UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant ☒

Filed by a Party other than the Registrant  o

Check the appropriate box:

Fellow Stockholders:

We are pleased to invite you to attend the 2018 Annual Meeting of Stockholders of Liquidity Services, Inc. to be held on Thursday, February 22, 2018, at 3:00 p.m., Eastern Time, at the offices of Liquidity Services, Inc., located at 6931 Arlington Road, Suite 200, Bethesda, MD 20814.

Details regarding admission to the Annual Meeting and the business to be conducted are more fully described in the accompanying Notice of Annual Meeting of Stockholders and proxy statement.

Your vote is important. Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote over the Internet, by telephone or by mailing a proxy or voting instruction card. Voting over the Internet, by phone or by written proxy will ensure your representation at the Annual Meeting regardless of whether you attend in person. Please review the instructions on the proxy or voting instruction card regarding each of these voting options.

Thank you for your ongoing support and continued interest in Liquidity Services, Inc.

NOTICE OF ANNUAL MEETING OF LIQUIDITY SERVICES, INC. STOCKHOLDERS

Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be Held on February 22, 2018: This Notice of Annual Meeting of Stockholders and Proxy Statement, Annual Report and Other Proxy Materials are Available at www.envisionreports.com/LQDT.

This Notice of Annual Meeting of Stockholders, proxy statement, proxy card and voting instructions and our 2017 Annual Report are first being mailed on or about January 22, 2018.

TABLE OF CONTENTS

LIQUIDITY SERVICES, INC.
6931 ARLINGTON ROAD, SUITE 200,
BETHESDA, MD 20814

PROXY STATEMENT

QUESTIONS AND ANSWERS

	Why did I receive these proxy materials?
	We are sending you this proxy statement as part of a solicitation by the board of directors of Liquidity Services, Inc. for use at our 2018 Annual Meeting of Stockholders (the “Annual Meeting”) and at any adjournment or postponement that may take place. Unless the context otherwise requires, the terms “us,” “we,” “our” and the “Company” include Liquidity Services, Inc. and its consolidated subsidiaries. The terms “Board of Directors” and “Board” mean the board of directors of the Company.
	You are invited to attend our Annual Meeting on Thursday, February 22, 2018, beginning at 3:00 p.m., Eastern Time. The Annual Meeting will be held at the offices of Liquidity Services, Inc., located at 6931 Arlington Road, Suite 200, Bethesda, MD 20814.
	This Notice of Annual Meeting of Stockholders, proxy statement, proxy card and voting instructions and our 2017 Annual Report are first being mailed on or about January 22, 2018.
	Do I need a ticket to attend the Annual Meeting?
	You will need an admission ticket or proof of ownership to enter the Annual Meeting. If you plan to attend the Annual Meeting, please vote your proxy prior to the Annual Meeting but keep the admission ticket and bring it with you to the Annual Meeting.
	If your shares are held beneficially in the name of a broker, bank or other nominee and you plan to attend the Annual Meeting, you must present proof of your ownership of Liquidity Services common stock as of the close of business on January 9, 2018, such as a bank or brokerage account statement, to be admitted to the Annual Meeting. If you would rather have an admission ticket, you may obtain one in advance by mailing a written request, along with proof of your ownership of Liquidity Services stock, to:
	Liquidity Services, Inc. Attn: Jaclyn Kushman 6931 Arlington Road, Suite 200 Bethesda, MD 20814
	All stockholders also must present a form of personal identification in order to be admitted to the Annual Meeting.
	No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Annual Meeting.
	Who is entitled to vote at the Annual Meeting?
	Holders of Liquidity Services common stock at the close of business on January 9, 2018 (the “Record Date”) are entitled to receive this Notice and to vote their shares at the Annual Meeting. As of the Record Date, there were 31,935,263 shares of common stock outstanding and entitled to vote. All holders of common stock shall vote together as a single class on each matter properly brought before the Annual Meeting.

GOVERNANCE OF THE COMPANY

Corporate Governance Guidelines

The Board is committed to sound and effective corporate governance practices and has adopted a set of guidelines describing the corporate governance principles and procedures by which it functions (the “Corporate Governance Guidelines”). The Corporate Governance and Nominating Committee reviews the Corporate Governance Guidelines periodically, or more frequently as necessary, and recommends changes to the Board as appropriate. Our Corporate Governance Guidelines, as well as the charters of the Audit, Corporate Governance and Nominating and Compensation Committees, are available on our website, www.liquidityservicesinc.com, at “Investors—Corporate Governance—Governance Documents.” Stockholders may request a free copy of any of these documents by sending a written request to our Corporate Secretary at Liquidity Services, Inc., 6931 Arlington Road, Suite 200, Bethesda, MD 20814.

Among other matters, the Corporate Governance Guidelines address board selection, composition and evaluation, engagement of outside advisors, succession planning and stockholder communication with the Board.

Board Leadership Structure

The Board believes it is important to retain the flexibility to select its leadership structure. The Board regularly reviews the Board leadership structure as part of the succession planning process. The Board presently believes that combining the role of Chairman and CEO is in the best interests of the Company and our stockholders and has selected Mr. Angrick for these roles. Mr. Angrick, a co-founder of the Company, has extensive industry experience and knowledge gained through 18 years of hands-on management and engagement with the Company’s senior leaders, employees and business partners, as well as industry influencers. Mr. Angrick has a history of outstanding leadership through both strong and challenging periods as our Chairman and CEO since 2000.

Lead Independent Director

The Board believes that strong, independent Board leadership and oversight is critical to effective corporate governance. The Board has established the position of Lead Director to provide an appropriate balance of leadership among directors in light of the combination of the roles of Chairman and CEO. The Lead Director is an independent director elected for a period of at least one year by the independent directors and whose responsibilities include:

Patrick W. Gross has served as the Lead Director since August 2013.

Director Independence

The Board makes an affirmative determination regarding the independence of each director annually, based upon the recommendation of the Corporate Governance and Nominating Committee. Under the NASDAQ Stock Market, Inc. listing standards, an independent director is a person other than an executive officer or employee of the Company that the Board determines meets the objective standards for “director independence” set forth in the listing standards and is free of any relationship with the Company that, in the Board’s opinion, would interfere with the exercise of such person’s independent judgment in carrying out the responsibilities of a director. The Board has not established categorical standards or guidelines to use in making these independence determinations but considers all relevant facts and circumstances. In addition, the directors who serve on the Audit Committee each must satisfy SEC standards providing that Audit Committee members may not accept, directly or indirectly, any consulting, advisory or other compensatory fee from Liquidity Services other than their director compensation or fixed payments under a retirement plan for prior service. Similarly, in determining whether the directors who serve on the Compensation Committee satisfy independence standards established by the NASDAQ Stock Market, Inc. for service on that committee, the Board must consider the source of compensation of the member, including any consulting, advisory or other compensatory fee from Liquidity Services other than their director compensation or fixed payments under a retirement plan for prior service, as well as whether the member is affiliated with Liquidity Services, any of its subsidiaries or any affiliate of its subsidiaries.

The Board has determined that each of our directors other than Mr. Angrick, our Chairman and CEO, and Mr. Mateus-Tique, our former President and Chief Operating Officer, qualifies as “independent” in accordance with the NASDAQ Stock Market, Inc. listing standards, as follows: Phillip A. Clough, George H. Ellis, Patrick W. Gross, Beatriz V. Infante and Edward J. Kolodzieski.

Board Oversight of Risk

The Board has overall responsibility for oversight of the risks facing the Company. The Board implements its risk oversight function both directly and indirectly through delegation to committees that report back to the Board. For example, the Company is dedicated to managing cyber security risk across all its marketplaces and, accordingly, management of cyber security risks is the responsibility of the Board. Oversight of other risks, such as risks related to accounting and compensation, is delegated to Board committees such as the Audit and Compensation Committees. Overseeing risk is a continuous process.

Risk Considerations in Our Compensation Program. The Company’s management has conducted an assessment of the risk associated with the Company’s current compensation programs covering its employees, including executives. Management’s risk assessment considered the following:

Board and Committee Membership

Our bylaws provide that our Board shall consist of at least three members and the exact number of directors will be determined from time to time by resolution of our Board. Our Board currently is composed of seven directors, divided into three classes: Class I, Class II and Class III. The term for each class of directors expires at successive annual meetings. The Class I directors are William P. Angrick, III and Edward J. Kolodzieski, the Class II directors are Phillip A. Clough, George H. Ellis and Jaime Mateus-Tique, and the Class III directors are Patrick W. Gross and Beatriz V. Infante.

The Board met eight times during fiscal 2017. Each of our directors attended 75% or more of the aggregate of the total number of meetings of the Board held while he or she was a director and of each standing committee on which he or she served while he or she was a member of that committee. Our directors are encouraged to attend each Annual Meeting of Stockholders. Five members of our Board attended the 2017 Annual Meeting.

The table below provides membership information for the Board and each standing committee of the Board as of the date of this proxy statement.

