Press Releases
Aug 19

Liquidity Services, Inc. Announces First Quarter Fiscal Year 2013 Financial Results

– First quarter revenue of $122.2 million up 15% – Gross Merchandise
Volume (GMV) of $233.4 million up 30% – Adjusted Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA) of $24.2 million
up 6% – Adjusted EPS of $0.41 up 11% –

WASHINGTON–(BUSINESS WIRE)–Jan. 31, 2013–
Liquidity Services, Inc. (NASDAQ: LQDT; www.liquidityservicesinc.com)
today reported its financial results for its first quarter of fiscal
year 2013 (Q1-13) ended December 31, 2012. Liquidity Services, Inc.
provides business and government clients and buying customers
transparent, innovative and effective online marketplaces and integrated
services for surplus assets.

Liquidity Services, Inc. (Liquidity Services or the Company) reported
consolidated Q1-13 revenue of $122.2 million, an increase of
approximately 15% from the prior year’s comparable period. Adjusted
EBITDA, which excludes stock based compensation and acquisition costs
including changes in acquisition earn out payment estimates, for Q1-13
was $24.2 million, an increase of approximately 6% from the prior year’s
comparable period. Q1-13 GMV, the total sales volume of all merchandise
sold through the Company’s marketplaces, was $233.4 million, an increase
of approximately 30% from the prior year’s comparable period.

Net income in Q1-13 was $6.7 million or $0.20 diluted earnings per
share. Adjusted net income, which excludes stock based compensation,
acquisition costs including changes in acquisition earn out payment
estimates and amortization of contract-related intangible assets
associated with the Jacobs Trading acquisition – net of tax, in Q1-13
was $13.6 million or $0.41 adjusted diluted earnings per share based on
33.1 million fully diluted shares outstanding, an increase of
approximately 15% and 11%, respectively, from the prior year’s
comparable period.

“Liquidity Services generated strong adjusted EBITDA and EPS results
during Q1-FY13 as we expanded margins in our core business due to
operating leverage and as we continued to benefit from large commercial
and government clients placing their trust in us to handle more of their
excess inventory and high value capital asset sales,” said Bill Angrick,
Chairman and CEO of Liquidity Services. “We remain focused on executing
our long term growth strategy to achieve $2 billion in GMV by fiscal
year 2016. During the quarter, we continued to advance our multi-year
investment efforts in upgrading our ecommerce platform, investing in our
sales and marketing organization and integrating our recent acquisitions
of NESA and GoIndustry which have expanded our operations to Canada,
Europe and the Asia Pacific regions. While the pace of integrating our
GoIndustry acquisition is currently slower than expected and will
require more investment, particularly in the Asia Pacific region, our
expanded breadth of services, industry expertise and geographic coverage
has been well received by our clients and has strengthened our
competitive position in the reverse supply chain market. We believe
these important investments uniquely address the client needs of Fortune
500 retailers, manufacturers and public sector agencies and position us
well for long term profitable growth and market leadership.”

Business Outlook

While economic conditions have improved, our overall outlook remains
cautious due to the volatility in the macro environment including
instability arising from the fiscal cliff and debt ceiling negotiations
and their potential impact on the retail and industrial supply chains
and GDP growth. Additionally, we plan to further invest in our
technology infrastructure and product roadmap to support further
expansion and integration of our existing and recently acquired
businesses and online marketplaces. In the longer term, we expect our
business to continue to benefit from the following trends: (i) as
consumers trade down and seek greater value, we anticipate stronger
buyer demand for the surplus merchandise sold in our marketplaces, (ii)
as corporations and public sector agencies focus on reducing costs,
improving transparency and working capital flows by outsourcing reverse
supply chain activities, we expect our seller base to increase, and
(iii) as corporations and public sector agencies increasingly prefer
service providers with a proven track record, innovative technology
solutions and demonstrated financial strength, we expect our seller base
to increase.

The following forward looking statements reflect trends and assumptions
for the next quarter and FY 2013:

      (i)       stable commodity prices in our scrap business;
(ii) stable average sales prices realized in our capital assets
marketplaces;
(iii)

an effective income tax rate of 40%; and

(iv) improved operations and service levels in our retail goods
marketplaces.
 

