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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-51813

LIQUIDITY SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware	52-2209244
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

6931 Arlington Road, Suite 200, Bethesda, MD	20814
(Address of Principal Executive Offices)	(Zip Code)

(202) 467-6868

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Securities registered to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	LQDT	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐			Accelerated filer ☒

Non-accelerated filer ☐			Smaller reporting company ☐

			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the issuer’s common stock, par value $0.001 per share, as of May 1, 2023, was 30,679,393.


INDEX

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations	4

	Condensed Consolidated Statements of Comprehensive Income	5

	Condensed Consolidated Statement of Stockholders' Equity	6

	Condensed Consolidated Statements of Cash Flows	7

	Notes to the Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 5.	Other Information	33

Item 6.	Exhibits	34

SIGNATURES		35

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Liquidity Services, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Dollars in Thousands, Except Par Value)


	March 31, 2023			September 30, 2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	95,583		$	96,122
Short-term investments		5,615			1,819
Accounts receivable, net of allowance for doubtful accounts of $313 and $449		5,960			11,792
Inventory, net		15,290			11,679
Prepaid taxes and tax refund receivable		1,994			1,631
Prepaid expenses and other current assets		6,135			6,551
Total current assets		130,577			129,594
Property and equipment, net		18,245			19,094
Operating lease assets		11,414			13,207
Intangible assets, net		14,274			16,234
Goodwill		89,464			88,910
Deferred tax assets		11,104			13,628
Other assets		8,019			7,437
Total assets	$	283,097		$	288,104
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	42,915		$	41,982
Accrued expenses and other current liabilities		24,755			23,304
Current portion of operating lease liabilities		4,505			4,540
Deferred revenue		4,530			4,439
Payables to sellers		47,342			49,238
Total current liabilities		124,047			123,503
Operating lease liabilities		7,776			9,687
Other long-term liabilities		200			378
Total liabilities		132,023			133,568
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value; 120,000,000 shares authorized; 36,049,719 shares issued and outstanding at March 31, 2023; 35,724,057 shares issued and outstanding at September 30, 2022		36			36
Additional paid-in capital		262,118			258,275
Treasury stock, at cost; 5,096,341 shares at March 31, 2023, and 3,813,199 shares at September 30, 2022		(79,586	)		(62,554	)
Accumulated other comprehensive loss		(8,769	)		(10,285	)
Accumulated deficit		(22,725	)		(30,936	)
Total stockholders’ equity		151,074			154,536
Total liabilities and stockholders’ equity	$	283,097		$	288,104

See accompanying notes to the unaudited condensed consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Dollars in Thousands, Except Per Share Data)


	Three Months Ended March 31,						Six Months Ended March 31,
	2023			2022			2023			2022
Purchase revenues	$	47,273		$	37,384		$	85,907		$	73,602
Consignment and other fee revenues		34,180			30,891			67,829			61,381
Total revenue		81,453			68,275			153,736			134,983
Costs and expenses from operations:
Cost of goods sold (excludes depreciation and amortization)		40,366			28,968			72,139			56,730
Technology and operations		14,791			13,872			29,495			27,790
Sales and marketing		11,854			11,273			22,644			21,317
General and administrative		6,404			7,053			13,789			15,284
Depreciation and amortization		2,803			2,603			5,567			4,906
Fair value adjustment of acquisition earn-outs		—			(8,500	)		—			(8,500	)
Other operating (income) expenses, net		(11	)		23			129			(10	)
Total costs and expenses		76,207			55,292			143,763			117,517
Income from operations		5,246			12,983			9,973			17,466
Interest and other income, net		(572	)		(46	)		(961	)		(177	)
Income before provision for income taxes		5,818			13,029			10,934			17,643
Provision for income taxes		1,573			1,059			2,723			2,071
Net income	$	4,245		$	11,970		$	8,211		$	15,572
Basic income per common share	$	0.14		$	0.37		$	0.26		$	0.48
Diluted income per common share	$	0.13		$	0.35		$	0.25		$	0.45
Basic weighted average shares outstanding		31,305,214			32,561,903			31,562,988			32,769,057
Diluted weighted average shares outstanding		32,124,188			34,004,568			32,544,953			34,382,149

