– Revenue of $71.5 million up 36% – Gross Merchandise Volume (GMV) of $104.2 million up 67% – Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $8.2 million up 41% –
WASHINGTON–(BUSINESS WIRE)–Aug. 4, 2008–Liquidity Services,
Inc. (NASDAQ:LQDT; www.liquidityservicesinc.com) today reported its
financial results for its fiscal third quarter ended June 30, 2008
(Q3-08). Liquidity Services, Inc. (LSI or the Company) is a leading
online auction marketplace for wholesale, surplus and salvage assets.
The Company reported record consolidated Q3-08 revenue of $71.5
million, a growth rate of approximately 36% over the prior year.
Adjusted EBITDA for Q3-08 was a record $8.2 million, a growth rate of
approximately 41% over the prior year. Q3-08 GMV, the total sales
volume of all merchandise sold through the Company’s marketplaces
during a given period, was a record $104.2 million, a growth rate of
approximately 67% over the prior year.
Net income in Q3-08 was $3.8 million or $0.14 diluted earnings per
share. Adjusted net income in Q3-08 was a record $4.5 million or $0.16
adjusted diluted earnings per share, a growth rate of approximately
33% over the prior year.
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.
“Q3-08 was a record quarter for LSI as we grew GMV in all major
areas of our business and completed the acquisition of Geneva in May,”
said Bill Angrick, Chairman and CEO of LSI. “Despite a weakening
economy, LSI grew consolidated GMV by 67% over the prior year period,
or 29% excluding the acquired GovDeals and Geneva businesses, and
generated cash from operating activities of approximately $5.5 million
during the quarter. Our surplus business GMV grew approximately 35%
over the prior year period and our scrap business GMV grew
approximately 51% over the prior year period and 27% sequentially. Our
commercial business GMV grew approximately 18% over the prior period
driven by strong GMV growth in the consignment model, which was up 18%
sequentially during the quarter and 28% over the prior year, while our
purchase model was consistent over the same periods. The GovDeals
acquisition added $20.9 million in consignment GMV for the quarter,
significantly ahead of plan. Our business development activity remains
strong, exemplified by the closing of the Geneva Group acquisition,
which strengthens our position in the European commercial marketplace.
Our buyer marketplace continues to deliver strong results for our
sellers as we ended the quarter with over 948,000 registered buyers,
which is up approximately 46% over the prior year period, including
the addition of a record 56,000 new registered buyers in the third
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) start-up costs associated with the opening of our
new distribution center in Bentonville, Arkansas, (iv) a seasonal slow
down in the fourth quarter, 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 earned
$1.4 million under this incentive feature for the 12 months ended June
30, 2008 and we recorded this amount in the quarter ended June 30,
2008. We are eligible to receive this incentive in each year of the
term of the Scrap contract.
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 is 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 for the fourth quarter of fiscal year 2008.
GMV – We expect GMV for fiscal year 2008 to range from $354
million to $356 million. We expect GMV for Q4-08 to range from $94
million to $96 million.
Adjusted EBITDA – Our expected Adjusted EBITDA for fiscal year
2008 is unchanged from prior guidance. We expect Adjusted EBITDA for
Q4-08 to range from $6.7 million to $6.9 million.
Adjusted Diluted EPS – Our estimated Adjusted Earnings Per Diluted
Share for fiscal year 2008 is unchanged from prior guidance. In Q4-08,
we estimate Adjusted Earnings Per Diluted Share to be $0.13.
Key Q3-08 Operating Metrics
Registered Buyers — At the end of Q3-08, registered buyers
totaled approximately 948,000 including GovDeals and Geneva,
representing a 46% increase over the approximately 649,000 registered
buyers at the end of Q3-07.
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 499,000, including GovDeals and two months of Geneva, in
Q3-08, an approximately 73% increase over the approximately 287,000
auction participants in Q3-07.
Completed Transactions — Completed transactions increased to
108,000 including GovDeals and two months of Geneva, an approximately
101% increase for Q3-08 from the approximately 54,000 completed
transactions in Q3-07.
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 Q3-08 decreased to 20.4% compared to 25.3% in the prior year
period. The table below summarizes GMV and revenue by pricing model.
