Liquidity Services, Inc. Announces Fourth Quarter and Fiscal Year 2012 Financial Results

  Liquidity Services, Inc. Announces Fourth Quarter and Fiscal Year 2012
  Financial Results

     – Record fiscal year revenue of $475.3 million up 41% – Record Gross
 Merchandise Volume (GMV) of $864.2 million up 55% - Record Adjusted earnings
   before interest, taxes, depreciation and amortization (EBITDA) of $110.1
                              million up 109% –

   – Fourth quarter revenue of $122.3 million up 52% – Record GMV of $241.0
          million up 65% - Adjusted EBITDA of $23.1 million up 85% –

Business Wire

WASHINGTON -- November 29, 2012

Liquidity Services, Inc. (NASDAQ: LQDT; www.liquidityservicesinc.com) today
reported its financial results for its fiscal year (FY-12) and fourth quarter
(Q4-12) ended September 30, 2012. Liquidity Services, Inc. provides business
and government clients and buying customers transparent, innovative and
effective online marketplaces and integrated services for surplus assets.

Liquidity Services, Inc. (LSI or the Company) reported record consolidated
FY-12 revenue of $475.3 million, an increase of approximately 41% from the
prior year. Adjusted EBITDA, which excludes stock-based compensation and
acquisition costs including changes in acquisition earn out payment estimates,
for FY-12 was a record $110.1 million, an increase of approximately 109% from
the prior year. FY-12 GMV, the total sales volume of all merchandise sold
through the Company’s marketplaces, was a record $864.2 million, an increase
of approximately 55% from the prior year. Comparisons to FY-11 results include
our U.K. operations, which were shut down, effective September 30, 2011, and
are accounted for as discontinued operations in our statement of operations.

The Company reported consolidated Q4-12 revenue of $122.3 million, an increase
of approximately 52% from the prior year’s comparable period. Adjusted EBITDA
for Q4-12 was $23.1 million, an increase of approximately 85% from the prior
year’s comparable period. GMV was a record $241.0 million for Q4-12, an
increase of approximately 65% from the prior year’s comparable period. These
comparisons include the results of our U.K. operations, as noted above.

Net income in FY-12 was $48.3 million or $1.47 diluted earnings per share.
Adjusted net income in FY-12, which excludes stock-based compensation and
acquisition costs including changes in acquisition earn out payment estimates,
was a record $60.9 million, an increase of approximately 100% from the prior
year, and was a record $1.86 adjusted diluted earnings per share. Net income
in Q4-12 was $5.5 million or $0.17 diluted earnings per share. Adjusted net
income in Q4-12 was $13.1 million, an increase of approximately 216% from the
prior year’s comparable period, and was $0.40 adjusted diluted earnings per
share. Adjusted net income excludes stock-based compensation and acquisition
costs including changes in acquisition earn out payment estimates, net of tax.
These comparisons include the results of our U.K. operations, as noted above.

Annual operating cash flow was a record $52.1 million during FY-12, an
increase of approximately 31% from the prior year. Q4-12 operating cash flow
was $12.9 million, an increase of approximately 13% from the prior year’s
comparable period.

“Liquidity Services generated strong results during Q4-12 as we continued to
grow our market share and build on our leadership position in the reverse
supply chain market during a seasonally low quarter for the Company. We
continued to benefit from large commercial and government clients placing
their trust in us to handle more of their excess inventory and high value
capital asset sales, which drove strong growth this quarter,” said Bill
Angrick, Chairman and CEO of LSI. “Our recent acquisition, of NESA, further
enhances our position as the leading reverse supply chain solution for large
retailers and their suppliers, and we are excited by the numerous related
opportunities to create value for our buyers and clients, which we plan to
demonstrate during fiscal year 2013.”