The Audit Committee

Under the terms of its Charter, the Audit Committee meets at least four times per fiscal year, including periodic meetings in executive session with Liquidity Services’ management and independent registered public accounting firm, and reports regularly to the full Board on its activities. Specifically, the Audit Committee is responsible for:

investigation by governmental or professional authorities, within the preceding five years, with respect to one or more independent audits carried out by the independent registered public accounting firm, and any steps taken to deal with any such issues;

The Audit Committee met five times during fiscal 2017.

The members of the Audit Committee as of the date of this proxy statement are Mr. Ellis (Chair), Mr. Gross and Ms. Infante. The Board has determined that each is independent, as defined by the Company’s director independence standards and the rules of the NASDAQ Stock Market, Inc. and the SEC, and that Mr. Ellis is an “audit committee financial expert” for purposes of the rules of the SEC.

The Corporate Governance and Nominating Committee

Under the terms of its Charter, the Corporate Governance and Nominating Committee is responsible for:

The Corporate Governance and Nominating Committee is also responsible for overseeing enterprise risk management at the Company throughout the year to focus the Board and management on identifying and managing the risks across the entire Company likely to have the greatest impact on the Company.

The Corporate Governance and Nominating Committee met four times during fiscal 2017.

The members of the Corporate Governance and Nominating Committee as of the date of this proxy statement are Messrs. Clough (Chair), Gross and Kolodzieski. The Board has determined that each of the members of the Corporate Governance and Nominating Committee is independent, as defined by the Company’s director independence standards and the rules of the NASDAQ Stock Market, Inc.

Recommendation of Director Candidates

The Corporate Governance and Nominating Committee believes that candidates for director should have certain minimum qualifications, including the highest level of personal and professional ethics and integrity, sound judgment, the ability to make independent analytical inquiries, the willingness to devote adequate time and resources to diligently perform Board duties and appropriate and relevant business experience and acumen. The Committee evaluates candidates for the Board on the basis of these qualifications, and seeks to achieve a diversity of strengths and backgrounds on the Board, including members who have specific industry experience and familiarity with general issues affecting our business, as discussed in more detail under “Item 1—Election of Directors” below. The Committee also considers the number of other boards of public companies on which the candidate serves.

The Committee uses a variety of methods to identify and evaluate candidates for director. Candidates may come to the attention of the Committee through current Board members, the CEO, professional search firms (to whom we pay a fee), stockholders or other persons. The Company has also sought to identify potential candidates through professional associations such as the National Association of Corporate Directors and The Boston Club, initiatives such as George Washington University’s On the Board and Stanford Women on Boards, and executive education programs such as Stanford’s Directors’ College. The Committee did not use a professional search firm in fiscal 2017.

The Company’s Corporate Governance Guidelines provide that the Committee will consider candidates for director suggested by our stockholders, provided that the recommendations are made in accordance with the procedures required under our bylaws and described in this proxy statement under the heading “Requirements, Including Deadlines, for Submission of Proxy Proposals, Nomination of Directors and Other Business of Stockholders.” Director candidates recommended by stockholders in accordance with these procedures and who meet the criteria outlined above, in the Committee’s Charter and in our Corporate Governance Guidelines will be evaluated by the Corporate Governance and Nominating Committee in the same manner as other director candidates.

The Compensation Committee

Under the terms of its Charter, the Compensation Committee is responsible for:

The Compensation Committee met six times in fiscal 2017.

The members of the Compensation Committee as of the date of this proxy statement are Mr. Clough, Ms. Infante (Chair) and Mr. Kolodzieski. The Board has determined that each of the members of the Compensation Committee is independent, as defined by the Company’s director independence standards and the rules of the NASDAQ Stock Market, Inc.

Code of Conduct

Our Board has adopted a Code of Conduct (the “Code”) applicable to all of our directors, officers and employees in order to protect and promote organization-wide integrity and to enhance Liquidity Services’ ability to achieve its mission.

The Code embodies general principles such as compliance with laws, acting with honesty and integrity, avoidance of conflicts of interest, maintenance of accurate and timely financial and business records, use of the Company’s assets for legitimate business purposes only, provision and acceptance of gifts to or from customers, suppliers and governments in compliance with law, protecting the Company’s information and dealing fairly with other companies.

All directors, officers, and employees are obligated to report violations and suspected violations of the Code and any concerns they may have pertaining to non-compliance with the Code by following certain procedures described in the Code. All reports of suspected Code violations will be forwarded to the General Counsel or Compliance Officer, except for complaints and concerns involving accounting or auditing matters, which will be handled in accordance with procedures established by the Audit Committee.

The Code is available on our website, www.liquidityservicesinc.com, at “Investors—Corporate Governance—Governance Documents.” A free printed copy is available to any stockholder who requests it by writing to us at the address on page 1 of this proxy statement. We intend to disclose future amendments to certain provisions of the Code, or waivers of such provisions granted to executive officers and directors, on our website within four business days following the date of such amendment or waiver.

Communications with Directors

Stockholders and other interested parties may communicate with the Board by writing c/o the Corporate Secretary, Liquidity Services, Inc., 6931 Arlington Road, Suite 200, Bethesda, MD 20814. Communications intended for a specific director or directors should be addressed to the attention of the relevant individual(s) c/o the Corporate Secretary at the same address.

Our Corporate Secretary will review all correspondence intended for the Board and forward to the Board a summary of such correspondence and a copy of correspondence that, in the opinion of the Corporate Secretary requires the Board’s attention. Directors may at any time review a log, and receive copies, of all correspondence received by the Corporate Secretary that is intended for the Board.

In addition, the Audit Committee has established a procedure for parties to submit concerns regarding what they believe to be questionable accounting, internal accounting controls and auditing matters. Concerns may be reported through our Compliance Hotline at (888) 475-8376. Concerns may be submitted anonymously and confidentially.

COMPENSATION OF NON-EMPLOYEE DIRECTORS

Our non-employee directors receive a combination of equity and cash compensation for service as directors. Directors who are employed by the Company (including Mr. Angrick) do not receive any compensation for their service as directors. The Compensation Committee, in consultation with its independent compensation consultant, periodically reviews non-employee director compensation and recommends changes based on competitive market data.

Non-employee director compensation for calendar year 2017 was the same as calendar year 2016. Each non-employee director received an annual cash retainer of $45,000. Committee chairs received an additional annual retainer as follows: $15,000 for the Audit Committee and $7,500 for each of the Compensation Committee and the Corporate Governance and Nominating Committee. The Lead Director received an additional cash retainer of $7,500. All amounts paid to our non-employee directors are paid quarterly in advance. Our non-employee directors may receive payment of their cash retainers in the form of grants of stock options or restricted stock by making an irrevocable one-time annual election. Mr. Gross was the only director to elect to receive payment of his annual retainer in the form of restricted stock in fiscal year 2017, and no director elected to receive payment of their annual retainer in the form of stock options in fiscal year 2017. On February 1, 2017, Mr. Gross received 5,384 shares of restricted stock with a grant date fair value of $52,500. All restrictions applicable to the restricted shares received pursuant to this election lapse on February 1, 2018.

In addition to a cash retainer, non-employee directors also receive equity-based compensation. Annual non-employee director equity awards are generally granted in February and generally vest on the one-year anniversary of the grant date, subject to the director’s continued service with the Company through that date. Stock options granted to non-employee directors expire ten years from the date of grant. Annual cash retainers and equity compensation for new non-employee directors are pro-rated based on when they join the Board during the fiscal year.

Non-employee directors are required to hold a number of shares of our common stock equal to five times the value of his or her annual cash retainer. Each non-employee director has either five years from the implementation of this policy in 2014 or five years after a non-employee director’s appointment to the Board (whichever is later) to satisfy this requirement. Each of our non-employee directors has satisfied or is on track to satisfy this requirement within the applicable timeframe. Directors are not permitted to purchase any financial instrument or enter into any transaction that is designed to hedge or offset any decrease in the market value of our common stock (including, but not limited to, prepaid variable forward contracts, equity swaps, collars, or exchange funds).

For fiscal 2017, each non-employee director received an annual equity award with an aggregate value of $95,000 granted under the Company’s Second Amended and Restated 2006 Omnibus Long-Term Incentive Plan. Such awards will vest on February 1, 2018 subject to continued service with the Company through such date.

All equity awards granted to our non-employee directors for 2017 will vest on February 1, 2018. The determination of the number of stock options to be granted was made using the Black-Scholes model. The number of shares of restricted stock to be granted was determined by dividing the value of the award by the closing price of our common stock on the grant date.

The non-employee director compensation described above is summarized in the following table:

Non-employee directors are also reimbursed for expenses they incur in attending meetings of the Board or Board committees.

