Press Releases
Aug 16

Liquidity Services, Inc. Announces Second Quarter 2008 Financial Results

– Revenue of $62.8 million up 28% – Gross Merchandise Volume (GMV)
of $88.2 million up 47% – Adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) of $5.7 million up 21% –

WASHINGTON–(BUSINESS WIRE)–May 1, 2008–Liquidity Services, Inc.
(NASDAQ:LQDT; www.liquidityservicesinc.com) today reported its
financial results for its fiscal second quarter ended March 31, 2008
(Q2-08). Liquidity Services, Inc. (LSI or the Company) is a leading
online auction marketplace for wholesale, surplus and salvage assets.

The Company reported record consolidated Q2-08 revenue of $62.8
million, a growth rate of approximately 28% over the prior year.
Adjusted EBITDA for Q2-08 was $5.7 million, a growth rate of
approximately 21% over the prior year. Q2-08 GMV, the total sales
volume of all merchandise sold through the Company’s marketplaces
during a given period, was a record $88.2 million, a growth rate of
approximately 47% over the prior year.

Net income in Q2-08 was $2.6 million or $0.10 diluted earnings per
share. Adjusted net income in Q2-08 was $3.3 million or $0.12 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.

“Q2-08 was another productive quarter for LSI as we grew GMV in
all major segments of our business and completed the acquisition of
GovDeals in January,” said Bill Angrick, Chairman and CEO of LSI.
“Despite a weakening economy, LSI grew consolidated GMV by 47% over
the prior year period, or 21% excluding the acquired GovDeals
business, and generated cash from operating activities of
approximately $3.8 million during the quarter. Our surplus business
GMV grew approximately 38% over the prior year period and 20%
sequentially and our scrap business GMV grew approximately 33% over
the prior year period. Our commercial business also grew 11%
sequentially during the quarter. The GovDeals acquisition added $15.9
million in consignment GMV for the quarter, significantly ahead of
plan. Our business development activity remains strong, exemplified by
the announcement of our agreement to acquire the Geneva Group, which
strengthens our position in the European commercial marketplace. Our
buyer marketplace continues to deliver strong results for our sellers
as we again averaged over 5 auction participants per completed
transaction during the second quarter.”

Business Outlook

The following forward-looking statements assume that current
business trends and our operating environment continue, including (i)
improvement in margins and product mix in our commercial business,
(ii) continued improvement in inventory turnover within our commercial
marketplace, (iii) continuation of our Surplus Contract under its
current terms for the balance of fiscal 2008 pending the award and
phase-in of a new surplus contract, (iv) start-up costs associated
with the opening of our new distribution center in Bentonville,
Arkansas, and (v) 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 the next quarter and
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 next 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 two quarters of
fiscal year 2008.

GMV – We expect GMV for fiscal year 2008 to range from $330
million to $340 million. We expect GMV for Q3-08 to range from $91
million to $93 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 Q3-08 to range from $7.8 million to $8.0 million.

Adjusted Diluted EPS – We estimate Adjusted Earnings Per Diluted
Share for fiscal year 2008 to range from $0.51 to $0.53. In Q3-08, we
estimate Adjusted Earnings Per Diluted Share to be $0.16.

Key Q1-08 Operating Metrics

Registered Buyers — At the end of Q2-08, registered buyers
totaled approximately 892,000 including GovDeals, representing a 46%
increase over the approximately 613,000 registered buyers at the end
of Q2-07.

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 463,000, including GovDeals, in Q2-08, an approximately
61% increase over the approximately 287,000 auction participants in
Q2-07.

Completed Transactions — Completed transactions increased to
91,000 including GovDeals, an approximately 74% increase for Q2-08
from the approximately 52,000 completed transactions in Q2-07.