“During fiscal year 2012, we continued to advance our business strategy of
building a defensible, leadership position in the reverse supply chain market
and generated strong results for our clients and shareholders. With our large
and growing buyer marketplace, integrated services and domain expertise, we
are enabling retailers, manufacturers and government agencies to drive
efficiencies in their global supply chains and better compete in an
increasingly complex environment. We believe our continued focus on delivering
the breadth of services, geographic coverage and global market data that large
enterprises require in the reverse supply chain positions us well for fiscal
year 2013 and continued long term profitable growth and market leadership,”
said Mr. Angrick. “Operationally, Liquidity Services continued to build on the
process improvements and scale efficiencies started last fiscal year resulting
in overall improved cycle times and margins. Adjusted EBITDA margins improved
significantly from 15.6% of revenue and 9.4% of GMV in FY-11 to 23.2% and
12.7%, respectively for FY-12. Liquidity Services remains focused on executing
our long term growth strategy to ensure the Company is well positioned to
drive attractive returns for shareholders.”

Business Outlook

While economic conditions have improved, our overall outlook remains cautious
due to the volatility in the macro environment and its potential impact on the
retail and industrial supply chains and GDP growth. Additionally, we plan to
further invest in our technology infrastructure and product roadmap to support
further expansion and integration of our existing businesses and online
marketplaces which are proceeding according to our original plan. In the
longer term, we expect our business to continue to benefit from the following
trends: (i) as consumers trade down and seek greater value, we anticipate
stronger buyer demand for the surplus merchandise sold in our marketplaces,
(ii) as corporations and public sector agencies focus on reducing costs,
improving transparency and working capital flows by outsourcing reverse supply
chain activities, we expect our seller base to increase, and (iii) as
corporations and public sector agencies increasingly prefer service providers
with a proven track record, innovative technology solutions and demonstrated
financial strength, we expect our seller base to increase.

The following forward looking statements reflect trends and assumptions for
the next quarter and FY 2013:

(i) stable commodity prices in our scrap business;

(ii) stable average sales prices realized in our capital assets marketplaces;

(iii) an effective income tax rate of 40%; and

(iv) improved operations and service levels in our retail goods marketplaces.

Our results may also be materially affected by changes in business trends and
our operating environment, and by other factors, such as: (i) investments in
infrastructure and value-added services to support new business in both
commercial and public sector markets; and (ii) pricing pressure from buyers in
selected categories of our retail goods marketplaces, which can result in
lower than optimal margins.

Our Scrap Contract with the Department of Defense (DoD) includes an incentive
feature, which can increase the amount of profit sharing distribution we
receive from 23% up to 25%. Payments under this incentive feature are based on
the amount of scrap we sell for the DoD to small businesses during the
preceding 12 months as of June 30^th of each year. We are eligible to receive
this incentive in each year of the term of the Scrap Contract and have assumed
for purposes of providing guidance regarding our projected financial results
for fiscal year 2013 that we will again receive this incentive payment.

In addition, we estimate that we will make investments totaling several
million dollars to fully integrate GoIndustry into Liquidity Services over the
next year resulting in a drag on our earnings during the first half of fiscal
year 2013. This is a change in our expectation that GoIndustry would be
accretive to the bottom line throughout fiscal year 2013. We believe this
investment is required to fully realize the synergies available across the
Company’s buyer marketplaces and clients and to position us for growth within
the $100 billion global market for capital assets.

GMV – We expect GMV for fiscal year 2013 to range from $1.1 billion to $1.2
billion. We expect GMV for Q1-13 to range from $240 million to $250 million.

Adjusted EBITDA – We expect Adjusted EBITDA for fiscal year 2013 to range from
$123 million to $133 million. We expect Adjusted EBITDA for Q1-13 to range
from $22.0 million to $24.0 million.

Adjusted Diluted EPS – We estimate Adjusted Earnings Per Diluted Share for
fiscal year 2013 to range from $2.05 to $2.23. In Q1-13, we estimate Adjusted
Earnings Per Diluted Share to be $0.36 to $0.40. This guidance assumes that we
have an average fully diluted number of shares outstanding for the year of
33.4 million, and that we will not repurchase shares with the approximately
$18.1million yet to be expended under the share repurchase program.

Our guidance adjusts EBITDA and Diluted EPS for (i) acquisition costs
including transaction costs and changes in earn out estimates; (ii)
amortization of contract intangible assets of $33.3 million from our
acquisition of Jacobs Trading; and (iii) for stock based compensation costs,
which we estimate to be approximately $3.0 million to $3.5 million per quarter
for fiscal year 2013. These stock based compensation costs are consistent with
fiscal year 2012.

