Liquidity Services, Inc. Announces Third Quarter Fiscal Year 2013 Financial Results – Third quarter revenue of $124.2 million up 2% – Gross Merchandise Volume (GMV) of $230.3 million up 2% – Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of $26.4 million down 21% – Adjusted EPS of $0.44 down 21% Business Wire WASHINGTON -- August 6, 2013 Liquidity Services, Inc. (NASDAQ: LQDT; www.liquidityservicesinc.com) today reported its financial results for its third quarter of fiscal year 2013 (Q3-13) ended June 30, 2013. 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. (Liquidity Services or the Company) reported consolidated Q3-13 revenue of $124.2 million, an increase of approximately 2% from the prior year’s comparable period. Adjusted EBITDA, which excludes stock based compensation and acquisition costs including changes in acquisition earn out payment estimates, for Q3-13 was $26.4 million, a decrease of approximately 21% from the prior year’s comparable period. Q3-13 GMV, the total sales volume of all merchandise sold through the Company’s marketplaces, was $230.3 million, an increase of approximately 2% from the prior year’s comparable period. Net income in Q3-13 was $11.3 million or $0.35 diluted earnings per share. Adjusted net income, which excludes stock based compensation, acquisition costs including changes in acquisition earn out payment estimates and amortization of contract-related intangible assets associated with the Jacobs Trading acquisition – net of tax, in Q3-13 was $14.3 million or $0.44 adjusted diluted earnings per share based on 32.5 million fully diluted shares outstanding, a decrease of approximately 24% and 21%, respectively, from the prior year’s comparable period. “Q3-FY13 results were in line with our pre-announced guidance range. We continue to make important investments in our sales and marketing organization to expand awareness of Liquidity Services as the trusted provider of choice in our industry which will drive our future growth. We have made good progress with the integration of our GoIndustry acquisition, which is now operating at near breakeven. Overall margins in our business remain strong as adjusted EBITDA margins increased to 11.5% in the third quarter from 11.3% in the second quarter primarily as a result of sharper focus and streamlined operations,” said Bill Angrick, Chairman and CEO of Liquidity Services. “Our year-over-year results were impacted by delays in new programs, weaker volumes and pricing in the consumer electronics category and the continued repositioning of our GoIndustry marketplace to focus on the key global Fortune 1000 relationships that we expect will drive sustained profitable growth in this business.” “We remain focused on executing our long term growth strategy to achieve $2 billion in GMV by fiscal year 2016. Fundamentally, we are confident in our competitive position and our ability to achieve attractive organic growth over the next several years driven by our strong client service and continued investments in innovation. However, in the short term, results have been less predictable and pressured due to significant integration efforts and the timing of new large commercial programs coming on line,” continued Angrick. Business Outlook While general economic conditions have improved, our overall outlook remains cautious due to the volatility in the macro environment. The retail vertical of our business has seen significant changes in consumer spending habits in certain categories, such as electronics, which has been affected by increases in payroll taxes, continued high unemployment, and reduced innovation in the sector resulting in decreased spending. Additionally, we plan to further invest in our technology infrastructure and innovation for our proprietary e-commerce marketplaces to support further expansion and integration of our existing and recently acquired businesses. 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: (i) stable commodity prices in our scrap business; (ii) stable average sales prices realized in our capital assets marketplaces; (iii) improved margins in our GoIndustry marketplace as we continue to integrate the acquisition and complete our restructuring plans; continued lower than prior year product flows from existing client (iv) programs in our retail goods marketplaces, particularly in our consumer electronics vertical; (v) an effective income tax rate of 40%; and (vi) improved operations and service levels in our retail goods marketplaces. 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. We earned approximately $1,265,000 under this incentive feature for the 12 months ended June 30, 2013, and we recorded this amount in the quarter ended June 30, 2013. GMV – We expect GMV for fiscal year 2013 to range from $925 million to $950 million. We expect GMV for Q4-13 to range from $200 million to $225 million. Adjusted EBITDA – We expect Adjusted EBITDA for fiscal year 2013 to range from $104 million to $106 million. We expect Adjusted EBITDA for Q4-13 to range from $24.0 million to $26.0 million. Adjusted Diluted EPS – We estimate Adjusted Earnings Per Diluted Share for fiscal year 2013 to range from $1.72 to $1.76. In Q4-13, we estimate Adjusted Earnings Per Diluted Share to be $0.39 to $0.43. This guidance assumes that we have an average fully diluted number of shares outstanding for the year of 32.7 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 related 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 for Q4-13. Key Q3-13 Operating Metrics Registered Buyers — At the end of Q3-13, registered buyers totaled approximately 2,360,000, representing a 34% increase over the approximately 1,764,000 registered buyers at the end of Q3-12. 