Press Releases
Aug 13

Liquidity Services Announces Third Quarter Fiscal Year 2017 Financial Results

  • GMV of $160.9 million, down from $178.5 million in the prior year
  • Revenue of $65.5 million, down from $85.2 million in the prior year
  • GAAP Net Loss of $(8.6) million, down from $(0.1) million in the prior
    year
  • Non-GAAP Adjusted EBITDA of $(5.2) million, down from $4.8 million in
    the prior year
  • GovDeals achieves record GMV results of $75.5 million, up 17.7% versus
    the prior year
  • Network International energy marketplace launched on new LiquidityOne
    Platform; Platform Investments and Long-Term Growth Strategy Remain
    the Priority

WASHINGTON–(BUSINESS WIRE)–Aug. 3, 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 third quarter ended June 30, 2017. Q3-17 results were
within the guidance range for Non-GAAP Diluted EPS, GAAP Net Loss, GAAP
Diluted EPS, and Non-GAAP Adjusted EBITDA. Results were below the
company’s guidance range for GMV. Topline performance reflected lower
overall volume and sales activity in our DoD and commercial marketplaces
in our Capital Assets Group (CAG) segment. The company’s bottom line
results reflected ongoing investments in our LiquidityOne platform,
continued adoption of value added services in our GovDeals segment, and
efficiencies and improvement in overall recovery in our Retail Supply
Chain Group (RSCG) segment.

“Q3 marked an exciting milestone for the company as we launched our
global energy marketplace, Network
International
, on our new LiquidityOne e-commerce platform and ERP
system. We have already completed several online auction events on the
new platform and continue to drive increased activity from sellers and
buyers following the launch. The integration of our remaining legacy
marketplaces onto our LiquidityOne platform is underway to aggregate our
buyer base and add key functionality for our seller-clients. We
anticipate our next marketplace will go live in the Fall of 2017. We are
also making important investments in new products and services, such as
our commercial self-service and returns management offerings, that will
enable us to grow and consolidate the large, fragmented reverse supply
chain industry,” said Bill Angrick, chairman and chief executive officer
of Liquidity Services.

“Although our Q3 consolidated results were mixed, we were also pleased
with the performance of our state and local government marketplace
(GovDeals segment), which reported record GMV up 17.7% year over year,
and our retail supply chain marketplace (RSCG segment), which reported
GMV up 5.1% year over year. Our capital assets business (CAG segment)
experienced unexpected headwinds in Q3 due to lower than anticipated
client sales activity and delays in large asset sales, as well as lower
volumes of good received and lower service fee revenue in our DoD
Surplus contract,” continued Angrick.

“While we saw less client sales activity among industrial accounts in
the CAG segment in Q3, overall trends in globalization and innovation
are driving the need for our sales channels and services. Our retail
supply chain returns management solutions are well suited to the rapid
growth of online retailing which is fueling higher product returns.
Continued investments in our people, processes, and platform will
enhance the value we bring to clients and fuel long term growth in the
$100 billion reverse supply chain market.”

Third Quarter Consolidated Operating and Earnings Results

The company reported Q3-17 GMV, an operating measure of the total sales
value of all merchandise sold through our marketplaces during the given
period, of $160.9 million, down from $178.5 million in the prior year’s
comparable period. Revenue for Q3-17 was $65.5 million, down from $85.2
million in the prior year’s comparable period. GAAP Net loss for Q3-17
was $(8.6) million, which resulted in a diluted loss per share of
$(0.27) based on a weighted average of 31.5 million diluted shares
outstanding, down from $(0.1) million and $0.00 respectively, in the
prior year’s comparable period. Non-GAAP adjusted net loss was $(7.0)
million or $(0.22) adjusted diluted loss per share, down from $2.1
million and $0.07 respectively, in the prior year’s comparable period.
We exited Q3-17 in a strong financial position with $114 million in cash
and a debt free balance sheet.

Non-GAAP adjusted EBITDA, which excludes stock-based compensation,
impairment and business realignment, and acquisition costs, was $(5.2)
million, a decrease from the prior year’s comparable period of $4.8
million.