GMV and Revenue Mix — GMV continues to diversify due to the
continued rapid growth in our scrap businesses and the addition of
GovDeals. As a result, the percentage of GMV derived from the DoD
Surplus Contract (under which we utilize the profit-sharing model)
during Q2-08 decreased to 23.9% compared to 25.5% in the prior year
period. The table below summarizes GMV and revenue by pricing model.

                               GMV Mix
----------------------------------------------------------------------
                                                     Q2-08     Q2-07
                                                   -------------------
Profit-Sharing Model:
     Surplus                                           23.9%     25.5%
     Scrap                                             20.7%     22.9%
                                                   -------------------
        Total Profit Sharing                           44.6%     48.4%

Consignment Model:
     GovDeals                                          18.0%       --
     Commercial                                        17.6%     26.0%
                                                   -------------------
        Total Consignment                              35.6%     26.0%

Purchase Model                                         18.3%     21.6%
International and Other                                 1.5%      4.0%
                                                   -------------------
          Total                                       100.0%    100.0%
                                                   ===================
                             Revenue Mix
----------------------------------------------------------------------
                                                     Q2-08     Q2-07
                                                   -------------------
Profit-Sharing Model:
     Surplus                                           33.5%     31.0%
     Scrap                                             29.1%     27.8%
                                                   -------------------
        Total Profit Sharing                           62.6%     58.8%

Consignment Model:
     GovDeals                                           1.8%       --
     Commercial                                         6.4%      8.5%
                                                   -------------------
        Total Consignment                               8.2%      8.5%

Purchase Model                                         25.7%     26.3%
International and Other                                 3.5%      6.4%
                                                   -------------------
          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 (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       Six Months
                                   Ended March 31,   Ended March 31,
                                   ----------------  ----------------
                                    2008     2007     2008     2007
                                   -------  -------  -------  -------
                                       (in thousands) (unaudited)
Net income                         $ 2,646  $ 2,474  $ 5,009  $ 4,787
Interest expense (income) and
 other expense (income), net          (621)    (551)  (1,109)  (1,149)
Provision for income taxes           1,862    1,746    3,504    3,288
Amortization of contract
 intangibles                           203      203      407      407
Depreciation and amortization          465      309      852      581
                                   -------  -------  -------  -------

EBITDA                               4,555    4,181    8,663    7,914
                                   -------  -------  -------  -------
Stock compensation expense           1,151      519    2,263      883

Adjusted EBITDA                    $ 5,706  $ 4,700  $10,926  $ 8,797
                                   =======  =======  =======  =======

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    Six Months Ended March
                              March 31,                  31,
                       ----------------------- -----------------------
                          2008        2007        2008        2007
                       ----------- ----------- ----------- -----------
                       (Unaudited) (Dollars in thousands, except per
                                         share data)
Net income             $     2,646 $     2,474 $     5,009 $     4,787
Stock compensation
 expense (net of tax)          679         306       1,335         521
                       ----------- ----------- ----------- -----------

Adjusted net income    $     3,325 $     2,780 $     6,344 $     5,308
                       =========== =========== =========== ===========

Adjusted basic
 earnings per common
 share                 $      0.12 $      0.10 $      0.23 $      0.19
                       =========== =========== =========== ===========

Adjusted diluted
 earnings per common
 share                 $      0.12 $      0.10 $      0.23 $      0.19
                       =========== =========== =========== ===========

Basic weighted average
 shares outstanding     27,951,777  27,708,278  27,947,958  27,652,849
                       =========== =========== =========== ===========

Diluted weighted
 average shares
 outstanding            28,261,121  28,526,789  28,184,407  28,463,064
                       =========== =========== =========== ===========

Conference Call

The Company will host a conference call to discuss the fiscal
second quarter 2008 results at 5 p.m. Eastern Time today. Investors
and other interested parties may access the teleconference by dialing
866-510-0705 or 617-597-5363 and providing the participant pass code
74555519. 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 June 1, 2008 at 11:59 p.m.
ET. An audio replay of the teleconference will also be available until
June 1, 2008 at 11:59 p.m. ET. To listen to the replay, dial
888-286-8010 or 617-801-6888 and provide pass code 65370261. 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 is currently scheduled to expire in June 2008; 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; our ability to
successfully complete the integration of GovDeals into our existing
operations; and our ability to successfully complete the Geneva Group
acquisition and integrate the Geneva Group into our existing
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 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)

