10-Q
Q20001235468false--09-302024P6Yhttp://fasb.org/us-gaap/2023#AccountsPayableAndAccruedLiabilitiesCurrentAndNoncurrenthttp://fasb.org/us-gaap/2023#AccountsPayableAndAccruedLiabilitiesCurrentAndNoncurrenthttp://fasb.org/us-gaap/2023#InterestIncomeExpenseNet0001235468us-gaap:SellingAndMarketingExpenseMember2023-10-012024-03-310001235468us-gaap:RetainedEarningsMember2022-12-310001235468us-gaap:AdditionalPaidInCapitalMember2023-03-310001235468lqdt:StockOptionsAndRSUsAndRSAsMember2023-10-012024-03-310001235468us-gaap:AdditionalPaidInCapitalMember2023-12-310001235468lqdt:CreditAgreementMember2024-03-310001235468lqdt:WellsFargoBankNAMemberus-gaap:LetterOfCreditMember2022-02-100001235468us-gaap:RevolvingCreditFacilityMemberlqdt:WellsFargoBankNAMember2022-02-100001235468us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2024-03-310001235468us-gaap:CommonStockMember2023-12-310001235468lqdt:December2022RepurchasePlanMember2023-10-012024-03-310001235468us-gaap:GeographicConcentrationRiskMemberus-gaap:SalesRevenueNetMemberus-gaap:NonUsMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:GovDealsMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMember2024-01-012024-03-310001235468us-gaap:CommonStockMember2024-03-310001235468us-gaap:TreasuryStockCommonMember2023-03-310001235468us-gaap:SellingAndMarketingExpenseMember2022-10-012023-03-310001235468us-gaap:TreasuryStockCommonMember2023-01-012023-03-310001235468lqdt:GovDealsMember2024-01-012024-03-310001235468lqdt:ConsignmentAndOtherFeeRevenuesMember2023-01-012023-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:ConsignmentAndOtherFeeRevenuesMemberlqdt:RSCGMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMemberus-gaap:ProductMember2022-10-012023-03-310001235468lqdt:RestrictedStockUnitsAndRestrictedStockAwardsMember2023-01-012023-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:CAGMember2023-10-012024-03-310001235468us-gaap:RetainedEarningsMember2023-10-012023-12-310001235468lqdt:ConsignmentAndOtherFeeRevenuesMember2024-01-012024-03-310001235468us-gaap:OtherIntangibleAssetsMember2024-03-310001235468lqdt:GovDealsMember2022-09-300001235468us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-10-012022-12-310001235468us-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMemberus-gaap:NonUsMember2023-10-012024-03-310001235468us-gaap:RevolvingCreditFacilityMemberlqdt:CreditAgreementMember2022-02-102022-02-100001235468us-gaap:OperatingSegmentsMemberlqdt:RSCGMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:CAGMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2023-10-012024-03-310001235468us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-03-310001235468lqdt:StockOptionsAndRSUsAndRSAsMember2023-01-012023-03-310001235468us-gaap:AdditionalPaidInCapitalMember2023-09-300001235468us-gaap:OperatingSegmentsMemberlqdt:GovDealsMember2023-01-012023-03-310001235468us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001235468lqdt:SierraAcquisitionMemberus-gaap:GoodwillMember2024-01-010001235468us-gaap:TechnologyBasedIntangibleAssetsMember2023-09-300001235468lqdt:FirstAmendementCreditAgreementMember2022-10-012023-09-300001235468us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001235468us-gaap:ProductMemberus-gaap:CorporateNonSegmentMember2022-10-012023-03-310001235468us-gaap:AdditionalPaidInCapitalMember2022-09-3000012354682023-10-012023-12-310001235468lqdt:RestrictedStockUnitsAndRestrictedStockAwardsMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:RSCGMember2022-10-012023-03-310001235468lqdt:CustomerAndSupplierRelationshipsMember2023-09-300001235468us-gaap:ProductMember2023-10-012024-03-3100012354682023-03-310001235468us-gaap:ProductMember2022-10-012023-03-310001235468lqdt:MachinioCorporationMember2022-10-012023-09-300001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:CAGMember2022-10-012023-03-310001235468lqdt:CAGMember2023-09-300001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2024-01-012024-03-310001235468us-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMemberus-gaap:NonUsMember2022-10-012023-03-310001235468lqdt:MachinioCorporationMember2022-09-300001235468us-gaap:TreasuryStockCommonMember2023-09-300001235468us-gaap:AdditionalPaidInCapitalMember2024-03-310001235468lqdt:TechnologyAndOperationsExpenseMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMember2022-10-012023-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:GovDealsMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2023-10-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:CAGMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2023-01-012023-03-3100012354682023-01-012023-03-310001235468lqdt:StockOptionsAndRSUsAndRSAsMember2024-01-012024-03-310001235468lqdt:SecondAmendementCreditAgreementMember2023-10-012024-03-310001235468lqdt:GovDealsMember2023-09-300001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMember2023-10-012024-03-310001235468us-gaap:StockAppreciationRightsSARSMember2023-01-012023-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:CAGMember2022-10-012023-03-310001235468us-gaap:SellingAndMarketingExpenseMember2023-01-012023-03-310001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:CAGMember2