A Better Future for Surplus
|Liquidity Services Announces First Quarter Fiscal Year 2017 Financial Results|
|February 09, 2017|
“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
“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
Non-GAAP adjusted EBITDA, which excludes stock-based compensation and
acquisition costs, was
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
GMV and Revenue Mix —The table below summarizes GMV and revenue by pricing model.
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
For Q2-17 our guidance is as follows:
GMV – We expect GMV for Q2-17 to range from
GAAP Net Loss – We expect GAAP Net Loss for
Q2-17 to range from
GAAP Diluted EPS - We expect GAAP diluted
Loss Per Share for Q2-17 to range from
Non-GAAP Adjusted EBITDA –We expect
non-GAAP Adjusted EBITDA for Q2-17 to range from
Non-GAAP Adjusted Diluted EPS – We expect
non-GAAP Adjusted Loss Per Diluted Share for Q2-17 to range from
Q2-FY17 guidance does not include any one time impacts from winding down our TruckCenter marketplace.
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.
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.
The Company will host a conference call to discuss the first quarter of
fiscal year 2017 results at
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.
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
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.