GMV Mix
----------------------------------------------------------------------
Q3-08 Q3-07
---------------
Profit-Sharing Model:
Surplus 20.4% 25.3%
Scrap 22.2% 24.6%
---------------
Total Profit Sharing 42.6% 49.9%
Consignment Model:
GovDeals 20.0% --
Commercial 17.7% 23.1%
---------------
Total Consignment 37.7% 23.1%
Purchase Model 15.3% 23.5%
International and Other 4.4% 3.5%
---------------
Total 100.0% 100.0%
===============
Revenue Mix
----------------------------------------------------------------------
Q3-08 Q3-07
---------------
Profit-Sharing Model:
Surplus 29.8% 30.0%
Scrap 32.4% 29.2%
---------------
Total Profit Sharing 62.2% 59.2%
Consignment Model:
GovDeals 2.1% --
Commercial 5.9% 7.2%
---------------
Total Consignment 8.0% 7.2%
Purchase Model 22.3% 27.9%
International and Other 7.5% 5.7%
---------------
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 expense
(income) and other expense (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 Nine Months
Ended June 30, Ended June 30,
--------------- ---------------
2008 2007 2008 2007
------- ------- ------- -------
(in thousands) (unaudited)
Net income $ 3,847 $ 3,053 $ 8,857 $ 7,840
Interest expense (income) and other
expense (income), net (292) (475) (1,402) (1,624)
Provision for income taxes 2,672 2,134 6,176 5,422
Amortization of contract intangibles 203 203 610 610
Depreciation and amortization 584 355 1,436 935
------- ------- ------- -------
EBITDA 7,014 5,270 15,677 13,183
------- ------- ------- -------
Stock compensation expense 1,177 526 3,440 1,409
Adjusted EBITDA $ 8,191 $ 5,796 $19,117 $14,592
======= ======= ======= =======
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 June Nine Months Ended June
30, 30,
----------------------- -----------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
(Unaudited) (Dollars in thousands, except per
share data)
Net income $ 3,847 $ 3,053 $ 8,857 $ 7,840
Stock compensation
expense (net of tax) 695 310 2,030 831
----------- ----------- ----------- -----------
Adjusted net income $ 4,542 $ 3,363 $ 10,887 $ 8,671
=========== =========== =========== ===========
Adjusted basic
earnings per common
share $ 0.16 $ 0.12 $ 0.39 $ 0.31
=========== =========== =========== ===========
Adjusted diluted
earnings per common
share $ 0.16 $ 0.12 $ 0.39 $ 0.31
=========== =========== =========== ===========
Basic weighted average
shares outstanding 27,964,662 27,857,115 27,953,526 27,720,937
=========== =========== =========== ===========
Diluted weighted
average shares
outstanding 28,237,150 28,321,395 28,201,988 28,215,689
=========== =========== =========== ===========
Conference Call
The Company will host a conference call to discuss the fiscal
third quarter 2008 results at 5 p.m. Eastern Time today. Investors and
other interested parties may access the teleconference by dialing
866.770.7146 or 617.213.8068 and providing the participant pass code
38903374. 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 September 4, 2008 at 11:59
p.m. ET. An audio replay of the teleconference will also be available
until September 4, 2008 at 11:59 p.m. ET. To listen to the replay,
dial 888.286.8010 or 617.801.6888 and provide pass code 97803188. 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 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; and our ability to successfully complete the integration
of GovDeals and Geneva 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)
June 30, September 30,
2008 2007
----------- -------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 50,622 $ 39,954
Short-term investments 726 21,655
Accounts receivable, net of allowance for
doubtful accounts of $1,072 and $371 at
June 30, 2008 and September 30, 2007,
respectively 4,396 5,098
Inventory 16,637 16,467
Prepaid expenses and other current assets 7,119 5,486
----------- -------------
Total current assets 79,500 88,660
Property and equipment, net 4,717 4,202
Intangible assets, net 6,088 4,568
Goodwill 36,516 11,446
Other assets 3,034 2,266
----------- -------------
Total assets $ 129,855 $ 111,142
=========== =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 8,902 $ 3,333
Accrued expenses and other current
liabilities 7,808 10,299
Profit-sharing distributions payable 8,015 6,919
Customer payables 7,687 6,329
Current portion of capital lease
obligations 3 5
Current portion of long-term debt -- 13
----------- -------------
Total current liabilities 32,415 26,898
Capital lease obligations, net of current
portion 3 5
Long-term debt, net of current portion -- 29
Other long-term liabilities 2,971 2,176
----------- -------------
Total liabilities 35,389 29,108
Stockholders' equity:
Common stock, $0.001 par value;
120,000,000 shares authorized; 27,968,465
and 27,939,059 shares issued and