Comparative consolidated financial results reflect increased cost of
sales and lower margins under the new Scrap and Surplus contracts, the
transition to the new Surplus contract, under which we pay higher
product costs, lower service fee revenue related to pricing declines for
certain services under our Surplus contract, and the delay of large
sales in our industrial business during the quarter. Additionally, there
was a one time charge to the inventory reserve related to our IronDirect
business.

Third Quarter Segment Operating and Earnings Results

We are providing operating results in three reportable segments:
GovDeals, Capital Assets Group (CAG), and Retail Supply Chain Group
(RSCG). These three segments constitute 98% of our revenue, and each
offers separately branded marketplaces to enable sellers to achieve
channel marketing objectives to reach buyers. Across our segments, we
offer our seller-clients various transaction models as well as a suite
of services, and our revenues vary depending upon the models employed
and the level of service required. A description of the reportable
segments follows:

GovDeals reportable segment provides self-service solutions in which
sellers list their own assets, and it consists of marketplaces that
enable local and state government entities including city, county and
state agencies, as well as commercial businesses located in the United
States and Canada to sell surplus and salvage assets. GovDeals also
offers a suite of services that includes asset sales and marketing, and
client self-service. This segment includes our GovDeals.com
and AuctionDeals.com
marketplaces.

CAG reportable segment provides full-service solutions to sellers and it
consists of marketplaces that enable federal government agencies as well
as commercial businesses to sell surplus, salvage, and scrap assets. The
assets that the company receives as the exclusive contractor of the
Defense Logistics Agency (DLA) Disposition Services of the U.S.
Department of Defense are sold in this segment. CAG also offers a suite
of services that includes surplus management, asset valuation, and asset
sales and marketing. Commercial sellers are located in the United
States, Europe, Australia and Asia. This segment includes our Network
International
, GoIndustry
DoveBid
, Government
Liquidation
, and Uncle
Sam’s Retail Outlet
marketplaces.

RSCG reportable segment consists of marketplaces that enable
corporations located in the United States and Canada to sell surplus and
salvage consumer goods and retail capital assets. RSCG also offers a
suite of services that includes returns management, asset recovery, and
eCommerce services. This segment includes our Liquidation.com,
Liquidation.com
DIRECT
, and Secondipity
marketplaces.

Our Q3-17 segment results are as follows (unaudited, in thousands):

        Three Months Ended June 30,       Nine Months Ended June 30,
2017   2016 2017   2016
GovDeals:
GMV 75,527 64,184 195,866 165,920
Revenue 7,464 6,420 19,901 17,067
Gross profit 7,023 6,041 18,670 16,040
 
CAG:
GMV 55,113 83,450 197,710 225,129
Revenue 34,400 54,199 113,978 146,692
Gross profit 17,418 29,352 56,961 85,171
 
RSCG:
GMV 30,053 28,596 86,122 79,268
Revenue 23,528 23,804 72,029 67,818
Gross profit 7,398 7,675 22,566 22,176
 
Corporate & Other*:
GMV 178 2,287 4,613 12,625
Revenue 128 765 2,742 6,364
Gross profit (1,921 ) 164

(1,492

)

926
 
Total GMV 160,871 178,517 484,311 482,942
Total Revenue 65,520 85,188 208,650 237,941
Total Gross profit 29,918 43,232 96,705 124,313

* Corporate &Other primarily consists of the Company’s
TruckCenter and IronDirect operating segments that are not individually
significant, as well as elimination adjustments.

Additional Third Quarter Operational Results

  • Registered Buyers — At the end of Q3-17,
    registered buyers totaled approximately 3,106,000 representing an
    approximately 5% increase over the approximately 2,958,000 registered
    buyers at the end of Q3-16.
  • 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 577,000 in Q3-17, an
    approximately 10% decrease from the approximately 642,000 auction
    participants in Q3-16.
  • Completed Transactions — Completed
    transactions decreased to approximately 134,000, an approximately 11%
    decrease for Q3-17 from the approximately 151,000 completed
    transactions in Q3-16.