Key FY-12 and Q4-12 Operating Metrics

Registered Buyers — At the end of FY-12, registered buyers totaled
approximately 2,186,000, representing a 36% increase over the approximately
1,604,000 registered buyers at the end of FY-11.

Auction Participants — Auction participants, defined as registered buyers who
have bid in an auction during the period (a registered buyer who bids in more
than one auction is counted as an auction participant in each auction in which
he or she bids), increased to approximately 2,105,000 in FY-12, an
approximately 9% increase over the approximately 1,936,000 auction
participants in FY-11. Auction participants increased to approximately 565,000
in Q4-12, an approximately 28% increase over the approximately 442,000 auction
participants in Q4-11.

Completed Transactions — Completed transactions increased to approximately
501,000, an approximately 5% increase for FY-12 from the approximately 475,000
completed transactions in FY-11. Completed transactions increased to
approximately 140,000, an approximately 35% increase for Q4-12 from the
approximately 104,000 completed transactions in Q4-11. Average transaction
sizes increased approximately 47% from $1,175 in FY-11 to $1,725 in FY-12, and
23% from $1,400 in Q4-11 to $1,716 in Q4-12, due to our lotting and
merchandising strategies.

GMV and Revenue Mix — GMV continues to diversify due to the continued growth
in our commercial business and state and local government business (the
GovDeals.com marketplace). As a result, the percentage of GMV derived from our
DoD Contracts during FY-12 decreased to 23.7% compared to 33.9% in the prior
year and in Q4-12 decreased to 20.7% compared to 35.1% in the prior year
period. The table below summarizes GMV and revenue by pricing model. The
purchase model revenue mix has increased, as a result of the Jacobs Trading
acquisition.

GMV Mix
                                               
                        FY-12    FY-11    Q4-12    Q4-11
Profit-Sharing Model:                             
Scrap Contract          8.9   %  15.4  %  6.7   %  16.8  %
Total Profit Sharing    8.9   %   15.4  %   6.7   %   16.8  %
Consignment Model:
GovDeals                15.2  %   20.0  %   13.2  %   20.2  %
Commercial              37.1  %  24.7  %  45.0  %  30.1  %
Total Consignment       52.3  %   44.7  %   58.2  %   50.3  %
Purchase Model:
Commercial              24.0  %   21.1  %   21.1  %   14.6  %
Surplus Contract        14.8  %  18.5  %  14.0  %  18.3  %
Total Purchase          38.8  %   39.6  %   35.1  %   32.9  %
                                                      
Other                   0.0   %  0.3   %  0.0   %  0.0   %
Total                   100.0 %  100.0 %  100.0 %  100.0 %
Revenue Mix
Profit-Sharing Model:
Scrap Contract          16.1  %  25.5  %  13.3  %  30.3  %
Total Profit Sharing    16.1  %   25.5  %   13.3  %   30.3  %
Consignment Model:
GovDeals                2.6   %   3.0   %   2.5   %   3.4   %
Commercial              9.9   %  5.8   %  13.7  %  6.9   %
Total Consignment       12.5  %   8.8   %   16.2  %   10.3  %
Purchase Model:
Commercial              44.5  %   34.9  %   42.9  %   26.4  %
Surplus Contract        26.9  %  30.3  %  27.6  %  32.9  %
Total Purchase          71.4  %   65.2  %   70.5  %   59.3  %
                                                      
Other                   0.0   %  0.5   %  0.0   %  0.1   %
Total                   100.0 %  100.0 %  100.0 %  100.0 %

                           Liquidity Services, Inc.
                 Reconciliation of GAAP to Non-GAAP Measures

EBITDA and Adjusted EBITDA. EBITDA is a supplemental non-GAAP financial
measure and is equal to net income plus interest expense and other expense,
net; provision for income taxes; amortization of contract intangibles; and
depreciation and amortization. Our definition of Adjusted EBITDA differs from
EBITDA because we further adjust EBITDA for stock based compensation expense,
and acquisition costs including changes in earn out estimates and goodwill
impairment. Adjusted EBITDA for the three and twelve months ended September
30, 2011 includes the operating losses generated by our UK operations, which
were closed down as of September 30, 2011.