DIRECTOR COMPENSATION FOR FISCAL 2017

The following table sets forth the total cash and equity compensation paid to our non-employee directors for their service on the Board and committees of the Board during fiscal 2017:

BENEFICIAL OWNERSHIP OF SHARES OF COMMON STOCK

The following table sets forth information regarding ownership of our common stock as of January 9, 2018, other than as set forth below, by each of our directors and named executive officers, all of our directors and executive officers as a group and the holders of 5% or more of our common stock known to us. The information in this table is based on our records, information filed with the SEC and information provided to us. To our knowledge, except as disclosed in the table below, none of our stockholders hold 5% or more of our common stock. Except as otherwise indicated, (1) each person has sole voting and investment power (or shares such powers with his or her spouse) with respect to the shares set forth in the following table and (2) the business address of each person shown below is 6931 Arlington Road, Suite 200, Bethesda, MD 20814, other than for BlackRock, Inc., Staley Capital Advisers, Inc. and Renaissance Technologies LLC.

Named executive officers are obligated to hold a number of shares of our common stock equal to 150% of the executive’s annual base salary except the Chairman and CEO, who must hold common stock equal to 600% of his annual base salary. Each executive officer has either five years from the implementation of this policy in 2014 or five years after his or her date of hire (whichever is later) to satisfy this requirement. Executive officers are not permitted to purchase any financial instrument or enter into any transaction that is designed to hedge or offset any decrease in the market value of our common stock (including, but not limited to, prepaid variable forward contracts, equity swaps, collars, or exchange funds).

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors, executive officers and beneficial owners of greater than ten percent of our common stock to file reports of holdings and transactions in Liquidity Services’ common stock with the SEC. Based solely on these records, we believe that in fiscal 2017 all persons satisfied these filing requirements on a timely basis.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The Company did not participate in or review any potential related party transactions during fiscal 2017 and there currently are no proposed related party transactions. To be considered a related party transaction under current SEC rules, a transaction must include the Company as a participant, and one of our officers, directors or greater than 5% stockholders or a family member of such person must have a direct or indirect material interest in the transaction. To date, we have not participated in any related party transactions requiring disclosure as such under the SEC disclosure requirements. Should we consider participating in a related party transaction in the future, such transaction would be reviewed and subject to approval by the Audit Committee, in accordance with our written Audit Committee Charter. We have not adopted specific standards that would govern such review.

As a general matter, our written Code of Conduct prohibits conflicts of interest. We consider a conflict of interest to exist when a person’s private interest interferes in any way with the interests of our Company, including: (i) a conflict that makes it difficult for an employee, officer or director to perform his or her work objectively and effectively; (ii) when an employee, officer or director, or any member of his or her family, receives improper personal benefits as a result of his or her position in or with our Company; or (iii) when an employee, officer or director is engaged in a business or business activity that is in competition with or injurious to us. The Code of Conduct requires that the General Counsel be consulted with any questions about conflicts of interest in addition to requiring that our directors and officers consult with the General Counsel before engaging in any potential conflict of interest transactions.

PROPOSALS REQUIRING YOUR VOTE

ITEM 1—Election of Directors

Our Class III directors, elected at the Annual Meeting of Stockholders in 2015, are Patrick W. Gross and Beatriz V. Infante, and their terms end at this Annual Meeting of Stockholders. With respect to the Class III directors to be elected at the Annual Meeting, each nominee for director will, if elected, continue in office until our Annual Meeting of Stockholders in 2021 or until the director’s successor has been duly elected and qualified, or until the earlier of the director’s death, resignation or retirement.

If you are a stockholder of record, the proxy holders named on the proxy card intend to vote your proxy for the election of each of these nominees, unless you indicate on the proxy card that your vote should be withheld from any or all of the nominees. Brokers, banks and other nominees are not permitted to vote in the election of directors without instructions from the beneficial owner. Therefore, if your shares are held through a broker, bank or other nominee, they will not be voted in the election of directors unless you affirmatively vote your shares.

Each nominee has consented to be named as a nominee in this proxy statement, and we expect each nominee for election as a director to be able to serve if elected. If any nominee is unable to serve, proxies will be voted in favor of the other nominees and may be voted for substitute nominees selected by the Board, unless the Board chooses to reduce the number of directors serving on the Board.

In evaluating director candidates, and considering incumbent directors for renomination, the Board and the Corporate Governance and Nominating Committee consider a variety of factors as discussed above under “The Corporate Governance and Nominating Committee.” Among other things, the Board has determined that it is important to have individuals with the following skills and experiences on the Board:

The specific qualifications and experience of the individual directors and the nominees and certain other information are set forth on the following pages. For more information on the director nomination process, refer to “The Corporate Governance and Nominating Committee” above.

RECOMMENDATION OF THE BOARD
	Your Board of Directors unanimously recommends a vote FOR the election of Patrick W. Gross and Beatriz V. Infante as directors.

BOARD OF DIRECTORS

EXECUTIVE OFFICERS AND MANAGEMENT

Below you can find information, including biographical information, about our executive officers (other than Mr. Angrick, whose biographical information appears above):

Jorge A. Celaya has served as our Executive Vice President and Chief Financial Officer since August 10, 2015. Prior to joining the Company, Mr. Celaya was co-founder of Avanz Capital, an independent investment firm focused on private equity investing in emerging markets. From July 2007 to March 2010, Mr. Celaya was Executive Vice President and Chief Financial Officer of FTI Consulting, a global business advisory firm in restructuring, transaction advice, forensic accounting and due diligence, as well as e-discovery software and services. Prior to that, Mr. Celaya served as Executive Vice President and Chief Financial Officer of Sitel Corporation, a global provider of business process outsourcing services, from October 2003 to February 2007. From 1990 to October 2003, Mr. Celaya held various U.S. and international positions at Schlumberger Limited in both corporate and operating segment capacities across numerous industry sectors, including energy and technology. Mr. Celaya holds a Bachelor of Arts and a Master’s in Business degree from the University of Texas at Austin.

Gardner H. Dudley served as President, Capital Assets Group from October 2014 through October 2017. Prior to this role, he was Global Sales Vice President, Capital Assets Group from March 2014 to October 2014, VP and General Manager of our Network International subsidiary from October 2012 to March 2014, and Chief Operating Officer, Network International from June 2008 to October 2012, which subsidiary we acquired during 2010. Mr. Dudley holds a Bachelors in Business Administration from the University of Texas at Austin.

Roger Gravley has served as our Chief Information Officer since December 2017 and as President of GovDeals since 2014. Prior to this role, he was VP of Client Services, GovDeals, from 2009 to 2014. Mr. Gravley was the VP of Professional Services at Information Management Specialists from 1994 to 2009, where he also served on its board of directors from 1998 to 2009. He has also held a number of IT management roles for other leading companies, including Unisys, Litton Computer Services, and Harris Data Systems and served ten years in the U.S. Air Force as a linguist and computer programmer prior to commencing his career in the private sector.

James M. Rallo has served as President of the Retail Supply Chain Group since February 2014 and President of Capital Assets Group since October 2017. Prior to this role, Mr. Rallo was our Chief Financial Officer and Treasurer from February 2005 to August 2015. Prior to joining the Company, Mr. Rallo served as Chief Financial Officer and Treasurer of Sleep Services of America, Inc. from July 1999 to February 2005. Mr. Rallo served as Vice President of Deutsche Banc Alex Brown’s Healthcare Investment Banking Group from June 1995 to July 1999. Mr. Rallo holds an M.B.A. from the Smith School of Business at the University of Maryland and a B.S. from Washington and Lee University. Mr. Rallo is a Certified Public Accountant.

Mark A. Shaffer has served as our Vice President, General Counsel and Corporate Secretary since July 2016. Prior to this role, Mr. Shaffer was Senior Associate General Counsel and Assistant General Counsel from September 2012 to July 2016. Prior to joining the Company, Mr. Shaffer served as Senior Counsel and Global Compliance Officer for Barnes Group, Inc., an international industrial and aerospace manufacturer and service provider, from June 2010 to August 2012. Prior to that, he served in other roles at Barnes Group and as Senior Counsel at the law firm of Miller Canfield, where he focused on industrial and automotive mergers and acquisitions and commercial negotiations. Mr. Shaffer also served as Senior Counsel for Kmart Corporation and as an associate at the law firms of LeBoeuf, Lamb, Greene & MacRae LLP and Latham & Watkins LLP. Mr. Shaffer holds a Bachelor of Science in Foreign Service and a Juris Doctor from Georgetown University.

ITEM 2—Ratification of Independent Registered Public Accounting Firm

The Audit Committee has selected Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal 2018.

We are asking our stockholders to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm. Although ratification is not required by our bylaws or otherwise, we are submitting the selection of Ernst & Young LLP to our stockholders for ratification because we value our stockholders’ views on the Company’s independent registered public accounting firm and as a matter of good corporate practice. In the event that our stockholders fail to ratify the selection, the Audit Committee will review its future selection of the independent registered public accounting firm. Even if this selection is ratified, pursuant to the Sarbanes-Oxley Act of 2002, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm and may determine to change the firm selected at such time and based on such factors as it determines to be appropriate.

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting to answer appropriate questions. They also will have the opportunity to make a statement if they desire to do so.