outstanding at June 30, 2008 and
September 30, 2007, respectively 28 28
Additional paid-in capital 64,386 60,820
Accumulated other comprehensive income 663 653
Retained earnings 29,389 20,533
----------- -------------
Total stockholders' equity 94,466 82,034
----------- -------------
Total liabilities and stockholders' equity $ 129,855 $ 111,142
=========== =============
Liquidity Services, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Data)
Three Months Ended June Nine Months Ended June
30, 30,
------------------------- -------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Revenue $ 71,473 $ 52,505 $ 193,579 $ 146,952
Costs and
expenses:
Cost of goods
sold (excluding
amortization) 19,552 13,291 51,117 33,292
Profit-sharing
distributions 24,200 17,559 67,636 54,178
Technology and
operations 10,411 8,125 30,689 24,365
Sales and
marketing 4,469 3,556 12,519 9,745
General and
administrative 5,827 4,704 15,941 12,189
Amortization of
contract
intangibles 203 203 610 610
Depreciation and
amortization 584 355 1,436 935
------------ ------------ ------------ ------------
Total costs
and expenses 65,246 47,793 179,948 135,314
------------ ------------ ------------ ------------
Income from
operations 6,227 4,712 13,631 11,638
Interest income
(expense) and
other income, net 292 475 1,402 1,624
------------ ------------ ------------ ------------
Income before
provision for
income taxes 6,519 5,187 15,033 13,262
Provision for
income taxes (2,672) (2,134) (6,176) (5,422)
------------ ------------ ------------ ------------
Net income $ 3,847 $ 3,053 $ 8,857 $ 7,840
============ ============ ============ ============
Basic earnings per
common share $ 0.14 $ 0.11 $ 0.32 $ 0.28
============ ============ ============ ============
Diluted earnings
per common share $ 0.14 $ 0.11 $ 0.32 $ 0.28
============ ============ ============ ============
Basic weighted
average shares
outstanding 27,964,662 27,857,115 27,953,526 27,720,937
============ ============ ============ ============
Diluted weighted
average shares
outstanding 28,237,150 28,321,395 28,201,988 28,215,689
============ ============ ============ ============
Liquidity Services, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(In Thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
----------------------------------------------------------------------
Operating activities
Net income $ 3,847 $ 3,053 $ 8,857 $ 7,840
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 787 558 2,046 1,545
Stock compensation expense 1,177 526 3,440 1,409
Provision for doubtful
accounts 100 -- (64) --
Changes in operating assets
and liabilities:
Accounts receivable (146) (289) 1,846 (1,519)
Inventory 1,598 (2,510) 1,304 (7,821)
Prepaid expenses and other
assets (156) 492 (1,975) (2,540)
Accounts payable 1,354 (1,145) 3,200 247
Accrued expenses and other 33 2,387 (4,537) 2,101
Profit-sharing
distributions payable (1,494) (4,175) 1,096 (1,519)
Customer payables (1,534) (2,527) 1,358 (1,566)
Other long-term
liabilities (65) 14 8 1,062
-------- -------- -------- --------
Net cash provided by (used in)
operating activities 5,501 (3,616) 16,579 (761)
Investing activities
Purchases of short-term
investments (557) (14,197) (25,307) (28,594)
Proceeds from the sale of
short-term investments 21,755 5,421 46,043 21,887
(Decrease) increase in
goodwill and intangibles (18) 27 (41) 12
Cash paid for acquisitions (16,238) -- (25,627) (10,232)
Purchases of property and
equipment (488) (614) (1,242) (2,282)
-------- -------- -------- --------
Net cash (used in) provided by
investing activities 4,454 (9,363) (6,174) (19,209)
Financing activities
Principal repayments of
capital lease obligations and
debt -- -- (46) (64)
Proceeds from exercise of
common stock options and
warrants (net of tax) 14 259 107 748
Incremental tax benefit from
exercise of common stock
options 15 82 18 781
Net proceeds from the issuance
of common stock -- (282) -- 1,046
-------- -------- -------- --------
Net cash provided by financing
activities 29 59 79 2,511
Effect of exchange rate
differences on cash and cash
equivalents 195 57 184 203
-------- -------- -------- --------
Net (decrease) increase in
cash and cash equivalents 10,179 (12,863) 10,668 (17,256)
Cash and cash equivalents at
beginning of the period 40,443 49,966 39,954 54,359
-------- -------- -------- --------
Cash and cash equivalents at
end of period $ 50,622 $ 37,103 $ 50,622 $ 37,103
======== ======== ======== ========
Supplemental disclosure of
cash flow information
Cash paid for income taxes $ 2,245 $ 624 $ 9,384 $ 5,584
Cash paid for interest $ 11 $ 1 $ 20 $ 4
CONTACT: Liquidity Services, Inc.
Julie Davis
Director, Investor Relations
202-558-6234
[email protected]
SOURCE: Liquidity Services, Inc.
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