023-01-012023-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMember2023-01-012023-03-310001235468us-gaap:TradeNamesMember2024-03-310001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:GovDealsMember2023-01-012023-03-310001235468srt:MaximumMember2024-03-310001235468us-gaap:CorporateNonSegmentMember2024-01-012024-03-310001235468srt:MaximumMemberus-gaap:TradeNamesMember2024-03-310001235468us-gaap:RetainedEarningsMember2022-10-012022-12-310001235468us-gaap:TreasuryStockCommonMember2023-12-310001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:MachinioCorporationMember2023-01-012023-03-310001235468us-gaap:RetainedEarningsMember2023-09-300001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:RSCGMember2024-01-012024-03-310001235468srt:MinimumMemberus-gaap:TradeNamesMember2024-03-310001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:CAGMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2023-10-012024-03-310001235468us-gaap:EmployeeStockOptionMember2023-10-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:RSCGMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2023-01-012023-03-310001235468us-gaap:FairValueMeasurementsNonrecurringMember2023-09-300001235468lqdt:GovDealsMember2022-10-012023-09-300001235468us-gaap:CommonStockMember2023-01-012023-03-310001235468lqdt:RestrictedStockServiceBasedMember2023-10-012024-03-310001235468lqdt:TechnologyAndOperationsExpenseMember2023-01-012023-03-310001235468us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001235468us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2023-09-3000012354682022-09-300001235468us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001235468lqdt:MachinioCorporationMember2024-03-310001235468lqdt:SierraAcquisitionMemberus-gaap:TradeNamesMember2024-01-010001235468us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-300001235468lqdt:MachinioCorporationMember2024-01-012024-03-310001235468lqdt:RestrictedStockUnitsAndRestrictedStockAwardsMember2022-10-012023-03-310001235468lqdt:CAGMember2024-03-310001235468us-gaap:AdditionalPaidInCapitalMember2023-10-012023-12-310001235468lqdt:EmployeeStockOptionServiceBasedMember2023-10-012024-03-310001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:RSCGMember2023-10-012024-03-310001235468lqdt:SierraAcquisitionMember2024-03-310001235468us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-10-012023-12-310001235468us-gaap:RevolvingCreditFacilityMembersrt:MaximumMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberlqdt:CreditAgreementMember2022-02-102022-02-100001235468lqdt:ConsignmentAndOtherFeeRevenuesMember2022-10-012023-03-310001235468us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001235468us-gaap:ProductMemberus-gaap:CorporateNonSegmentMember2024-01-012024-03-3100012354682023-09-300001235468us-gaap:FairValueMeasurementsNonrecurringMember2024-03-310001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:GovDealsMember2023-10-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2023-01-012023-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:RSCGMember2022-10-012023-03-310001235468lqdt:StockOptionsAndRSUsAndRSAsMember2022-10-012023-03-310001235468us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001235468us-gaap:AdditionalPaidInCapitalMember2022-12-310001235468us-gaap:OtherIntangibleAssetsMember2023-09-3000012354682023-12-310001235468us-gaap:RetainedEarningsMember2023-01-012023-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMemberus-gaap:ProductMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:GovDealsMember2022-10-012023-03-310001235468us-gaap:CorporateNonSegmentMember2022-10-012023-03-310001235468lqdt:CAGMember2022-09-3000012354682022-10-012023-03-310001235468lqdt:RestrictedStockPerformanceBasedMember2023-10-012024-03-310001235468us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-03-310001235468us-gaap:TechnologyBasedIntangibleAssetsMembersrt:MinimumMember2024-03-310001235468us-gaap:CorporateNonSegmentMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2022-10-012023-03-310001235468us-gaap:TradeNamesMember2023-09-300001235468lqdt:SierraAcquisitionMember2024-01-012024-01-010001235468us-gaap:OperatingSegmentsMemberlqdt:GovDealsMember2023-10-012024-03-310001235468lqdt:TechnologyAndOperationsExpenseMember2023-10-012024-03-3100012354682023-10-012024-03-310001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:CAGMember2023-10-012024-03-310001235468lqdt:CAGMember2022-10-012023-09-300001235468us-gaap:OperatingSegmentsMemberlqdt:CAGMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2024-01-012024-03-310001235468us-gaap:RetainedEarningsMember2023-12-310001235468us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:CAGMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2022-10-012023-03-310001235468us-gaap:CommonStockMember2023-10-012023-12-3100012354682024-01-012024-03-310001235468us-gaap:EmployeeStockOptionMembersrt:MinimumMember2023-10-012024-03-310001235468us-gaap:CorporateNonSegmentMember2023-01-012023-03-310001235468us-gaap:ProductMemberus-gaap:CorporateNonSegmentMember2023-10-012024-03-310001235468us-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMembersrt:MinimumMemberlqdt:CreditAgreementMember