– Revenue of $59.3 million up 31% – Gross Merchandise Volume (GMV)
of $67.6 million up 27% – Adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) of $5.2 million up 27% –
WASHINGTON–(BUSINESS WIRE)–Feb. 7, 2008–Liquidity Services,
Inc. (NASDAQ:LQDT; www.liquidityservicesinc.com) today reported its
financial results for its fiscal first quarter ended December 31, 2007
(Q1-08). Liquidity Services, Inc. (LSI or the Company) is a leading
online auction marketplace for wholesale, surplus and salvage assets.
The Company reported record consolidated Q1-08 revenue of $59.3
million, a growth rate of approximately 31% over the prior year.
Adjusted EBITDA for Q1-08 was $5.2 million, a growth rate of
approximately 27% over the prior year. Q1-08 GMV, the total sales
volume of all merchandise sold through the Company’s marketplaces
during a given period, was a record $67.6 million, a growth rate of
approximately 27% over the prior year.
Net income in Q1-08 was $2.4 million or $0.08 diluted earnings per
share. Adjusted net income in Q1-08 was $3.0 million or $0.11 adjusted
diluted earnings per share.
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.
“Q1-08 was another strong quarter for LSI as our commercial
business and our scrap business with the Department of Defense (DoD)
posted impressive GMV gains,” said Bill Angrick, Chairman and CEO of
LSI. “Our performance during the first quarter fiscal year 2008
reflected continued progress as we generated approximately $7.3
million of operating cash flow and our commercial business GMV grew
approximately 41% over the prior year period and 13% sequentially. Our
scrap business, which grew GMV approximately 57% over the prior year
period and 49% sequentially, also contributed to strong results during
the first quarter. Despite stronger than expected GMV growth,
operating margins lagged during the quarter due to lower than expected
inventory turnover in our commercial business as we ramped up volume
with existing sellers in selected programs. We expect to gain further
efficiencies in this area of our business during FY08 through our
continued investments in marketing, account management and our planned
final integration of our Liquidation.com and Southerntextile.com
online marketplaces. Our business development activity remains strong,
exemplified by the closing of the GovDeals acquisition in January
2008, which strengthens our position in the state and local government
marketplace. We also continue to develop and test capabilities
designed to meet the long-term needs of our clients and to support a
much larger commercial business. Our buyer marketplace continues to
deliver strong results for our sellers as the number of auction
participants increased 31% over the prior period and we again averaged
over 5 auction participants per completed transaction during the first
quarter.”
Business Outlook
The following forward-looking statements are based on current
business trends and our current operating environment, including (i)
an increased volume of apparel in our product mix which is anticipated
to carry lower margins, (ii) continued less than optimal inventory
turnover within our commercial marketplace during the next quarter as
we ramp up volume with existing commercial sellers (iii) increased
spending in sales and marketing and (iv) our belief that we have yet
to realize the full potential of our distribution center network,
personnel, and value-added services necessary to support a much larger
commercial business in the future, which has resulted in less than our
target profitability. 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 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 2008 that we
will again receive this incentive payment.
Under our Surplus contract there are incentive features that allow
us to earn up to an additional 4.5% of the profit sharing distribution
above our base rate of 26%. This incentive will be measured quarterly
during fiscal year 2008. For the purposes of providing guidance
regarding our projected financial results for the second quarter and
fiscal year 2008, we have assumed that we will receive a portion of
the Surplus contract incentive payments.
Our guidance adjusts EBITDA and Diluted EPS for the effects of the
adoption of FAS 123(R), which we estimate to be approximately $1.2
million to $1.4 million per quarter for the remaining three quarters
of fiscal year 2008.
GMV – We expect GMV for fiscal year 2008 to range from $320
million to $330 million, which is an increase from the $285 million to
$295 million range provided last quarter, as a result of the GovDeals
acquisition. We expect GMV for Q2-08 to range from $78 million to $80
million.
Adjusted EBITDA – We expect Adjusted EBITDA for fiscal year 2008
to range from $24.5 million to $25.5 million. We expect Adjusted
EBITDA for Q2-08 to range from $5.2 million to $5.4 million.
Adjusted Diluted EPS – We estimate Adjusted Earnings Per Diluted
Share for fiscal year 2008 to range from $0.51 to $0.53. In Q2-08, we
estimate Adjusted Earnings Per Diluted Share to be $0.11.
