– First quarter revenue consistent at $121.9 – Gross Merchandise
Volume (GMV) consistent at $234.4 – Adjusted Earnings Before Interest,
Taxes, Depreciation and Amortization (EBITDA) of $20.0 million down 17%
– Adjusted EPS of $0.32 down 22%
WASHINGTON–(BUSINESS WIRE)–Feb. 7, 2014–
Liquidity Services, Inc. (NASDAQ: LQDT; www.liquidityservicesinc.com)
today reported its financial results for its first quarter of fiscal
year 2014 (Q1-14) ended December 31, 2013. Liquidity Services, Inc.
provides business and government clients and buying customers
transparent, innovative and effective online marketplaces and integrated
services for surplus assets.
Liquidity Services, Inc. (Liquidity Services or the Company) reported
consolidated Q1-14 revenue of $121.9 million, consistent with the prior
year’s comparable period. Adjusted EBITDA, which excludes stock based
compensation and acquisition costs including changes in acquisition earn
out payment estimates, for Q1-14 was $20.0 million, a decrease of
approximately 17% from the prior year’s comparable period. Q1-14 GMV,
the total sales volume of all merchandise sold through the Company’s
marketplaces, was $234.4 million, consistent with the prior year’s
comparable period.
Net income in Q1-14 was $7.1 million or $0.22 diluted earnings per
share. Adjusted net income, which excludes stock based compensation,
acquisition costs including changes in acquisition earn out payment
estimates and amortization of contract-related intangible assets
associated with the Jacobs Trading acquisition – net of tax, in Q1-14
was $10.4 million or $0.32 adjusted diluted earnings per share based on
32.7 million fully diluted shares outstanding, a decrease of
approximately 24% and 22%, respectively, from the prior year’s
comparable period.
“Liquidity Services generated better than expected financial results in
Q1-14 driven by strong topline performance in our retail supply chain
and municipal government businesses. Our retail supply chain business
saw sequential growth in GMV as we helped more OEM and retail clients
create strategic value in the secondary market for consumer goods
through our marketplace channels and service offering. These results
were partially offset by a sharp decline in our DoD Surplus business due
to changing property mix which has impacted margins,” said Bill Angrick,
Chairman and CEO of Liquidity Services. “During the quarter, we
continued to expand our GovDeals municipal government business in both
the U.S. and Canada driven by agencies’ desire for more transparency,
convenience and value in the sale of surplus assets. We also continued
to invest in extending our technology platform, buyer liquidity and
marketplace data with existing and new clients to unlock new
opportunities during the quarter as our clients seek greater strategic
value from the reverse supply chain. We believe our continued investment
in innovation and strong client service positions us well to drive long
term shareholder value.”
“As previously announced, we are pleased to continue to provide services
to the U.S. Department of Defense (DoD) following the recent award of a
sole source follow-on contract that extends the performance period of
our Surplus contract by a base term of 10 months with two one-month
option periods, resulting in a February 2015 expiry assuming the
exercise of all options. The mix of property under the DoD Surplus
contract has shifted to a higher volume of lower value, smaller size
items, requiring us to rent more space, incur higher transportation and
handling costs, and increase our staff size. We continue to provide a
high level of service to our DoD client and plan to participate in the
RFP process which is scheduled to conclude in April based on the DoD’s
current schedule,” said Mr. Angrick.
Business Outlook
While general economic conditions have improved, our overall outlook
remains cautious due to the volatility in the macro environment. The
retail vertical of our business has seen significant changes in consumer
spending habits in certain categories, such as electronics, which has
been affected by increases in payroll taxes, continued high
unemployment, and reduced innovation in the sector resulting in
decreased spending. Additionally, we plan to increase our investment in
technology infrastructure and innovation for our proprietary e-commerce
marketplaces to support further expansion and integration of our
existing and recently acquired businesses. In the longer term, we expect
our business to continue to benefit from the following trends: (i) as
consumers trade down and seek greater value, we anticipate stronger
buyer demand for the surplus merchandise sold in our marketplaces, (ii)
as corporations and public sector agencies focus on reducing costs,
improving transparency, compliance and working capital flows by
outsourcing reverse supply chain activities, we expect our seller base
to increase, and (iii) as corporations and public sector agencies
increasingly prefer service providers with a proven track record,
innovative technology solutions and demonstrated financial strength, we
expect our seller base to increase.