Our Scrap Contract with the Department of Defense (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 2013 that we will again receive this incentive payment.

In addition, our guidance has been adjusted to reflect:

      (1)   Reduced GMV and earnings versus our previous expectation from our
GoIndustry business as we implement restructuring initiatives and
investments totaling several million dollars, to fully integrate
GoIndustry into Liquidity Services. This is a change in our
expectation for GoIndustry operations from our previous fiscal year
2013 guidance. We believe this investment is required to fully
realize the synergies available across the Company’s buyer
marketplaces and clients and to position us for profitable growth
and market leadership within the $100 billion global market for
capital assets; and
 
(2) Reduced GMV versus our previous expectation from our Liquidation.com
marketplace due to lower than expected product flows from existing
clients and slower than expected ramp-up in product flows from new
clients and programs. We anticipate normalized flows from new
clients and programs sometime during the third and the fourth
quarter of FY13.
 

GMV – We expect GMV for fiscal year 2013 to
range from $1.025 billion to $1.1 billion, which is a decrease from our
previous guidance range of $1.1 billion to $1.2 billion. We expect GMV
for Q2-13 to range from $250 million to $275 million.

Adjusted EBITDA – We expect Adjusted EBITDA
for fiscal year 2013 to range from $115 million to $121 million, which
is a decrease from our previous guidance of $123 million to $133
million. We expect Adjusted EBITDA for Q2-13 to range from $28.0 million
to $30.0 million.

Adjusted Diluted EPS – We estimate Adjusted
Earnings Per Diluted Share for fiscal year 2013 to range from $1.90 to
$2.02, which is a decrease from our previous guidance of $2.05 to $2.23.
In Q2-13, we estimate Adjusted Earnings Per Diluted Share to be $0.46 to
$0.50. This guidance assumes that we have an average fully diluted
number of shares outstanding for the year of 33.4 million, and that we
will not repurchase shares with the approximately $18.1 million yet to
be expended under the share repurchase program.

Our guidance adjusts EBITDA and Diluted EPS for (i) acquisition costs
including transaction costs and changes in earn out estimates; (ii)
amortization of contract related intangible assets of $33.3 million from
our acquisition of Jacobs Trading; and (iii) for stock based
compensation costs, which we estimate to be approximately $3.0 million
to $3.5 million per quarter for fiscal year 2013. These stock based
compensation costs are consistent with fiscal year 2012.

Key Q1-13 Operating Metrics

Registered Buyers — At the end of Q1-13,
registered buyers totaled approximately 2,240,000, representing a 36%
increase over the approximately 1,641,000 registered buyers at the end
of Q1-12.

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 566,000 in Q1-13, an approximately 29%
increase over the approximately 438,000 auction participants in Q1-12.

Completed Transactions — Completed
transactions increased to approximately 129,000, an approximately 21%
increase for Q1-13 from the approximately 107,000 completed transactions
in Q1-12.

GMV and Revenue Mix — GMV continues to
diversify due to the continued growth in our commercial business and
state and local government business (the GovDeals.com marketplace). As a
result, the percentage of GMV derived from our DoD Contracts during
Q1-13 decreased to 21.0% compared to 28.2% in the prior year period. The
table below summarizes GMV and revenue by pricing model.

 

GMV Mix

        Q1-13       Q1-12
Profit-Sharing Model:      
Scrap Contract 6.6 %       11.8 %
Total Profit Sharing 6.6 % 11.8 %
Consignment Model:
GovDeals 12.6 % 13.9 %
Commercial 45.0 %       31.5 %
Total Consignment 57.6 % 45.4 %
Purchase Model:
Commercial 21.4 % 26.4 %
Surplus Contract 14.4 %       16.4 %
Total Purchase 35.8 % 42.8 %
         
Total 100.0 %       100.0 %
 

Revenue Mix

Q1-13       Q1-12
Profit-Sharing Model:
Scrap Contract 12.5 %       20.0 %
Total Profit Sharing 12.5 % 20.0 %
Consignment Model:
GovDeals 2.4 % 2.3 %
Commercial 12.3 %       7.0 %
Total Consignment 14.7 % 9.3 %
Purchase Model:
Commercial 42.9 % 44.6 %
Surplus Contract 27.5 %       26.1 %
Total Purchase 70.4 % 70.7 %
 
