A Better Future for Surplus
|Liquidity Services Announces First Quarter Fiscal Year 2016 Financial Results|
|February 04, 2016|
– First Quarter Revenue of
- Long Term Commercial Growth Strategy Remains the Priority
“As we commence fiscal year 2016, our focus remains on the long term
growth of our commercial business and building the most innovative
services and capabilities in the global reverse supply chain industry in
response to what our customers want and need to improve their own
Q1-16 results were led by our state and municipal government
marketplace, which achieved double-digit GMV growth. We also continue to
grow our client base and signed over 200 new government clients and 33
new industrial capital asset clients in the quarter. Our retail business
performed slightly below expectations during the quarter related to
timing of expenses for products that we received and processed during
the quarter but were not available for sale on our marketplace during
the quarter. Our retail business continues to strengthen with new client
programs ramping up in Q2-16, including the increasing adoption of our
returns management services. We continue to see unfavorable industry and
pricing trends in our energy and DoD scrap property verticals, which
have impacted pricing and transaction volume during the quarter. We
exited Q1-16 in a strong financial position with
Comparative financial results reflect the sale of our Jacobs Trading
subsidiary, the significant downturn in commodity prices which have
reduced prices and volume in our DoD scrap and energy marketplaces and
increased spending in our LiquidityOne investment program. Our
Q1-16 revenue and adjusted EBITDA decreased 47.4% and 119.2%,
respectively, from the prior year’s comparable period, and adjusted net
income and adjusted diluted earnings per share decreased 130.6% and
130.0%, respectively, from the prior year’s comparable period. Net GAAP
loss for Q1-16 was
In the near term it remains difficult to forecast the sales and margins of our business, as our DoD business has seen significant changes in the volume and mix of property we handle and a decline in scrap metals pricing which has reduced sales values and increased costs. We are also operating under an extension of the wind-down period of our prior DoD Surplus contract which reflects the more favorable pricing terms of that contract for merchandise received during the wind-down period. As we transition to the new Surplus contract during FY-16, we will receive and sell merchandise under both the old and new Surplus contracts.
During the next 15 months our organization is responsible for maintaining the ‘as-is’ business supported by legacy systems while investing in the development of an integrated global business and new marketplace platform. Our costs during this transition process will be elevated and we will also face a drag on productivity as we teach and implement new ways of doing business. We will have periods of uneven financial performance as we execute our strategy. However, we will emerge from this transformation as a much more scalable and capable organization that is able to focus entirely on growth activities in the global reverse supply chain. We also plan to further allocate management time and resources to accomplish our LiquidityOne transformation program, which may result in reduced productivity and growth that is difficult to forecast.
Our FY-16 outlook remains cautious due to the changing mix and volume of supply in our DoD and commercial business, in part due to lower commodity prices and macro weakness in the energy sector. While we anticipate a benefit to earnings in FY-16 compared to FY-15 from the sale of the Jacobs Trading business, client engagements and the mix of property received under select retail client programs are unpredictable, resulting in lower supply and lower per unit prices in certain categories.
In the longer term, we expect our business to benefit from: (i) innovative new service capabilities and more efficient business operations from our LiquidityOne investment program; (ii) improved monetization of our buyer base through the deployment of our new integrated marketplace system and data warehouse; (iii) increased outsourcing of reverse supply chain activities in response to our new model and the rise of e-commerce and sustainability programs; and (iv) increased brand recognition as a market leader due to our proven track record, innovative scalable solutions and the ability to make a strategic impact in the reverse supply chain.
The following forward-looking statements reflect trends and assumptions for Q2-16:
GMV – We expect GMV for Q2-16 to range from
Adjusted EBITDA –We expect Adjusted EBITDA
for Q2-16 to range from
Adjusted Diluted EPS – We estimate Adjusted
Earnings Per Diluted Share for Q2-16 to range from
Our second quarter guidance adjusts EBITDA and Diluted EPS for stock
based compensation costs, which we estimate to be approximately
Key Q1 FY16 Operating Metrics
Registered Buyers — At the end of Q1-16, registered buyers totaled approximately 2,875,000, representing an approximately 9% increase over the approximately 2,646,000 registered buyers at the end of Q1-15.
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 561,000 in Q1-16, an approximately 11% decrease from the approximately 631,000 auction participants in Q1-15.
Completed Transactions — Completed transactions decreased to approximately 133,000, an approximately 9% decrease for Q1-16 from the approximately 146,000 completed transactions in Q1-15.
GMV and Revenue Mix —The table below summarizes GMV and revenue by pricing model.
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 (loss) plus interest and other expense, net; provision (benefit) 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, acquisition costs, impairment of goodwill and long-lived assets, business realignment expenses, and gains or losses from business dispositions.
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 (loss) plus tax effected stock compensation expense, amortization of contract-related intangible assets associated with the Jacobs Trading acquisition, acquisition costs including changes in earn out estimates, and impairment of goodwill and long-lived assets. For Q1 FY16, the tax rate used to tax effect these items is our current rate of 29.3%. Adjusted basic and diluted earnings per share are determined using Adjusted Net Income.
The Company will host a conference call to discuss the first quarter of
fiscal year 2016 results at
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.
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, plans to increase investments in technology infrastructure, the Company’s proprietary e-commerce marketplace platform, product development and marketing initiatives, the LiquidityOne Transformation program, the supply and mix of inventory under the DoD Surplus Contracts, expected future effective tax rates, expected future tax benefits as a result of the sales of the Jacobs Trading business, and trends and assumptions about future periods, including the second quarter FY-16. 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
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.