The following forward looking statements reflect trends and assumptions
for the next quarter and FY 2014:
| (i) | stable commodity prices in our scrap business; | |
| (ii) |
stable average sales prices realized in our capital assets marketplaces; |
|
| (iii) |
improved margins in our GoIndustry marketplace as we continue to integrate the acquisition and complete our restructuring plans; |
|
| (iv) |
continued product flows under the DoD Surplus contract under the existing terms; |
|
| (v) | an effective income tax rate of 40%; and | |
| (vi) |
improved operations and service levels in our retail goods marketplaces. |
|
Our DoD Scrap Contract includes an incentive feature, which can increase
the amount of profit sharing distribution we receive from 23% up to 25%.
Payments under this incentive feature are based on the amount of scrap
we sell for the DoD to small businesses during the preceding 12 months
as of June 30th of each year. We are eligible to receive this
incentive in each year of the term of the Scrap Contract and have
assumed for purposes of providing guidance regarding our projected
financial results for fiscal year 2014 that we will again receive this
incentive payment.
GMV – We expect GMV for fiscal year 2014 to
range from $1.0 billion to $1.075 billion, which is unchanged. We expect
GMV for Q2-14 to range from $220 million to $240 million.
Adjusted EBITDA – We expect Adjusted EBITDA
for fiscal year 2014 to range from $100 million to $108 million, which
is unchanged. We expect Adjusted EBITDA for Q2-14 to range from $20.0
million to $23.0 million.
Adjusted Diluted EPS – We estimate Adjusted
Earnings Per Diluted Share for fiscal year 2014 to range from $1.60 to
$1.76, which is unchanged. In Q2-14, we estimate Adjusted Earnings Per
Diluted Share to be $0.33 to $0.37. This guidance assumes that we have
an average fully diluted number of shares outstanding for the year of
32.9 million, and that we will not repurchase shares with the
approximately $31.0 million yet to be expended under the share
repurchase program.
Our guidance adjusts EBITDA and Diluted EPS for (i) acquisition costs
including transaction costs and changes in earn out estimates; (ii)
amortization of contract related intangible assets of $33.3 million from
our acquisition of Jacobs Trading; and (iii) for stock based
compensation costs, which we estimate to be approximately $3.5 million
to $4.0 million per quarter for fiscal year 2014. These stock based
compensation costs are consistent with fiscal year 2013.
The Company’s Board of Directors approved the repurchase of up to $50.0
million under the share repurchase program.
Key Q1-14 Operating Metrics
Registered Buyers — At the end of Q1-14,
registered buyers totaled approximately 2,471,000, representing a 10%
increase over the approximately 2,240,000 registered buyers at the end
of Q1-13.
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), increased to approximately 603,000 in Q1-14, an approximately 7%
increase over the approximately 566,000 auction participants in Q1-13.
Completed Transactions — Completed
transactions were consistent at approximately 129,000 for Q1-14 and
Q1-13.
GMV and Revenue Mix — The table below
summarizes GMV and revenue by pricing model.
|
GMV Mix |
|||||
| Q1-14 | Q1-13 | ||||
| Profit-Sharing Model: | |||||
| Scrap Contract | 8.3% | 6.6% | |||
| Total Profit Sharing | 8.3% | 6.6% | |||
| Consignment Model: | |||||
| GovDeals | 16.4% | 12.6% | |||
| Commercial | 44.3% | 45.0% | |||
| Total Consignment | 60.7% | 57.6% | |||
| Purchase Model: | |||||
| Commercial | 18.3% | 21.4% | |||
| Surplus Contract | 12.7% | 14.4% | |||
| Total Purchase | 31.0% | 35.8% | |||
| Total | 100.0% | 100.0% | |||
|
Revenue Mix |
|||||
| Q1-14 | Q1-13 | ||||
| Profit-Sharing Model: | |||||
| Scrap Contract | 16.0% | 12.5% | |||
| Total Profit Sharing | 16.0% | 12.5% | |||
| Consignment Model: | |||||
| GovDeals | 3.2% | 2.4% | |||
| Commercial | 13.7% | 12.3% | |||
| Total Consignment | 16.9% | 14.7% | |||
| Purchase Model: | |||||
| Commercial | 36.1% | 42.9% | |||
| Surplus Contract | 24.5% | 27.5% | |||
| Total Purchase | 60.6% | 70.4% | |||
| Other | 6.5% | 2.4% | |||
| Total | 100.0% | 100.0% | |||
Liquidity Services, Inc.