Business Outlook

Our near-term outlook remains cautious. FY17 results continue to benefit
from growth in our GovDeals and RSCG segments. We continue to invest in
our strategy to unify our business processes, global sales organization,
and e-commerce marketplace platform. While the RSCG segment is showing
overall improvement, we anticipate our CAG segment will be adversely
impacted by decreased activity within its industrial verticals and lower
service fee revenues and inferior property mix under our Surplus
contract, impacting growth in FY17. We anticipate continued investments
in the design and deployment of our new LiquidityOne e-commerce platform
across our remaining marketplaces. Our expenses will remain elevated
throughout the remainder of FY17 as we continue this transformation.

The following forward-looking statements reflect the following trends
and assumptions for Q4-17:

(i) increased investment spending under our LiquidityOne transformation
initiative as we ready our remaining marketplaces for migration onto our
new platform;

(ii) increased cost of sales, lower volume of goods received, lower
margins, and declining service fee revenue as we anticipate inferior
product mix and pricing declines for the services we provide under our
DoD Surplus contract;

(iii) continued strength in our GovDeals segment and steady
year-over-year growth;

(iv) a mix shift to more consignment accounts in our RSCG segment; and

(v) new pricing for services provided under out DoD Scrap contract and
continued variability in commodities pricing, volumes of goods received,
and mix of commodities.

For Q4-17 our guidance is as follows:

GMV – We expect GMV for Q4-17 to range from
$145 million to $165 million.

GAAP Net Loss – We expect GAAP Net Loss for
Q4-17 to range from $(11.5) million to $(8.5) million.

GAAP Diluted EPS – We expect GAAP diluted
Loss Per Share for Q4-17 to range from $(0.37) to $(0.27).

Non-GAAP Adjusted EBITDA -We expect
non-GAAP Adjusted EBITDA for Q4-17 to range from $(8.0) million to
$(5.0) million.

Non-GAAP Adjusted Diluted EPS – We expect
non-GAAP Adjusted Loss Per Diluted Share for Q4-17 to range from $(0.32)
to $(0.22). This guidance assumes that our diluted weighted average
number of shares outstanding for the quarter of 31.5 million and that we
will not repurchase shares during the quarter with the approximately
$10.1 million available under the share repurchase program.

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, acquisition costs, and business realignment expense.

                 
Three Months Ended June 30,       Nine Months Ended June 30,
2017     2016   2017     2016

(In thousands)
(Unaudited)

Net loss $ (8,614 ) $ (124 ) $ (25,220 )   $ (6,171 )
Interest (income) expense and other expense, net (189 ) 208 (291 ) (242 )
Provision (benefit) for income taxes 41 (17 ) 91 (2,438 )
Depreciation and amortization 1,365   1,616   4,228   4,948  
EBITDA (7,397 ) 1,683   (21,192 ) (3,903 )
Stock compensation expense 1,563 3,084 5,462 8,228
Acquisition costs 39
Impairment of long-lived assets * 886 886
Business realignment expenses* (234 )   906    
Adjusted EBITDA $ (5,182 ) $ 4,767   $ (13,938 ) $ 4,364  
 
 

Adjusted Net (Loss) Income and Adjusted Basic and
Diluted Earnings Per Share
. Adjusted net loss is a
supplemental non-GAAP financial measure and is equal to net income
(loss) plus stock compensation expense, impairment and business
realignment expenses, acquisition costs, and the estimated impact of
income taxes on these non-GAAP adjustments. Adjusted basic and diluted
loss per share are determined using Adjusted Net (Loss) Income. For
Q3-17 the tax rate used to estimate the impact of income taxes on the
non-GAAP adjustments was 29.0% compared to 28.3% used for the Q3-16
results. The 29.0% tax rate excludes the impact of the charge to our
U.S. valuation allowance to provide a better comparison to the Q3-16
results.