2022-02-102022-02-100001235468us-gaap:ProductMember2024-01-012024-03-310001235468us-gaap:CommonStockMember2023-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:GovDealsMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2022-10-012023-03-310001235468srt:MaximumMemberlqdt:CustomerAndSupplierRelationshipsMember2024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2022-10-012023-03-310001235468us-gaap:TreasuryStockCommonMember2023-10-012023-12-310001235468lqdt:SierraAcquisitionMembersrt:MinimumMember2024-01-010001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:RSCGMember2023-01-012023-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:GovDealsMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2023-01-012023-03-310001235468us-gaap:RetainedEarningsMember2022-09-300001235468us-gaap:StockAppreciationRightsSARSMember2024-01-012024-03-3100012354682022-10-012022-12-310001235468us-gaap:OperatingSegmentsMemberlqdt:RSCGMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2023-10-012024-03-310001235468lqdt:GovDealsMember2024-03-310001235468srt:MaximumMemberus-gaap:TechnologyBasedIntangibleAssetsMember2024-03-310001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:GovDealsMember2022-10-012023-03-310001235468us-gaap:GeneralAndAdministrativeExpenseMember2022-10-012023-03-310001235468us-gaap:CommonStockMember2022-10-012022-12-3100012354682024-01-012024-03-310001235468us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001235468us-gaap:CommonStockMember2024-01-012024-03-310001235468us-gaap:TechnologyBasedIntangibleAssetsMember2024-03-310001235468us-gaap:CorporateNonSegmentMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2024-01-012024-03-3100012354682024-01-01lqdt:MachinioCorporationMember2024-03-310001235468us-gaap:CommonStockMember2022-09-300001235468us-gaap:ProductMember2023-01-012023-03-310001235468us-gaap:EmployeeStockOptionMember2022-10-012023-03-310001235468srt:MaximumMemberlqdt:SierraAcquisitionMember2024-01-010001235468us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001235468us-gaap:TreasuryStockCommonMember2024-03-310001235468us-gaap:ProductMemberus-gaap:CorporateNonSegmentMember2023-01-012023-03-310001235468us-gaap:GeneralAndAdministrativeExpenseMember2023-10-012024-03-310001235468srt:MaximumMemberus-gaap:EmployeeStockOptionMember2023-10-012024-03-3100012354682024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:MachinioCorporationMemberus-gaap:ProductMember2023-10-012024-03-310001235468lqdt:MachinioCorporationMember2023-09-300001235468us-gaap:OperatingSegmentsMemberus-gaap:ProductMemberlqdt:GovDealsMember2024-01-012024-03-310001235468us-gaap:CorporateNonSegmentMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2023-01-012023-03-310001235468us-gaap:TreasuryStockCommonMember2022-12-310001235468us-gaap:CommonStockMember2022-12-3100012354682024-05-060001235468us-gaap:TreasuryStockCommonMember2024-01-012024-03-310001235468us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001235468lqdt:TechnologyAndOperationsExpenseMember2022-10-012023-03-3100012354682022-12-310001235468srt:MinimumMember2024-03-310001235468lqdt:CustomerAndSupplierRelationshipsMember2024-03-310001235468us-gaap:RetainedEarningsMember2024-03-310001235468lqdt:CustomerAndSupplierRelationshipsMembersrt:MinimumMember2024-03-310001235468us-gaap:StockAppreciationRightsSARSMember2023-10-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:CAGMember2024-01-012024-03-310001235468us-gaap:AdditionalPaidInCapitalMember2022-10-012022-12-310001235468us-gaap:TreasuryStockCommonMember2022-09-300001235468us-gaap:OperatingSegmentsMemberlqdt:RSCGMember2023-01-012023-03-310001235468us-gaap:SellingAndMarketingExpenseMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:CAGMember2023-01-012023-03-310001235468us-gaap:CorporateNonSegmentMember2023-10-012024-03-310001235468us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001235468lqdt:EmployeeStockOptionPerformanceBasedMember2023-10-012024-03-3100012354682022-10-012023-09-300001235468us-gaap:OperatingSegmentsMemberlqdt:ConsignmentAndOtherFeeRevenuesMemberlqdt:RSCGMember2022-10-012023-03-310001235468lqdt:ConsignmentAndOtherFeeRevenuesMember2023-10-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:GovDealsMember2024-01-012024-03-310001235468us-gaap:OperatingSegmentsMemberlqdt:RSCGMember2023-10-012024-03-310001235468us-gaap:NonUsMemberus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2023-01-012023-03-310001235468us-gaap:CorporateNonSegmentMemberlqdt:ConsignmentAndOtherFeeRevenuesMember2023-10-012024-03-310001235468us-gaap:StockAppreciationRightsSARSMember2022-10-012023-03-310001235468lqdt:SierraAcquisitionMemberlqdt:SupplierRelationshipsMember2024-01-010001235468us-gaap:TreasuryStockCommonMember2022-10-012022-12-310001235468us-gaap:CommonStockMember2023-09-300001235468lqdt:CAGMember2024-01-012024-03-310001235468us-gaap:RetainedEarningsMember2023-03-310001235468us-gaap:RetainedEarningsMember2024-01-012024-03-310001235468lqdt:RestrictedStockUnitsAndRestrictedStockAwardsMember2023-10-012024-03-310001235468lqdt:December2022RepurchasePlanMember2024-01-012024-03-31lqdt:Segmentiso4217:USDxbrli:sharesxbrli:purexbrli:sharesiso4217:GBPiso4217:USD