Other 2.4 %        
Total 100.0 %       100.0 %
 

Liquidity Services, Inc.
Reconciliation
of GAAP to Non-GAAP Measures

EBITDA and Adjusted EBITDA. EBITDA
is a supplemental non-GAAP financial measure and is equal to net income
plus interest expense and other (income) expense, net; provision for
income taxes; amortization of contract intangibles; and depreciation and
amortization. Our definition of Adjusted EBITDA differs from EBITDA
because we further adjust EBITDA for stock based compensation expense,
and acquisition costs including changes in earn out estimates.

         
Three Months
Ended December 31,
2012     2011
(In thousands)
(Unaudited)
Net income $ 6,709 $ 9,126
Interest expense and other (income) expense, net (924 ) 525
Provision for income taxes 4,472 6,609
Amortization of contract intangibles 2,210 2,020
Depreciation and amortization   1,987   1,526
 
EBITDA 14,454 19,806
Stock compensation expense 4,367 2,625
Acquisition costs   5,376   318
 
Adjusted EBITDA $ 24,197 $ 22,749
 

Adjusted Net Income and Adjusted Basic and Diluted
Earnings Per Share
. Adjusted net income is a supplemental
non-GAAP financial measure and is equal to net income plus tax effected
stock compensation expense, amortization of contract-related intangible
assets associated with the Jacobs Trading acquisition and acquisition
costs including changes in earn out estimates. Adjusted basic and
diluted earnings per share are determined using Adjusted Net Income.

     
Three Months Ended
December 31,
2012     2011

(Dollars in thousands,

except per share data)

(Unaudited)
Net income $ 6,709     $ 9,126
Stock compensation expense (net of tax) 2,620 1,523
Amortization of contract intangibles (net of tax) 1,090 1,054
Acquisition costs (net of tax)   3,226   184
 
Adjusted net income $ 13,645 $ 11,887
 
Adjusted basic earnings per common share $ 0.43 $ 0.39
 
Adjusted diluted earnings per common share $ 0.41 $ 0.37
 
Basic weighted average shares outstanding   31,482,853   30,393,309
 
Diluted weighted average shares outstanding   33,054,264   32,382,518
 

Conference Call

The Company will host a conference call to discuss fiscal first quarter
2013 results at 10:30 a.m. Eastern Time today. Investors and other
interested parties may access the teleconference by dialing 866-713-8567
or 617-597-5326 and providing the participant pass code 55758425. 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 for
30 calendar days ending March 2, 2013 at 11:59 p.m. ET. An audio replay
of the teleconference will also be available until March 2, 2013 at
11:59 p.m. ET. To listen to the replay, dial 888-286-8010 or
617-801-6888 and provide pass code 36221612. Both replays will be
available starting at 12:30 p.m. today.

Non-GAAP Measures

To supplement our consolidated financial statements presented in
accordance with GAAP, we use certain non-GAAP measures of certain
components of financial performance. These non-GAAP measures include
earnings before interest, taxes, depreciation and amortization (EBITDA),
Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share.
These non-GAAP measures are provided to enhance investors’ overall
understanding of our current financial performance and prospects for the
future. We use EBITDA and Adjusted EBITDA: (a) as measurements of
operating performance because they assist us in comparing our operating
performance on a consistent basis as they do not reflect the impact of
items not directly resulting from our core operations; (b) for planning
purposes, including the preparation of our internal annual operating
budget; (c) to allocate resources to enhance the financial performance
of our business; (d) to evaluate the effectiveness of our operational
strategies; and (e) to evaluate our capacity to fund capital
expenditures and expand our business.

We believe these non-GAAP measures provide useful information to both
management and investors by excluding certain expenses that may not be
indicative of our core operating measures. In addition, because we have
historically reported certain non-GAAP measures to investors, we believe
the inclusion of non-GAAP measures provides consistency in our financial
reporting. These measures should be considered in addition to financial
information prepared in accordance with generally accepted accounting
principles, but should not be considered a substitute for, or superior
to, GAAP results. A reconciliation of all historical non-GAAP measures
included in this press release, to the most directly comparable GAAP
measures, may be found in the financial tables included in this press
release.

