Press Releases
Aug 19

Liquidity Services Announces First Quarter Fiscal Year 2017 Financial Results

  • GMV of $159.7 million, up 5.5% year over year
  • Revenue of $70.8 million, up 7.5% year over year
  • GAAP Net Loss of $8.4 million, down 61.6% year over year
  • Non-GAAP Adjusted EBITDA of $(4.3) million, down 32.0% year over year
  • New Global Customer Management Module Launched Under LiquidityOne
    Initiative
  • Long Term Commercial Growth Strategy Remains the Priority

WASHINGTON–(BUSINESS WIRE)–Feb. 9, 2017–
Liquidity Services (NASDAQ:LQDT; www.liquidityservices.com),
a global solution provider in the reverse supply chain with the world’s
largest marketplace for business surplus, today announced financial
results for the first quarter ended December 31, 2016. Q1-17 results
were within the company’s guidance range for GMV and Non-GAAP Adjusted
Diluted EPS and above the company’s guidance range for GAAP Net Loss,
Non-GAAP Adjusted EBITDA, and GAAP EPS. The company’s performance was
led by our commercial capital assets marketplaces, which experienced
higher than expected volume and margins related to large projects in our
industrial and energy verticals. In addition, we had higher than
expected service revenue with solid margins.

“We are pleased with our progress made this quarter despite the
headwinds related to changes in our DoD contracts. The focus of our long
term growth strategy is our commercial and state and local government
businesses, and we are pleased to report that aggregate GMV in these
marketplaces grew 12% over the prior year period, not only marking a
return to top line organic growth for the first time in eight quarters,
but also a significant milestone in the advancement of our
transformation strategy. We continue to expand our service offerings to
capture more opportunities and invest in our sales channels to grow
seller accounts and our buyer network,” said Bill Angrick, chairman and
chief executive officer of Liquidity Services.

“During the quarter, the strong performance of our commercial capital
assets business combined with double digit top line growth in our retail
supply chain marketplace demonstrated our ability to attract new clients
and expand existing relationships driven by our strong recovery rates
and innovative returns management services. Our state and local
government marketplace also continued its upward trend as more sellers
utilized our platform and value added services. Regarding our
LiquidityOne transformation plan, we launched our new Customer
Management Module which provides a common process for managing customer
and client data, eliminating numerous legacy platforms to manage these
processes. We anticipate the launch of our next marketplace in the
summer of 2017 and we remain focused on ensuring the highest quality,
most robust functionality, and a smooth transition for our clients and
buyers,” continued Angrick.

Under our LiquidityOne transformation initiative, we will leverage our
new Customer Management Module across our entire organization to bring
further harmonization to developing an integrated sales pipeline, to
improve our ability to fully integrate with our clients, and to provide
the ability to extend our functionality to partner programs. As we
prepare for the rollout of our next marketplace on the LiquidityOne
platform, we have designed and developed the building blocks for a
scalable solution that eliminates multiple, disparate legacy systems and
processes and expands our capability to handle the complexity of a
two-sided global marketplace with multiple verticals and a vast range of
asset categories. Our new platform is built with a mobile first
philosophy and brings next generation functionality, including unified
account management for all buying and selling activity, singular
automated transaction settlement with localized invoicing and payment,
multi-language and multi-currency support, and additional merchandising
and search functionality within the marketplace.

First Quarter Operating and Earnings Results

The company reported Q1-17 GMV, an operating measure of the total sales
value of all merchandise sold through our marketplaces during the given
period, of $159.7 million, an increase of 5.5% from the prior year’s
comparable period. Revenue for Q1-17 was $70.8 million, an increase of
7.5% from the prior year’s comparable period. GAAP Net loss for Q1-17
was $8.4 million, which resulted in a diluted loss per share of $0.27
based on a weighted average of 31.3 million diluted shares outstanding,
an increase of 61.6% and 58.8% respectively from the prior year’s
comparable period. Non-GAAP adjusted net loss was $6.8 million or $0.22
adjusted diluted loss per share, an increase of 96.1% and 100.0%,
respectively, from the prior year’s comparable period. We exited Q1-17
in a strong financial position with $127 million in cash and a debt free
balance sheet.

Non-GAAP adjusted EBITDA, which excludes stock-based compensation and
acquisition costs, was $(4.3) million, a decrease of 32.0% from the
prior year’s comparable period of $(3.3) million.

Comparative financial results reflect increased cost of sales and lower
margins under the new Scrap contract and the downturn in commodity
prices which have reduced prices under the Scrap contract, and the
transition to the new Surplus contract, under which we pay higher
product costs.