                                             March 31,   September 30,
                                               2008          2007
                                           ------------- -------------
Assets                                      (Unaudited)
Current assets:
  Cash and cash equivalents                $      40,444 $      39,954
  Short-term investments                          21,992        21,655
  Accounts receivable, net of allowance
   for doubtful accounts of $296 and $371
   at March 31, 2008 and September 30,
   2007, respectively                              3,625         5,098
  Inventory                                       16,760        16,467
  Prepaid expenses and other current
   assets                                          7,043         5,486
                                           ------------- -------------
    Total current assets                          89,864        88,660
Property and equipment, net                        4,402         4,202
Intangible assets, net                             5,143         4,568
Goodwill                                          19,752        11,446
Other assets                                       2,775         2,266
                                           ------------- -------------
Total assets                               $     121,936 $     111,142
                                           ============= =============
Liabilities and stockholders' equity
Current liabilities:
  Accounts payable                         $       5,530 $       3,333
  Accrued expenses and other current
   liabilities                                     5,729        10,299
  Profit-sharing distributions payable             9,510         6,919
  Customer payables                                9,220         6,329
  Current portion of capital lease
   obligations                                         3             5
  Current portion of long-term debt                   --            13
                                           ------------- -------------
   Total current liabilities                      29,992        26,898
Capital lease obligations, net of current
 portion                                               4             5
Long-term debt, net of current portion                --            29
Other long-term liabilities                        2,673         2,176
                                           ------------- -------------
Total liabilities                                 32,669        29,108
Stockholders' equity:
  Common stock, $0.001 par value;
   120,000,000 shares authorized;
   27,961,320 and 27,939,059 shares issued
   and outstanding at March 31, 2008 and
   September 30, 2007, respectively                   28            28
  Additional paid-in capital                      63,180        60,820
  Accumulated other comprehensive income             517           653
  Retained earnings                               25,542        20,533
                                           ------------- -------------
    Total stockholders' equity                    89,267        82,034
                                           ------------- -------------
Total liabilities and stockholders' equity $     121,936 $     111,142
                                           ============= =============
              Liquidity Services, Inc. and Subsidiaries
           Unaudited Consolidated Statements of Operations
            (Dollars in Thousands, Except Per Share Data)

                   Three Months Ended March   Six Months Ended March
                              31,                       31,
                   ------------------------- -------------------------
                       2008         2007         2008         2007
                   ------------ ------------ ------------ ------------

Revenue            $    62,839  $    49,281  $   122,105  $    94,448
Costs and
 expenses:
  Cost of goods
   sold (excluding
   amortization)        16,162       11,539       31,565       20,001
  Profit-sharing
   distributions        22,630       17,890       43,436       36,619
  Technology and
   operations           10,300        8,397       20,277       16,238
  Sales and
   marketing             3,917        3,225        8,050        6,189
  General and
   administrative        5,275        4,049       10,114        7,487
  Amortization of
   contract
   intangibles             203          203          407          407
  Depreciation and
   amortization            465          309          852          581
                   ------------ ------------ ------------ ------------

   Total costs and
    expenses            58,952       45,612      114,701       87,522
                   ------------ ------------ ------------ ------------

Income from
 operations              3,887        3,669        7,404        6,926
Interest income
 (expense) and
 other income, net         621          551        1,109        1,149
                   ------------ ------------ ------------ ------------

Income before
 provision for
 income taxes            4,508        4,220        8,513        8,075
Provision for
 income taxes           (1,862)      (1,746)      (3,504)      (3,288)
                   ------------ ------------ ------------ ------------