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, 2024

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/5252f5a7f218be0ede63abcc25272c57-img213967513_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 460, 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 6, 2024, was 30,482,345.


 

 

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

19

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

 

 

 

Item 4.

Controls and Procedures

30

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

31

 

 

 

Item 1A.

Risk Factors

31

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

 

 

 

Item 5.

Other Information

32

 

 

 

Item 6.

Exhibits

33

 

 

 

SIGNATURES

 

34

 

 

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, 2024

 

 

September 30, 2023

 

 

 

(Unaudited)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

108,634

 

 

$

110,281

 

Short-term investments

 

 

8,400

 

 

 

7,891

 

Accounts receivable, net of allowance for doubtful accounts of $2,094 and $1,424

 

 

9,552

 

 

 

7,848

 

Inventory, net

 

 

15,398

 

 

 

11,116

 

Prepaid taxes and tax refund receivable

 

 

1,488

 

 

 

1,783

 

Prepaid expenses and other current assets

 

 

7,966

 

 

 

7,349

 

Total current assets

 

 

151,438

 

 

 

146,268

 

Property and equipment, net

 

 

17,055

 

 

 

17,156

 

Operating lease assets

 

 

9,429

 

 

 

9,888

 

Intangible assets, net

 

 

15,937

 

 

 

12,457

 

Goodwill

 

 

97,555

 

 

 

89,388

 

Deferred tax assets

 

 

5,268

 

 

 

7,050

 

Other assets

 

 

6,969

 

 

 

6,762

 

Total assets

 

$

303,651

 

 

$

288,970

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

48,410

 

 

$

39,115

 

Accrued expenses and other current liabilities

 

 

23,718

 

 

 

23,809

 

Current portion of operating lease liabilities

 

 

4,331

 

 

 

4,101

 

Deferred revenue

 

 

4,865

 

 

 

4,701

 

Payables to sellers

 

 

51,842

 

 

 

48,992

 

Total current liabilities

 

 

133,166

 

 

 

120,718

 

Operating lease liabilities

 

 

6,453

 

 

 

6,581

 

Other long-term liabilities

 

 

107

 

 

 

137

 

Total liabilities

 

 

139,726

 

 

 

127,436

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.001 par value; 120,000,000 shares authorized; 36,476,363 shares issued and outstanding at March 31, 2024; 36,142,346 shares issued and outstanding at September 30, 2023

 

 

36

 

 

 

36

 

Additional paid-in capital

 

 

269,297

 

 

 

265,945

 

Treasury stock, at cost; 5,975,690 shares at March 31, 2024, and 5,433,045 shares at September 30, 2023

 

 

(93,109

)

 

 

(84,031

)

Accumulated other comprehensive loss

 

 

(9,957

)

 

 

(10,457

)

Accumulated deficit

 

 

(2,342

)

 

 

(9,958

)

Total stockholders’ equity

 

 

163,925

 

 

 

161,533

 

Total liabilities and stockholders’ equity

 

$

303,651

 

 

$

288,970

 

 

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,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Purchase revenues

 

$

53,105

 

 

$

47,273

 

 

$

89,330

 

 

$

85,907

 

Consignment and other fee revenues

 

 

38,348

 

 

 

34,180

 

 

$

73,448

 

 

 

67,829

 

Total revenue

 

 

91,453

 

 

 

81,453

 

 

 

162,778

 

 

 

153,736

 

Costs and expenses from operations:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold (excludes depreciation and amortization)

 

 

44,222

 

 

 

40,366

 

 

 

75,748

 

 

 

72,139

 

Technology and operations

 

 

15,526

 

 

 

14,791

 

 

 

29,764

 

 

 

29,495

 

Sales and marketing

 

 

14,195

 

 

 

11,854

 

 

 

27,176

 

 

 

22,644

 

General and administrative

 

 

7,658

 

 

 

6,404

 

 

 

15,242

 

 

 

13,789

 

Depreciation and amortization

 

 

3,195

 

 

 

2,803

 

 

 

6,098

 

 

 

5,567

 

Other operating expenses (income), net

 

 

62

 

 

 

(11

)

 

 

507

 

 

 

129

 

Total costs and expenses

 

 

84,858

 

 

 

76,207

 

 

 

154,535

 

 

 

143,763

 

Income from operations

 

 

6,595

 

 

 

5,246

 

 

 

8,243

 

 

 

9,973

 

Interest and other income, net

 

 

(601

)

 

 

(572

)

 

 

(1,743

)

 

 

(961

)

Income before provision for income taxes

 

 

7,196

 

 

 

5,818

 

 

 

9,986

 

 

 

10,934

 

Provision for income taxes

 

 

1,487

 

 

 

1,573

 

 

 

2,369

 

 

 

2,723

 

Net income

 

$

5,709

 

 

$

4,245

 

 

$

7,617

 

 

$

8,211

 

Basic income per common share

 

$

0.19

 

 

$

0.14

 

 

$

0.25

 

 

$

0.26

 

Diluted income per common share

 

$

0.18

 

 

$

0.13

 

 

$

0.24

 

 

$

0.25

 

Basic weighted average shares outstanding

 

 

30,498,127

 

 

 

31,305,214

 

 

 

30,552,094

 

 

 

31,562,988

 

Diluted weighted average shares outstanding

 

 

31,459,066

 

 

 

32,124,188

 

 

 

31,677,685

 

 

 

32,544,953

 

 

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,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net income

 

$

5,709

 

 

$

4,245

 

 

$

7,617

 

 

$

8,211

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

$

(457

)

 

 

243

 

 

$

501

 

 

 

1,516

 

Other comprehensive (loss) income, net of taxes

 

 

(457

)

 

 

243

 

 

 

501

 

 

 

1,516

 

Comprehensive income

 

$

5,252

 

 

$

4,488

 

 

$

8,118

 

 

$

9,727

 

 

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, 2023

 

36,142,345

 

$

36

 

$

265,945

 

 

(5,433,045

)

$

(84,031

)

$

(10,458

)

$

(9,958

)

$

161,533

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

1,907

 

 

1,907

 

Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units

 

59,471

 

 

 

 

127

 

 

 

 

 

 

 

 

 

 

127

 

Taxes paid associated with net settlement of stock compensation awards

 

(12,058

)

 

 

 

(224

)

 

 

 

 

 

 

 

 

 

(224

)

Common stock repurchase

 

 

 

 

 

 

 

(68,692

)

 

(1,171

)

 

 

 

 

 

(1,171

)

Stock compensation expense

 