                                   Three Months         Twelve Months
                                    Ended September 30,   Ended September 30,
                                    2012      2011       2012       2011
                                    (In thousands)
Net income                          $ 5,545    $ 3,126    $ 48,296    $ 8,512
Interest and other expense, net       593        62         2,218       111
Provision for income taxes            2,627      2,527      31,652      4,419
Amortization of contract              1,884      203        7,943       813
intangibles
Depreciation and amortization        1,715     1,587     6,223      5,519
                                                                      
EBITDA                                12,364     7,505      96,332      19,374
Stock compensation expense            3,462      2,387      12,117      9,136
Acquisition costs and goodwill       7,256     2,578     1,695      24,167
impairment
                                                                      
Adjusted EBITDA                     $ 23,082   $ 12,470   $ 110,144   $ 52,677

Adjusted Net Income and Adjusted Basic and Diluted Earnings Per Share.
Adjusted net income is a supplemental non-GAAP financial measure and is equal
to net income plus tax effected stock compensation expense, amortization of
contract-related intangible assets associated with the Jacobs Trading
acquisition and acquisition costs including changes in earn out estimates and
goodwill impairment. Adjusted basic and diluted earnings per share are
determined using Adjusted Net Income. Adjusted net income for the three and
twelve months ended September 30, 2011 includes the operating losses generated
by our UK operations, which were closed down as of September 30, 2011.

                     Three Months Ended            Twelve Months Ended
                   
                     September 30,                 September 30,
                     2012          2011           2012          2011
                     (Dollars in thousands, except per share data)
Net income           $ 5,545        $ 3,126        $ 48,296       $ 8,512
Stock compensation
expense (net of        2,077          1,034          7,270          6,029
tax)
Amortization of
contract               1,090          —              4,359          —
intangibles (net
of tax)
Acquisition costs
and goodwill          4,354         (26        )  1,017         15,950
impairment (net of
tax)
                                                                  
Adjusted net         $ 13,066       $ 4,134        $ 60,942       $ 30,491
income
                                                                  
Adjusted basic
earnings per         $ 0.42         $ 0.15         $ 1.98         $ 1.10
common share
                                                                  
Adjusted diluted
earnings per         $ 0.40         $ 0.14         $ 1.86         $ 1.05
common share
                                                                  
Basic weighted
average shares        31,045,293    28,512,433    30,854,796    27,736,865
outstanding
                                                                  
Diluted weighted
average shares        32,788,205    30,527,438    32,783,079    29,081,933
outstanding

Conference Call

The Company will host a conference call to discuss the fiscal 2012 and fourth
quarter 2012 results at 10:30 a.m. Eastern Time today. Investors and other
interested parties may access the teleconference by dialing 800-561-2731 or
617-614-3528 and providing the participant pass code 20943794. A live web cast
of the conference call will be provided on the Company’s investor relations
website at http://www.liquidityservicesinc.com. A replay of the web cast will
be available on the Company’s website for 30 calendar days ending December 29,
2012 at 11:59 p.m. ET. An audio replay of the teleconference will also be
available until December 29, 2012 at 11:59 p.m. ET. To listen to the replay,
dial 888-286-8010 or 617-801-6888 and provide pass code 18384625. Both replays
will be available starting at 12:30 p.m. today.

Non-GAAP Measures

To supplement our consolidated financial statements presented in accordance
with GAAP, we use certain non-GAAP measures of certain components of financial
performance. These non-GAAP measures include earnings before interest, taxes,
depreciation and amortization (EBITDA), Adjusted EBITDA, Adjusted Net Income
and Adjusted Earnings Per Share. These non-GAAP measures are provided to
enhance investors’ overall understanding of our current financial performance
and prospects for the future. We use EBITDA and Adjusted EBITDA: (a) as
measurements of operating performance because they assist us in comparing our
operating performance on a consistent basis as they do not reflect the impact
of items not directly resulting from our core operations; (b) for planning
purposes, including the preparation of our internal annual operating budget;
(c) to allocate resources to enhance the financial performance of our
business; (d) to evaluate the effectiveness of our operational strategies; and
(e) to evaluate our capacity to fund capital expenditures and expand our
business.

