Revenue of $45.2 Million up 40% – Gross Merchandise Volume (GMV)
of $53.2 Million up 45% – Adjusted Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA) of $4.1 Million up 29%
WASHINGTON–(BUSINESS WIRE)–Feb. 7, 2007–Liquidity Services,
Inc. (NASDAQ: LQDT; www.liquidityservicesinc.com) today reported its
financial results for its fiscal first quarter ended December 31, 2006
(Q1-07). Liquidity Services, Inc. is a leading online auction
marketplace for wholesale, surplus and salvage assets.
Liquidity Services, Inc. (LSI or the Company) reported record
consolidated Q1-07 revenue of $45.2 million, representing a growth
rate of approximately 40% when compared to the prior year’s comparable
period; and record adjusted EBITDA of $4.1 million, representing a
growth rate of approximately 29% when compared to the prior year’s
comparable period. LSI also reported record GMV of $53.2 million for
Q1-07, representing a growth rate of approximately 45% when compared
to the prior year’s comparable period. GMV is the total sales volume
of all merchandise sold through our marketplaces during a given
period.
Net income in Q1-07 was $2.3 million or $0.08 diluted earnings per
share. Adjusted net income in Q1-07 was $2.5 million or $0.09 adjusted
diluted earnings per share, up 50% when compared to the prior year’s
comparable period.
LSI enables buyers and sellers to transact in an efficient,
automated online auction environment. The Company’s marketplaces
provide professional buyers access to a global, organized supply of
wholesale, surplus and salvage assets presented with digital images
and other relevant product information. Additionally, LSI enables its
corporate and government sellers to enhance their financial return on
excess assets by providing a liquid marketplace and value-added
services that are integrated into a single offering. The Company
organizes its products into categories across major industry verticals
such as consumer electronics, general merchandise, apparel, scientific
equipment, aerospace parts and equipment, technology hardware, and
scrap metals. The Company’s online auction marketplaces are
www.liquidation.com, www.govliquidation.com and www.liquibiz.com. LSI
also operates a wholesale industry portal, www.goWholesale.com, that
connects advertisers with buyers seeking products for resale and
related business services.
The Company’s ability to create liquid marketplaces for wholesale,
surplus and salvage assets generates a continuous flow of goods from
its corporate and government sellers. This flow of goods in turn
attracts an increasing number of professional buyers to the
marketplaces.
“Q1 was another strong quarter for LSI as corporate and government
sellers continued to leverage our online platform and integrated
services to sell goods in the reverse supply chain,” said Bill
Angrick, Chairman and CEO of LSI. “Our performance during the quarter
reflected solid execution of our business strategy as our commercial
business grew approximately 156% over the prior year period and 72%
sequentially from Q4-06. Our scrap business with the Department of
Defense (DoD), which grew approximately 80% over the prior year
period, also contributed to strong growth in GMV and Adjusted EBITDA
during the quarter. We believe Q1-07 results demonstrate that
corporations and government agencies are increasingly relying on our
online platform and service offerings to realize greater returns and
efficiencies in the tracking and sale of surplus and salvage assets.”
Business Outlook
The following forward-looking statements are based on current
business trends and our current operating environment, including (i)
the reengineering of certain business and inventory processes in our
Surplus business with the Department of Defense (DoD); (ii) the fact
that we have yet to realize the full potential of our new distribution
center operations where we have made significant upfront investments
in personnel, processes, equipment, and new value added services to
support a much larger commercial business in the future; and (iii) the
acquisition of STR, Inc., which closed on October 16, 2006. Our
results may be materially affected by changes in business trends and
our operating environment, as well as by other factors, including
investments we expect to make in our infrastructure and value-added
services to support new business in both commercial and public sector
markets.
Our Scrap contract with the DoD includes an incentive feature,
which can increase the amount of profit sharing distribution we
receive from 20% up to 22%. 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.
Therefore, we will record this benefit, to the extent achieved for the
12 months ended June 30, 2007, in the quarter ended June 30, 2007. We
are eligible to receive this incentive in each year of the term of the
Scrap contract. For the purposes of providing guidance regarding our
projected financial results for fiscal year 2007, we have assumed that
we will receive this incentive in the quarter ended June 30, 2007. In
addition, there are incentive features in our Surplus contract that
allow us to earn up to an additional 5.5% of the profit sharing
distribution above our new base rate of 25%, which began December 1,
2006. For the purposes of providing guidance regarding our projected
financial results for fiscal year 2007, we have assumed that we will
not receive any of the Surplus contract incentive payments , as the
period we would be eligible to record such incentive may not occur
until the fourth quarter of Fiscal Year 2007 or the first quarter of
Fiscal Year 2008.