 

 

 

 

2,249

 

 

 

 

 

 

 

 

 

 

2,249

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

958

 

 

 

 

958

 

Balance at December 31, 2023

 

36,189,758

 

$

36

 

$

268,096

 

 

(5,501,737

)

$

(85,202

)

$

(9,500

)

$

(8,051

)

$

165,379

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

5,709

 

 

5,709

 

Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units

 

353,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxes paid associated with net settlement of stock compensation awards

 

(66,464

)

 

 

 

(1,142

)

 

 

 

 

 

 

 

 

 

(1,142

)

Common stock repurchase

 

 

 

 

 

 

 

(473,953

)

 

(7,907

)

 

 

 

 

 

(7,907

)

Shares swapped to exercise stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation expense

 

 

 

 

 

2,343

 

 

 

 

 

 

 

 

 

 

2,343

 

Forfeitures of restricted stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

(457

)

 

 

 

(457

)

Balance at March 31, 2024

 

36,476,363

 

$

36

 

$

269,297

 

 

(5,975,690

)

$

(93,109

)

$

(9,957

)

$

(2,342

)

$

163,925

 

 

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,

 

 

 

2024

 

 

2023

 

Operating activities

 

 

 

 

 

 

Net income

 

$

7,617

 

 

$

8,211

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

6,098

 

 

 

5,567

 

Stock compensation expense

 

 

4,592

 

 

 

3,882

 

Inventory adjustment to net realizable value

 

 

163

 

 

 

847

 

Provision for doubtful accounts

 

 

673

 

 

 

194

 

Deferred tax expense

 

 

1,782

 

 

 

2,524

 

Gain on disposal of property and equipment

 

 

(24

)

 

 

(55

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(1,993

)

 

 

5,801

 

Inventory

 

 

(4,409

)

 

 

(4,438

)

Prepaid taxes and tax refund receivable

 

 

296

 

 

 

(363

)

Prepaid expenses and other assets

 

 

(859

)

 

 

310

 

Operating lease assets and liabilities

 

 

288

 

 

 

(155

)

Accounts payable

 

 

9,079

 

 

 

902

 

Accrued expenses and other current liabilities

 

 

(179

)

 

 

1,461

 

Deferred revenue

 

 

164

 

 

 

90

 

Payables to sellers

 

 

2,685

 

 

 

(2,314

)

Other liabilities

 

 

 

 

 

(129

)

Net cash provided by operating activities

 

 

25,973

 

 

 

22,335

 

Investing activities

 

 

 

 

 

 

Cash paid for business acquisitions, net of cash acquired

 

 

(13,265

)

 

 

 

Purchases of property and equipment, including capitalized software

 

 

(4,108

)

 

 

(2,711

)

Purchase of short-term investments

 

 

(2,264

)

 

 

(3,696

)

Maturities of short-term investments

 

 

1,986

 

 

 

 

Other investing activities, net

 

 

60

 

 

 

51

 

Net cash used in investing activities

 

 

(17,591

)

 

 

(6,356

)

Financing activities

 

 

 

 

 

 

Common stock repurchases

 

 

(9,047

)

 

 

(16,963

)

Taxes paid associated with net settlement of stock compensation awards

 

 

(1,366

)

 

 

(736

)

Payments of the principal portion of finance lease liabilities

 

 

(56

)

 

 

(50

)

Proceeds from exercise of stock options, net of tax

 

 

127

 

 

 

496

 

Net cash used in financing activities

 

 

(10,342

)

 

 

(17,253

)

Effect of exchange rate differences on cash and cash equivalents

 

 

313

 

 

 

735

 

Net decrease in cash and cash equivalents

 

 

(1,647

)

 

 

(539

)

Cash and cash equivalents at beginning of period

 

 

110,281

 

 

 

96,122

 

Cash and cash equivalents at end of period

 

$

108,634

 

 

$

95,583

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for income taxes, net

 

$

470

 

 

$

539

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

7


Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

1.
Organization

Liquidity Services, Inc. (Liquidity Services, the Company) is a leading global commerce company providing trusted online marketplace platforms that power the circular economy. We create a better future for organizations, individuals, and the planet by using technology to capture and unleash the intrinsic value of surplus. We connect millions of buyers and thousands of sellers through our leading e-commerce auction marketplaces, search engines, asset management software, and related services. Our comprehensive solutions enable the transparent, efficient, sustainable recovery of value from excess items owned by business and government sellers.

Our business delivers value to shareholders by unleashing the intrinsic value of surplus through our online marketplace platforms. These platforms ignite and enable a self-reinforcing cycle of value creation where buyers and sellers attract one another in greater numbers. The result of this cycle is a continuous flow of goods that becomes increasingly valuable as more participants join the platforms, thereby creating positive network effects that benefit sellers, buyers, and shareholders.

Liquidity Services was incorporated in Delaware in November 1999 as Liquidation.com, Inc. and commenced operations in early 2000.

Reportable Segments

The Company has four reportable segments under which we conduct business: GovDeals, Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), and Machinio. Further information and operating results of our reportable segments can be found in Note 14 - Segment Information.