               
Three Months Ended June 30,       Nine Months Ended June 30,
2017     2016   2017     2016

(In thousands)
(Unaudited)

Net loss $ (8,614 ) $ (124 ) $ (25,220 )   $ (6,171 )
Stock compensation expense 1,563 3,084 5,462 8,228
Acquisition costs 39
Impairment of long-lived assets * 886 886
Business realignment expenses* (234 ) 906
Adjustment for provision (benefit) for income taxes (642 ) (873 ) (2,104 ) (2,341 )
Adjusted net (loss) income (7,041 ) 2,087   (20,070 ) (245 )
Adjusted basic (loss) earnings per common share $ (0.22 ) $ 0.07   $ (0.64 ) $ (0.01 )
Adjusted diluted (loss) earnings per common share $ (0.22 ) $ 0.07   $ (0.64 ) $ (0.01 )
Basic weighted average shares outstanding 31,485,599   30,726,554   31,369,077   30,603,641  
Diluted weighted average shares outstanding 31,485,599   30,726,554   31,369,077   30,603,641  
 

*Business realignment expenses and impairment of long-lived assets
are included within the Other operating expense line item in the
Consolidated Statements of Operations.

Conference Call

The Company will host a conference call to discuss the third 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 54076495. 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 August 2, 2018 at 11:59 p.m. ET. An audio replay of the
teleconference will also be available until August 10, 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 54076495. 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.

We are not providing a reconciliation of our guidance for Non-GAAP
Adjusted EBITDA to our guidance for GAAP Net Loss because this
reconciliation would require us to make projections regarding the amount
of stock based compensation expense and benefit for income taxes, which
are reconciling items between net loss and Adjusted EBITDA, as well as
the impact of foreign currency fluctuations. These items will impact net
income and are out of our control and/or cannot be reasonably predicted
due to their high variability and complexity, and inherent uncertainty.
For example, equity compensation expense would be difficult to predict
because it depends on our future hiring and retention needs, as well as
the future fair market value of our common stock, all of which are
subject to constant change. As a result, the reconciliation is not
possible without unreasonable efforts. In addition, we believe such
reconciliations could imply a degree of precision that might be
confusing or misleading to investors. The actual effect of the
reconciling items that we exclude from Adjusted EBITDA, when determined,
may be significant to the calculation of GAAP Net Loss. As a result,
there can be no assurance that such reconciling items will not
materially affect our future GAAP Net Loss.

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; the Company’s proprietary e-commerce
marketplace platform; the migration of legacy marketplaces to the new
LiquidityOne platform; expected investments in sales teams; expected
investment in, benefits of and timing of completion of the LiquidityOne
transformation initiative; the pricing for services, and the pricing,
supply, and mix of inventory under the DoD Scrap Contract and Surplus
Contract; expected future commodity prices; expected future effective
tax rates; the timing of large client projects; and trends and
assumptions about future periods, including the fourth 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; business realignment costs related
to relocation of offices and facilities; 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 resources between running our business
and 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) 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.
The company employs innovative e-commerce marketplace solutions to
manage, value and sell inventory and equipment for business and
government clients. Our superior service, unmatched scale and ability to
deliver results enable us to forge trusted, long-term relationships with
over 10,000 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 and Subsidiaries
Unaudited
Consolidated Balance Sheets

(Dollars in Thousands)

         
June 30, 2017

September 30, 2016

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 113,935 $ 134,513

Accounts receivable, net of allowance for doubtful accounts of
$643 and $718
at June 30, 2017 and September 30, 2016,
respectively

11,621 10,355
Inventory 18,876 27,610
Tax refund receivable 378 1,205
Prepaid taxes 1,981 2,166

Prepaid expenses and other current assets ($0.9 million and $2.2
million measured at
fair value as of June 30, 2017 and
September 30, 2016, respectively)

7,891   9,063  
Total current assets 154,682 184,912
Property and equipment, net 16,689 14,376
Intangible assets, net 1,374 2,650
Goodwill 45,189 45,134
Deferred long-term tax assets 1,021 1,021
Other assets 12,611   12,016  
Total assets $ 231,566   $ 260,109  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 11,768 $ 9,732
Accrued expenses and other current liabilities 31,742 45,133
Distributions payable 9,930 1,722
Customer payables 23,931   28,901  
Total current liabilities 77,371 85,488
Deferred taxes and other long-term liabilities 10,642   12,010  
Total liabilities 88,013 97,498
Commitments and contingencies (Note 11)

 

 

Stockholders’ equity:

Common stock, $0.001 par value; 120,000,000 shares authorized;
31,485,857 shares
issued and outstanding at June 30, 2017;
30,742,662 shares issued and outstanding at
September 30, 2016