Supplemental Operating Data

To supplement our consolidated financial statements presented in
accordance with GAAP, we use certain supplemental operating data as a
measure of certain components of operating performance. We review GMV
because it provides a measure of the volume of goods being sold in our
marketplaces and thus the activity of those marketplaces. GMV and our
other supplemental operating data, including registered buyers, auction
participants and completed transactions, also provide a means to
evaluate the effectiveness of investments that we have made and continue
to make in the areas of customer support, value-added services, product
development, sales and marketing and operations. Therefore, we believe
this supplemental operating data provides useful information to both
management and investors. In addition, because we have historically
reported certain supplemental operating data to investors, we believe
the inclusion of this supplemental operating data provides consistency
in our financial reporting. This data should be considered in addition
to financial information prepared in accordance with generally accepted
accounting principles, but should not be considered a substitute for, or
superior to, GAAP results.

Forward-Looking Statements

This document contains forward-looking statements made pursuant to the
Private Securities Litigation Reform Act of 1995. These statements are
only predictions. The outcome of the events described in these
forward-looking statements is subject to known and unknown risks,
uncertainties and other factors that may cause our actual results,
levels of activity, performance or achievements to differ materially
from any future results, levels of activity, performance or achievements
expressed or implied by these forward-looking statements. These
statements include, but are not limited to, statements regarding the
Company’s business outlook and expected future effective tax rates. You
can identify forward-looking statements by terminology such as “may,”
“will,” “should,” “could,” “would,” “expects,” “intends,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential,”
“continues” or the negative of these terms or other comparable
terminology. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements.

There are a number of risks and uncertainties that could cause our
actual results to differ materially from the forward-looking statements
contained in this document. Important factors that could cause our
actual results to differ materially from those expressed as
forward-looking statements are set forth in our filings with the SEC
from time to time, and include, among others, our dependence on our
contracts with the DoD and Walmart for a significant portion of our
revenue and profitability; our ability to successfully expand the supply
of merchandise available for sale on our online marketplaces; our
ability to attract and retain active professional buyers to purchase
this merchandise; the timing and success of upgrades to our technology
infrastructure; our ability to successfully complete the integration of
any acquired companies, including NESA, Go-Industry, Jacobs Trading and
Truckcenter.com, into our existing operations and our ability to realize
any anticipated benefits of these or other acquisitions; and our ability
to recognize any expected tax benefits as a result of closing our U.K.
retail consumer goods operations. There may be other factors of which we
are currently unaware or deem immaterial that may cause our actual
results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us or persons acting on
our behalf apply only as of the date of this document and are expressly
qualified in their entirety by the cautionary statements included in
this document. Except as may be required by law, we undertake no
obligation to publicly update or revise any forward-looking statement to
reflect events or circumstances occurring after the date of this
document or to reflect the occurrence of unanticipated events.

About Liquidity Services, Inc.

Liquidity Services, Inc. (NASDAQ: LQDT) provides leading corporations,
public sector agencies and buying customers the world’s most
transparent, innovative and effective online marketplaces and integrated
services for surplus assets. On behalf of its clients, Liquidity
Services has completed the sale of over $3.5 billion of surplus,
returned and end-of-life assets, in over 500 product categories,
including consumer goods, capital assets and industrial equipment. The
Company is based in Washington, D.C. and has over 1,300 employees.
Additional information can be found at: http://www.liquidityservicesinc.com.