GovDeals. The GovDeals reportable segment provides solutions that enable government entities including city, county, state and federal agencies located in the United States and Canada and related commercial businesses to sell surplus property and real estate assets through our GovDeals, Bid4Assets and Sierra marketplaces; see Note 3 - Sierra Acquisition.
RSCG. The RSCG reportable segment consists of marketplaces that enable corporations located in the United States and Canada to sell excess, returned, and overstocked consumer goods. RSCG also offers a suite of services that includes returns management, asset recovery, and e-commerce solutions. This segment uses multiple selling channels across our network of marketplaces and others to optimize the best combination of velocity, volume, and value. This segment conducts its business-to-business sales on its Liquidation.com marketplace, and direct-to-consumer sales on its AllSurplus Deals and Secondipity marketplaces.
CAG. The CAG reportable segment provides solutions to sellers and consists of marketplaces that enable commercial businesses to sell surplus assets. The core verticals in which CAG operates include industrial manufacturing, oil and gas, heavy equipment, biopharma, and electronics. CAG also offers a suite of services that includes surplus management, asset valuation, asset sales and marketing. CAG benefits from a global base of buyers and sellers enabling the sale and redeployment of assets wherever they’re most likely to generate the best value and highest use across the world. This segment primarily uses the AllSurplus and GovDeals marketplaces.
Machinio. The Machinio reportable segment operates a global search engine platform for listing used equipment for sale in the construction, machine tool, transportation, printing, and agriculture sectors. Machinio also offers the Machinio System service that provides equipment sellers with a suite of online marketing tools that includes website hosting, email marketing, and inventory management, to support and enable equipment sellers’ online business.

The Company's operations are subject to certain risks and uncertainties, many of which are associated with technology-oriented companies, including, but not limited to, the Company's dependence on use of the Internet; the effect of general business and economic trends including inflationary pressures and impacts from interest rate changes; ongoing international armed and geopolitical conflicts; the Company's susceptibility to rapid technological change; actual and potential competition by entities with greater financial and other resources; and the potential for the commercial sellers from which the Company derives a significant portion of its inventory to change the way they conduct their disposition of surplus assets or to otherwise terminate or not renew their contracts with the Company.

2.
Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In management's opinion, all adjustments, consisting of normal, recurring adjustments considered necessary for a fair presentation, have been included, and intercompany transactions and accounts have been eliminated in consolidation. The information disclosed in the notes to the condensed consolidated financial statements for these periods is unaudited. Operating results for the three and six months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending September 30, 2024, or for any future period.

 

8


Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements - (Continued)

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts in the condensed consolidated financial statements and accompanying notes. For the three and six months ended March 31, 2024, these estimates required the Company to make assumptions about the impact of ongoing international armed and geopolitical conflicts, and other disruptions to macroeconomic conditions and, in turn, the Company's results of operations. The Company will continue to update its assumptions as conditions change. Actual results could differ significantly from those estimates.

Contract Assets and Liabilities

Contract assets reflect an estimate of expenses that will be reimbursed upon settlement with a seller. The contract asset balance was $0.9 million as of March 31, 2024, and $0.9 million as of September 30, 2023, and is included in the line-item Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

Contract liabilities reflect obligations to provide services for which the Company has already received consideration, and generally arise from up-front payments received in connection with Machinio's subscription services. The contract liability balance was $4.9 million as of March 31, 2024, and $4.7 million as of September 30, 2023, and is included in the line-item Deferred revenue on the Condensed Consolidated Balance Sheets. Of the September 30, 2023 contract liability balance, $3.6 million was earned as other fee revenue during the six months ended March 31, 2024.

For the Company's Machinio segment, the performance obligation has been identified as the stand ready obligation to provide access to the Machinio subscription services, which it satisfies over time and recognizes as other fee revenues in the line-item Consignment and other fee revenues on the Condensed Consolidated Statements of Operations. As of March 31, 2024, the Machinio segment had a remaining performance obligation of $4.8 million; the Company expects to recognize the substantial majority of that amount as other fee revenues over the next 12 months.

Contract Costs

Contract costs relate to sales commissions paid on subscription contracts that are capitalized within our Machinio segment. Contract costs are amortized over the expected life of the customer contract. The contract cost balance was $2.3 million as of March 31, 2024, and $2.2 million as of September 30, 2023, and is included in the line-item Prepaid expenses and other current assets, and Other assets on the Condensed Consolidated Balance Sheets. Amortization expense was $0.4 million and $0.3 million during the three months ended March 31, 2024 and 2023, respectively, and $0.7 million and $0.6 million during the six months ended March 31, 2024, and 2023, respectively.

Risk Associated with Certain Concentrations

For the majority of buyers that receive goods before payment to the Company is made, credit evaluations are performed. However, for the remaining buyers, goods are not shipped before payment is made, and as a result, the Company is not subject to significant collection risk from those buyers.

For consignment sales transactions, funds are typically collected from buyers and are held by the Company on the sellers' behalf. The funds are included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets. The Company releases the funds to the seller, less the Company's commission and other fees due, through Accounts payable after the buyer has accepted the goods or within 30 days, depending on the state where the buyer and seller conduct business.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash in banks within non-interest bearing, interest-bearing, and earnings allowance checking accounts, as well as cash equivalent money market funds, all of which exceed the applicable U.S. federal (FDIC and/or SIPC) and local jurisdiction (foreign banking institutions) insurance limits, and Accounts receivable.

The Company deposits its cash in interest bearing checking accounts, acquires cash equivalent money market funds, and holds short-term investments designated as held-to-maturity investment securities, each with financial institutions that the Company considers to be of high credit quality. Management continually monitors the financial institutions with whom we conduct business and responds appropriately, when necessary, to manage potential risk exposure to our cash balances above the insurance limits.