29 29
Additional paid-in capital 226,422 220,192
Accumulated other comprehensive loss (8,639 ) (8,571 )
Retained earnings (accumulated deficit) (74,259 ) (49,039 )
Total stockholders’ equity 143,553   162,611  
Total liabilities and stockholders’ equity $ 231,566   $ 260,109  
 
 

                   
 
 

Liquidity Services and Subsidiaries
Unaudited
Consolidated Statements of Operations

(Dollars in
Thousands, Except Per Share Data)

 

 
Three Months Ended June 30, Nine Months Ended June 30,
2017   2016 2017   2016
Revenue $ 44,404 $ 62,025 $ 144,799 $ 178,633
Fee revenue 21,116   23,163   63,851   59,308  
Total revenue 65,520 85,188 208,650 237,941
Costs and expenses:
Cost of goods sold (excluding amortization) 30,413 39,292 97,248 106,102
Client distributions 5,189 2,663 14,697 7,526
Technology and operations 19,639 22,541 62,607 70,026
Sales and marketing 8,273 9,967 27,410 28,575
General and administrative 8,751 9,042 26,836 29,576
Depreciation and amortization 1,365 1,616 4,228 4,948
Acquisition costs       39  
Total costs and expenses 73,630   85,121   233,026   246,792  
Other operating expense 652     1,044    
(Loss) income from operations (8,762 ) 67 (25,420 ) (8,851 )
Interest (income) expense and other expense, net (189 ) 208   (291 ) (242 )
Loss before provision (benefit) for income taxes (8,573 ) (141 ) (25,129 ) (8,609 )
Provision (benefit) for income taxes 41   (17 ) 91   (2,438 )
Net loss $ (8,614 ) $ (124 ) $ (25,220 ) $ (6,171 )
Basic and diluted loss per common share $ (0.27 ) $ 0.00   $ (0.80 ) $ (0.20 )
Basic and diluted weighted average shares outstanding 31,485,599   30,726,554   31,369,077   30,603,641  
 
 
 
 

Liquidity Services and Subsidiaries
Unaudited
Consolidated Statements of Cash Flows

(Dollars In
Thousands)

             
Nine Months Ended June 30,
2017     2016
Operating activities
Net loss $ (25,220 ) $ (6,171 )
Adjustments to reconcile net loss to net cash (used) provided by
operating activities:
Depreciation and amortization 4,228 4,948
Stock compensation expense 5,462 8,228
Provision for inventory allowance 8,101 2,052
Provision for doubtful accounts (1 ) 226
Deferred tax benefit (2,438 )
Incremental tax benefit from exercise of common stock options 138
Impairment of long-lived assets 1,028
Change in fair value of financial instruments (749 )
Changes in operating assets and liabilities:
Accounts receivable (1,274 ) (2,997 )
Inventory 633 (2,371 )
Prepaid and deferred taxes 1,356 33,938
Prepaid expenses and other assets 981 (1,919 )
Accounts payable 2,036 (988 )
Accrued expenses and other current liabilities (13,422 ) 7,907
Distributions payable 8,208 (998 )
Customer payables (4,971 ) (785 )
Other liabilities (662 ) (134 )
Net cash (used) provided by operating activities (14,266 ) 38,636
Investing activities
Increase in intangibles (78 ) (46 )
Purchases of property and equipment, including capitalized software (6,210 ) (4,587 )
Net cash used in investing activities (6,288 ) (4,633 )
Financing activities
Proceeds from exercise of common stock options (net of tax) 93
Incremental tax benefit from exercise of common stock options   (138 )
Net cash provided (used) by financing activities 93 (138 )
Effect of exchange rate differences on cash and cash equivalents (117 ) 535  
Net (decrease) increase in cash and cash equivalents (20,578 ) 34,400
Cash and cash equivalents at beginning of period 134,513   95,465  
Cash and cash equivalents at end of period $ 113,935   $ 129,865  
Supplemental disclosure of cash flow information
Cash paid (received) for income taxes, net $ (931 ) $ (34,001 )

Source: Liquidity Services

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