Additional First Quarter Operational Results

  • Registered Buyers — At the end of Q1-17,
    registered buyers totaled approximately 3,018,000 representing an
    approximately 5% increase over the approximately 2,875,000 registered
    buyers at the end of Q1-16.
  • 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), decreased to approximately 544,000 in Q1-17, an
    approximately 3% decrease over the approximately 561,000 auction
    participants in Q1-16.
  • Completed Transactions — Completed
    transactions decreased to approximately 129,000, an approximately 3%
    decrease for Q1-17 from the approximately 133,000 completed
    transactions in Q1-16.

GMV and Revenue Mix —The table below
summarizes GMV and revenue by pricing model.

 

GMV Mix

    Q1-FY17 Q1-FY16
Consignment Model:
GovDeals 35.1% 34.4%
Commercial 34.4% 32.5%
Total Consignment 69.5% 66.9%
Purchase Model:
Commercial 16.2% 14.0%
Surplus Contract 9.9% 13.5%
Total Purchase 26.1% 27.5%
 
Other: 4.4% 5.6%
Total 100.0% 100.0%
 

Revenue Mix

Q1-FY17 Q1-FY16
Consignment Model:
GovDeals 8.2% 8.2%
Commercial 16.5% 15.6%
Total Consignment 24.7% 23.8%
Purchase Model:
Commercial 35.5% 32.2%
Surplus Contract 22.3% 31.0%
Total Purchase 57.8% 63.2%
 
Other: 17.5% 13.0%
Total 100.0% 100.0%
 

Business Outlook

FY17 results are continuing to benefit from growth in our commercial and
state and local government marketplaces as we advance our strategy to
unify our business processes, global sales organization, and e-commerce
marketplace platform. While the commercial businesses are showing
continuous improvement, profitability for the year will be impacted by
the higher pricing terms and lower volumes for our DoD Surplus contract,
higher distributions under our new Scrap contract, and continued
investments in the design and deployment of our new LiquidityOne
platform. We will also continue to make investments in our IronDirect
business to drive customer demand onto the platform.

Our near term outlook remains cautious due to the increasing
distributions and soft pricing in our DoD scrap contract, variability in
the timing of large client projects in our capital assets business, and
ongoing investments in our LiquidityOne transformation plan.

The following forward-looking statements reflect the following trends
and assumptions for Q2-FY17:

(i) continued investment spending under our LiquidityOne transformation
initiative;
(ii) increased cost of sales and lower volume and
margins under our new DoD Surplus contract;
(iii) continued
strength in our state and local government marketplace and steady
year-over-year growth;
(iv) continued signs of improved liquidity
in our energy marketplace;
(v) strong deal flow in our commercial
capital assets marketplaces;
(vi) investments in our sales teams to
further accelerate the growth of new and expanded client relationships;
(vii)
seasonally higher volumes and growth in core accounts in our retail
business; and
(viii) increased distributions and lower margins
under our new DoD Scrap contract, and continued variability in
commodities pricing, volumes received, and mix of metals.

For Q2-17 our guidance is as follows:

GMV – We expect GMV for Q2-17 to range from
$150 million to $170 million.

GAAP Net Loss – We expect GAAP Net Loss for
Q2-17 to range from $(12.0) million to $(9.0) million.

GAAP Diluted EPS – We expect GAAP diluted
Loss Per Share for Q2-17 to range from $(0.38) to $(0.29).

Non-GAAP Adjusted EBITDA –We expect
non-GAAP Adjusted EBITDA for Q2-17 to range from $(7.5) million to
$(4.5) million.

Non-GAAP Adjusted Diluted EPS – We expect
non-GAAP Adjusted Loss Per Diluted Share for Q2-17 to range from $(0.30)
to $(0.21). This guidance assumes that we have diluted weighted average
number of shares outstanding for the quarter of 31.4 million and that we
will not repurchase shares with the approximately $10.1 million
available under the share repurchase program.

Q2-FY17 guidance does not include any one time impacts from winding down
our TruckCenter marketplace.

Liquidity Services

Reconciliation of GAAP to Non-GAAP Measures

EBITDA and Adjusted EBITDA. EBITDA
is a supplemental non-GAAP financial measure and is equal to net (loss)
income plus interest and other expense, net; benefit for income taxes;
and depreciation and amortization. Our definition of Adjusted EBITDA
differs from EBITDA because we further adjust EBITDA for stock-based
compensation and acquisition costs.