RECOMMENDATION OF THE BOARD
	Your Board of Directors unanimously recommends a vote FOR the ratification of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2018.

AUDITORS

Audit and Non-Audit Fees

The following table presents fees for professional audit services rendered by Ernst & Young LLP for the audit of the Company’s annual financial statements for the fiscal years ended September 30, 2017, and September 30, 2016, and for fees billed for other services rendered by Ernst & Young LLP during those periods.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

Pursuant to its Charter, Audit Committee policy and applicable law, the Audit Committee pre-approves all audit and permissible non-audit services to be provided by our independent registered public accounting firm, including audit services, audit-related services, tax services and other services. The Audit Committee has delegated authority to the Chair of the Audit Committee in some cases to pre-approve the provision of services by our independent registered public accounting firm, which pre-approvals the Chair then communicates to the full Audit Committee. To avoid potential conflicts of interest, the law prohibits a publicly traded company from obtaining certain non-audit services from its independent registered public accounting firm. We obtain these services from other service providers as needed.

Audit Committee Report

Liquidity Services’ management is responsible for Liquidity Services’ financial statements, internal controls and financial reporting process. Liquidity Services’ independent registered public accounting firm, Ernst & Young LLP, is responsible for auditing the financial statements and for expressing an opinion as to whether those audited financial statements fairly present, in all material respects, the financial position, results of operations and cash flows of the Company in conformity with U.S. generally accepted accounting principles. The Audit Committee was established for the purpose of representing and assisting the Board in overseeing Liquidity Services’ accounting and financial reporting processes and audits of Liquidity Services’ annual financial statements, including the

integrity of Liquidity Services’ financial statements, Liquidity Services’ compliance with legal and regulatory authority requirements, the independent registered public accounting firm’s qualifications and independence and the performance of Liquidity Services’ independent registered public accounting firm. The members of the Audit Committee are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent registered public accounting firm.

In this context, the Audit Committee has reviewed and discussed the audited financial statements with management. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Ethics and Independence Rule 3526, “Communication with Audit Committees Concerning Independence” and the matters required to be discussed by PCAOB Auditing Standard 1301. The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the audit committee concerning independence, and has discussed with the independent registered public accounting firm its independence.

Based upon the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2017 for filing with the Securities and Exchange Commission. The Board of Directors approved including the audited financial statements in the Company’s Annual Report.

The Audit Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate the Audit Committee Report by reference therein.

ITEM 3—Approval of an Advisory Resolution on Executive Compensation

We are asking stockholders to approve an advisory resolution on the Company’s executive compensation as reported in this proxy statement. As described below in the “Compensation Discussion and Analysis” section of this proxy statement, the Compensation Committee’s goals in setting executive compensation are to support the attainment of our short- and long-term financial and strategic objectives, reward executives for continuous growth in earnings and stockholder value, and align executives’ interests with those of our stockholders. To achieve these goals, our executive compensation structure emphasizes performance-based compensation, including annual incentive compensation and stock-based awards.

We urge stockholders to read the “Compensation Discussion and Analysis,” beginning on page 37 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, appearing on page 56 through page 71, which provide detailed information on the compensation of our named executive officers. The Board and the Compensation Committee believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reflects and supports these compensation policies and procedures.

In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, stockholders will be asked at the Annual Meeting to approve the following advisory resolution:

RESOLVED, that the stockholders of Liquidity Services, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers described in the Compensation Discussion and Analysis and disclosed in the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2018 Annual Meeting of Stockholders.

This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.

The Board has adopted a policy of providing for annual “say-on-pay” advisory votes. Unless the Board modifies its policy on the frequency of holding “say-on-pay” advisory votes, the next “say-on-pay” advisory vote will occur in 2019.

RECOMMENDATION OF THE BOARD
	Your Board of Directors unanimously recommends a vote FOR the advisory resolution on executive compensation.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This section describes our compensation strategy, programs and practices for the following executive officers during fiscal year 2017:

In this proxy statement, we refer to these individuals as our named executive officers.

Executive Summary

The Compensation Committee believes in a “pay-for-performance” approach to executive compensation that aligns executive compensation with shareholder interests. This means that a significant portion of an executive's compensation should be at risk and may vary from “targeted” compensation based upon the level of achievement of specified performance objectives. Our pay for performance executive compensation philosophy and the elements of our executive compensation program with regard to fiscal 2017 are summarized below:

The targeted value for long-term incentive awards for the named executive officers other than Mr. Angrick is approximately 74% of the targeted value of their annual incentive awards and for Mr. Angrick is approximately 329% of the targeted value of such awards.

Our 2017 business and financial performance, combined with a number of important operational developments, significantly impacted the design of our 2017 executive compensation program and the timing of decisions related to such program. In 2017, we achieved some notable financial and operational milestones, including:

An important strategic priority during fiscal 2017 was continued implementation of the LiquidityOne Transformation initiative which seeks to create a single integrated platform to support seller and buyer management, property management, transaction management, and financial and human capital management across all our marketplaces. This initiative implements a uniform set of best practices across our entire business and provides an enhanced user experience by making more personalized tools and services available to our buyers and sellers. We believe that the LiquidityOne Transformation will be instrumental to our future success. An important milestone in the LiquidityOne Transformation was the launch of our Network International energy marketplace in the fourth quarter on the new singular, unified LiquidityOne platform. In addition, we realized $2.3 million of annualized savings related to our LiquidityOne initiatives during fiscal 2017.

For fiscal 2017, we, overall, and our Capital Assets Group and the Retail Supply Chain Group segments, achieved commercial margin growth and gross profit growth that fell short of threshold performance levels under our incentive programs, resulting in no payouts. The exception to this was Mr. Gravley, who received payouts due to gross profit levels exceeding threshold levels and commercial margin growth falling just short of maximum target levels.

Realizable pay was further impacted given the decline in our stock price during fiscal 2017, which resulted in many executive options remaining unexercisable due to an exercise price that is greater than current share price and the forfeiture of certain long-term incentive awards due to failure to achieve certain performance goals. As we continue to complete our LiquidityOne transformation in 2018, we expect shareholder value will be unlocked and, in tandem, realizable pay for executives will increase. In the near-term, however, the following charts show executive compensation reflects realized pay that is lower than target pay based on overall lower than target financial results and a depressed company stock price:

Best Practices

˛   The Compensation Committee receives objective advice from an independent compensation consultant, Radford, which is an Aon Hewitt company.

˛   Our Board has adopted a clawback policy applicable to all cash incentive payments and performance-based equity awards granted to our executive officers.

˛   Our named executive officers are not entitled to any “single trigger” equity acceleration in connection with a change in control.

˛   All named executive officers are required to own Company common stock equal to 150% of their annual base salaries (or, for the CEO, 600%).

˛   We do not provide excise tax gross-ups to any of our executive officers.

“Say-on-Pay” Advisory Vote on Executive Compensation

We asked stockholders to vote on a “say-on-pay” advisory vote on our executive compensation in 2017 at the 2017 Annual Meeting of Stockholders. Stockholders expressed substantial support for the compensation of our named executive officers, with approximately 96% of the votes cast in favor of the “say-on-pay” advisory vote. The Committee carefully evaluated the results of the 2017 advisory vote at its March meeting. The Committee also considers many other factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Committee’s assessment of total stockholder return, the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer group and survey data, each of which is evaluated in the context of the Committee’s fiduciary duty to act as the directors determine to be in stockholders’ best interests. While each of these factors bore on the Committee’s decisions regarding our named executive officers’ compensation, the Committee did not make any changes to our executive compensation program and policies as a result of the 2017 “say-on-pay” advisory vote.

General Compensation Philosophy

Liquidity Services’ executive compensation programs are designed to:

To achieve these objectives, the Compensation Committee uses a variety of compensation elements, as follows:

Factors Considered When Determining Compensation. The Compensation Committee seeks to set executive compensation at competitive levels that the Compensation Committee considers appropriate for a company of our size and stage of growth. On an annual basis, the Compensation Committee determines and approves the total compensation level of each of our named executive officers based on its evaluation of external market conditions, Company performance and each named executive officer’s

individual performance relative to pre-established performance goals and objectives. The Compensation Committee also considers each executive’s level of experience, unique skills and abilities critical to the Company, and the executive’s tenure, position and responsibilities with the Company. The Compensation Committee considers recommendations from the Chairman and CEO regarding levels for base salary, annual incentive awards and long-term incentive awards for named executive officers. The Chairman and CEO annually provides to the Compensation Committee historical and prospective breakdowns of the total direct compensation components for each named executive officer. The Chairman and CEO also recommends financial and non-financial performance goals for each named executive officer under the annual cash incentive compensation plan.