Net income         $     2,646  $     2,474  $     5,009  $     4,787
                   ============ ============ ============ ============

Basic earnings per
 common share      $      0.10  $      0.09  $      0.18  $      0.17
                   ============ ============ ============ ============

Diluted earnings
 per common share  $      0.10  $      0.09  $      0.18  $      0.17
                   ============ ============ ============ ============

Basic weighted
 average shares
 outstanding        27,951,777   27,708,278   27,947,958   27,652,849
                   ============ ============ ============ ============

Diluted weighted
 average shares
 outstanding        28,261,121   28,526,789   28,184,407   28,463,064
                   ============ ============ ============ ============
              Liquidity Services, Inc. and Subsidiaries
           Unaudited Consolidated Statements of Cash Flows
                            (In Thousands)

                                Three Months Ended  Six Months Ended
                                     March 31,          March 31,
                                ------------------ -------------------
                                  2008      2007     2008      2007
----------------------------------------------------------------------
Operating activities
Net income                      $  2,646  $ 2,474  $  5,009  $  4,787
Adjustments to reconcile net
 income to net cash provided by
 operating activities:
  Depreciation and amortization      668      512     1,259       988
  Stock compensation expense       1,152      519     2,263       883
  Provision for doubtful
   accounts                         (164)      --      (164)       --
  Changes in operating assets
   and liabilities:
   Accounts receivable              (460)  (2,048)    1,991    (1,230)
   Inventory                         803   (2,580)     (294)   (5,311)
   Prepaid expenses and other
    assets                        (1,545)  (1,859)   (1,819)   (3,032)
   Accounts payable                  335     (484)    1,847     1,391
   Accrued expenses and other       (989)     900    (4,570)     (287)
   Profit-sharing distributions
    payable                         (583)   2,206     2,591     2,656
   Customer payables               1,927      316     2,892       961
   Other long-term liabilities        38      163        73     1,048
                                --------- -------- --------- ---------

Net cash provided by operating
 activities                        3,828      119    11,078     2,854
Investing activities
Purchases of short-term
 investments                     (18,414)  (4,065)  (24,749)  (14,397)
Proceeds from the sale of
 short-term investments           18,159    9,559    24,288    16,466
Increase in goodwill and
 intangibles                         (11)      (8)      (23)      (15)
Cash paid for acquisitions        (9,389)      --    (9,389)  (10,232)
Purchases of property and
 equipment                          (404)    (862)     (754)   (1,668)
                                --------- -------- --------- ---------

Net cash (used in) provided by
 investing activities            (10,059)   4,624   (10,627)   (9,846)
Financing activities
Principal repayments of capital
 lease obligations and debt          (2)      (10)      (46)      (65)
Proceeds from exercise of
 common stock options and
 warrants (net of tax)                44      339        93       489
Incremental tax benefit from
 exercise of common stock
 options                               3      577         3       700
Net proceeds from the issuance
 of common stock                      --    1,328        --     1,328
                                --------- -------- --------- ---------

Net cash provided by financing
 activities                           45    2,234        50     2,452
Effect of exchange rate
 differences on cash and cash
 equivalents                         107       18       (11)      147
                                --------- -------- --------- ---------

Net (decrease) increase in cash
 and cash equivalents             (6,079)   6,995       490    (4,393)
Cash and cash equivalents at
 beginning of the period          46,523   42,971    39,954    54,359
                                --------- -------- --------- ---------

Cash and cash equivalents at
 end of period                  $ 40,444  $49,966  $ 40,444  $ 49,966
                                ========= ======== ========= =========
Supplemental disclosure of cash
 flow information
Cash paid for income taxes      $  4,628  $ 3,817  $  7,139  $  4,960
Cash paid for interest          $      8  $     1  $      9  $      3

CONTACT: Liquidity Services, Inc.
Julie Davis
Director, Investor Relations
202-558-6234
[email protected]

SOURCE: Liquidity Services, Inc.