Key Q1-08 Operating Metrics
Registered Buyers — At the end of Q1-08, registered buyers
totaled approximately 724,000, representing a 28% increase over the
approximately 565,000 registered buyers at the end of Q1-07.
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 a record 323,000 in Q1-08, an approximately 31% increase
over the approximately 247,000 auction participants in Q1-07.
Completed Transactions — Completed transactions increased to a
record 63,000, an approximately 29% increase for Q1-08 from the
approximately 49,000 completed transactions in Q1-07.
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) during Q1-08 decreased to 25.9% and 29.6%,
respectively, compared to 34.7% and 40.9%, respectively, in the prior
year period. The percentage of GMV and revenue derived from our
commercial business, during Q1-08, increased to 42.1% and 32.4%,
respectively, from 37.8% and 25.1%, respectively, in the prior year
period. The table below summarizes GMV and revenue from our two
significant contracts with the DoD (Surplus and Scrap), and our
commercial and international businesses.
GMV Mix
----------------------------------------------------------
Q1-08 Q1-07
--------------------
Profit-Sharing Model:
Surplus 25.9% 34.7%
Scrap 29.2% 23.5%
--------------------
Total Profit Sharing 55.1% 58.2%
Commercial Marketplaces:
Consignment Model 18.7% 23.5%
Purchase Model 23.4% 14.3%
--------------------
Total Commercial Marketplaces 42.1% 37.8%
International and Other 2.8% 4.0%
--------------------
Total 100.0% 100.0%
====================
Revenue Mix
----------------------------------------------------------
Q1-08 Q1-07
--------------------
Profit-Sharing Model:
Surplus 29.6% 40.9%
Scrap 33.2% 27.7%
--------------------
Total Profit Sharing 62.8% 68.6%
Commercial Marketplaces:
Consignment Model 5.8% 8.2%
Purchase Model 26.6% 16.9%
--------------------
Total Commercial Marketplaces 32.4% 25.1%
International and Other 4.8% 6.3%
--------------------
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,
------------------
2007 2006
-------- --------
(In thousands)
(Unaudited)
Net income $ 2,363 $ 2,313
Interest expense (income) and other expense
(income), net (488) (598)
Provision for income taxes 1,642 1,542
Amortization of contract intangibles 203 203
Depreciation and amortization 388 273
-------- --------
EBITDA 4,108 3,733
Stock compensation expense 1,111 364
-------- --------
Adjusted EBITDA $ 5,219 $ 4,097
======== ========
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,
-----------------------
2007 2006
-----------------------
(Dollars in thousands,
except per share data)
(Unaudited)
Net income $ 2,363 $ 2,313
Stock compensation expense (net of tax) 656 219
----------- -----------
Adjusted net income $ 3,019 $ 2,532
=========== ===========
Adjusted basic earnings per common share $ .11 $ .09
=========== ===========
Adjusted diluted earnings per common share $ .11 $ .09
=========== ===========
Basic weighted average shares outstanding 27,944,139 27,597,419
=========== ===========
Diluted weighted average shares outstanding 28,107,692 28,449,429
=========== ===========
Conference Call
The Company will host a conference call to discuss the fiscal
first quarter 2008 results at 5 p.m. Eastern Time today. Investors and
other interested parties may access the teleconference by dialing
(866) 510-0712 or (617) 597-5380 and providing the participant pass
code 18244084. A live web cast of the conference call will 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 until March 7, 2008 at 11:59 p.m.
ET. An audio replay of the teleconference will also be available until
March 7, 2008 at 11:59 p.m. ET. To listen to the replay, dial (888)
286-8010 or (617) 801-6888 and provide pass code 23585154. Both
replays will be available starting at 7:00 p.m. 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 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. 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. 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, one
of which currently expires in June; our ability to successfully expand
the supply of merchandise available for sale on our online
marketplaces; and our ability to attract and retain active
professional buyers to purchase this merchandise. 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 LSI
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, www.govdeals.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.