Reconciliation
of GAAP to Non-GAAP Measures
EBITDA and Adjusted EBITDA. EBITDA
is a supplemental non-GAAP financial measure and is equal to net income
plus interest expense and other (income) expense, net; provision for
income taxes; amortization of contract intangibles; and depreciation and
amortization. Our definition of Adjusted EBITDA differs from EBITDA
because we further adjust EBITDA for stock based compensation expense,
and acquisition costs including changes in earn out estimates.
| Three Months | |||||
| Ended December 31, | |||||
| 2013 | 2012 | ||||
| (In thousands) | |||||
| (Unaudited) | |||||
| Net income | $ 7,093 | $ 6,709 | |||
| Interest expense and other (income) expense, net | 21 | (924 | ) | ||
| Provision for income taxes | 4,729 | 4,472 | |||
| Amortization of contract intangibles | 2,407 | 2,210 | |||
| Depreciation and amortization | 2,004 | 1,987 | |||
| EBITDA | 16,254 | 14,454 | |||
| Stock compensation expense | 3,659 | 4,367 | |||
| Acquisition costs | 95 | 5,376 | |||
| Adjusted EBITDA | $ 20,008 | $ 24,197 | |||
Adjusted Net Income and Adjusted Basic and Diluted
Earnings Per Share. Adjusted net income is a supplemental
non-GAAP financial measure and is equal to net income plus tax effected
stock compensation expense, amortization of contract-related intangible
assets associated with the Jacobs Trading acquisition and acquisition
costs including changes in earn out estimates. Adjusted basic and
diluted earnings per share are determined using Adjusted Net Income.
| Three Months Ended | ||||
| December 31, | ||||
| 2013 | 2012 | |||
|
(Dollars in thousands, |
||||
| (Unaudited) | ||||
| Net income | $7,093 | $6,709 | ||
| Stock compensation expense (net of tax) | 2,195 | 2,620 | ||
| Amortization of contract intangibles (net of tax) | 1,090 | 1,090 | ||
| Acquisition costs (net of tax) | 57 | 3,226 | ||
| Adjusted net income | $10,435 | $13,645 | ||
| Adjusted basic earnings per common share | $0.32 | $0.43 | ||
| Adjusted diluted earnings per common share | $0.32 | $0.41 | ||
| Basic weighted average shares outstanding | 32,143,064 | 31,482,853 | ||
| Diluted weighted average shares outstanding | 32,658,070 | 33,054,264 | ||
Conference Call
The Company will host a conference call to discuss the first quarter
2014 results at 10:30 a.m. Eastern Time today. Investors and other
interested parties may access the teleconference by dialing 866-515-2909
or 617-399-5123 and providing the participant pass code 62519518. A live
web cast of the conference call will be provided on the Company’s
investor relations website at www.liquidityservices.com/investors.
An archive of the web cast will be available on the Company’s website
until March 7, 2014 at 11:59 p.m. ET. An audio replay of the
teleconference will also be available until March 7, 2014 at 11:59 p.m.
ET. To listen to the replay, dial 888-286-8010 or 617-801-6888 and
provide pass code 44635766. Both replays will be available starting at
2:30 p.m. ET on the day of the call.
Non-GAAP Measures
To supplement our consolidated financial statements presented in
accordance with 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 and Adjusted Earnings 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.
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 generally accepted accounting
principles, 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.
