Liquidity Services Announces Third Quarter Fiscal Year 2017 Financial Results
-
GMV of
$160.9 million , down from$178.5 million in the prior year -
Revenue of
$65.5 million , down from$85.2 million in the prior year -
GAAP Net Loss of
$(8.6) million , down from$(0.1) million in the prior year -
Non-GAAP Adjusted EBITDA of
$(5.2) million , down from$4.8 million in the prior year -
GovDeals achieves record GMV results of
$75.5 million , up 17.7% versus the prior year Network International energy marketplace launched on new LiquidityOne Platform; Platform Investments and Long-Term Growth Strategy Remain the Priority
“Q3 marked an exciting milestone for the company as we launched our
global energy marketplace,
“Although our Q3 consolidated results were mixed, we were also pleased with the performance of our state and local government marketplace (GovDeals segment), which reported record GMV up 17.7% year over year, and our retail supply chain marketplace (RSCG segment), which reported GMV up 5.1% year over year. Our capital assets business (CAG segment) experienced unexpected headwinds in Q3 due to lower than anticipated client sales activity and delays in large asset sales, as well as lower volumes of good received and lower service fee revenue in our DoD Surplus contract,” continued Angrick.
"While we saw less client sales activity among industrial accounts in
the CAG segment in Q3, overall trends in globalization and innovation
are driving the need for our sales channels and services. Our retail
supply chain returns management solutions are well suited to the rapid
growth of online retailing which is fueling higher product returns.
Continued investments in our people, processes, and platform will
enhance the value we bring to clients and fuel long term growth in the
Third Quarter Consolidated Operating and Earnings Results
The company reported Q3-17 GMV, an operating measure of the total sales
value of all merchandise sold through our marketplaces during the given
period, of
Non-GAAP adjusted EBITDA, which excludes stock-based compensation,
impairment and business realignment, and acquisition costs, was
Comparative consolidated financial results reflect increased cost of sales and lower margins under the new Scrap and Surplus contracts, the transition to the new Surplus contract, under which we pay higher product costs, lower service fee revenue related to pricing declines for certain services under our Surplus contract, and the delay of large sales in our industrial business during the quarter. Additionally, there was a one time charge to the inventory reserve related to our IronDirect business.
Third Quarter Segment Operating and Earnings Results
We are providing operating results in three reportable segments:
GovDeals,
GovDeals reportable segment provides self-service solutions in which
sellers list their own assets, and it consists of marketplaces that
enable local and state government entities including city, county and
state agencies, as well as commercial businesses located in
CAG reportable segment provides full-service solutions to sellers and it
consists of marketplaces that enable federal government agencies as well
as commercial businesses to sell surplus, salvage, and scrap assets. The
assets that the company receives as the exclusive contractor of the
RSCG reportable segment consists of marketplaces that enable
corporations located in
Our Q3-17 segment results are as follows (unaudited, in thousands):
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| GovDeals: | |||||||||||||||
| GMV | 75,527 | 64,184 | 195,866 | 165,920 | |||||||||||
| Revenue | 7,464 | 6,420 | 19,901 | 17,067 | |||||||||||
| Gross profit | 7,023 | 6,041 | 18,670 | 16,040 | |||||||||||
| CAG: | |||||||||||||||
| GMV | 55,113 | 83,450 | 197,710 | 225,129 | |||||||||||
| Revenue | 34,400 | 54,199 | 113,978 | 146,692 | |||||||||||
| Gross profit | 17,418 | 29,352 | 56,961 | 85,171 | |||||||||||
| RSCG: | |||||||||||||||
| GMV | 30,053 | 28,596 | 86,122 | 79,268 | |||||||||||
| Revenue | 23,528 | 23,804 | 72,029 | 67,818 | |||||||||||
| Gross profit | 7,398 | 7,675 | 22,566 | 22,176 | |||||||||||
| Corporate & Other*: | |||||||||||||||
| GMV | 178 | 2,287 | 4,613 | 12,625 | |||||||||||
| Revenue | 128 | 765 | 2,742 | 6,364 | |||||||||||
| Gross profit | (1,921 | ) | 164 |
(1,492 |
) |
926 | |||||||||
| Total GMV | 160,871 | 178,517 | 484,311 | 482,942 | |||||||||||
| Total Revenue | 65,520 | 85,188 | 208,650 | 237,941 | |||||||||||
| Total Gross profit | 29,918 | 43,232 | 96,705 | 124,313 | |||||||||||
* Corporate &Other primarily consists of the Company's TruckCenter and IronDirect operating segments that are not individually significant, as well as elimination adjustments.
