- GMV of $159.7 million, up 5.5% year
over year
- Revenue of $70.8 million, up 7.5% year
over year
- GAAP Net Loss of $8.4 million, down
61.6% year over year
- Non-GAAP Adjusted EBITDA of $(4.3)
million, down 32.0% year over year
- New Global Customer Management Module
Launched Under LiquidityOne Initiative
- Long Term Commercial Growth Strategy
Remains the Priority
Liquidity Services (NASDAQ:LQDT; www.liquidityservices.com), a global solution
provider in the reverse supply chain with the world’s largest
marketplace for business surplus, today announced financial results
for the first quarter ended December 31, 2016. Q1-17 results were
within the company’s guidance range for GMV and Non-GAAP Adjusted
Diluted EPS and above the company’s guidance range for GAAP Net
Loss, Non-GAAP Adjusted EBITDA, and GAAP EPS. The company’s
performance was led by our commercial capital assets marketplaces,
which experienced higher than expected volume and margins related
to large projects in our industrial and energy verticals. In
addition, we had higher than expected service revenue with solid
margins.
“We are pleased with our progress made this quarter despite the
headwinds related to changes in our DoD contracts. The focus of our
long term growth strategy is our commercial and state and local
government businesses, and we are pleased to report that aggregate
GMV in these marketplaces grew 12% over the prior year period, not
only marking a return to top line organic growth for the first time
in eight quarters, but also a significant milestone in the
advancement of our transformation strategy. We continue to expand
our service offerings to capture more opportunities and invest in
our sales channels to grow seller accounts and our buyer network,”
said Bill Angrick, chairman and chief executive officer of
Liquidity Services.
“During the quarter, the strong performance of our commercial
capital assets business combined with double digit top line growth
in our retail supply chain marketplace demonstrated our ability to
attract new clients and expand existing relationships driven by our
strong recovery rates and innovative returns management services.
Our state and local government marketplace also continued its
upward trend as more sellers utilized our platform and value added
services. Regarding our LiquidityOne transformation plan, we
launched our new Customer Management Module which provides a common
process for managing customer and client data, eliminating numerous
legacy platforms to manage these processes. We anticipate the
launch of our next marketplace in the summer of 2017 and we remain
focused on ensuring the highest quality, most robust functionality,
and a smooth transition for our clients and buyers,” continued
Angrick.
Under our LiquidityOne transformation initiative, we will
leverage our new Customer Management Module across our entire
organization to bring further harmonization to developing an
integrated sales pipeline, to improve our ability to fully
integrate with our clients, and to provide the ability to extend
our functionality to partner programs. As we prepare for the
rollout of our next marketplace on the LiquidityOne platform, we
have designed and developed the building blocks for a scalable
solution that eliminates multiple, disparate legacy systems and
processes and expands our capability to handle the complexity of a
two-sided global marketplace with multiple verticals and a vast
range of asset categories. Our new platform is built with a mobile
first philosophy and brings next generation functionality,
including unified account management for all buying and selling
activity, singular automated transaction settlement with localized
invoicing and payment, multi-language and multi-currency support,
and additional merchandising and search functionality within the
marketplace.
First Quarter Operating and Earnings Results
The company reported Q1-17 GMV, an operating measure of the
total sales value of all merchandise sold through our marketplaces
during the given period, of $159.7 million, an increase of 5.5%
from the prior year’s comparable period. Revenue for Q1-17 was
$70.8 million, an increase of 7.5% from the prior year’s comparable
period. GAAP Net loss for Q1-17 was $8.4 million, which resulted in
a diluted loss per share of $0.27 based on a weighted average of
31.3 million diluted shares outstanding, an increase of 61.6% and
58.8% respectively from the prior year’s comparable period.
Non-GAAP adjusted net loss was $6.8 million or $0.22 adjusted
diluted loss per share, an increase of 96.1% and 100.0%,
respectively, from the prior year’s comparable period. We exited
Q1-17 in a strong financial position with $127 million in cash and
a debt free balance sheet.
Non-GAAP adjusted EBITDA, which excludes stock-based
compensation and acquisition costs, was $(4.3) million, a decrease
of 32.0% from the prior year’s comparable period of $(3.3)
million.
Comparative financial results reflect increased cost of sales
and lower margins under the new Scrap contract and the downturn in
commodity prices which have reduced prices under the Scrap
contract, and the transition to the new Surplus contract, under
which we pay higher product costs.
Additional First Quarter Operational Results
- Registered
Buyers — At the end of Q1-17, registered buyers totaled
approximately 3,018,000 representing an approximately 5% increase
over the approximately 2,875,000 registered buyers at the end of
Q1-16.