We believe these non-GAAP measures provide useful information to both
management and investors by excluding certain expenses that may not be
indicative of our core operating measures. In addition, because we have
historically reported certain non-GAAP measures to investors, we believe the
inclusion of non-GAAP measures provides consistency in our financial
reporting. These measures should be considered in addition to financial
information prepared in accordance with generally accepted accounting
principles, but should not be considered a substitute for, or superior to,
GAAP results. A reconciliation of all historical non-GAAP measures included in
this press release, to the most directly comparable GAAP measures, may be
found in the financial tables included in this press release.

Supplemental Operating Data

To supplement our consolidated financial statements presented in accordance
with GAAP, we use certain supplemental operating data as a measure of certain
components of operating performance. We review GMV because it provides a
measure of the volume of goods being sold in our marketplaces and thus the
activity of those marketplaces. GMV and our other supplemental operating data,
including registered buyers, auction participants and completed transactions,
also provide a means to evaluate the effectiveness of investments that we have
made and continue to make in the areas of customer support, value-added
services, product development, sales and marketing and operations. Therefore,
we believe this supplemental operating data provides useful information to
both management and investors. In addition, because we have historically
reported certain supplemental operating data to investors, we believe the
inclusion of this supplemental operating data provides consistency in our
financial reporting. This data should be considered in addition to financial
information prepared in accordance with generally accepted accounting
principles, but should not be considered a substitute for, or superior to,
GAAP results.

Forward-Looking Statements

This document contains forward-looking statements made pursuant to the Private
Securities Litigation Reform Act of 1995. These statements are only
predictions. The outcome of the events described in these forward-looking
statements is subject to known and unknown risks, uncertainties and other
factors that may cause our actual results, levels of activity, performance or
achievements to differ materially from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking
statements. These statements include, but are not limited to, statements
regarding the Company’s business outlook and expected future effective tax
rates. You can identify forward-looking statements by terminology such as
"may," "will," "should," "could," "would," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," "continues"
or the negative of these terms or other comparable terminology. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity,
performance or achievements.

There are a number of risks and uncertainties that could cause our actual
results to differ materially from the forward-looking statements contained in
this document. Important factors that could cause our actual results to differ
materially from those expressed as forward-looking statements are set forth in
our filings with the SEC from time to time, and include, among others, our
dependence on our contracts with the DoD and Walmart for a significant portion
of our revenue and profitability; our ability to successfully expand the
supply of merchandise available for sale on our online marketplaces; our
ability to attract and retain active professional buyers to purchase this
merchandise; the timing and success of upgrades to our technology
infrastructure; our ability to successfully complete the integration of any
acquired companies, including NESA, GoIndustry, Jacobs Trading and
Truckcenter.com, into our existing operations and our ability to realize any
anticipated benefits of these or other acquisitions; and our ability to
recognize any expected tax benefits as a result of closing our U.K.
operations. There may be other factors of which we are currently unaware or
deem immaterial that may cause our actual results to differ materially from
the forward-looking statements.

All forward-looking statements attributable to us or persons acting on our
behalf apply only as of the date of this document and are expressly qualified
in their entirety by the cautionary statements included in this document.
Except as may be required by law, we undertake no obligation to publicly
update or revise any forward-looking statement to reflect events or
circumstances occurring after the date of this document or to reflect the
occurrence of unanticipated events.

About LSI

Liquidity Services, Inc. (NASDAQ: LQDT) provides leading corporations, public
sector agencies and buying customers the world's most transparent, innovative
and effective online marketplaces and integrated services for surplus assets.
On behalf of its clients, Liquidity Services has completed the sale of over
$3.0 billion of surplus, returned and end-of-life assets, in over 500 product
categories, including consumer goods, capital assets and industrial equipment.
The Company is based in Washington, D.C. and has nearly 1,200 employees.
Additional information can be found at: http://www.liquidityservicesinc.com.

