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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

OR

 

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

 

https://cdn.kscope.io/a87d99bd8087413634e68694a95118b9-img213043992_0.jpg 

 

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

 

 

2


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.

 

3


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.

 

4


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.

 

5


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.

 

6


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

)

 

 

(21,949

)

Effect of exchange rate differences on cash and cash equivalents

 

 

735

 

 

 

(22

)

Net decrease in cash and cash equivalents

 

 

(539

)

 

 

(22,071

)

Cash and cash equivalents at beginning of period

 

 

96,122

 

 

 

106,335

 

Cash and cash equivalents at end of period

 

$

95,583

 

 

 

84,264

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid (received) for income taxes, net

 

$

539