See accompanying notes to the unaudited condensed consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Dollars in Thousands)


	Three Months Ended March 31,					Six Months Ended March 31,
	2023		2022			2023		2022
Net income	$	4,245	$	11,970		$	8,211	$	15,572
Other comprehensive income (loss):
Foreign currency translation		243		(169	)		1,516		(300	)
Other comprehensive income (loss), net of taxes		243		(169	)		1,516		(300	)
Comprehensive income	$	4,488	$	11,801		$	9,727	$	15,272

See accompanying notes to the unaudited condensed consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders’ Equity

(Dollars In Thousands)


						Additional									Accumulated Other
	Common Stock					Paid-in			Treasury Stock						Comprehensive			Retained
	Shares			Amount		Capital			Shares			Amount			Loss			Earnings			Total
Balance at September 30, 2022		35,724,057		$	36	$	258,275			(3,813,199	)	$	(62,554	)	$	(10,285	)	$	(30,936	)	$	154,536
Net Income		—			—		—			—			—						3,967			3,967
Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units		190,119			—		495			—			—			—			—			495
Taxes paid associated with net settlement of stock compensation awards		(14,536	)		—		(244	)		—			—			—			—			(244	)
Common stock repurchase		—			—		—			(531,819	)		(7,199	)		—			—			(7,199	)
Stock compensation expense		—			—		2,126			—			—			—			—			2,126
Foreign currency translation		—			—		—			—			—			1,273			—			1,273
Balance at December 31, 2022		35,899,640		$	36	$	260,653			(4,345,018	)	$	(69,754	)	$	(9,012	)	$	(26,970	)	$	154,953
Net income		—			—		—			—			—			—			4,245			4,245
Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units		184,791			—		—			—			—			—			—			—
Taxes paid associated with net settlement of stock compensation awards		(34,713	)		—		(492	)		—			—			—			—			(492	)
Common stock repurchase		—			—		—			(749,903	)		(9,814	)		—			—			(9,814	)
Shares swapped to exercise stock options		—			—		18			(1,420	)		(18	)		—			—			(0	)
Stock compensation expense		—			—		1,939			—			—			—			—			1,939
Foreign currency translation		—			—		—			—			—			243			—			243
Balance at March 31, 2023		36,049,718		$	36	$	262,118			(5,096,341	)	$	(79,586	)	$	(8,769	)	$	(22,725	)	$	151,074

See accompanying notes to the unaudited condensed consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars In Thousands)


	Six Months Ended March 31,
	2023			2022
Operating activities
Net income	$	8,211		$	15,572
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,567			4,906
Stock compensation expense		3,882			4,272
Inventory adjustment to net realizable value		847			98
Provision for doubtful accounts		194			11
Deferred tax expense		2,524			1,590
Impairment of long-lived and other non-current assets		—			31
Gain on disposal of property and equipment		(55	)		(13	)
Gain on termination of lease		—			(240	)
Change in fair value of earn-out liability		—			(8,500	)
Changes in operating assets and liabilities:
Accounts receivable		5,801			(637	)
Inventory		(4,438	)		(709	)
Prepaid taxes and tax refund receivable		(363	)		(3	)
Prepaid expenses and other assets		310			(1,230	)
Operating lease assets and liabilities		(155	)		422
Accounts payable		902			393
Accrued expenses and other current liabilities		1,461			(8,121	)
Deferred revenue		90			442
Payables to sellers		(2,314	)		7,149
Other liabilities		(129	)		(806	)
Net cash provided by operating activities		22,335			14,627
Investing activities
Cash paid for business acquisitions, net of cash acquired		—			(11,164	)
Purchases of property and equipment, including capitalized software		(2,711	)		(3,572	)
Purchase of short-term investments		(3,696	)		—
Other investing activities, net		51			9
Net cash used in investing activities		(6,356	)		(14,727	)
Financing activities
Common stock repurchases		(16,963	)		(19,998	)
Taxes paid associated with net settlement of stock compensation awards		(736	)		(1,809	)
Payments of the principal portion of finance lease liabilities		(50	)		(51	)
Payment for debt issuance cost		—			(91	)
Proceeds from exercise of stock options, net of tax		496			—
Net cash used in financing activities		(17,253	)