Our guidance adjusts EBITDA and Diluted EPS for the effects of the
adoption of FAS 123R, which we estimate to be approximately $525,000
to $575,000 for each of the remaining quarters in fiscal year 2007.
GMV – We expect GMV for FY2007 to range from $220 million to $225
million. We expect GMV for Q2-07 to range from $50 million to $52
million.
Adjusted EBITDA – We expect Adjusted EBITDA for FY2007 to range
from $19 million to $20 million. We expect Adjusted EBITDA for Q2-07
to range from $4.0 million to $4.2 million.
Adjusted Diluted EPS – We estimate Adjusted Earnings Per Diluted
Share for FY2007 to range from $0.40 to $0.42. In Q2-07, we estimate
Adjusted Earnings Per Diluted Share to be approximately $0.09.
Key Q1-07 Operating Metrics
Registered Buyers — At the end of Q1-07, registered buyers
totaled approximately 565,000, representing a 36% increase over the
approximately 415,000 registered buyers at the end of Q1-06.
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 247,000 in Q1-07, an approximately 10%
increase over the approximately 225,000 auction participants in Q1-06.
Completed Transactions — Completed transactions increased to
approximately 49,000, an approximately 4% increase for Q1-07 from the
approximately 47,000 completed transactions in Q1-06. In addition, we
experienced a 40.0% increase in the average value of our transactions,
over the same period, resulting from product mix, lotting and
merchandising strategies, and buyer demand.
GMV and Revenue Mix — GMV and revenue continue to diversify due
to the continued rapid growth in our commercial and scrap businesses.
As a result, the percentage of GMV and revenue derived from the DoD
Surplus Contract (under which our revenue is based on the
profit-sharing model) has decreased to 34.7% and 40.9%, respectively,
versus 56.4% and 64.3%, respectively, in the prior year period. GMV
and revenue derived from our commercial marketplaces business, which
includes the acquired STR business and our Liquidation.com
marketplace, increased to 37.8% and 25.1%, respectively, from 21.4%
and 8.1%, respectively, in the prior year period. The table below
summarizes the GMV and revenue from the Company’s two significant
contracts with the DoD (Surplus and Scrap), and our commercial and
international businesses.
GMV Mix
----------------------------------------------------------------------
Q1-07 Q1-06
------------------
Profit-Sharing Model:
Surplus 34.7% 56.4%
Scrap 23.5% 19.0%
------------------
Total Profit Sharing 58.2% 75.4%
Commercial Marketplaces:
Consignment Model 23.5% 19.3%
Purchase Model 14.3% 2.1%
------------------
Total Commercial Marketplaces 37.8% 21.4%
International and Other 4.0% 3.2%
------------------
Total 100.0% 100.0%
==================
Revenue Mix
----------------------------------------------------------------------
Q1-07 Q1-06
------------------
Profit-Sharing Model:
Surplus 40.9% 64.3%
Scrap 27.7% 21.6%
------------------
Total Profit Sharing 68.6% 85.9%
Commercial Marketplaces:
Consignment Model 8.2% 5.7%
Purchase Model 16.9% 2.4%
------------------
Total Commercial Marketplaces 25.1% 8.1%
International and Other 6.3% 6.0%
------------------
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 (a) interest income
and expense and other income, net; (b) provision for income taxes; (c)
amortization of contract intangibles; and (d) depreciation and
amortization. Our definition of Adjusted EBITDA differs from EBITDA
because we further adjust EBITDA for stock compensation expense.
Three months Ended
December 31,
------------------
2006 2005
--------- --------
(In thousands)
(Unaudited)
Net income $ 2,313 $ 1,468
Interest (income) expense and other income, net (598) 363
Provision for income taxes 1,542 979
Amortization of contract intangibles 203 203
Depreciation and amortization 273 153
--------- --------
EBITDA 3,733 3,166
Stock compensation expense 364 9
--------- --------
Adjusted EBITDA $ 4,097 $ 3,175
========= ========
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. Adjusted basic and diluted earnings per share
are determined using Adjusted Net Income.
