UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of |
(I.R.S. Employer |
Incorporation or Organization) |
Identification No.) |
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(Address of Principal Executive Offices) |
(Zip Code) |
(
(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 |
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.
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).
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 ☐ |
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Non-accelerated filer ☐ |
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Smaller reporting company |
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Emerging growth company |
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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 $0.001 per share, as of August 5, 2024, was
INDEX |
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Page |
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3 |
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3 |
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4 |
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5 |
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6 |
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7 |
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Notes to the Unaudited Condensed Consolidated Financial Statements |
8 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
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30 |
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31 |
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32 |
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33 |
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34 |
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2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Liquidity Services, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in Thousands, Except Par Value)
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June 30, 2024 |
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September 30, 2023 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventory, net |
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Prepaid taxes and tax refund receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease assets |
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Intangible assets, net |
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Goodwill |
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Deferred tax assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current portion of operating lease liabilities |
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Deferred revenue |
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Payables to sellers |
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Total current liabilities |
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Operating lease liabilities |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Common stock, $ |
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Additional paid-in capital |
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Treasury stock, at cost; |
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( |
) |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Retained earnings (accumulated deficit) |
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( |
) |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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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)
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Three Months Ended June 30, |
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Nine Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Purchase revenues |
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$ |
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$ |
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$ |
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$ |
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Consignment and other fee revenues |
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$ |
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Total revenue |
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Costs and expenses from operations: |
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Cost of goods sold (excludes depreciation and amortization) |
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Technology and operations |
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Sales and marketing |
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General and administrative |
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Depreciation and amortization |
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Other operating expenses (income), net |
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( |
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Total costs and expenses |
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Income from operations |
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Interest and other income, net |
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( |
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( |
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( |
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( |
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Income before provision for income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Basic income per common share |
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$ |
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$ |
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$ |
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$ |
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Diluted income per common share |
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$ |
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$ |
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$ |
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$ |
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Basic weighted average shares outstanding |
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Diluted weighted average shares outstanding |
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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)
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Three Months Ended June 30, |
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Nine Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive (loss) income: |
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Foreign currency translation |
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$ |
( |
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$ |
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Other comprehensive (loss) income, net of taxes |
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( |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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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)
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Additional |
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Accumulated |
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Common Stock |
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Paid-in |
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Treasury Stock |
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Comprehensive |
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Retained |
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Shares |
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Amount |
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Capital |
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Shares |
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Amount |
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Loss |
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Earnings |
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Total |
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Balance at September 30, 2023 |
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$ |
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$ |
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( |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Net Income |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Taxes paid associated with net settlement of stock compensation awards |
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( |
) |
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— |
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( |
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— |
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— |
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— |
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— |
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( |
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Common stock repurchase |
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— |
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— |
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— |
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( |
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( |
) |
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— |
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— |
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( |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at December 31, 2023 |
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$ |
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$ |
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( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Taxes paid associated with net settlement of stock compensation awards |
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( |
) |
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— |
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( |
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— |
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— |
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— |
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— |
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( |
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Common stock repurchase |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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— |
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( |
) |
Shares swapped to exercise stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance at March 31, 2024 |
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$ |
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$ |
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( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Taxes paid associated with net settlement of stock compensation awards |
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( |
) |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
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Common stock repurchased |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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— |
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( |
) |
Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance at June 30, 2024 |
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$ |
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$ |
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( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
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$ |
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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)
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Nine Months Ended June 30, |
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2024 |
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2023 |
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Operating activities |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Stock compensation expense |
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Inventory adjustment to net realizable value |
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Provision for doubtful accounts |
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Deferred tax expense |
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Gain on disposal of property and equipment |
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( |
) |
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( |
) |
Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
) |
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Inventory |
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( |
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( |
) |
Prepaid taxes and tax refund receivable |
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( |
) |
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Prepaid expenses and other assets |
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( |
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( |
) |
Operating lease assets and liabilities |
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( |
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Accounts payable |
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Accrued expenses and other current liabilities |
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( |
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Deferred revenue |
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Payables to sellers |
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( |
) |
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Other liabilities |
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( |
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Net cash provided by operating activities |
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Investing activities |
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Cash paid for business acquisitions, net of cash acquired |
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( |
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Purchases of property and equipment, including capitalized software |
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( |
) |
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( |
) |
Purchase of short-term investments |
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( |
) |
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( |
) |
Maturities of short-term investments |
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Other investing activities, net |
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Net cash used in investing activities |
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( |
) |
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( |
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Financing activities |
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Common stock repurchases |
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( |
) |
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( |
) |
Taxes paid associated with net settlement of stock compensation awards |
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( |
) |
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( |
) |
Payments of the principal portion of finance lease liabilities |
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( |
) |
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( |
) |
Proceeds from exercise of stock options, net of tax |
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Net cash used in financing activities |
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( |
) |
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( |
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Effect of exchange rate differences on cash and cash equivalents |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information |
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Cash paid for income taxes, net |
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$ |
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$ |
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Non-cash: Common stock surrendered in the exercise of stock options |
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— |
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|
See accompanying notes to the unaudited condensed consolidated financial statements.