Pay Mix. Because our named executive officers are in a position to directly influence our performance, a significant portion of their compensation is delivered in the form of annual cash incentive award and long-term incentive compensation. We rely on a mix of compensation components intended to reward short-term results (in the form of annual cash incentive awards) and motivate long-term performance (in the form of option and restricted stock grants that vest over several years). We do not have a specific allocation target between cash and equity-based compensation or between annual and long-term incentive compensation. Instead, we retain the flexibility when determining the compensation mix to react to our evolving business environment and our specific hiring and retention requirements. In fiscal 2017, approximately 56% or more of each of our named executive officer’s target total direct compensation, including approximately 84% of the target total direct compensation for the Chairman and CEO, was performance-based and/or tied directly to the performance of our stock (in the form of target annual cash incentive awards and stock options and restricted stock awards), consistent with our compensation philosophy to link executive compensation with stockholder returns and achievement of strategic business objectives.

Market Data. The Compensation Committee has engaged on an annual basis a leading industry compensation consultant to assess the market competitiveness of our executive compensation program so that our program attracts and retains executive talent essential to achieve our business plans. For fiscal 2017, the Compensation Committee engaged Radford to assess the market competitiveness of our executive compensation program for purposes of evaluating and setting fiscal 2017 executive compensation levels. After considering the following six factors with respect to Radford: (i) the provision of other services to us by Radford; (ii) the amount of fees received from us by Radford, as a

percentage of the total revenue of Radford; (iii) the policies and procedures of Radford that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the Radford consultant with a member of the Compensation Committee; (v) any of our stock owned by the Radford consultants; and (vi) any business or personal relationship of the Radford consultant or Radford with any of our executive officers, our Compensation Committee has concluded that no conflict of interest exists with respect to its engagement of Radford. The scope of Radford’s work included a review of the Company’s executive compensation practices, assistance with development of an appropriate peer group, and presentation to the Compensation Committee of a report regarding executive compensation trends for similarly sized companies and the market competitiveness of our executive compensation program. Radford was engaged directly by the Compensation Committee and did not provide any services to the Company other than the executive and director compensation consulting services described above.

To assist the Compensation Committee in its market review for fiscal 2017, the Compensation Committee’s compensation consultant prepared an analysis of the market competitiveness of the aggregate value of total direct compensation (base salary, annual incentive bonus and long-term incentives) as well as the market competitiveness of each element of compensation for each named executive officer. The market review was based upon two different sources of compensation data provided by Radford—published surveys and publicly available market data from a selected peer group of e-commerce companies. The survey sources relied upon for the market review were national surveys and contained compensation data for both high-technology sector companies as well as similarly sized general industry companies. These survey sources were the Radford Global Technology Survey and Radford’s Q2 2016 Trends Report. The survey data was used as a market reference to assess how the Company’s compensation practices for top executives compare to market practices and to confirm that the overall compensation mix is reasonably aligned with the marketplace.

The peer companies utilized in Radford’s fiscal 2017 review were updated in fiscal 2017 by Radford with input from the Compensation Committee and approved by the Compensation Committee. The peer group was developed using several criteria as a guide (e.g. company size, net income, growth, location, internet presence and technology focus) and included 16 companies, with revenues ranging from approximately $120 million to $1.67 billion. When the peer group was established prior to the start of fiscal 2017, we were at the 16^th percentile of the peer group for revenue, the 10^th percentile for operating income and the 29^th percentile for market capitalization. The peer group companies for the fiscal 2017 review were:

Ten companies, Agilysys, Blucora, DXP Enterprises, EVINELive, H&E Equipment Services, ModusLink Global Solutions, Overstock.com, QuinStreet, Sotheby’s, TESSCO Technologies, were added to the peer group for purposes of the fiscal 2017 review based on, among other things, their

size, revenues and technology focus. Ten companies, 1-800-Flowers.com, ACI Worldwide, Blue Nile, Cimpress N.V., Converse Technology, CoPart, Digital River, Rosetta Stone, Shutterfly and TripAdvisor, were removed from the peer group because they were no longer comparable to the Company.

The Compensation Committee considers all of the market data in setting compensation levels but does not target or position named executive officer pay levels at a specific percentile level relative to the peer group. Rather, the Committee reviews total direct compensation and the mix of the compensation components relative to the peer group as one of the factors in determining if compensation is adequate to attract and retain qualified executive officers. The compensation decisions specific to each component of total direct compensation for the named executive officers are discussed below.

Base Salary

Purpose. Salaries for named executive officers are designed to be competitive when compared with prevailing market rates and are based on a variety of factors, including level of responsibility, performance and the recommendations of the Chairman and CEO. Base salaries are reviewed annually or at the time of promotion or other changes in responsibilities. In determining whether to award base salary increases, the Compensation Committee considers the Company’s overall business outlook, the Company’s budget, the executive’s individual performance, historical compensation, market compensation levels for comparable positions, internal pay equity and other factors, including any retention concerns. Under the terms of the employment agreements in place with our named executive officers, the Compensation Committee may not reduce the salary of a named executive officer downward unless the named executive officer consents to a reduction.

Fiscal 2017 Decisions. In fiscal 2017, base salary levels remained unchanged for Messrs. Angrick, Rallo and Celaya and increased for Messrs. Dudley and Gravley in order to provide a base salary level that is competitive with our peers and to reflect each officer’s experience and tenure. Mr. Angrick’s base salary remained below the competitive median range of the proxy and survey data to emphasize the role of long-term equity incentives during a period in which the Company is focused on long-term reinvestment of its earnings. Effective October 1, 2017, the Compensation Committee approved base salaries in the following amounts for our named executive officers:

The Compensation Committee utilizes a report of market compensation levels prepared by its independent compensation consultant in order to evaluate the executives’ base salaries. The Compensation Committee considers the base salary levels of similarly situated executives in the peer group, as well as executive experience and other factors such as tenure, individual performance and responsibilities.

Fiscal 2018 Decisions. In light of the significant expansion of Mr. Rallo’s duties to be both President of the Capital Assets Group and the Retail Supply Chain Group, the Compensation Committee determined that Mr. Rallo’s base salary would be increased to $367,000 in order to provide base salary levels that are competitive with levels of our peers and to reflect experience, tenure, individual performance and organizational structure. In light of the significant expansion of Mr. Gravley’s duties to be both President of GovDeals and our Chief Information Officer, the

Compensation Committee also determined that Mr. Gravley’s base salary would be increased to $350,000. Finally, the Compensation Committee determined that Mr. Celaya’s base salary would be increased to $359,000 in order to provide base salary levels that are competitive with levels of our peers and to reflect experience, tenure, individual performance and organizational structure.

Annual Incentive Compensation

Purpose.   Annual incentive compensation is an “at risk” performance-based cash award that is designed to motivate our named executive officers to achieve pre-established corporate financial and individual performance objectives that are consistent with the Company’s strategic plan. Awards under the plan are payable if, and only to the extent that, these pre-established objectives are achieved. The Compensation Committee retains the discretion to increase or decrease payouts under the annual cash incentive plan in connection with its review of the Company’s and the executive’s performance during the year. The Compensation Committee did not exercise this discretion with respect to fiscal 2017 cash incentive awards payable to the named executive officers. Compensation paid under the plan has varied significantly from year to year. For example, over the last several years, the annual cash incentive award of our Chairman and CEO has ranged from 31.5% to 205% of his base salary. The annual incentive award plan is also designed to attract and retain key employees by providing our named executive officers with a significant opportunity to earn additional annual cash compensation. As noted below, the target opportunities of our named executive officers range from 70% to 125% of base salary, with a maximum opportunity of between 119% and 213% of the base salary. The Committee strives to set the annual incentive plan target opportunity at the median of the peer group with potential for upper quartile pay based on superior performance of the Company and the individual.

Fiscal 2017 Target Annual Cash Incentive Award Opportunities.   At the beginning of each fiscal year, the Committee establishes the performance goals and target and maximum cash incentive awards for each named executive officer. Each target and maximum cash incentive award is set as a percentage of each named executive officer’s base salary. The amount of the cash incentive ultimately awarded depends on the achievement of performance goals. The “Grants of Plan-Based Awards for Fiscal 2017” table below shows the range of possible payments to each of our named executive officers under the annual incentive award plan in fiscal 2017.

For fiscal 2017, the annual incentive cash award target and maximum award of our named executive officers were:

The Committee established these target and maximum cash incentive award opportunities based upon (1) the relative scope and responsibility of the named executive officer’s position and his respective impact on overall Company performance and (2) comparative compensation data based on the Committee’s review of the competitive market conducted for fiscal 2017. For fiscal 2017, the target award opportunity for each of our named executive officers remained the same as for fiscal 2016 except with respect to Messrs. Angrick and Dudley, each of whom had an increase in the target award as a percentage of base salary by 10%. Such increases were implemented in order to emphasize the importance of achieving objectives under the Company’s LiquidityOne Transformation Program.