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 customer 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 generally accepted
accounting principles, 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 and expected future effective tax rates. 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. 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 a number of risks and uncertainties that could cause our
actual results to differ materially from the forward-looking statements
contained 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, our dependence on our
contracts with the DoD and Wal-Mart for a significant portion of our
revenue and profitability; our ability to successfully expand the supply
of merchandise available for sale on our online marketplaces; our
ability to attract and retain active professional buyers to purchase
this merchandise; the timing and success of upgrades to our technology
infrastructure; our ability to successfully complete the integration of
any acquired companies, including NESA and Go-Industry, into our
existing operations and our ability to realize any anticipated benefits
of these or other acquisitions; and our ability to recognize any
expected tax benefits as a result of closing our U.K. retail consumer
goods operations. There may be other factors of which we are currently
unaware or 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, Inc.
Liquidity Services, Inc. (NASDAQ: LQDT) provides leading corporations,
public sector agencies and buying customers the world’s most
transparent, innovative and effective online marketplaces and integrated
services for surplus assets. On behalf of its clients, Liquidity
Services has completed the sale of over $4.3 billion of surplus,
returned and end-of-life assets, in over 500 product categories,
including consumer goods, capital assets and industrial equipment. The
Company is based in Washington, D.C. and has over 1,300 employees.
Additional information can be found at: http://www.liquidityservices.com.
| Liquidity Services, Inc. and Subsidiaries | |||||||
| Consolidated Balance Sheets | |||||||
| (Dollars in Thousands) | |||||||
| December 31, |
|
September 30, |
|||||
| 2013 | 2013 | ||||||
| Assets | (Unaudited) | ||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 101,491 | $ | 95,109 | |||
|
Accounts receivable, net of allowance for doubtful accounts of $834 and $891 at December 31, 2013 and September 30, 2013, respectively |
28,567 | 24,050 | |||||
| Inventory | 35,771 | 29,261 | |||||
| Prepaid and deferred taxes | 10,858 | 11,243 | |||||
| Prepaid expenses and other current assets | 4,632 | 4,802 | |||||
| Total current assets | 181,319 | 164,465 | |||||
| Property and equipment, net | 11,620 | 10,380 | |||||
| Intangible assets, net | 25,232 | 28,205 | |||||
| Goodwill | 211,562 | 211,711 | |||||
| Other assets | 6,846 | 6,583 | |||||
| Total assets | $ | 436,579 | $ | 421,344 | |||
| Liabilities and stockholders’ equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 20,589 | $ | 16,539 | |||
| Accrued expenses and other current liabilities | 32,144 | 34,825 | |||||
| Profit-sharing distributions payable | 4,474 | 4,315 | |||||
| Customer payables | 29,737 | 29,497 | |||||
| Total current liabilities | 86,944 | 85,176 | |||||
| Acquisition earn out payables | 18,479 | 18,390 | |||||
| Deferred taxes and other long-term liabilities | 2,703 | 2,899 | |||||
| Total liabilities | 108,126 | 106,465 | |||||
| Stockholders’ equity: | |||||||
|
Common stock, $0.001 par value; 120,000,000 shares authorized; 32,200,409 shares issued and outstanding at December 31, 2013; 31,811,764 shares issued and outstanding at September 30, 2013 |
31 | 31 | |||||
| Additional paid-in capital | 213,871 | 206,861 | |||||
| Accumulated other comprehensive (loss) income | (11 | ) | 518 | ||||
| Retained earnings | 114,562 | 107,469 | |||||
| Total stockholders’ equity | 328,453 | 314,879 | |||||
| Total liabilities and stockholders’ equity | $ | 436,579 | $ | 421,344 | |||
| Liquidity Services, Inc. and Subsidiaries | |||||||
| Unaudited Consolidated Statements of Operations | |||||||