7
Liquidity Services, Inc. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
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
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.
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 nine months ended June 30, 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 nine months ended June 30, 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 $
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 $
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 June 30, 2024, the Machinio segment had a remaining performance obligation of $
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 $
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
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.
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 $
In connection with its acquisition of Sierra, the Company preliminarily recorded the fair value of acquired supplier relationships and trade name assets for $
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 nine months ended June 30, 2024.
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:
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Three months ended June 30, |
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Nine Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Numerator: |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Denominator: |
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Basic weighted average shares outstanding |
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Dilutive impact of stock options, RSUs and RSAs |
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Diluted weighted average shares outstanding |
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Basic income per common share |
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$ |
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$ |
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$ |
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$ |
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Diluted income per common share |
|
$ |
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|
$ |
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$ |
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$ |
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Stock options, RSUs and RSAs excluded from income per diluted share because their effect would have been anti-dilutive |
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10
Liquidity Services, Inc. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements - (Continued)
The Company has operating leases for its corporate offices, warehouses, vehicles, and equipment. During the nine months ended June 30, 2024, the Company entered into a lease for warehouse space in Brownsburg, IN, in order to continue serving our RSCG buyers and sellers following the expiration of our Plainfield, IN lease.
The operating leases have remaining terms of up to
The components of lease expense are:
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Three Months Ended June 30, |
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Nine Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Finance lease – lease asset amortization |
$ |
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$ |
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$ |
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$ |
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Finance lease – interest on lease liabilities |
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Operating lease cost |
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Short-term lease cost |
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Variable lease cost (1) |
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Sublease income |
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( |
) |
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( |
) |
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( |
) |
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|
( |
) |
Total net lease cost |
$ |
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|
$ |
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|
$ |
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$ |
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Maturities of lease liabilities are:
|
June 30, 2024 |
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Operating Leases |
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Finance Leases |
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Remainder of 2024 |
$ |
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$ |
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2025 |
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2026 |
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2027 |
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2028 |
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Thereafter |
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Total lease payments (1) |
$ |
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|
$ |
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Less: imputed interest (2) |
|
( |
) |
|
|
( |
) |
$ |
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|
$ |
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Supplemental disclosures of cash flow information related to leases are:
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Nine Months Ended June 30, |
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2024 |
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2023 |
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Cash paid for amounts included in operating lease liabilities |
$ |
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$ |
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||
Cash paid for amounts included in finance lease liabilities |
$ |
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$ |
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Non-cash: lease liabilities arising from new operating lease assets obtained |
$ |
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$ |
|
||
Non-cash: lease liabilities arising from new finance lease assets obtained |
$ |
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|
$ |
|
||
Non-cash: adjustments to lease assets and liabilities(1) |
$ |
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|
$ |
|
||
Lease liabilities increased during the nine months ended June 30, 2024, due to the commencement of a lease for new warehouse space in Brownsburg, IN during the period, as well as new leases relating to the Sierra acquisition. See Note 3 - Sierra Acquisition for further information.
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 |
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CAG |
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Machinio |
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Total |
|
||||
September 30, 2022 |
$ |
|
$ |
|
$ |
|
$ |
|
||||
Translation adjustments |
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September 30, 2023 |
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