- 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), decreased to
approximately 544,000 in Q1-17, an approximately 3% decrease over
the approximately 561,000 auction participants in Q1-16.
- Completed
Transactions — Completed transactions decreased to
approximately 129,000, an approximately 3% decrease for Q1-17 from
the approximately 133,000 completed transactions in Q1-16.
GMV and Revenue Mix —The table
below summarizes GMV and revenue by pricing model.
GMV Mix
Q1-FY17 Q1-FY16 Consignment Model: GovDeals 35.1%
34.4% Commercial 34.4% 32.5% Total Consignment 69.5% 66.9% Purchase
Model: Commercial 16.2% 14.0% Surplus Contract 9.9% 13.5% Total
Purchase 26.1% 27.5% Other: 4.4% 5.6% Total 100.0% 100.0%
Revenue
Mix
Q1-FY17 Q1-FY16 Consignment Model: GovDeals 8.2% 8.2% Commercial
16.5% 15.6% Total Consignment 24.7% 23.8% Purchase Model:
Commercial 35.5% 32.2% Surplus Contract 22.3% 31.0% Total Purchase
57.8% 63.2% Other: 17.5% 13.0% Total 100.0% 100.0%
Business Outlook
FY17 results are continuing to benefit from growth in our
commercial and state and local government marketplaces as we
advance our strategy to unify our business processes, global sales
organization, and e-commerce marketplace platform. While the
commercial businesses are showing continuous improvement,
profitability for the year will be impacted by the higher pricing
terms and lower volumes for our DoD Surplus contract, higher
distributions under our new Scrap contract, and continued
investments in the design and deployment of our new LiquidityOne
platform. We will also continue to make investments in our
IronDirect business to drive customer demand onto the platform.
Our near term outlook remains cautious due to the increasing
distributions and soft pricing in our DoD scrap contract,
variability in the timing of large client projects in our capital
assets business, and ongoing investments in our LiquidityOne
transformation plan.
The following forward-looking statements reflect the following
trends and assumptions for Q2-FY17:
(i) continued investment spending under our
LiquidityOne transformation initiative;(ii) increased cost of sales
and lower volume and margins under our new DoD Surplus
contract;(iii) continued strength in our state and local government
marketplace and steady year-over-year growth;(iv) continued signs
of improved liquidity in our energy marketplace;(v) strong deal
flow in our commercial capital assets marketplaces;(vi) investments
in our sales teams to further accelerate the growth of new and
expanded client relationships;(vii) seasonally higher volumes and
growth in core accounts in our retail business; and(viii) increased
distributions and lower margins under our new DoD Scrap contract,
and continued variability in commodities pricing, volumes received,
and mix of metals.
For Q2-17 our guidance is as follows:
GMV – We expect GMV for Q2-17 to
range from $150 million to $170 million.
GAAP Net Loss – We expect GAAP Net
Loss for Q2-17 to range from $(12.0) million to $(9.0) million.
GAAP Diluted EPS - We expect GAAP
diluted Loss Per Share for Q2-17 to range from $(0.38) to
$(0.29).
Non-GAAP Adjusted EBITDA –We expect
non-GAAP Adjusted EBITDA for Q2-17 to range from $(7.5) million to
$(4.5) million.
Non-GAAP Adjusted Diluted EPS – We
expect non-GAAP Adjusted Loss Per Diluted Share for Q2-17 to range
from $(0.30) to $(0.21). This guidance assumes that we have diluted
weighted average number of shares outstanding for the quarter of
31.4 million and that we will not repurchase shares with the
approximately $10.1 million available under the share repurchase
program.
Q2-FY17 guidance does not include any one time impacts from
winding down our TruckCenter marketplace.
Liquidity
Services
Reconciliation of GAAP
to Non-GAAP Measures
EBITDA and Adjusted EBITDA. EBITDA
is a supplemental non-GAAP financial measure and is equal to net
(loss) income plus interest and other expense, net; benefit for
income taxes; and depreciation and amortization. Our definition of
Adjusted EBITDA differs from EBITDA because we further adjust
EBITDA for stock-based compensation and acquisition costs.