Additional Third Quarter Operational Results
- Registered Buyers — At the end of Q3-17, registered buyers totaled approximately 3,106,000 representing an approximately 5% increase over the approximately 2,958,000 registered buyers at the end of Q3-16.
- 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 577,000 in Q3-17, an approximately 10% decrease from the approximately 642,000 auction participants in Q3-16.
- Completed Transactions — Completed transactions decreased to approximately 134,000, an approximately 11% decrease for Q3-17 from the approximately 151,000 completed transactions in Q3-16.
Business Outlook
Our near-term outlook remains cautious. FY17 results continue to benefit from growth in our GovDeals and RSCG segments. We continue to invest in our strategy to unify our business processes, global sales organization, and e-commerce marketplace platform. While the RSCG segment is showing overall improvement, we anticipate our CAG segment will be adversely impacted by decreased activity within its industrial verticals and lower service fee revenues and inferior property mix under our Surplus contract, impacting growth in FY17. We anticipate continued investments in the design and deployment of our new LiquidityOne e-commerce platform across our remaining marketplaces. Our expenses will remain elevated throughout the remainder of FY17 as we continue this transformation.
The following forward-looking statements reflect the following trends and assumptions for Q4-17:
(i) increased investment spending under our LiquidityOne transformation initiative as we ready our remaining marketplaces for migration onto our new platform;
(ii) increased cost of sales, lower volume of goods received, lower margins, and declining service fee revenue as we anticipate inferior product mix and pricing declines for the services we provide under our DoD Surplus contract;
(iii) continued strength in our GovDeals segment and steady year-over-year growth;
(iv) a mix shift to more consignment accounts in our RSCG segment; and
(v) new pricing for services provided under out DoD Scrap contract and continued variability in commodities pricing, volumes of goods received, and mix of commodities.
For Q4-17 our guidance is as follows:
GMV - We expect GMV for Q4-17 to range from
GAAP Net Loss - We expect GAAP Net Loss for
Q4-17 to range from
GAAP Diluted EPS - We expect GAAP diluted
Loss Per Share for Q4-17 to range from
Non-GAAP Adjusted EBITDA -We expect
non-GAAP Adjusted EBITDA for Q4-17 to range from
Non-GAAP Adjusted Diluted EPS - We expect
non-GAAP Adjusted Loss Per Diluted Share for Q4-17 to range from
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, acquisition costs, and business realignment expense.
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||
|
(In thousands) |
|||||||||||||||||||||||||
| Net loss | $ | (8,614 | ) | $ | (124 | ) | $ | (25,220 | ) | $ | (6,171 | ) | |||||||||||||
| Interest (income) expense and other expense, net | (189 | ) | 208 | (291 | ) | (242 | ) | ||||||||||||||||||
| Provision (benefit) for income taxes | 41 | (17 | ) | 91 | (2,438 | ) | |||||||||||||||||||
| Depreciation and amortization | 1,365 | 1,616 | 4,228 | 4,948 | |||||||||||||||||||||
| EBITDA | (7,397 | ) | 1,683 | (21,192 | ) | (3,903 | ) | ||||||||||||||||||
| Stock compensation expense | 1,563 | 3,084 | 5,462 | 8,228 | |||||||||||||||||||||
| Acquisition costs | — | — | — | 39 | |||||||||||||||||||||
| Impairment of long-lived assets * | 886 | — | 886 | — | |||||||||||||||||||||
| Business realignment expenses* | (234 | ) | — | 906 | — | ||||||||||||||||||||
| Adjusted EBITDA | $ | (5,182 | ) | $ | 4,767 | $ | (13,938 | ) | $ | 4,364 | |||||||||||||||
Adjusted Net (Loss) Income and Adjusted Basic and Diluted Earnings Per Share. Adjusted net loss is a supplemental non-GAAP financial measure and is equal to net income (loss) plus stock compensation expense, impairment and business realignment expenses, acquisition costs, and the estimated impact of income taxes on these non-GAAP adjustments. Adjusted basic and diluted loss per share are determined using Adjusted Net (Loss) Income. For Q3-17 the tax rate used to estimate the impact of income taxes on the non-GAAP adjustments was 29.0% compared to 28.3% used for the Q3-16 results. The 29.0% tax rate excludes the impact of the charge to our U.S. valuation allowance to provide a better comparison to the Q3-16 results.