       
Liquidity Services, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
 
December 31,

 

September 30,

2012

 

2012

Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 45,892 $ 104,782

Accounts receivable, net of allowance for doubtful accounts of
$1,127 and $1,248

at December 31, 2012 and September 30, 2012, respectively

19,525 16,226
Inventory 21,914 20,669
Prepaid and deferred taxes 20,237 16,927
Prepaid expenses and other current assets   3,945   3,973
Total current assets 111,513 162,577
Property and equipment, net 11,118 10,382
Intangible assets, net 37,075 34,204
Goodwill 212,664 185,771
Other assets   7,656   7,474
Total assets $ 380,026 $ 400,408
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 11,342 $ 9,997
Accrued expenses and other current liabilities 33,797 36,569
Profit-sharing distributions payable 3,508 4,041
Current portion of acquisition earn out payables 2,207 14,511
Customer payables 35,108 34,265
Current portion of note payable     10,000
Total current liabilities 85,962 109,383
Acquisition earn out payables 18,113
Note payable, net of current portion 32,000
Deferred taxes and other long-term liabilities   9,926   9,022
Total liabilities 114,001 150,405
Stockholders’ equity:

Common stock, $0.001 par value; 120,000,000 shares authorized;
31,501,381 shares issued and

outstanding at December 31, 2012; 31,138,111 shares issued and
outstanding at September 30, 2012

31 31
Additional paid-in capital 191,942 182,361
Accumulated other comprehensive income 978 1,246
Retained earnings   73,074   66,365
Total stockholders’ equity   266,025   250,003
Total liabilities and stockholders’ equity $ 380,026 $ 400,408
 
         

Liquidity Services, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in Thousands, Except Share and Per Share Data)

 

 

Three Months Ended

December 31,

2012 2011
 
Revenue $ 104,261 $ 95,896
Fee revenue   17,944   10,135
Total revenue 122,205 106,031
 
Costs and expenses:
Cost of goods sold (excluding amortization) 47,122 43,285
Profit-sharing distributions 8,410 12,487
Technology and operations 22,547 15,783
Sales and marketing 10,328 6,535
General and administrative 13,968 7,817
Amortization of contract intangibles 2,210 2,020
Depreciation and amortization 1,987 1,526
Acquisition costs   5,376   318
 
Total costs and expenses   111,948   89,771
 
Income from operations 10,257 16,260
Interest expense and other income (expense), net   924   (525 )
 
Income before provision for income taxes 11,181 15,735
Provision for income taxes   4,472   6,609
 
Net income $ 6,709 $ 9,126
Basic earnings per common share $ 0.21 $ 0.30
Diluted earnings per common share $ 0.20 $ 0.28
 
Basic weighted average shares outstanding   31,482,853   30,393,309
Diluted weighted average shares outstanding   33,054,264   32,382,518
 
       
Liquidity Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
Three Months Ended
December 31,
2012 2011
Operating activities
Net income $     6,709 $     9,126
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 4,197 3,546
Gain on early extinguishment of debt (1,000 )
Stock compensation expense 4,367 2,625
Provision for inventory allowance (733 ) (47 )
Provision for doubtful accounts (121 ) (211 )
Incremental tax benefit from exercise of common stock options (5,005 ) (4,889 )
Changes in operating assets and liabilities:
Accounts receivable (3,177 ) 1,739
Inventory (512 ) (3,241 )
Prepaid expenses and other assets 1,541 6,880
Accounts payable 1,345 (2,314 )
Accrued expenses and other (4,976 ) (4,859 )
Profit-sharing distributions payable (533 ) (959 )
Customer payables 842 4,082
Acquisition earn out payables (4,118 )
Other liabilities       967       711
Net cash (used in) provided by operating activities (207) 12,189
Investing activities
Increase in goodwill and intangibles and cash paid for acquisitions (14,684 ) (80,018 )
Purchases of property and equipment       (1,897 )       (1,176 )
Net cash used in investing activities (16,581 ) (81,194 )
Financing activities
Repayment of notes payable (39,000 )
Payment of acquisition contingent liabilities (8,185 )
Proceeds from exercise of common stock options (net of tax) 209 4,010
Incremental tax benefit from exercise of common stock options       5,005         4,889
Net cash (used in) provided by financing activities (41,971 ) 8,899
Effect of exchange rate differences on cash and cash equivalents       (131 )       1
Net decrease in cash and cash equivalents (58,890 ) (60,105 )
Cash and cash equivalents at beginning of period       104,782       128,904
Cash and cash equivalents at end of period $     45,892 $     68,799
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 94 $ 79
Cash paid for interest 2,011 9
Note payable issued in connection with acquisition 40,000
Contingent purchase price accrued 23,146 8,185
 

Source: Liquidity Services, Inc.

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