Fiscal 2017 Performance Goals.   At the beginning of the fiscal year, the Compensation Committee established performance goals for the plan based on achievement of certain operational and strategic objectives to drive company performance and growth of stockholder value. For fiscal 2017, the Committee determined that awards under the plan for our named executive officers would be based on the achievement of gross profit growth and commercial contribution market growth from all marketplaces other than the DOD Surplus marketplace (except with respect to Messrs. Rallo, Dudley and Gravley, for whom the goal was based on achievement of commercial contribution margin growth for the Retail Supply Chain Group, the Capital Assets Group and GovDeals, respectively) (“Commercial CMG”). In addition, Mr. Angrick, Mr. Celaya, and Mr. Dudley’s performance goals included an additional corporate financial measure of annualized LiquidityOne Transformation EBITDA savings. Elimination of dependency on outside consultants and reduced labor costs as a result of efficiencies realized by LiquidityOne Transformation contributed to LiquidityOne Transformation EBITDA savings. The performance goals carry different weights for our named executive officers based on their position and responsibilities. The relative weights assigned to gross profit growth, Commercial CMG growth, annualized LiquidityOne Transformation Savings and individual goals for fiscal 2017 are as follows:

The Committee’s evaluation of the Company’s financial performance under the plan for fiscal 2017 was based on two Company-wide goals— gross profit growth and Commercial CMG. Gross profit growth measures the growth in gross profit from the Company’s marketplaces. Commercial CMG measures the growth in contribution margin contributed from the Company’s marketplaces before allocation of certain expenses. The Committee selected these metrics as the corporate performance measures because these continue to be key metrics used by management to measure the Company’s business performance.

The Commercial CMG growth goal for the named executive officers for fiscal 2017 were as set forth in the table below. If the level of achievement was below threshold levels, then no award would be earned with respect to the goal and if maximum levels had been achieved, then the payout for that goal would be capped at 200%.

Because we believe disclosure of the exact total contribution margin amounts to which these Commercial CMG growth targets equate would cause the Company competitive harm by publishing sensitive information that would not otherwise be disclosed, the Company is not disclosing total contribution margin amounts. The Committee cannot specify the degree of difficulty required to meet the Commercial CMG growth target goal, but believes that achievement of the target goal would have required substantial and sustained performance by the Company. The target Commercial CMG growth goal is consistent with the Company’s annual business plan and strategic objectives, and achievement of the target goal required extensive business development efforts, a significant increase in inventory velocity and continued improvement in service levels.

The gross profit goals for the named executive officers for fiscal 2017 were as set forth in the table below. If the level of achievement was below threshold levels, then no award would be earned with respect to the goal and if maximum levels had been achieved, then the payout for that goal would be capped at 200%.

Because we believe disclosure of the exact total gross profit amounts to which these gross profit growth targets equate would cause the Company competitive harm by publishing sensitive information that would not otherwise be disclosed, the Company is not disclosing total gross profit amounts. The Committee cannot specify the degree of difficulty required to meet the gross profit growth target goal, but believes that achievement of the target goal would have required substantial and sustained performance by the Company. The target gross profit growth goal is consistent with the Company’s annual business plan and strategic objectives, and achievement of the target goal required extensive business development efforts, a significant increase in inventory velocity and continued improvement in service levels.

The annualized LiquidityOne Transformation EBITDA savings goal for the named executive officers for fiscal 2017 were as set forth in the table below. If the level of achievement was below threshold levels, then no award would be earned with respect to the goal and if maximum levels had been achieved, then the payout for that goal would be capped at 200%. Mr. Rallo and Mr. Gravley were not subject to an EBITDA savings goal.

The Committee cannot specify the degree of difficulty required to meet the EBITDA savings target goal, but believes that achievement of the target goal would have required substantial and sustained execution with respect to the LiquidityOne Transformation initiative. The target EBITDA savings goal is consistent with the Company’s annual business plan and strategic objectives, and achievement of the target goal required timely and coordinate execution with respect to the LiquidityOne Transformation plans.

The individual performance goals established for each of our named executive officers varied based on his relative job responsibilities and emphasized improvement in metrics or operational objectives within the control of each named executive officer. Each of our named executive officers had four to five individual management objectives designed to further each of the following two Company strategic initiatives of market leadership and of collaboration, integration and transformation. Each individual management objective is weighted differently as noted below. To the extent that an objective was determined to be critical to the Company’s strategy and business plan, it may have served as an individual objective of more than one named executive officer.

Our Chairman and Chief Executive Officer’s individual performance was evaluated based on the following individual objectives (which comprised 30% of his total annual award opportunity):

Mr. Rallo’s individual performance was evaluated based on the following four individual objectives (which comprised 30% of his total annual award opportunity):

Mr. Dudley’s individual performance was intended to be evaluated based on the following four individual objectives (which comprised 30% of his total annual award opportunity):

As a result of Mr. Dudley’s separation from the Company at fiscal year-end, Mr. Dudley’s individual performance was not evaluated against his goals for Fiscal Year 2017 and he received no pay-out based on achievement of these individual objectives.

Mr. Gravley’s individual performance was evaluated based on the following five individual objectives (which comprised 30% of his total annual award opportunity):

Mr. Celaya’s individual performance was evaluated based on the following five individual objectives (which comprised 30% of his total annual award opportunity):

Fiscal 2017 Results and Payouts.   At the end of the performance year, our Chairman and CEO assessed the achievement of the Company and individual performance goals and made a recommendation to the Committee regarding the annual incentive award payouts.

In determining the amount of the fiscal 2017 awards, the Committee assessed the Company’s and each named executive officer’s performance measured against the previously described corporate or business unit, LiquidityOne Transformation savings and individual management objectives.

For fiscal 2017, the Company, the Capital Assets Group and the Retail Supply Chain Group achieved Commercial CMG and gross profit growth that fell short of the threshold performance levels, resulting in no payouts. However, with respect to Mr. Gravley, the Company achieved gross profit growth with respect to GovDeals that exceeded the threshold level but fell short of the target level, resulting in a payout to Mr. Gravley equal to 86% of target for this goal. In addition to gross profit growth, Mr. Gravley was subject to a Commercial CMG and this goal was achieved at a level that exceeded target but fell short of the maximum level, resulting in 170% of target for this goal. The Company achieved annualized LiquidityOne Transformation savings that exceeded the target level, resulting in a payout to Mr. Celaya equal to 154.6% of target for this goal and resulting in a payout to Mr. Angrick equal to 100% of target for this goal. Fiscal 2017 results, including individual performance achievement, appear in the table below. Mr. Dudley was not eligible to receive a payout under the annual incentive compensation plan for 2017 given that his employment terminated effective as of October 2, 2017, which is prior to the payment date for the awards.

Fiscal 2018 Incentive Award Plan.   At its November 13, 2017 meeting, the Compensation Committee determined that with 2018, executive compensation would continue to focus on financial metrics. The corporate financial measures for our fiscal 2018 annual incentive compensation plan will be gross profit and commercial contribution market growth from all marketplaces other than the DOD Surplus marketplace (except with respect to Mr. Rallo, for whom the goals will be based on achievement of gross profit and commercial contribution margin growth and revenue for the combined Capital Assets Group and Retail Supply Chain Group and, in the case of Mr. Gravley, for whom the goals will be based on GovDeals and Auction Deals). The Compensation Committee also continued to set individual goals to emphasize execution as well as financial metrics. Payout based on individual financial performance, however, has been changed for fiscal year 2018 as the payout based on these objectives is subject to minimum financial performance targets. The Compensation Committee, recognizing that Mr. Angrick’s cash compensation was below the peer group twenty-fifth percentile, increased Mr. Angrick’s annual incentive cash compensation for fiscal 2018 to 150% of his base salary.

For fiscal 2018, the annual incentive cash award target and maximum award of our named executive officers were:

The relative weight assigned to corporate and individual goals for fiscal 2018 is as follows:

Long-Term Incentive Compensation

Purpose. We grant equity-based compensation to our named executive officers in order to attract, retain and reward our executives and strengthen the mutuality of interests between our named executive officers and Liquidity Services’ stockholders. The Compensation Committee annually determines whether to grant stock options or other equity-based incentives to executives. In making its determinations, the Compensation Committee considers factors such as market data, the executive’s

and the Company’s performance in the last year and the results achieved by the executive, the executive’s base salary and the Compensation Committee’s view regarding the future potential of long-term contributions of the executive. Recommendations of the Chairman and CEO are also taken into consideration.

The Compensation Committee historically had granted our named executive officers long-term incentive awards in the form of stock options. As of January 22, 2018, 350,403 outstanding and exercisable stock options were older than six years from their grant date. One of the reasons the Company has traditionally granted stock options is because they contribute to our pay for performance philosophy in that grantees only receive value from the stock options if there is an increase in the value of the Company’s shares following the date of grant. If our stock price declines, then the stock options will not be of value and may end up expiring prior to ever being exercised. Based on a stock price of $5.78 which represents the 30-day average stock price as of September 18, 2017, 43% of issued equity is “underwater,” which means that the exercise price for the stock options exceeds $5.78. This represents approximately 5.5% of the Company’s total common stock. Any options that expire unexercised are returned to the share pool under the Company’s Second Amended and Restated 2006 Omnibus Long-Term Incentive Plan and made available for future grants. The following chart depicts the portion of the Company’s equity overhang that is underwater and which may be potentially returned to the share pool in the future.