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
|
(In thousands) |
||||||||||||||||||||||||
| Net loss | $ | (8,614 | ) | $ | (124 | ) | $ | (25,220 | ) | $ | (6,171 | ) | ||||||||||||
| Stock compensation expense | 1,563 | 3,084 | 5,462 | 8,228 | ||||||||||||||||||||
| Acquisition costs | — | — | — | 39 | ||||||||||||||||||||
| Impairment of long-lived assets * | 886 | 886 | — | |||||||||||||||||||||
| Business realignment expenses* | (234 | ) | — | 906 | — | |||||||||||||||||||
| Adjustment for provision (benefit) for income taxes | (642 | ) | (873 | ) | (2,104 | ) | (2,341 | ) | ||||||||||||||||
| Adjusted net (loss) income | (7,041 | ) | 2,087 | (20,070 | ) | (245 | ) | |||||||||||||||||
| Adjusted basic (loss) earnings per common share | $ | (0.22 | ) | $ | 0.07 | $ | (0.64 | ) | $ | (0.01 | ) | |||||||||||||
| Adjusted diluted (loss) earnings per common share | $ | (0.22 | ) | $ | 0.07 | $ | (0.64 | ) | $ | (0.01 | ) | |||||||||||||
| Basic weighted average shares outstanding | 31,485,599 | 30,726,554 | 31,369,077 | 30,603,641 | ||||||||||||||||||||
| Diluted weighted average shares outstanding | 31,485,599 | 30,726,554 | 31,369,077 | 30,603,641 | ||||||||||||||||||||
*Business realignment expenses and impairment of long-lived assets
are included within the Other operating expense line item in the
Consolidated Statements of Operations.
Conference Call
The Company will host a conference call to discuss the third quarter of
fiscal year 2017 results at
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.
We are not providing a reconciliation of our guidance for Non-GAAP Adjusted EBITDA to our guidance for GAAP Net Loss because this reconciliation would require us to make projections regarding the amount of stock based compensation expense and benefit for income taxes, which are reconciling items between net loss and Adjusted EBITDA, as well as the impact of foreign currency fluctuations. These items will impact net income and are out of our control and/or cannot be reasonably predicted due to their high variability and complexity, and inherent uncertainty. For example, equity compensation expense would be difficult to predict because it depends on our future hiring and retention needs, as well as the future fair market value of our common stock, all of which are subject to constant change. As a result, the reconciliation is not possible without unreasonable efforts. In addition, we believe such reconciliations could imply a degree of precision that might be confusing or misleading to investors. The actual effect of the reconciling items that we exclude from Adjusted EBITDA, when determined, may be significant to the calculation of GAAP Net Loss. As a result, there can be no assurance that such reconciling items will not materially affect our future GAAP Net Loss.
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; the Company’s proprietary e-commerce marketplace platform; the migration of legacy marketplaces to the new LiquidityOne platform; expected investments in sales teams; expected investment in, benefits of and timing of completion of the LiquidityOne transformation initiative; the pricing for services, and the pricing, supply, and mix of inventory under the DoD Scrap Contract and Surplus Contract; expected future commodity prices; expected future effective tax rates; the timing of large client projects; and trends and assumptions about future periods, including the fourth 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.