Three Months Ended December 31,
2016 2015 (In thousands)
(Unaudited) Net loss $ (8,397 ) $ (5,197 ) Interest expense
(income) and other expense, net 34 (60 ) Provision (benefit) for
income taxes 103 (2,154 ) Depreciation and amortization 1,429
1,672 EBITDA (6,831 ) (5,739 ) Stock compensation
expense 2,500 2,420 Acquisition costs — 39 Adjusted
EBITDA $ (4,331 ) $ (3,280 )
Adjusted Net (Loss) 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 (loss) plus tax effected stock compensation expense and
acquisition costs. Adjusted basic and diluted loss per share are
determined using Adjusted Net (Loss) Income. For Q1-17 the tax rate
used to tax effect stock compensation expense and acquisition costs
was 35.4% compared to 29.3% used for the Q1-16 results. The 35.4%
tax rate excludes the impact of the charge to our U.S. valuation
allowance to provide a better comparison to the Q1-16 results.
Three Months Ended December 31,
2016 2015 (Dollars in thousands, except per
share data) (Unaudited) Net loss $(8,397 ) $(5,197)
Stock compensation expense (net of tax) 1,615 1,711 Acquisition
costs (net of tax) — 28 Adjusted net loss $(6,782 ) $(3,458)
Adjusted basic loss per common share $(0.22 ) $(0.11)
Adjusted diluted loss per common share $(0.22 ) $(0.11)
Basic weighted average shares outstanding 31,261,603 30,490,670
Diluted weighted average shares outstanding 31,261,603
30,490,670
Conference Call
The Company will host a conference call to discuss the first
quarter of fiscal year 2017 results at 10:30 a.m. Eastern Time
today. Investors and other interested parties may access the
teleconference by dialing (844) 795-4614 or (661) 378-9639 and
providing conference identification number 52473457. A live web
cast of the conference call will be provided on the Company's
investor relations website at
http://investors.liquidityservices.com. An archive of the web cast
will be available on the Company's website until February 8, 2018
at 11:59 p.m. ET. An audio replay of the teleconference will also
be available until February 16, 2017 at 11:59 p.m. ET. To listen to
the replay, dial (855) 859-2056 or (404) 537-3406 and provide
conference identification number 52473457. Both replays will be
available starting at 1:30 p.m. ET on the day of the call.
Non-GAAP Measures
To supplement our consolidated financial statements presented in
accordance with generally accepted accounting principles (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. Adjusted net income is used
to arrive at EBITDA and adjusted EBITDA calculations, and adjusted
EPS is the result of our adjusted net income and diluted shares
outstanding.
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 GAAP, 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 GAAP, 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,
including prospects for its new IronDirect platform, the Company’s
proprietary e-commerce marketplace platform, expected investments
in sales teams, expected investment in, benefits of and timing of
completion of the LiquidityOne transformation initiative, the
supply and mix of inventory under the DoD Surplus and Scrap
Contracts, expected future commodity prices, expected sales prices
and margins in the Company’s energy marketplaces, expected future
effective tax rates, the timing of large client projects in the
Company’s industrial business, and trends and assumptions about
future periods, including the second quarter FY-17. 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; variability in mix and volume of supply due to
project based activity; variability in business related to mix,
timing, and volume of supply; timing and speed of recovery in the
energy sector macro conditions and commodity market prices; intense
competition in our lines of business; 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 develop and grow our new business ventures such as
IronDirect; costs and timing of the wind-down of our Truckcenter
business; our ability to attract and retain key employees; our
ability to raise additional capital as and when required; the
success of our recent business realignment in which we balance
management time and resource to run our business with migrating our
marketplaces to the new LiquidityOne platform; and the success of
our LiquidityOne transformation initiative, including training and
education of customers to adopt our new LiquidityOne platform.
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
Liquidity Services (NASDAQ: LQDT) employs innovative e-commerce
marketplace solutions to manage, value and sell inventory and
equipment for business and government clients. The company operates
a network of leading e-commerce marketplaces that enable buyers and
sellers to transact in an efficient, automated environment offering
over 500 product categories. Our superior service, unmatched scale
and ability to deliver results enable us to forge trusted,
long-term relationships with over 9,000 clients worldwide. With
nearly $7 billion in completed transactions, and 3 million buyers
in almost 200 countries and territories, we are the proven leader
in delivering smart commerce solutions. Visit us at
LiquidityServices.com.