As in fiscal 2016, our long-term incentive compensation program in fiscal 2017 provided grants of stock options and restricted stock under our Second Amended and Restated 2006 Omnibus Long-Term Incentive Plan, which has been approved by our stockholders.

The Compensation Committee has historically granted annual equity awards with respect to each fiscal year after financial results are available for the prior fiscal year at a regularly scheduled meeting. As the Compensation Committee’s meeting schedule is established prior to the start of each fiscal year, the proximity of any award grants to earnings announcements or other market events is coincidental. For annual awards, the Compensation Committee’s policy is to grant options and restricted stock awards on the date it approves them. The option exercise price is determined in accordance with the terms of the plan under which the award is granted (generally, the closing price on the date of grant) and cannot be less than the fair market value of our Common Stock as of that date. In addition to annual option awards, our named executive officers may receive stock options in connection with the commencement of employment or upon promotion. In these cases, the exercise price is typically the closing price of our common stock on the date the Compensation Committee approves the award.

Fiscal 2017 Annual Awards. In fiscal 2017, the Compensation Committee granted a mix of time-based stock options and restricted stock awards and performance-based stock options and restricted stock awards to each of our named executive officers as part of the annual grant for fiscal 2017. Approximately 20% of the equity award value was in the form of stock options (with 50% subject to performance-based vesting terms and 50% subject to time-based vesting terms over four years), and 80% was in the form of restricted stock (with 50% subject to performance-based vesting terms and 50% subject to time-based vesting terms over four years). We granted a portion of our annual equity awards in the form of performance-based stock options and restricted stock awards in order to incentivize the named executive officers to achieve objectives related to profitable growth, particularly with respect to the marketplaces other than the DOD Surplus marketplace. The 2017 annual awards (both time-based and performance-based) were approved by the Compensation Committee at its March 3, 2017 meeting. These performance-based awards will vest in installments at the end of each fiscal year over a four-year period based on our consolidated contribution margin growth excluding operating expenses related to the LiquidityOne Transformation program. In determining the size of the annual grants to our named executive officers, the Compensation Committee considered the size of equity awards granted in fiscal 2016, the scope of job responsibilities, the target long-term incentive award value of similarly situated executives in the peer group, experience, individual performance and recommendations of the Chairman and CEO. The target grant date fair values of options and restricted stock for the CEO in fiscal 2017 were above the 75^th percentile of the peer group in order to incentivize long-run transformation of the business. In light of this, the Compensation Committee has set below range base salary compensation for Mr. Angrick to balance with the target equity compensation.

The target value of each of our named executive officer’s annual stock options and restricted stock awards as a percentage of base salary is as shown in the table below.

The following award types were granted to our named executive officers in fiscal 2017:

The number of stock options and restricted shares granted to our named executive officers in fiscal 2017 is included in the “Grants of Plan-Based Awards for Fiscal 2017” table.

Fiscal 2018 Equity Awards.   The Compensation Committee has granted each of our named executive officers a mix of approximately 80% stock options and 20% restricted stock awards subject to both time-based and performance-based vesting terms for fiscal 2018 in December 2017. In addition, in connection with the increased scope and complexity of his role and for retention purposes, Mr. Rallo received an additional stock option and restricted stock award with a grant date value of approximately $580,000.

Other Compensation and Benefit Programs

Our named executive officers are eligible to participate in benefit plans that are available to substantially all of our employees, including participation in the Liquidity Services, Inc. 401(k) Profit Sharing and Trust Plan, medical insurance, dental insurance, life insurance and disability insurance programs. Mr. Rallo also receives the benefit of a Company car.

We do not provide our named executive officers with any additional benefits or perquisites not available to all other employees.

Employment Agreements

We have entered into employment agreements with each of our named executive officers that provide for, among other things, specified payments in the event of termination of employment in certain circumstances. The terms of these agreements are described under “Employment Agreements” below. The Committee believes it is important to provide our named executive officers with some measure of financial security in the event that their employment with the Company is terminated

without cause or in connection with certain unforeseen circumstances. The Committee believes that these arrangements encourage an executive to comply with post-termination restrictive non-competition covenants and to cooperate with the Company both before and after his employment is terminated. The Committee believes that these arrangements are reasonable and that it is beneficial to have agreements in place that specify the exact terms and benefits an executive receives if the Company elects to terminate a named executive officer’s employment.

Stock Ownership Policy

In fiscal 2014, the Board adopted a stock ownership policy obligating executive officers to hold a number of shares of our common stock as shown in the below table. Each executive officer has either (i) five years from the implementation of the applicable policy or (ii) five years after an executive officer’s date of hire or designation as a named executive officer (whichever is later of (i) or (ii)) to satisfy this requirement. Executive officers are not permitted to purchase any financial instrument or enter into any transaction that is designed to hedge or offset any decrease in the market value of our common stock (including, but not limited to, prepaid variable forward contracts, equity swaps, collars, or exchange funds). Each of our executive officers has satisfied or is on track to satisfy this requirement within the applicable timeframe.

Clawback Policy

If the Company’s financial statements are restated due to material non-compliance with any financial reporting requirement under the securities laws, the Company's clawback policy requires that bonus and other incentive awards, as well as any performance-based equity awards, will be subject to forfeiture and/or recoupment if such awards would have been lower had they been determined or calculated based on the restated results.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended (Internal Revenue Code), limits publicly-held companies to a deduction in 2017 for federal income tax purposes of $1 million for compensation paid to a company’s chief executive officer and the three other most highly compensated executive officers (not including the chief financial officer) determined at the end of each year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation. For fiscal 2017, payments of annual bonuses and the grants of stock options were intended to qualify as performance-based compensation.

Summary Compensation Table

The following table summarizes the compensation of our named executive officers, which includes our principal executive officer, our principal financial officer and our three other most highly compensated executive officers.

November 27, 2013 and 9,938 performance stock options awarded to Mr. Rallo on November 27, 2013. In fiscal 2017, on October 1, 2016, performance stock and performance stock options were forfeited for all grants made in fiscal 2015.

For Mr. Angrick, the amount shown includes: $14,492.40 for 401(k) matching contributions, $840.06 for short- and long-term disability insurance premium payments, $1,932.06 for group term life insurance premium payments and $27,468 for reimbursements in connection with the cost of a personal IRS audit stemming from the Company’s corporate audit.

For Mr. Celaya, the amount shown includes: $11,082.73 for 401(k) matching contributions, $840.06 for short- and long-term disability insurance premium payments, and $1,932.06 for group term life insurance payments.

For Mr. Gravley, the amount shown includes: $11,711.59 for 401(k) matching contributions, $840.06 for short- and long-term disability insurance premium payments, and $1,932.06 for group term life insurance premium payments.

For Mr. Rallo, the amount shown includes: $12,135.20 for 401(k) matching contributions, $840.06 for short- and long-term disability insurance premium payments, and $1,932.06 for group term life insurance premium payments, $2,310 in imputed income due to the use of a Company car, and $2,851 for reimbursements in connection with the cost of a personal IRS audit stemming from the Company’s corporate audit.

For Mr. Dudley, the amount shown includes: $10,629.46 for 401(k) matching contributions, $840.06 for short- and long-term disability insurance premium payments, $1,932.06 for group term life insurance payments, and $336,419 for severance.

Employment Agreements

We have entered into employment agreements with all of our named executive officers that provide for, among other things, the term of employment, compensation and benefits payable during the term of the agreement and certain compensation payable when an executive’s employment is terminated under certain conditions.

We also have confidentiality, non-competition and intellectual property agreements with the named executive officers. These agreements typically provide that the employee may not disclose or transfer any of our confidential information to any person, business entity or other organization without authorization from us, and that the employee may not, during his or her employment with us and for 24 months thereafter, hire or solicit any of our employees for employment with another person or entity or in any way interfere with the relationship we have with any of our employees, clients or other business relationships. Further, these agreements also typically provide that the employee may not, during his employment with us and for up to 24 months thereafter, compete with us. These agreements typically also provide that all ideas, designs, works and inventions made by the employee in the course of his or her employment with us are our exclusive property, and that the copyrights of all writings produced by the employee during the course of his or her work for us are the property of our Company.

Summary of Employment Agreement with William P. Angrick, III

We entered into an employment agreement with Mr. Angrick effective as of June 13, 2016. The agreement provides that Mr. Angrick will be employed as our Chairman and Chief Executive Officer and that his employment will continue for a one year period from the effective date, which such period will automatically renew for successive one year terms until terminated by either party pursuant to the terms of the agreement. The agreement provides for an initial annual base salary of $380,000, which was approved by the Compensation Committee and which may be increased but not decreased. Mr. Angrick is also eligible for an annual incentive bonus under a sliding scale as approved by the Compensation Committee based upon the achievement of financial targets that for fiscal 2017 was equal to 125% of his base salary. In addition, he is eligible to receive an additional bonus amount for the completion of projects that increase stockholder value, at the discretion of the Compensation Committee. If Mr. Angrick’s employment is terminated as a result of his death, his estate will receive his base salary through the next full calendar month and all other unpaid amounts. If Mr. Angrick’s employment is terminated because of disability, he is entitled to his base salary through the third full calendar month after termination and all other unpaid amounts, provided that his base salary will be reduced by any amounts received under any disability insurance provided by the Company.