   
Three Months
Ended December 31,
2016   2015
(In thousands)
(Unaudited)
Net loss $ (8,397 ) $ (5,197 )
Interest expense (income) and other expense, net 34 (60 )
Provision (benefit) for income taxes 103 (2,154 )
Depreciation and amortization 1,429   1,672  
EBITDA (6,831 ) (5,739 )
Stock compensation expense 2,500 2,420
Acquisition costs   39  
Adjusted EBITDA $ (4,331 ) $ (3,280 )
 

Adjusted Net (Loss) 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
(loss) plus tax effected stock compensation expense and acquisition
costs. Adjusted basic and diluted loss per share are determined using
Adjusted Net (Loss) Income. For Q1-17 the tax rate used to tax effect
stock compensation expense and acquisition costs was 35.4% compared to
29.3% used for the Q1-16 results. The 35.4% tax rate excludes the impact
of the charge to our U.S. valuation allowance to provide a better
comparison to the Q1-16 results.

   
Three Months Ended
December 31,
2016 2015
(Dollars in thousands,
except per share data)
(Unaudited)
Net loss $(8,397 ) $(5,197)
Stock compensation expense (net of tax) 1,615 1,711
Acquisition costs (net of tax) 28
 
Adjusted net loss $(6,782 ) $(3,458)
 
Adjusted basic loss per common share $(0.22 ) $(0.11)
 
Adjusted diluted loss per common share $(0.22 ) $(0.11)
 
Basic weighted average shares outstanding 31,261,603 30,490,670
 
Diluted weighted average shares outstanding 31,261,603 30,490,670
 

Conference Call

The Company will host a conference call to discuss the first quarter of
fiscal year 2017 results at 10:30 a.m. Eastern Time today. Investors and
other interested parties may access the teleconference by dialing (844)
795-4614 or (661) 378-9639 and providing conference identification
number 52473457. A live web cast of the conference call will be provided
on the Company’s investor relations website at http://investors.liquidityservices.com.
An archive of the web cast will be available on the Company’s website
until February 8, 2018 at 11:59 p.m. ET. An audio replay of the
teleconference will also be available until February 16, 2017 at 11:59
p.m. ET. To listen to the replay, dial (855) 859-2056 or (404) 537-3406
and provide conference identification number 52473457. Both replays will
be available starting at 1:30 p.m. ET 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 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. Adjusted net income is used to arrive at EBITDA and adjusted
EBITDA calculations, and adjusted EPS is the result of our adjusted net
income and diluted shares outstanding.

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.

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 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, including prospects for its new IronDirect
platform, the Company’s proprietary e-commerce marketplace platform,
expected investments in sales teams, expected investment in, benefits of
and timing of completion of the LiquidityOne transformation initiative,
the supply and mix of inventory under the DoD Surplus and Scrap
Contracts, expected future commodity prices, expected sales prices and
margins in the Company’s energy marketplaces, expected future effective
tax rates, the timing of large client projects in the Company’s
industrial business, and trends and assumptions about future periods,
including the second quarter FY-17. 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 for a significant portion of our revenue and
profitability; variability in mix and volume of supply due to project
based activity; variability in business related to mix, timing, and
volume of supply; timing and speed of recovery in the energy sector
macro conditions and commodity market prices; intense competition in our
lines of business; 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 develop and grow our new
business ventures such as IronDirect; costs and timing of the wind-down
of our Truckcenter business; our ability to attract and retain key
employees; our ability to raise additional capital as and when required;
the success of our recent business realignment in which we balance
management time and resource to run our business with migrating our
marketplaces to the new LiquidityOne platform; and the success of our
LiquidityOne transformation initiative, including training and education
of customers to adopt our new LiquidityOne platform. 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

Liquidity Services (NASDAQ: LQDT) employs innovative e-commerce
marketplace solutions to manage, value and sell inventory and equipment
for business and government clients. The company operates a network of
leading e-commerce marketplaces that enable buyers and sellers to
transact in an efficient, automated environment offering over 500
product categories. Our superior service, unmatched scale and ability to
deliver results enable us to forge trusted, long-term relationships with
over 9,000 clients worldwide. With nearly $7 billion in completed
transactions, and 3 million buyers in almost 200 countries and
territories, we are the proven leader in delivering smart commerce
solutions. Visit us at LiquidityServices.com.