We have multiple vendor contracts with Amazon.com, Inc. under which we acquire and sell commercial merchandise. While purchase model transactions account for less than 20% of our total GMV, the cost of inventory for purchase model transactions is the most significant component of our consolidated Costs of goods sold. $11.1 million and $5.8 million of inventory purchased under such contracts with Amazon.com, Inc. is included in the line-item Inventory on the Condensed Consolidated Balance Sheets as of March 31, 2024, and September 30, 2023, respectively. Our vendor contracts with respect to sourcing or consigning merchandise for our RSCG segment generally reflect the concentration dynamics inherent to the retail industry.

 

9


Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements - (Continued)

 

Recent Accounting Pronouncements

Accounting Standards Adopted

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). The majority of the Company’s sales require payment in advance of the sale, but a limited number of buyers are approved to conduct sales on credit. Accounts receivables related to those sales are generally short-term in nature and do not require the posting of collateral. The Company estimates its allowances for credit loss based on historical collection trends, the age of outstanding receivables, existing economic conditions, and the specific facts and circumstances of individual customers. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Past-due account balances are written off when the Company’s internal collection efforts have been unsuccessful in collecting the amounts due. The Company adopted the new standard effective October 1, 2023. The adoption of ASU 2016-13 did not have a material impact on our condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. It will require organizations to provide enhanced disclosures primarily regarding significant segment expenses. The guidance will be effective for the Company beginning with its Annual Report on Form 10-K for the fiscal year ending September 30, 2025. The guidance is required to be applied on a retrospective basis, with all such required disclosures to be made with regard to all fiscal years presented in the financial statements. The Company is currently evaluating the effect that the adoption of this ASU may have on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU will require organizations to disclose specific categories in their tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The guidance will be effective for the Company beginning with its Annual Report on Form 10-K for the fiscal year ending September 30, 2026. The guidance is required to be applied on a prospective basis; however, retrospective application is permitted. The Company is currently evaluating the effect that the adoption of this ASU may have on its consolidated financial statements.

3.
Sierra Acquisition

On January 1, 2024, the Company acquired all the issued and outstanding equity securities associated with Sierra Auction Management, Inc. (Sierra), a full-service auction company specializing in the sale of vehicles, equipment and surplus assets for government agencies, commercial businesses, and charities. Total preliminary purchase consideration was approximately $13.8 million paid in cash. As of March 31, 2024, the Company's purchase price allocation related to this acquisition is preliminary and subject to revision as additional information is obtained about the facts and circumstances that existed as of the acquisition date.

In connection with its acquisition of Sierra, the Company preliminarily recorded the fair value of acquired supplier relationships and trade name assets for $5.1 million and $0.3 million, respectively, and goodwill of $8.0 million. The supplier relationships and trade name shall be amortized on a straight-line basis over a useful life of six and three years, respectively. The total goodwill arising from the acquisition is included in the GovDeals reportable segment and is deductible for tax purposes.

Sierra's financial results are reported within the GovDeals reportable segment. Revenue, net income (loss), and pro forma information related to the Sierra acquisition was immaterial to the condensed consolidated financial statements and its related notes for the three and six months ended March 31, 2024.

4.
Earnings per Share

Basic net income per share is computed by dividing Net income for the period by the weighted average number of shares outstanding during the period. Diluted net income per share is computed by dividing Net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. The calculation of Diluted net income per share excludes all anti-dilutive common shares.

The computation of Basic and Diluted net income per share is as follows:

 

 

 

Three months ended March 31,

 

 

Six Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5,709

 

 

$

4,245

 

 

$

7,617

 

 

$

8,211

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

30,498,127

 

 

 

31,305,214

 

 

 

30,552,094

 

 

 

31,562,988

 

Dilutive impact of stock options, RSUs and RSAs

 

 

960,939

 

 

 

818,974

 

 

 

1,125,591

 

 

 

981,965

 

Diluted weighted average shares outstanding

 

 

31,459,066

 

 

 

32,124,188

 

 

 

31,677,685

 

 

 

32,544,953

 

Basic income per common share

 

$

0.19

 

 

$

0.14

 

 

$

0.25

 

 

$

0.26

 

Diluted income per common share

 

$

0.18

 

 

$

0.13

 

 

$

0.24

 

 

$

0.25

 

Stock options, RSUs and RSAs excluded from income per diluted share because their effect would have been anti-dilutive

 

 

2,287,081

 

 

 

2,303,254

 

 

 

1,922,927

 

 

 

1,837,326

 

 

 

10


Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements - (Continued)

 

 

5.
Leases

The Company has operating leases for its corporate offices, warehouses, vehicles, and equipment. During the six months ended March 31, 2024, the Company entered into a lease for warehouse space in Brownsburg, IN, which has not yet commenced but is expected to during the year ended September 30, 2024. This warehouse will serve our RSCG buyers and sellers upon expiration of our Plainfield, IN lease.

The operating leases have remaining terms of up to 4.8 years. Some of the leases have options to extend or terminate the leases. The exercise of such options is generally at the Company’s discretion. The lease agreements do not contain any significant residual value guarantees or restrictive covenants. The Company also subleases excess corporate office space. The Company's finance leases and related balances are not significant.

