
5,567 |
|
|
|
4,906 |
|
Stock compensation expense |
|
|
3,882 |
|
|
|
4,272 |
|
Inventory adjustment to net realizable value |
|
|
847 |
|
|
|
98 |
|
Provision for doubtful accounts |
|
|
194 |
|
|
|
11 |
|
Deferred tax expense |
|
|
2,524 |
|
|
|
1,590 |
|
Impairment of long-lived and other non-current assets |
|
|
— |
|
|
|
31 |
|
Gain on disposal of property and equipment |
|
|
(55 |
) |
|
|
(13 |
) |
Gain on termination of lease |
|
|
— |
|
|
|
(240 |
) |
Change in fair value of earn-out liability |
|
|
— |
|
|
|
(8,500 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
5,801 |
|
|
|
(637 |
) |
Inventory |
|
|
(4,438 |
) |
|
|
(709 |
) |
Prepaid taxes and tax refund receivable |
|
|
(363 |
) |
|
|
(3 |
) |
Prepaid expenses and other assets |
|
|
310 |
|
|
|
(1,230 |
) |
Operating lease assets and liabilities |
|
|
(155 |
) |
|
|
422 |
|
Accounts payable |
|
|
902 |
|
|
|
393 |
|
Accrued expenses and other current liabilities |
|
|
1,461 |
|
|
|
(8,121 |
) |
Deferred revenue |
|
|
90 |
|
|
|
442 |
|
Payables to sellers |
|
|
(2,314 |
) |
|
|
7,149 |
|
Other liabilities |
|
|
(129 |
) |
|
|
(806 |
) |
Net cash provided by operating
activities |
|
|
22,335 |
|
|
|
14,627 |
|
Investing
activities |
|
|
|
|
|
|
Cash paid for business
acquisitions, net of cash acquired |
|
|
— |
|
|
|
(11,164 |
) |
Purchases of property and
equipment, including capitalized software |
|
|
(2,711 |
) |
|
|
(3,572 |
) |
Purchase of short-term
investments |
|
|
(3,696 |
) |
|
|
— |
|
Other investing activities,
net |
|
|
51 |
|
|
|
9 |
|
Net cash used in investing
activities |
|
|
(6,356 |
) |
|
|
(14,727 |
) |
Financing
activities |
|
|
|
|
|
|
Common stock repurchases |
|
|
(16,963 |
) |
|
|
(19,998 |
) |
Taxes paid associated with net
settlement of stock compensation awards |
|
|
(736 |
) |
|
|
(1,809 |
) |
Payments of the principal
portion of finance lease liabilities |
|
|
(50 |
) |
|
|
(51 |
) |
Payment for debt issuance
cost |
|
|
— |
|
|
|
(91 |
) |
Proceeds from exercise of
stock options, net of tax |
|
|
496 |
|
|
|
— |
|
Net cash used in financing
activities |
|
|
(17,253 |
) |
|
|
(21,949 |
) |
Effect of exchange rate
differences on cash and cash equivalents |
|
|
735 |
|
|
|
(22 |
) |
Net decrease in cash and cash
equivalents |
|
|
(539 |
) |
|
|
(22,071 |
) |
Cash and cash equivalents at
beginning of period |
|
|
96,122 |
|
|
|
106,335 |
|
Cash and cash equivalents at
end of period |
|
$ |
95,583 |
|
|
|
84,264 |
|
Supplemental
disclosure of cash flow information |
|
|
|
|
|
|
Cash paid (received) for
income taxes, net |
|
$ |
539 |
|
|
$ |
350 |
|
Non-cash: Common stock
surrendered in the exercise of stock options |
|
|
18 |
|
|
|
100 |
|
Non-cash: Earn-out liability
for acquisition activity |
|
|
— |
|
|
|
19,500 |
|
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