Liquidity Services, Inc. and
Subsidiaries Consolidated Balance Sheets (Dollars in
Thousands) December 31, September
30, 2016 2016 (Unaudited) Assets
Current assets: Cash and cash equivalents $ 126,914 $ 134,513
Accounts receivable, net of allowance for
doubtful accounts of $802 and $718 at
December 31, 2016 and September 30, 2016,
respectively
10,711 10,355 Inventory 26,744 27,610 Tax refund receivable 1,217
1,205 Prepaid and deferred taxes 2,507 2,166
Prepaid expenses and other current assets
($2.6 million and $2.2 million measured at
fair value as of December 31, 2016 and
September 30, 2016, respectively)
9,045 9,063 Total current assets 177,138 184,912
Property and equipment, net 15,591 14,376 Intangible assets, net
2,324 2,650 Goodwill 44,786 45,134 Deferred long-term tax assets
1,021 1,021 Other assets 11,847 12,016 Total assets $
252,707 $ 260,109
Liabilities and stockholders’
equity Current liabilities: Accounts payable $ 9,180 $ 9,732
Accrued expenses and other current liabilities 43,054 45,133
Distributions payable 4,689 1,722 Customer payables 28,890
28,901 Total current liabilities 85,813 85,488 Deferred
taxes and other long-term liabilities 11,119 12,010
Total liabilities 96,932 97,498 Commitments and contingencies - -
Stockholders’ equity:
Common stock, $0.001 par value;
120,000,000 shares authorized; 31,291,341 shares
issued and outstanding at December 31,
2016; 30,742,662 shares issued and
outstanding at September 30, 2016
29 29 Additional paid-in capital 222,392 220,192 Accumulated other
comprehensive loss (9,210 ) (8,571 ) Retained earnings (accumulated
deficit) (57,436 ) (49,039 ) Total stockholders’ equity 155,775
162,611 Total liabilities and stockholders’ equity $
252,707 $ 260,109
Liquidity
Services, Inc. and Subsidiaries Unaudited Consolidated
Statements of Operations (Dollars in Thousands, Except Per
Share Data) Three Months Ended December
31, 2016 2015 Revenue $ 47,980 $ 50,138
Fee revenue 22,816 15,737 Total revenue 70,796 65,875
Costs and expenses: Cost of goods sold (excluding amortization)
32,271 26,883 Client distributions 4,548 2,357 Technology and
operations 21,892 22,807 Sales and marketing 9,987 9,460 General
and administrative 9,857 10,068 Depreciation and amortization 1,429
1,672 Acquisition costs — 39 Total
costs and expenses 79,984
73,286
Other operating income 928 — Loss from
operations (8,260 ) (7,411 ) Interest expense (income) and other
expense, net 34 (60 ) Loss before provision (benefit) for
income taxes (8,294 ) (7,351 ) Provision (benefit) for income taxes
103 (2,154 ) Net loss $ (8,397 ) $ (5,197 ) Basic and
diluted loss per common share $ (0.27 ) $ (0.17 ) Basic and diluted
weighted average shares outstanding 31,261,603 30,490,670
Liquidity Services, Inc. and
Subsidiaries Unaudited Consolidated Statements of Cash
Flows (Dollars In Thousands) Three
Months Ended December 31, 2016 2015
Operating activities Net loss $ (8,397 ) $ (5,197 )
Adjustments to reconcile net loss to net cash used in operating
activities: Depreciation and amortization 1,429 1,672 Stock
compensation expense 2,500 2,420 Provision for inventory allowance
715 1,208 Provision for doubtful accounts 84 78 Incremental tax
loss from exercise of common stock options — 48 Change in fair
value of financial instruments (928 ) — Changes in operating assets
and liabilities: Accounts receivable (440 ) 77 Inventory 151 (3,152
) Prepaid and deferred taxes (9 ) (2,424 ) Prepaid expenses and
other assets 773 (969 ) Accounts payable (552 ) 594 Accrued
expenses and other current liabilities (2,922 ) (2,070 )
Distributions payable 2,967 (1,169 ) Customer payables (11 ) 583
Other liabilities (381 ) 3 Net cash used in operating
activities (5,021 ) (8,298 )
Investing activities Increase
in intangibles (7 ) (29 ) Purchases of property and equipment,
including capitalized software (2,321 ) (1,428 ) Net cash used in
investing activities (2,328 ) (1,457 )
Financing activities
Proceeds from exercise of common stock options (net of tax) 32 —
Incremental tax loss from exercise of common stock options —
(48 ) Net cash provided (used) by financing activities 32 (48 )
Effect of exchange rate differences on cash and cash equivalents
(282 ) (210 ) Net decrease in cash and cash equivalents (7,599 )
(10,013 ) Cash and cash equivalents at beginning of period 134,513
95,465 Cash and cash equivalents at end of period $
126,914 $ 85,452
Supplemental disclosure of cash
flow information Cash paid for income taxes, net $ (209 ) $
(237 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170209005494/en/
Liquidity ServicesJulie Davis, 202-467-6868 ext.
2234Senior Director, Investor
Relationsjulie.davis@liquidityservices.com
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