The agreement further provides that if his employment with the Company is terminated by us other than for cause, disability or death, or is terminated by Mr. Angrick for good reason, Mr. Angrick will receive: (1) his base salary through the date of termination and all other unpaid amounts owed under the employment agreement and (2) a lump-sum severance package equal to twelve months of his base salary plus an amount equal to the average annual incentive bonus earned by Mr. Angrick over the previous two fiscal years. All severance payments made by us to Mr. Angrick will be payable within 30 days of notice of termination.

Summary of Employment Agreement with Jorge A. Celaya

We entered into an employment agreement with Mr. Celaya effective as of July 20, 2015. The agreement provides that Mr. Celaya will serve as the Executive Vice President and Chief Financial Officer for a period of one year from the effective date, after such time the employment term will automatically renew for additional one year terms. The agreement provides for an initial base salary of $350,000, which was approved by the Compensation Committee. Mr. Celaya is also eligible for a target annual incentive bonus of up to 80% of his salary based on the attainment of certain performance milestones. Pursuant to the agreement, Mr. Celaya received an initial equity grant of restricted stock with a value of $1,700,000 that vests quarterly over four years. The agreement also provides that Mr. Celaya is eligible to receive additional long-term incentive compensation each year.

If Mr. Celaya’s employment is terminated as a result of his death, his estate will receive his base salary through the next full calendar month and all other unpaid amounts owed under the employment agreement. If Mr. Celaya’s employment is terminated because of disability, he is entitled to receive his base salary through the third full calendar month after termination and all other unpaid amounts, provided that his base salary will be reduced by any amounts received under any disability insurance provided by the Company. This agreement also provides that if his employment with our Company is terminated by us other than for cause, disability or death or by Mr. Celaya for good reason, in each case not in connection with a corporate transaction, Mr. Celaya is entitled to receive: (1) his base salary through the date of termination and all other unpaid amounts; and (2) a lump-sum severance package equal to the sum of twelve months of his base salary plus an amount equal to his annual target incentive bonus. In addition, the Company will maintain his medical, dental and vision benefits at the same level as if he had continued to remain actively employed with the Company for a period of six months following his termination. If Mr. Celaya’s employment with our Company is terminated by us other than for cause, disability or death or by Mr. Celaya for good reason, in each case within the twelve months following a corporate transaction, Mr. Celaya is entitled to receive: (1) his base salary through the date of termination and all other unpaid amounts; and (2) a lump-sum severance

package equal to eighteen months of his base salary plus an amount equal to 150% of his then current target bonus. In addition, the Company will maintain his medical, dental and vision benefits at the same level as if he had continued to remain actively employed with the Company for a period of six months following his termination. All severance payments made by us to Mr. Celaya will be payable within 30 days of notice of termination

Summary of Employment Agreement with Gardner Dudley

We entered into an Executive Employment Agreement with Mr. Dudley in connection with his appointment as our President, Capital Assets Group originally effective as of September 10, 2014 and as amended effective June 13, 2016. The agreement initially set Mr. Dudley’s base salary at $250,000, which was approved by the Compensation Committee. In fiscal 2017, Mr. Dudley was eligible for a target annual incentive bonus of up to 70% of his salary, payable upon the achievement of certain performance milestones; however, due to his termination of employment prior to the payout date for annual cash incentive awards, he did not receive a cash incentive payout in respect of fiscal year 2017 performance. The employment agreement also provided Mr. Dudley with a grant of 25,000 shares of restricted stock that vest over four years commencing on October 1, 2015. If Mr. Dudley is terminated as a result of his death, his estate will receive his base salary through the next full calendar month and all other unpaid amounts owed under the employment agreement. If Mr. Dudley’s employment is terminated because of disability, he is entitled to receive his base salary through the third full calendar month after termination and all other unpaid amounts, provided that his base salary will be reduced by any amounts received under any disability insurance provided by the Company. The employment agreement, as amended, further provides that if his employment with our Company is terminated by us other than for cause, disability or death or if his employment is terminated by Mr. Dudley for good reason, Mr. Dudley will receive: (1) his base salary through the date of termination and all other unpaid amounts; and (2) a lump-sum severance package equal to twelve months of his base salary plus an amount equal to the average annual incentive bonus earned by Mr. Dudley over the previous two fiscal years. All severance payments made by us to Mr. Dudley will be payable within 30 days of notice of termination subject to potential delay as a result of Section 409A.

We entered into a Severance Agreement and Release (the “Severance Agreement”) with Mr. Dudley on September 25, 2017. Per the terms of the Severance Agreement, Mr. Dudley was paid $336,419 in accordance with his employment agreement in fiscal 2018 except that the severance value actually received in respect of his bonus represented the average annual incentive bonus earned by him over the previous two fiscal years, which such amount was less than his target bonus.

Summary of Employment Agreement with Roger Gravley

We entered into an Executive Employment Agreement with Mr. Gravley in connection with his appointment as our President, GovDeals and Chief Information Officer effective as of January 10, 2018. The agreement sets Mr. Gravley’s base salary at $350,000 and he is eligible for a target annual incentive bonus of up to 60% of his salary, payable upon the achievement of certain performance milestones. If Mr. Gravley is terminated as a result of his death, his estate will receive his base salary through the next full calendar month and all other unpaid amounts owed under the employment agreement. If Mr. Gravley’s employment is terminated because of disability, he is entitled to receive his base salary through the third full calendar month after termination and all other unpaid amounts, provided that his base salary will be reduced by any amounts received under any disability insurance provided by the Company. The employment agreement further provides that if his employment with our Company is terminated by us other than for cause, disability or death or if his employment is terminated by Mr. Gravley for good reason, Mr. Dudley will receive: (1) his base salary through the date of termination and all other unpaid amounts; and (2) a lump-sum severance package equal to

twelve months of his base salary plus an amount equal to the average annual incentive bonus earned by Mr. Gravley over the previous two fiscal years. All severance payments made by us to Mr. Dudley will be payable within 30 days of notice of termination subject to potential delay as a result of Section 409A.

Summary of Employment Agreement with James M. Rallo

We entered into an employment agreement with Mr. Rallo effective as of February 21, 2005. During fiscal 2017, Mr. Rallo received a salary of $330,424, which was approved by the Compensation Committee. Mr. Rallo is also eligible for a target annual incentive bonus that must be at least $50,000, subject to the achievement of certain deliverables and milestones; for fiscal 2017, the annual bonus target was 80% of his base salary.

If Mr. Rallo’s employment is terminated as a result of his death, his estate will receive his base salary through the next full calendar month and all other unpaid amounts owed under the employment agreement. If Mr. Rallo’s employment is terminated because of disability, he is entitled to receive his base salary through the third full calendar month after termination and all other unpaid amounts, provided that his base salary will be reduced by any amounts received under any disability insurance provided by the Company. This agreement also provides that if his employment with our Company is terminated by us other than for cause, disability or death, or because we elect not to extend the term of the agreement, or if his employment is terminated by Mr. Rallo for good reason, Mr. Rallo is entitled to receive: (1) his base salary through the date of termination and all other unpaid amounts; and (2) a lump-sum severance package equal to the sum of twelve months of his base salary plus an amount equal to his average annual bonus for the previous two fiscal years. All severance payments made by us to Mr. Rallo will be payable within 30 days of notice of termination. Mr. Rallo’s employment agreement was amended effective February 23, 2012 to extend the term from February 20, 2012 to February 20, 2013, after which date the agreement renews automatically for a term of one year unless either party terminates the agreement. Pursuant to this amendment, if during the twelve months following a corporate transaction Mr. Rallo is terminated by us other than for cause, death or disability, or because we elect not to extend the term of the agreement, or if his employment is terminated by Mr. Rallo for good reason, Mr. Rallo is entitled to receive: (1) his base salary through the date of termination and all other unpaid amounts; and (2) a lump-sum severance package equal to the sum of twenty-four months of the sum of his base salary plus an amount equal to his average annual bonus for the previous two fiscal years.

Grants of Plan-Based Awards for Fiscal 2017

The following table provides additional information about plan-based awards granted to our named executive officers in fiscal 2017. Our named executive officers received five types of plan-based awards: annual cash bonuses (referred to as the “Incentive Cash Award”), time-based stock options (referred to as the “2017 Stock Options”), time-based restricted stock awards (referred to as the “2017 Restricted Stock”), performance-based stock options (referred to as the “2017 Performance Options”) and performance-based restricted stock awards (referred to as the “2017 Performance Stock”).