Three Months Ended
December 31,
-------------------------
2006 2005
-------------------------
(Dollars in thousands,
except per share data)
(Unaudited)
Net income $ 2,313 $ 1,468
Stock compensation expense (net of tax) 219 5
------------ ------------
Adjusted net income $ 2,532 $ 1,473
============ ============
Adjusted basic earnings per common share $ .09 $ .08
============ ============
Adjusted diluted earnings per common share $ .09 $ .06
============ ============
Basic weighted average shares outstanding 27,597,419 19,034,172
============ ============
Diluted weighted average shares outstanding 28,449,429 22,848,367
============ ============
Conference Call
The Company will host a conference call to discuss the fiscal
first quarter 2007 results at 5 p.m. Eastern Time today. Investors and
other interested parties may access the teleconference by dialing
(800) 901-5248 or (617) 786-4512 and providing the participant pass
code 93989208. A live web cast of the conference call will also be
provided on the Company’s investor relations website at
http://www.liquidityservicesinc.com. A replay of the web cast will be
available on the Company’s website for 30 calendar days ending March
9, 2007 at 11:59 p.m. ET. An audio replay of the teleconference will
also be available until March 9, 2007 at 11:59 p.m. ET. To listen to
the replay, dial (888) 286-8010 or (617) 801-6888 and provide pass
code 14270194. Both replays will be available starting at 7:00 p.m. on
February 7.
Non-GAAP Measures
To supplement the Company’s 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 and 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 because the
measures 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 non-GAAP measures included in this press release, to the most
directly comparable GAAP measures, can 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. LSI reviews
GMV because it provides a measure of the volume of goods being sold in
its marketplaces and thus the activity of those marketplaces. GMV and
our other supplemental operating data, 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 LSI
has 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. 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. 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.
Liquidity Services, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands)
December 31, September 30,
------------ -------------
2006 2006
------------ -------------
Assets (Unaudited)
Current assets:
Cash, cash equivalents and short-term
investments $ 58,659 $ 66,647
Other current assets 13,424 9,264
------------ -------------
Total current assets 72,083 75,911
Property and equipment, net 3,325 2,362
Intangible assets and goodwill, net 16,533 8,587
Other assets 1,882 1,178
------------ -------------
Total assets $ 93,823 $ 88,038
============ =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable, accrued expenses and
other $ 8,076 $ 7,356
Profit-sharing distributions payable 8,185 7,736
Consignment payables 7,379 6,658
Current portion of capital lease
obligations and long-term debt 30 79
------------ -------------
Total current liabilities 23,670 21,829
Long-term liabilities, net of current
portion 1,337 457
------------ -------------
Total liabilities 25,007 22,286
Stockholders' equity 68,816 65,752
------------ -------------
Total liabilities and stockholders'
equity $ 93,823 $ 88,038
============ =============
Liquidity Services, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Data)
Three Months Ended December 31,
-------------------------------
2006 2005
---------------- --------------
Revenue $ 45,167 $ 32,207
Costs and expenses:
Cost of goods sold (excluding
amortization) 8,462 2,367
Profit-sharing distributions 18,729 18,170
Technology and operations 7,843 4,055
Sales and marketing 2,964 1,816
General and administrative 3,436 2,633
Amortization of contract intangibles 203 203
Depreciation and amortization 273 153
---------------- --------------
Total costs and expenses 41,910 29,397
---------------- --------------
Income from operations 3,257 2,810
Interest income and (expense) and other
income, net 598 (363)
---------------- --------------
Income before provision for income
taxes 3,855 2,447
Provision for income taxes (1,542) (979)
---------------- --------------
Net income $ 2,313 $ 1,468
================ ==============
Basic earnings per common share $ .08 $ .08
================ ==============
Diluted earnings per common share $ .08 $ .06
================ ==============
Basic weighted average shares
outstanding 27,597,419 19,034,172
================ ==============
Diluted weighted average shares
outstanding 28,449,429 22,848,367
================ ==============
CONTACT: Liquidity Services, Inc.
Julie Davis, 202-467-6868 ext. 234
[email protected]
SOURCE: Liquidity Services, Inc.
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