Liquidity Services,Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in Thousands)
                                                     
                                                       September 30,
                                                       2012       2011
Assets
Current assets:
Cash and cash equivalents                              $ 104,782   $ 128,984
Accounts receivable, net of allowance for doubtful
accounts of $1,248 and $514 in 2012 and 2011,            16,226      6,049
respectively
Inventory                                                20,669      15,065
Prepaid and deferred taxes                               16,927      16,073
Prepaid expenses and other current assets                3,973       4,805
Current assets of discontinued operations               —          277
Total current assets                                     162,577     171,253
Property and equipment, net                              10,382      7,042
Intangible assets, net                                   34,204      2,993
Goodwill                                                 185,771     40,549
Other assets                                            7,474      5,970
Total assets                                           $ 400,408   $ 227,807
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable                                       $ 9,997     $ 8,590
Accrued expenses and other current liabilities           36,425      23,411
Profit-sharing distributions payable                     4,041       7,267
Current portion of acquisition earn out payable          14,511      5,410
Customer payables                                        34,255      12,728
Current portion of note payable                          10,000      —
Current liabilities of discontinued operations          154        2,160
Total current liabilities                                109,383     59,566
Acquisition earn out payable                             —           4,741
Note payable, net of current portion                     32,000      —
Deferred taxes and other long-term liabilities          9,022      2,087
Total liabilities                                        150,405     66,394
Stockholders’ equity:
Common stock, $0.001 par value; 120,000,000 shares
authorized; 31,138,111 shares issued and outstanding     31          29
at September 30, 2012; 31,192,608 shares issued and
29,030,552 shares outstanding at September 30, 2011
Additional paid-in capital                               182,361     124,886
Treasury stock, at cost                                  —           (21,884 )
Accumulated other comprehensive income                   1,246       52
Retained earnings                                       66,365     58,330
Total stockholders’ equity                              250,003    161,413
Total liabilities and stockholders’ equity             $ 400,408   $ 227,807

Liquidity Services,Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in Thousands, Except Share and Per Share Data)
                 
                   Three Months Ended            Twelve Months Ended

                   September 30,                 September 30,
                   2012          2011           2012          2011
Revenue            $ 102,424      $ 70,814       $ 415,829      $ 297,584
Fee revenue         19,851        8,391         59,475        29,794
Total revenue
from continuing      122,275        79,205         475,304        327,378
operations
                                                                             
Costs and
expenses from
continuing
operations:
Cost of goods
sold (excluding      50,626         25,440         198,123        126,395
amortization)
Profit-sharing       9,125          14,788         43,242         49,318
distributions
Technology and       20,025         13,239         67,553         52,178
operations
Sales and            10,444         5,970          31,252         23,279
marketing
General and          12,435         6,849          37,107         26,484
administrative
Amortization of
contract             1,884          203            7,943          813
intangibles
Depreciation and     1,715          1,342          6,223          4,881
amortization
Acquisition         7,256         1,762         1,695         6,702
costs
                                                                             
Total costs and     113,510       69,593        393,138       290,050
expenses
                                                                             
Income from
continuing           8,765          9,612          82,166         37,328
operations
Interest and
other expense,      593           401           2,218         1,190
net
                                                                             
Income before
provision for
income taxes         8,172          9,211          79,948         36,138
from continuing
operations
Provision for       2,627         2,528         31,652        15,459
income taxes
Income from
continuing           5,545          6,683          48,296         20,679
operations
Loss from
discontinued        —             (3,557     )  —             (12,167    )
operations, net
of tax
Net income         $ 5,545        $ 3,126        $ 48,296       $ 8,512
                                                                             
Basic earnings
(loss) per
common share:
From continuing    $ 0.18         $ 0.23         $ 1.57         $ 0.75
operations
From
discontinued        —             (0.12      )  —             (0.44      )
operations
Basic earnings     $ 0.18         $ 0.11         $ 1.57         $ 0.31
per common share
                                                                             
Diluted earnings
(loss) per
common share:
From continuing    $ 0.17         $ 0.22         $ 1.47         $ 0.71
operations
From
discontinued        —             (0.12      )  —             (0.42      )
operations
Diluted earnings   $ 0.17         $ 0.10         $ 1.47         $ 0.29
per common share
                                                                             
Basic weighted
average shares      31,045,293    28,512,433    30,854,796    27,736,865
outstanding
                                                                             