The components of lease expense are:

 

 

Three Months Ended March 31,

 

 

Six Months Ended March 31,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Finance lease – lease asset amortization

$

19

 

 

$

20

 

 

$

39

 

 

$

39

 

Finance lease – interest on lease liabilities

 

2

 

 

 

4

 

 

 

5

 

 

 

8

 

Operating lease cost

 

1,334

 

 

 

1,326

 

 

 

2,628

 

 

 

2,684

 

Short-term lease cost

 

84

 

 

 

133

 

 

 

124

 

 

 

270

 

Variable lease cost (1)

 

284

 

 

 

375

 

 

 

607

 

 

 

750

 

Sublease income

 

(12

)

 

 

(26

)

 

 

(15

)

 

 

(51

)

Total net lease cost

$

1,711

 

 

$

1,832

 

 

$

3,388

 

 

$

3,700

 

 

(1)
Variable lease costs primarily relate to the Company's election to combine non-lease components such as common area maintenance, insurance and taxes related to its real estate leases. To a lesser extent, the Company's equipment leases have variable costs associated with usage and subsequent changes to costs based upon an index.

Maturities of lease liabilities are:

 

 

March 31, 2024

 

 

Operating Leases

 

 

Finance Leases

 

Remainder of 2024

$

2,455

 

 

$

46

 

2025

 

4,571

 

 

 

68

 

2026

 

2,854

 

 

 

65

 

2027

 

1,009

 

 

 

12

 

2028

 

606

 

 

 

 

Thereafter

 

206

 

 

 

 

Total lease payments (1)

$

11,701

 

 

$

191

 

Less: imputed interest (2)

 

(916

)

 

 

(13

)

Total lease liabilities

$

10,785

 

 

$

178

 

 

(1)
The weighted average remaining lease term is 2.8 years for operating leases and 2.5 years for finance leases.
(2)
The weighted average discount rate is 6.0 % for operating leases and 5.6 % for finance leases.

Supplemental disclosures of cash flow information related to leases are:

 

 

Six Months Ended March 31,

 

 

2024

 

 

2023

 

Cash paid for amounts included in operating lease liabilities

$

2,342

 

 

$

2,421

 

Cash paid for amounts included in finance lease liabilities

$

56

 

 

$

50

 

Non-cash: lease liabilities arising from new operating lease assets obtained

$

2,098

 

 

$

 

Non-cash: lease liabilities arising from new finance lease assets obtained

$

11

 

 

$

 

Non-cash: adjustments to lease assets and liabilities(1)

$

298

 

 

$

407

 

 

(1)
These include adjustments due to lease modifications, renewals, and other related adjustments.

 

Lease liabilities increased due to new operating lease assets relating to the Sierra acquisition. See Note 3 - Sierra Acquisition for further information.

6.
Goodwill

The carrying value and changes in the carrying value of goodwill attributable to each reportable segment were as follows:

 

 

11


Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements - (Continued)

 

(in thousands)

GovDeals

 

CAG

 

Machinio

 

Total

 

September 30, 2022

$

53,814

 

$

20,538

 

$

14,558

 

$

88,910

 

Translation adjustments

 

 

 

478

 

 

 

 

478

 

September 30, 2023

 

53,814

 

 

21,016

 

 

14,558

 

 

89,388

 

Sierra acquisition (see Note 3)

 

7,977

 

 

 

 

 

 

7,977

 

Translation adjustments

 

 

 

190

 

 

 

 

190

 

March 31, 2024

$

61,791

 

$

21,206

 

$

14,558

 

$

97,555

 

The increase in the goodwill balance of approximately $8.0 million at the GovDeals reportable segment and reporting unit during the six months ended March 31, 2024, is due to the Sierra acquisition. See Note 3 - Sierra Acquisition for further information.

Goodwill is tested for impairment at the beginning of the fourth quarter and during interim periods whenever events or circumstances indicate that the carrying value may not be recoverable. The Company did not identify any indicators of impairment that required an interim goodwill impairment test during the three and six months ended March 31, 2024.

7.
Intangible Assets

Intangible assets consist of the following:

 

 

 

 

 

March 31, 2024

 

 

September 30, 2023

 

(in thousands)

 

Useful
Life
(in years)

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

Customer and supplier relationships

 

6 - 8

 

$

22,100

 

 

$

(7,382

)

 

$

14,718

 

 

$

17,000

 

 

$

(6,043

)

 

$

10,957

 

Technology

 

3 - 5

 

 

4,900

 

 

 

(4,472

)

 

 

428

 

 

 

4,900

 

 

 

(4,105

)

 

 

795

 

Trade names

 

3 - 7

 

 

2,200

 

 

 

(1,579

)

 

 

621

 

 

 

1,900

 

 

 

(1,381

)

 

 

519

 

Other intangibles

 

10

 

 

884

 

 

 

(714

)

 

 

170

 

 

 

875

 

 

 

(689

)

 

 

186

 

Total intangible assets, net

 

 

 

$

30,084

 

 

$

(14,147

)

 

$

15,937

 

 

$

24,675

 

 

$

(12,218

)

 

$

12,457

 

 

The Company has reclassified certain assets within the footnote for presentation purposes only, as well as renamed certain accounts. No changes have been made to the assets respective underlying recorded amounts or useful lives, and there has been no effect on the current nor prior year financial results. What was previously labeled as “Contract intangibles” is now “Customer and supplier relationships”. The Company has reclassified Brand intangibles from “Technology” and is now included within the “Trade names” intangible asset type. Previously reported “Patents and trademarks” have been separated such that “Other intangibles” are now comprised of patents and related assets. The gross carrying amount of total intangible assets increased by $5.4 million during the six months ended March 31, 2024, due to the Sierra acquisition. The acquired supplier relationships and trade name assets are included in the above line items of Customer and supplier relationships and Trade names, respectively. See Note 3 - Sierra Acquisition for further information.

 

Future expected amortization of intangible assets as of March 31, 2024, is as follows: