Liquidity Services, Inc. Announces Fourth Quarter and Fiscal Year 2013 Financial Results
Record fiscal year revenue of
– Fourth quarter revenue of
The Company reported consolidated Q4-13 revenue of
Net income in FY-13 was
Annual operating cash flow was
“Liquidity Services generated improved results during Q4-13 based on the
expansion of our services with retail supply chain clients and strong
growth in our public sector business highlighted by 33% growth in our
GovDeals marketplace this quarter. Both our retail supply chain and
capital assets businesses grew sequentially during a seasonally low
quarter for the Company and we continued to make progress with our
integration of GoIndustry to deliver profitable growth going forward,”
said
“During fiscal year 2013, we enhanced our industry coverage, breadth of services, geographic reach and global buyer base which have expanded our addressable market and reinforced our leadership position. We are excited by the numerous related opportunities to create value for our buyers and clients by delivering supply chain efficiencies, protecting their brands and providing technology enabled services to better compete in an increasingly complex environment,” said Mr. Angrick.
“There are compelling opportunities to more broadly extend our
technology platform, buyer liquidity and marketplace data to existing
and new customers and partners. During FY14 we will establish and fund a
new directive focused on developing new on demand services in these
areas to further penetrate and serve our target market. We believe our
continued investments in our people, technology platform and service
offering position us well for long term profitable growth and market
leadership.
Business Outlook
While general economic conditions have improved, our overall outlook remains cautious due to the volatility in the macro environment. The retail vertical of our business has seen significant changes in consumer spending habits in certain categories, such as electronics, which has been affected by increases in payroll taxes, continued high unemployment, and reduced innovation in the sector resulting in decreased spending. Additionally, we plan to increase our investment in technology infrastructure and innovation for our proprietary e-commerce marketplaces to support further expansion and integration of our existing and recently acquired businesses. In the longer term, we expect our business to continue to benefit from the following trends: (i) as consumers trade down and seek greater value, we anticipate stronger buyer demand for the surplus merchandise sold in our marketplaces, (ii) as corporations and public sector agencies focus on reducing costs, improving transparency and working capital flows by outsourcing reverse supply chain activities, we expect our seller base to increase, and (iii) as corporations and public sector agencies increasingly prefer service providers with a proven track record, innovative technology solutions and demonstrated financial strength, we expect our seller base to increase.
The following forward looking statements reflect trends and assumptions for the next quarter and FY 2014:
(i) | stable commodity prices in our scrap business; | |
(ii) | stable average sales prices realized in our capital assets marketplaces; | |
(iii) | improved margins in our GoIndustry marketplace as we continue to integrate the acquisition and complete our restructuring plans; | |
(iv) | continued product flows under the DoD Surplus contract under the existing terms; | |
(v) | an effective income tax rate of 40%; and | |
(vi) | improved operations and service levels in our retail goods marketplaces. | |
Our Scrap Contract with the
GMV – We expect GMV for fiscal year 2014 to
range from
Adjusted EBITDA – We expect Adjusted EBITDA
for fiscal year 2014 to range from
Adjusted Diluted EPS – We estimate Adjusted
Earnings Per Diluted Share for fiscal year 2014 to range from
Our guidance adjusts EBITDA and Diluted EPS for (i) acquisition costs
including transaction costs and changes in earn out estimates; (ii)
amortization of contract related intangible assets of
Key FY-13 and Q4-13 Operating Metrics
Registered Buyers — At the end of FY-13, registered buyers totaled approximately 2,424,000, representing an 11% increase over the approximately 2,186,000 registered buyers at the end of FY-12.
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 approximately 2,458,000 in FY-13, an approximately 17% increase over the approximately 2,105,000 auction participants in FY-12. Auction participants increased to approximately 626,000 in Q4-13, an approximately 11% increase over the approximately 565,000 auction participants in Q4-12.
Completed Transactions — Completed transactions increased to approximately 530,000, an approximately 6% increase for FY-13 from the approximately 501,000 completed transactions in FY-12. Completed transactions decreased to approximately 133,000, an approximately 5% decrease for Q4-13 from the approximately 140,000 completed transactions in Q4-12.
GMV and Revenue Mix — GMV continues to diversify due to the continued growth in our commercial business and state and local government business (the GovDeals.com marketplace). As a result, the percentage of GMV derived from our DoD Contracts during FY-13 decreased to 21.3% compared to 23.7% in the prior year. The table below summarizes GMV and revenue by pricing model.
GMV Mix |
||||||||
FY-13 | FY-12 | Q4-13 | Q4-12 | |||||
Profit-Sharing Model: | ||||||||
Scrap Contract | 7.0% | 8.9% | 6.8% | 6.7% | ||||
Total Profit Sharing | 7.0% | 8.9% | 6.8% | 6.7% | ||||
Consignment Model: | ||||||||
GovDeals | 15.8% | 15.2% | 16.9% | 13.2% | ||||
Commercial | 43.3% | 37.1% | 44.8% | 45.0% | ||||
Total Consignment | 59.1% | 52.3% | 61.7% | 58.2% | ||||
Purchase Model: | ||||||||
Commercial | 19.6% | 24.0% | 17.1% | 21.1% | ||||
Surplus Contract | 14.3% | 14.8% | 14.4% | 14.0% | ||||
Total Purchase | 33.9% | 38.8% | 31.5% | 35.1% | ||||
Total | 100.0% | 100.0% | 100.0% | 100.0% | ||||
Revenue Mix |
||||||||
Profit-Sharing Model: | ||||||||
Scrap Contract | 13.5% | 16.1% | 13.2% | 13.3% | ||||
Total Profit Sharing | 13.5% | 16.1% | 13.2% | 13.3% | ||||
Consignment Model: | ||||||||
GovDeals | 3.1% | 2.6% | 3.5% | 2.5% | ||||
Commercial | 12.2% | 9.9% | 13.5% | 13.7% | ||||
Total Consignment | 15.3% | 12.5% | 17.0% | 16.2% | ||||
Purchase Model: | ||||||||
Commercial | 38.8% | 44.5% | 33.8% | 42.9% | ||||
Surplus Contract | 27.6% | 26.9% | 28.0% | 27.6% | ||||
Total Purchase | 66.4% | 71.4% | 61.8% | 70.5% | ||||
Other | 4.8% | 0.0% | 8.0% | 0.0% | ||||
Total | 100.0% | 100.0% | 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 interest and other expense (income), net; provision 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 expense, and acquisition costs including changes in earn out estimates. |
Three Months | Twelve Months | ||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
(In thousands) | |||||||||||||
Net income | $ | 10,409 | $ | 5,545 | $ | 41,104 | $ | 48,296 | |||||
Interest and other expense (income), net | 69 | 593 | (704 | ) | 2,218 | ||||||||
Provision for income taxes | 6,729 | 2,627 | 27,551 | 31,652 | |||||||||
Amortization of contract intangibles | 1,816 | 1,884 | 7,265 | 7,943 | |||||||||
Depreciation and amortization | 2,583 | 1,715 | 10,109 | 6,223 | |||||||||
EBITDA | 21,606 | 12,364 | 85,325 | 96,332 | |||||||||
Stock compensation expense | 3,150 | 3,462 |
13,379 |
12,117 | |||||||||
Acquisition costs | 95 | 7,256 | 5,921 | 1,695 | |||||||||
Adjusted EBITDA | $ | 24,851 | $ | 23,082 | $ | 104,625 | $ | 110,144 |
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, amortization of contract-related intangible assets associated with the Jacobs Trading acquisition and acquisition costs including changes in earn out estimates. Adjusted basic and diluted earnings per share are determined using Adjusted Net Income. |
Three Months Ended | Twelve Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
(Dollars in thousands, except per share data) | ||||||||||||
Net income | $ | 10,409 | $ | 5,545 | $ | 41,104 | $ | 48,296 | ||||
Stock compensation expense (net of tax) | 1,890 | 2,077 | 7,998 | 7,270 | ||||||||
Amortization of contract intangibles (net of tax) | 1,090 | 1,090 | 4,342 | 4,359 | ||||||||
Acquisition costs (net of tax) | 57 | 4,354 | 3,550 | 1,017 | ||||||||
Adjusted net income | $ | 13,446 | $ | 13,066 | $ | 56,994 | $ | 60,942 | ||||
Adjusted basic earnings per common share | $ | 0.42 | $ | 0.42 | $ | 1.80 | $ | 1.98 | ||||
Adjusted diluted earnings per common share | $ | 0.41 | $ | 0.40 | $ | 1.75 | $ | 1.86 | ||||
Basic weighted average shares outstanding | 31,772,379 | 31,045,293 | 31,616,926 | 30,854,796 | ||||||||
Diluted weighted average shares outstanding | 32,702,807 | 32,788,205 | 32,657,236 | 32,783,079 | ||||||||
Conference Call
The Company will host a conference call to discuss the fiscal 2013 and
fourth quarter 2013 results at
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, 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.
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 and expected future effective tax rates. 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
Liquidity Services, Inc. and Subsidiaries | ||||||
Consolidated Balance Sheets | ||||||
(Dollars in Thousands) | ||||||
September 30, | ||||||
2013 | 2012 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 95,109 | $ | 104,782 | ||
Accounts receivable, net of allowance for doubtful accounts of $891 and $1,248 in 2013 and 2012, respectively | 24,050 | 16,226 | ||||
Inventory | 29,261 | 20,669 | ||||
Prepaid and deferred taxes | 11,243 | 16,927 | ||||
Prepaid expenses and other current assets | 4,802 | 3,973 | ||||
Total current assets | 164,465 | 162,577 | ||||
Property and equipment, net | 10,380 | 10,382 | ||||
Intangible assets, net | 28,205 | 34,204 | ||||
Goodwill | 211,711 | 185,771 | ||||
Other assets | 6,583 | 7,474 | ||||
Total assets | $ | 421,344 | $ | 400,408 | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 16,539 | $ | 9,997 | ||
Accrued expenses and other current liabilities | 34,825 | 36,425 | ||||
Profit-sharing distributions payable | 4,315 | 4,041 | ||||
Current portion of acquisition earn out payable | — | 14,511 | ||||
Customer payables | 29,497 | 34,255 | ||||
Current portion of note payable | — | 10,000 | ||||
Current liabilities of discontinued operations | — | 154 | ||||
Total current liabilities | 85,176 | 109,383 | ||||
Acquisition earn out payable | 18,390 | — | ||||
Note payable, net of current portion | — | 32,000 | ||||
Deferred taxes and other long-term liabilities | 2,899 | 9,022 | ||||
Total liabilities | 106,465 | 150,405 | ||||
Stockholders’ equity: | ||||||
Common stock, $0.001 par value; 120,000,000 shares authorized; 31,811,764 shares issued and outstanding at September 30, 2013; 31,138,111 shares issued and outstanding at September 30, 2012 | 31 | 31 | ||||
Additional paid-in capital | 206,861 | 182,361 | ||||
Accumulated other comprehensive income | 518 | 1,246 | ||||
Retained earnings | 107,469 | 66,365 | ||||
Total stockholders’ equity | 314,879 | 250,003 | ||||
Total liabilities and stockholders’ equity | $ | 421,344 | $ | 400,408 |
Liquidity Services, Inc. and Subsidiaries | |||||||||||||
Consolidated Statements of Operations | |||||||||||||
(Dollars in Thousands, Except Share and Per Share Data) | |||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Revenue | $ | 96,839 | $ | 102,424 | $ | 404,041 | $ | 415,829 | |||||
Fee revenue | 32,289 | 19,851 | 101,815 | 59,475 | |||||||||
Total revenue | 129,128 | 122,275 | 505,856 | 475,304 | |||||||||
Costs and expenses: | |||||||||||||
Cost of goods sold (excluding amortization) | 52,449 | 50,626 | 199,494 | 198,123 | |||||||||
Profit-sharing distributions | 8,942 | 9,125 | 35,944 | 43,242 | |||||||||
Technology and operations | 23,247 | 20,025 | 90,052 | 67,553 | |||||||||
Sales and marketing | 9,742 | 10,444 | 40,170 | 31,252 | |||||||||
General and administrative | 13,047 | 12,435 | 48,950 | 37,107 | |||||||||
Amortization of contract intangibles | 1,816 | 1,884 | 7,265 | 7,943 | |||||||||
Depreciation and amortization | 2,583 | 1,715 | 10,109 | 6,223 | |||||||||
Acquisition costs | 95 | 7,256 | 5,921 | 1,695 | |||||||||
Total costs and expenses | 111,921 | 113,510 | 437,905 | 393,138 | |||||||||
Income from operations | 17,207 | 8,765 | 67,951 | 82,166 | |||||||||
Interest and other expense (income), net | 69 | 593 | (704 | ) | 2,218 | ||||||||
Income before provision for income taxes from operations | 17,138 | 8,172 | 68,655 | 79,948 | |||||||||
Provision for income taxes | 6,729 | 2,627 | 27,551 | 31,652 | |||||||||
Income from operations | 10,409 | 5,545 | 41,104 | 48,296 | |||||||||
Net income | $ | 10,409 | $ | 5,545 | $ | 41,104 | $ | 48,296 | |||||
Basic earnings per common share | $ | 0.33 | $ | 0.18 | $ | 1.30 | $ | 1.57 | |||||
Diluted earnings per common share | $ | 0.32 | $ | 0.17 | $ | 1.26 | $ | 1.47 | |||||
Basic weighted average shares outstanding | 31,772,379 | 31,045,293 | 31,616,926 | 30,854,796 | |||||||||
Diluted weighted average shares outstanding | 32,702,807 | 32,788,205 | 32,657,236 | 32,783,079 |
Liquidity Services, Inc. and Subsidiaries | ||||||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||||||
(In Thousands) | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Operating activities | ||||||||||||||||
Net income | $ | 10,409 | $ | 5,545 | $ | 41,104 | $ | 48,296 | ||||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 4,399 | 3,599 | 17,374 | 14,166 | ||||||||||||
Gain on early extinguishment of debt | — | — | (1,000 | ) | — | |||||||||||
Stock compensation expense | 3,150 | 3,462 | 13,379 | 12,117 | ||||||||||||
Inventory allowance | (13 | ) | 1,660 | (1,122 | ) | 884 | ||||||||||
Doubtful accounts | (114 | ) | 334 | (357 | ) | 117 | ||||||||||
Deferred tax provision | (6,852 | ) | (1,719 | ) | (6,852 | ) | (1,719 | ) | ||||||||
Incremental tax benefit from exercise of common stock options | (2,514 | ) | (1,765 | ) | (8,588 | ) | (16,953 | ) | ||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | (1,114 | ) | (433 | ) | (7,466 | ) | (1,548 | ) | ||||||||
Inventory | (1,538 | ) | 4,383 | (7,470 | ) | (132 | ) | |||||||||
Prepaid expenses and other assets | 10,925 | 4,594 | 14,217 | 18,003 | ||||||||||||
Accounts payable | 4,258 | (1,017 | ) | 6,542 | (7,260 | ) | ||||||||||
Accrued expenses and other | 6,267 | (15,806 | ) | (2,341 | ) | (9,507 | ) | |||||||||
Profit-sharing distributions payable | 1,502 | 1,103 | 274 | (3,226 | ) | |||||||||||
Customer payables | 1,458 | 2,696 | (4,768 | ) | 2,529 | |||||||||||
Acquisition earn out payables | 92 | 6,242 | (5,985 | ) | (3,826 | ) | ||||||||||
Other liabilities | (397 | ) | 77 | (198 | ) | 205 | ||||||||||
Net cash provided by operating activities | 29,918 | 12,955 | 46,743 | 52,146 | ||||||||||||
Investing activities | ||||||||||||||||
Cash paid for acquisitions and decrease (increase) in goodwill and intangibles | (11 | ) | 8,267 | (14,730 | ) | (71,796 | ) | |||||||||
Purchases of property and equipment | (1,554 | ) | (3,965 | ) | (5,463 | ) | (6,793 | ) | ||||||||
Net cash (used in) provided by investing activities | (1,565 | ) | 4,302 | (20,193 | ) | (78,589 | ) | |||||||||
Financing activities | ||||||||||||||||
Repayment of notes payable | — | — | (39,000 | ) | — | |||||||||||
Payment of acquisition contingent liabilities | — | — | (8,185 | ) | — | |||||||||||
Proceeds from exercise of common stock options (net of tax) | 1,138 | 1,469 | 2,532 | 15,491 | ||||||||||||
Incremental tax benefit from exercise of common stock options | 2,514 | 1,765 | 8,588 | 16,953 | ||||||||||||
Repurchases of common stock | — | — | — | (29,999 | ) | |||||||||||
Net cash provided by (used in) financing activities | 3,652 | 3,234 | (36,065 | ) | 2,445 | |||||||||||
Effect of exchange rate differences on cash and cash equivalents | (223 | ) | (288 | ) | (158 | ) | (309 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 31,782 | 20,203 | (9,673 | ) | (24,307 | ) | ||||||||||
Cash and cash equivalents at beginning of the period | 63,327 | 84,659 | 104,782 | 129,089 | ||||||||||||
Cash and cash equivalents at end of period | $ | 95,109 | $ | 104,862 | $ | 95,109 | $ | 104,782 | ||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||
Cash paid for income taxes | $ | 4,539 | $ | 2,721 | $ | 16,760 | $ | 14,482 | ||||||||
Cash paid for interest | 5 | 64 | 2,034 | 117 | ||||||||||||
Contingent purchase price accrued | — | 6,242 | 18,390 | 7,438 | ||||||||||||
Note payable issued in connection with acquisition | — | — | — | 40,000 | ||||||||||||
Source:
Liquidity Services, Inc.
Julie Davis
Director, Investor
Relations
202-467-6868 ext. 2234
julie.davis@liquidityservicesinc.com