About
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Liquidity Services and Subsidiaries |
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| June 30, 2017 |
September 30, 2016 |
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| (Unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 113,935 | $ | 134,513 | |||||||
|
Accounts receivable, net of allowance for doubtful accounts of
$643 and $718 |
11,621 | 10,355 | |||||||||
| Inventory | 18,876 | 27,610 | |||||||||
| Tax refund receivable | 378 | 1,205 | |||||||||
| Prepaid taxes | 1,981 | 2,166 | |||||||||
|
Prepaid expenses and other current assets ($0.9 million and $2.2
million measured at |
7,891 | 9,063 | |||||||||
| Total current assets | 154,682 | 184,912 | |||||||||
| Property and equipment, net | 16,689 | 14,376 | |||||||||
| Intangible assets, net | 1,374 | 2,650 | |||||||||
| Goodwill | 45,189 | 45,134 | |||||||||
| Deferred long-term tax assets | 1,021 | 1,021 | |||||||||
| Other assets | 12,611 | 12,016 | |||||||||
| Total assets | $ | 231,566 | $ | 260,109 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 11,768 | $ | 9,732 | |||||||
| Accrued expenses and other current liabilities | 31,742 | 45,133 | |||||||||
| Distributions payable | 9,930 | 1,722 | |||||||||
| Customer payables | 23,931 | 28,901 | |||||||||
| Total current liabilities | 77,371 | 85,488 | |||||||||
| Deferred taxes and other long-term liabilities | 10,642 | 12,010 | |||||||||
| Total liabilities | 88,013 | 97,498 | |||||||||
| Commitments and contingencies (Note 11) |
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| Stockholders’ equity: | |||||||||||
|
Common stock, $0.001 par value; 120,000,000 shares authorized;
31,485,857 shares |
29 | 29 | |||||||||
| Additional paid-in capital | 226,422 | 220,192 | |||||||||
| Accumulated other comprehensive loss | (8,639 | ) | (8,571 | ) | |||||||
| Retained earnings (accumulated deficit) | (74,259 | ) | (49,039 | ) | |||||||
| Total stockholders’ equity | 143,553 | 162,611 | |||||||||
| Total liabilities and stockholders’ equity | $ | 231,566 | $ | 260,109 | |||||||
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Liquidity Services and Subsidiaries
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| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
| Revenue | $ | 44,404 | $ | 62,025 | $ | 144,799 | $ | 178,633 | ||||||||||||||||
| Fee revenue | 21,116 | 23,163 | 63,851 | 59,308 | ||||||||||||||||||||
| Total revenue | 65,520 | 85,188 | 208,650 | 237,941 | ||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||
| Cost of goods sold (excluding amortization) | 30,413 | 39,292 | 97,248 | 106,102 | ||||||||||||||||||||
| Client distributions | 5,189 | 2,663 | 14,697 | 7,526 | ||||||||||||||||||||
| Technology and operations | 19,639 | 22,541 | 62,607 | 70,026 | ||||||||||||||||||||
| Sales and marketing | 8,273 | 9,967 | 27,410 | 28,575 | ||||||||||||||||||||
| General and administrative | 8,751 | 9,042 | 26,836 | 29,576 | ||||||||||||||||||||
| Depreciation and amortization | 1,365 | 1,616 | 4,228 | 4,948 | ||||||||||||||||||||
| Acquisition costs | — | — | — | 39 | ||||||||||||||||||||
| Total costs and expenses | 73,630 | 85,121 | 233,026 | 246,792 | ||||||||||||||||||||
| Other operating expense | 652 | — | 1,044 | — | ||||||||||||||||||||
| (Loss) income from operations | (8,762 | ) | 67 | (25,420 | ) | (8,851 | ) | |||||||||||||||||
| Interest (income) expense and other expense, net | (189 | ) | 208 | (291 | ) | (242 | ) | |||||||||||||||||
| Loss before provision (benefit) for income taxes | (8,573 | ) | (141 | ) | (25,129 | ) | (8,609 | ) | ||||||||||||||||
| Provision (benefit) for income taxes | 41 | (17 | ) | 91 | (2,438 | ) | ||||||||||||||||||
| Net loss | $ | (8,614 | ) | $ | (124 | ) | $ | (25,220 | ) | $ | (6,171 | ) | ||||||||||||
| Basic and diluted loss per common share | $ | (0.27 | ) | $ | 0.00 | $ | (0.80 | ) | $ | (0.20 | ) | |||||||||||||
| Basic and diluted weighted average shares outstanding | 31,485,599 | 30,726,554 | 31,369,077 | 30,603,641 | ||||||||||||||||||||
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Liquidity Services and Subsidiaries |
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| Nine Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | ||||||||||||||
| Operating activities | |||||||||||||||
| Net loss | $ | (25,220 | ) | $ | (6,171 | ) | |||||||||
| Adjustments to reconcile net loss to net cash (used) provided by operating activities: | |||||||||||||||
| Depreciation and amortization | 4,228 | 4,948 | |||||||||||||
| Stock compensation expense | 5,462 | 8,228 | |||||||||||||
| Provision for inventory allowance | 8,101 | 2,052 | |||||||||||||
| Provision for doubtful accounts | (1 | ) | 226 | ||||||||||||
| Deferred tax benefit | — | (2,438 | ) | ||||||||||||
| Incremental tax benefit from exercise of common stock options | — | 138 | |||||||||||||
| Impairment of long-lived assets | 1,028 | — | |||||||||||||
| Change in fair value of financial instruments | (749 | ) | — | ||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||
| Accounts receivable | (1,274 | ) | (2,997 | ) | |||||||||||
| Inventory | 633 | (2,371 | ) | ||||||||||||
| Prepaid and deferred taxes | 1,356 | 33,938 | |||||||||||||
| Prepaid expenses and other assets | 981 | (1,919 | ) | ||||||||||||
| Accounts payable | 2,036 | (988 | ) | ||||||||||||
| Accrued expenses and other current liabilities | (13,422 | ) | 7,907 | ||||||||||||
| Distributions payable | 8,208 | (998 | ) | ||||||||||||
| Customer payables | (4,971 | ) | (785 | ) | |||||||||||
| Other liabilities | (662 | ) | (134 | ) | |||||||||||
| Net cash (used) provided by operating activities | (14,266 | ) | 38,636 | ||||||||||||
| Investing activities | |||||||||||||||
| Increase in intangibles | (78 | ) | (46 | ) | |||||||||||
| Purchases of property and equipment, including capitalized software | (6,210 | ) | (4,587 | ) | |||||||||||
| Net cash used in investing activities | (6,288 | ) | (4,633 | ) | |||||||||||
| Financing activities | |||||||||||||||
| Proceeds from exercise of common stock options (net of tax) | 93 | — | |||||||||||||
| Incremental tax benefit from exercise of common stock options | — | (138 | ) | ||||||||||||
| Net cash provided (used) by financing activities | 93 | (138 | ) | ||||||||||||
| Effect of exchange rate differences on cash and cash equivalents | (117 | ) | 535 | ||||||||||||
| Net (decrease) increase in cash and cash equivalents | (20,578 | ) | 34,400 | ||||||||||||
| Cash and cash equivalents at beginning of period | 134,513 | 95,465 | |||||||||||||
| Cash and cash equivalents at end of period | $ | 113,935 | $ | 129,865 | |||||||||||
| Supplemental disclosure of cash flow information | |||||||||||||||
| Cash paid (received) for income taxes, net | $ | (931 | ) | $ | (34,001 | ) | |||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170803005432/en/
Source:
Liquidity Services
Julie Davis, 202-467-6868 ext. 2234
Senior
Director, Investor Relations
julie.davis@liquidityservices.com