Diluted weighted
average shares      32,788,205    30,527,438    32,783,079    29,081,933
outstanding

Liquidity Services,Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)
                           
                             Three Months Ended        Twelve Months Ended

                             September 30,             September 30,
                             2012       2011         2012       2011
Operating activities
Net income                   $ 5,545     $ 3,126       $ 48,296    $ 8,512
Less: Discontinued            —          (3,557   )  —          (12,167 )
operations, net of tax
                                                                             
Income from continuing         5,545       6,683         48,296      20,679
operations
Adjustments to reconcile
income from continuing
operations to net cash
provided by operating
activities from continued
operations:
Depreciation and               3,599       1,545         14,166      5,694
amortization
Stock compensation expense     3,462       2,386         12,117      9,136
Provision (benefit) for        1,660       (73       )   884         (22     )
inventory allowance
Provision (benefit) for        334         90            117         221
doubtful accounts
Deferred tax (benefit)         (1,719  )   66            (1,719  )   66
provision
Incremental tax benefit
from exercise of common        (1,765  )   (4,146    )   (16,953 )   (6,597  )
stock options
Changes in operating
assets and liabilities:
Accounts receivable            (483    )   (883      )   (1,596  )   (1,809  )
Inventory                      4,384       (1,693    )   (132    )   (392    )
Prepaid expenses and other     4,490       1,480         17,890      7,815
assets
Accounts payable               (1,331  )   2,582         (7,570  )   1,552
Accrued expenses and other     (15,298 )   4,312         (8,534  )   (691    )
Profit-sharing                 1,103       1,909         (3,226  )   1,671
distributions payable
Customer payables              2,677       (608      )   2,510       2,945
Acquisition earn out           6,242       (1,838    )   (3,826  )   358
payable
Other liabilities             77         (21     )    205        (1      )
                                                                             
Net cash provided by
operating activities from      12,977      11,791        52,629      40,625
continuing activities
Net cash used in operating
activities from               (102    )  (405     )  (483    )  (739    )
discontinued operations
Net cash provided by           12,875      11,386        52,146      39,886
operating activities
Investing activities
Purchases of short-term        —           (1,462    )   —           (10,292 )
investments
Proceeds from the sale of      —           12,392        —           43,812
short-term investments
Cash paid for acquisitions
and decrease (increase) in     8,267       (62       )   (71,796 )   (9,092  )
goodwill and intangibles
Purchases of property and     (3,965  )  (423     )  (6,793  )  (4,822  )
equipment
                                                                             
Net cash provided by (used     4,302       10,445        (78,589 )   19,606
in) investing activities
Financing activities
Proceeds from exercise of
common stock options (net      1,469       10,590        15,491      23,639
of tax)
Incremental tax benefit
from exercise of common        1,765       4,146         16,953      6,597
stock options
Repurchases of common         —          —           (29,999 )  (3,541  )
stock
                                                                             
Net cash provided by           3,234       14,736        2,445       26,695
financing activities
Effect of exchange rate
differences on cash and       (288    )  (990     )  (309    )  (476    )
cash equivalents
                                                                             
Net increase (decrease) in     20,123      35,577        (24,307 )   85,711
cash and cash equivalents
Cash and cash equivalents     84,659     93,512      129,089    43,378
at beginning of the period
                                                                             
Cash and cash equivalents    $ 104,782   $ 129,089     $ 104,782   $ 129,089
at end of period
Less: Cash and cash
equivalents of                —          105         —          105
discontinued operations at
end of year
Cash and cash equivalents
of continuing operations     $ 104,782   $ 128,984     $ 104,782   $ 128,984
at end of year
Supplemental disclosure of
cash flow information
Cash paid for income taxes   $ 2,721     $ 12          $ 14,482    $ 6,245
Cash paid for interest         65          14            117         62
Contingent purchase price      6,242       —             7,438       6,989
accrued
Note payable issued in
connection with                —           —             40,000      —
acquisition

Contact:

Liquidity Services, Inc.
Julie Davis, 202-467-6868 ext. 2234
Director, Investor Relations
julie.davis@liquidityservicesinc.com
 
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