|
(Dollars in Thousands, Except Share and Per Share Data) |
|||||||
| Three Months Ended December 31, | |||||||
| 2013 | 2012 | ||||||
| Revenue | $ | 93,470 | $ | 104,261 | |||
| Fee revenue | 28,478 | 17,944 | |||||
| Total revenue | 121,948 | 122,205 | |||||
| Costs and expenses: | |||||||
| Cost of goods sold (excluding amortization) | 47,710 | 47,122 | |||||
| Profit-sharing distributions | 10,130 | 8,410 | |||||
| Technology and operations | 25,621 | 22,547 | |||||
| Sales and marketing | 9,831 | 10,328 | |||||
| General and administrative | 12,307 | 13,968 | |||||
| Amortization of contract intangibles | 2,407 | 2,210 | |||||
| Depreciation and amortization | 2,004 | 1,987 | |||||
| Acquisition costs | 95 | 5,376 | |||||
| Total costs and expenses | 110,105 | 111,948 | |||||
| Income from operations | 11,843 | 10,257 | |||||
| Interest expense and other (income) expense, net | 21 | (924 | ) | ||||
| Income before provision for income taxes | 11,822 | 11,181 | |||||
| Provision for income taxes | 4,729 | 4,472 | |||||
| Net income | $ | 7,093 | $ | 6,709 | |||
| Basic earnings per common share | $ | 0.22 | $ | 0.21 | |||
| Diluted earnings per common share | $ | 0.22 | $ | 0.20 | |||
| Basic weighted average shares outstanding | 32,143,064 | 31,482,853 | |||||
| Diluted weighted average shares outstanding | 32,658,070 | 33,054,264 | |||||
| Liquidity Services, Inc. and Subsidiaries | ||||||||
| Unaudited Consolidated Statements of Cash Flows | ||||||||
| (In Thousands) | ||||||||
| Three Months Ended | ||||||||
| December 31, | ||||||||
| 2013 | 2012 | |||||||
| Operating activities | ||||||||
| Net income | $ | 7,093 | $ | 6,709 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization | 4,411 | 4,197 | ||||||
| Gain on early extinguishment of debt | — | (1,000 | ) | |||||
| Stock compensation expense | 3,659 | 4,367 | ||||||
| Provision (benefit) for inventory allowance | 291 | (733 | ) | |||||
| Provision for doubtful accounts | (57 | ) | (121 | ) | ||||
| Incremental tax benefit from exercise of common stock options | (2,882 | ) | (5,005 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (4,460 | ) | (3,177 | ) | ||||
| Inventory | (6,801 | ) | (512 | ) | ||||
| Prepaid expenses and other assets | 3,175 | 1,541 | ||||||
| Accounts payable | 4,050 | 1,345 | ||||||
| Accrued expenses and other | (2,681 | ) | (4,976 | ) | ||||
| Profit-sharing distributions payable | 159 | (533 | ) | |||||
| Customer payables | 239 | 842 | ||||||
| Acquisition earn out payables | 89 | (4,118 | ) | |||||
| Other liabilities | (1,343 | ) | 967 | |||||
| Net cash provided by (used in) operating activities | 4,942 |
(207 |
) |
|||||
| Investing activities | ||||||||
| Increase in goodwill and intangibles and cash paid for acquisitions | — | (14,684 | ) | |||||
| Purchases of property and equipment | (2,678 | ) | (1,897 | ) | ||||
| Net cash used in investing activities | (2,678 | ) | (16,581 | ) | ||||
| Financing activities | ||||||||
| Repayment of notes payable | — | (39,000 | ) | |||||
| Payment of acquisition contingent liabilities | — | (8,185 | ) | |||||
| Proceeds from exercise of common stock options (net of tax) | 469 | 209 | ||||||
| Incremental tax benefit from exercise of common stock options | 2,882 | 5,005 | ||||||
| Net cash provided by (used in) financing activities | 3,351 | (41,971 | ) | |||||
| Effect of exchange rate differences on cash and cash equivalents | 767 | (131 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 6,382 | (58,890 | ) | |||||
| Cash and cash equivalents at beginning of period | 95,109 | 104,782 | ||||||
| Cash and cash equivalents at end of period | $ | 101,491 | $ | 45,892 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for income taxes | $ | 1,461 | $ | 94 | ||||
| Cash paid for interest | — | 2,011 | ||||||
| Contingent purchase price accrued | — | 23,146 | ||||||
Source: Liquidity Services, Inc.
Liquidity Services, Inc.
Julie Davis
Senior Director, Investor
Relations
202-467-6868 ext. 2234
[email protected]
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