Liquidity Services, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
December 31, September 30,
2007 2007
------------ -------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 46,523 $ 39,954
Short-term investments 21,840 21,655
Accounts receivable, net of allowance for
doubtful accounts of $399 and $371 at
December 31, 2007 and September 30,
2007, respectively 2,646 5,098
Inventory 17,563 16,467
Prepaid expenses and other current assets 5,587 5,486
------------ -------------
Total current assets 94,159 88,660
Property and equipment, net 4,205 4,202
Intangible assets, net 4,336 4,568
Goodwill 11,446 11,446
Other assets 2,440 2,266
------------ -------------
Total assets $ 116,586 $ 111,142
============ =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 4,843 $ 3,333
Accrued expenses and other current
liabilities 6,718 10,298
Profit-sharing distributions payable 10,093 6,919
Customer payables 7,293 6,328
Current portion of capital lease
obligations 4 5
Current portion of long-term debt -- 13
------------ -------------
Total current liabilities 28,951 26,898
Capital lease obligations, net of current
portion 4 5
Long-term debt, net of current portion -- 29
Other long-term liabilities 2,212 2,176
------------ -------------
Total liabilities 31,167 29,108
Stockholders' equity:
Common stock, $0.001 par value;
120,000,000 shares authorized;
27,948,948 and 27,939,059 shares issued
and outstanding at December 31, 2007 and
September 30, 2007, respectively 28 28
Additional paid-in capital 61,982 60,820
Accumulated other comprehensive income 513 653
Retained earnings 22,896 20,533
------------ -------------
Total stockholders' equity 85,419 82,034
------------ -------------
Total liabilities and stockholders' equity $ 116,586 $ 111,142
============ =============
Liquidity Services, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Data)
Three Months Ended
December 31,
-------------------------
2007 2006
------------ ------------
Revenue $ 59,266 $ 45,167
Costs and expenses:
Cost of goods sold (excluding
amortization) 15,403 8,462
Profit-sharing distributions 20,806 18,729
Technology and operations 9,977 7,843
Sales and marketing 4,133 2,964
General and administrative 4,839 3,436
Amortization of contract intangibles 203 203
Depreciation and amortization 388 273
----------- -----------
Total costs and expenses 55,749 41,910
----------- -----------
Income from operations 3,517 3,257
Interest income and other income, net 488 598
----------- -----------
Income before provision for income taxes 4,005 3,855
Provision for income taxes (1,642) (1,542)
----------- -----------
Net income $ 2,363 $ 2,313
=========== ===========
Basic earnings per common share $ 0.08 $ 0.08
=========== ===========
Diluted earnings per common share $ 0.08 $ 0.08
=========== ===========
Basic weighted average shares outstanding 27,944,139 27,597,419
=========== ===========
Diluted weighted average shares outstanding 28,107,692 28,449,429
=========== ===========
Liquidity Services, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(In Thousands)
Three Months Ended
December 31,
-------------------
2007 2006
--------- ---------
Operating activities
Net income $ 2,363 $ 2,313
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 591 476
Stock compensation expense 1,111 364
Provision for doubtful accounts 28 --
Loss (gain) on disposal of property and
equipment 4 (4)
Changes in operating assets and liabilities:
Accounts receivable 2,423 818
Inventory (1,096) (2,731)
Prepaid expenses and other assets (274) (1,173)
Accounts payable 1,510 1,875
Accrued expenses and other (3,581) (1,187)
Profit-sharing distributions payable 3,174 450
Customer payables 965 646
Other liabilities 36 885
-------- --------
Net cash provided by operating activities 7,254 2,732
Investing activities
Purchases of short-term investments (6,336) (10,332)
Proceeds from the sale of short-term investments 6,129 6,907
Proceeds from the sale of property and equipment -- 4
Increase in goodwill and intangibles (12) (7)
Cash paid for acquisitions -- (10,232)
Purchases of property and equipment (353) (807)
-------- --------
Net cash used in investing activities (572) (14,467)
Financing activities
Principal repayments of capital lease obligations
and debt (44) (55)
Proceeds from exercise of common stock options and
warrants (net of tax) 49 150
Incremental tax benefit from exercise of common
stock options -- 123
-------- --------
Net cash provided by financing activities 5 218
Effect of exchange rate differences on cash and
cash equivalents (118) 129
-------- --------
Net increase (decrease) in cash and cash
equivalents 6,569 (11,388)
Cash and cash equivalents at beginning of period 39,954 54,359
-------- --------
Cash and cash equivalents at end of period $ 46,523 $ 42,971
======== ========
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 2,511 $ 1,143
Cash paid for interest $ 1 $ 2
CONTACT: Liquidity Services, Inc.
Julie Davis
Director, Investor Relations
202-467-6868 ext. 2234
[email protected]
SOURCE: Liquidity Services, Inc.
Comments are closed.