     
Liquidity Services, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
 
 
December 31, September 30,
2016 2016
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 126,914 $ 134,513

Accounts receivable, net of allowance for doubtful accounts of
$802 and $718 at

December 31, 2016 and September 30, 2016, respectively

10,711 10,355
Inventory 26,744 27,610
Tax refund receivable 1,217 1,205
Prepaid and deferred taxes 2,507 2,166

Prepaid expenses and other current assets ($2.6 million and $2.2
million measured at

fair value as of December 31, 2016 and September 30, 2016,
respectively)

9,045   9,063  
Total current assets 177,138 184,912
Property and equipment, net 15,591 14,376
Intangible assets, net 2,324 2,650
Goodwill 44,786 45,134
Deferred long-term tax assets 1,021 1,021
Other assets 11,847   12,016  
Total assets $ 252,707   $ 260,109  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 9,180 $ 9,732
Accrued expenses and other current liabilities 43,054 45,133
Distributions payable 4,689 1,722
Customer payables 28,890   28,901  
Total current liabilities 85,813 85,488
Deferred taxes and other long-term liabilities 11,119   12,010  
Total liabilities 96,932 97,498
Commitments and contingencies
Stockholders’ equity:

Common stock, $0.001 par value; 120,000,000 shares authorized;
31,291,341 shares

issued and outstanding at December 31, 2016; 30,742,662 shares
issued and

outstanding at September 30, 2016

29 29
Additional paid-in capital 222,392 220,192
Accumulated other comprehensive loss (9,210 ) (8,571 )
Retained earnings (accumulated deficit) (57,436 ) (49,039 )
Total stockholders’ equity 155,775   162,611  
Total liabilities and stockholders’ equity $ 252,707   $ 260,109  
 
   
Liquidity Services, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Data)
 
 
Three Months Ended December 31,
2016   2015
Revenue $ 47,980 $ 50,138
Fee revenue 22,816   15,737  
Total revenue 70,796 65,875
Costs and expenses:
Cost of goods sold (excluding amortization) 32,271 26,883
Client distributions 4,548 2,357
Technology and operations 21,892 22,807
Sales and marketing 9,987 9,460
General and administrative 9,857 10,068
Depreciation and amortization 1,429 1,672
Acquisition costs       39  
Total costs and expenses 79,984

73,286

 

Other operating income   928      
Loss from operations (8,260 ) (7,411 )
Interest expense (income) and other expense, net 34   (60 )
Loss before provision (benefit) for income taxes (8,294 ) (7,351 )
Provision (benefit) for income taxes 103   (2,154 )
Net loss $ (8,397 ) $ (5,197 )
Basic and diluted loss per common share $ (0.27 ) $ (0.17 )
Basic and diluted weighted average shares outstanding 31,261,603   30,490,670  
 
   
Liquidity Services, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(Dollars In Thousands)
 
 
Three Months Ended December 31,
2016   2015
Operating activities
Net loss $ (8,397 ) $ (5,197 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,429 1,672
Stock compensation expense 2,500 2,420
Provision for inventory allowance 715 1,208
Provision for doubtful accounts 84 78
Incremental tax loss from exercise of common stock options 48
Change in fair value of financial instruments (928 )
Changes in operating assets and liabilities:
Accounts receivable (440 ) 77
Inventory 151 (3,152 )
Prepaid and deferred taxes (9 ) (2,424 )
Prepaid expenses and other assets 773 (969 )
Accounts payable (552 ) 594
Accrued expenses and other current liabilities (2,922 ) (2,070 )
Distributions payable 2,967 (1,169 )
Customer payables (11 ) 583
Other liabilities (381 ) 3  
Net cash used in operating activities (5,021 ) (8,298 )
Investing activities
Increase in intangibles (7 ) (29 )
Purchases of property and equipment, including capitalized software (2,321 ) (1,428 )
Net cash used in investing activities (2,328 ) (1,457 )
Financing activities
Proceeds from exercise of common stock options (net of tax) 32
Incremental tax loss from exercise of common stock options   (48 )
Net cash provided (used) by financing activities 32 (48 )
Effect of exchange rate differences on cash and cash equivalents (282 ) (210 )
Net decrease in cash and cash equivalents (7,599 ) (10,013 )
Cash and cash equivalents at beginning of period 134,513   95,465  
Cash and cash equivalents at end of period $ 126,914   $ 85,452  
Supplemental disclosure of cash flow information
Cash paid for income taxes, net $ (209 ) $ (237 )
 

Source: Liquidity Services

Liquidity Services
Julie Davis, 202-467-6868 ext. 2234
Senior
Director, Investor Relations
julie.davis@liquidityservices.com