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 623,000 in Q3-13, an approximately 16% increase over the approximately 537,000 auction participants in Q3-12. Completed Transactions — Completed transactions increased to approximately 130,000, an approximately 3% increase for Q3-13 from the approximately 126,000 completed transactions in Q3-12. 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 Q3-13 decreased to 21.9% compared to 23.7% in the prior year period. The table below summarizes GMV and revenue by pricing model. GMV Mix Q3-13 Q3-12 Profit-Sharing Model: Scrap Contract 7.9% 8.8% Total Profit Sharing 7.9% 8.8% Consignment Model: GovDeals 19.8% 16.8% Commercial 37.8% 36.8% Total Consignment 57.6% 53.6% Purchase Model: Commercial 20.5% 22.7% Surplus Contract 14.0% 14.9% Total Purchase 34.5% 37.6% Total 100.0% 100.0% Revenue Mix Q3-13 Q3-12 Profit-Sharing Model: Scrap Contract 14.7% 16.3% Total Profit Sharing 14.7% 16.3% Consignment Model: GovDeals 3.8% 2.9% Commercial 10.6% 10.1% Total Consignment 14.4% 13.0% Purchase Model: Commercial 39.7% 42.9% Surplus Contract 25.9% 27.8% Total Purchase 65.6% 70.7% Other 5.3% — Total 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 and other expense (income), 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. Three Months Nine Months Ended June 30, Ended June 30, 2013 2012 2013 2012 (in thousands) (unaudited) Net income $ 11,288 $ 14,863 $ 30,695 $ 42,751 Interest and other expense 56 517 (772 ) 1,625 (income), net Provision for income taxes 7,525 9,909 20,822 29,025 Amortization of contract 2,407 2,020 7,023 6,059 intangibles Depreciation and amortization 1,984 1,477 5,952 4,508 EBITDA 23,260 28,786 63,720 83,968 Stock compensation expense 2,927 3,537 10,229 8,655 Acquisition costs 239 1,109 5,826 (5,562 ) Adjusted EBITDA $ 26,426 $ 33,432 $ 79,775 $ 87,061 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. Adjusted basic and diluted earnings per share are determined using Adjusted Net Income. Three Months Ended June 30, Nine Months Ended June 30, 2013 2012 2013 2012 (Unaudited) (Dollars in thousands, except per share data) Net income $ 11,288 $ 14,863 $ 30,695 $ 42,751 Stock compensation 1,756 2,122 6,137 5,193 expense (net of tax) Amortization of contract 1,090 1,090 3,269 3,269 intangibles (net of tax) Acquisition costs (net of 143 665 3,496 (3,337 ) tax) Adjusted net $ 14,277 $ 18,740 $ 43,597 $ 47,876 income Adjusted basic earnings per $ 0.45 $ 0.60 $ 1.38 $ 1.55 common share Adjusted diluted earnings per $ 0.44 $ 0.56 $ 1.34 $ 1.46 common share Basic weighted average shares 31,651,061 31,140,261 31,565,109 30,791,297 outstanding Diluted weighted average shares 32,540,187 33,183,165 32,642,046 32,781,370 outstanding Conference Call The Company will host a conference call to discuss fiscal third quarter 2013 results at 8:00 a.m. Eastern Time tomorrow. Investors and other interested parties may access the teleconference by dialing 866-202-0886 or 617-213-8841 and providing the participant pass code 42835180. 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 September 7, 2013 at 11:59 p.m. ET. An audio replay of the teleconference will also be available until September 6, 2013 at 11:59 p.m. ET. To listen to the replay, dial 888-286-8010 or 617-801-6888 and provide pass code 74058780. Both replays will be available starting at 12:30 p.m. tomorrow. 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 Wal-Mart 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, Go-Industry, and Jacobs Trading, 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. retail consumer goods 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 Liquidity Services, Inc. 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 $3.8 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 over 1,300 employees. Additional information can be found at: http://www.liquidityservicesinc.com. Liquidity Services,Inc. and Subsidiaries Consolidated Balance Sheets (Dollars in Thousands) June 30, September 30, 2013 2012 Assets (Unaudited) Current assets: Cash and cash equivalents $ 63,327 $ 104,782 Accounts receivable, net of allowance for doubtful accounts of $1,005 and $1,248 at June 22,821 16,226 30, 2013 and September 30, 2012, respectively Inventory 27,710 20,669 Prepaid and deferred taxes 17,752 16,927 Prepaid expenses and other current assets 5,737 3,973 Total current assets 137,347 162,577 Property and equipment, net 10,289 10,382 Intangible assets, net 31,097 34,204 Goodwill 209,357 185,771 Other assets 7,667 7,474 Total assets $ 395,757 $ 400,408 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 12,281 $ 9,997 Accrued expenses and other current liabilities 30,165 36,569 Profit-sharing distributions payable 2,813 4,041 Current portion of acquisition earn out payables — 14,511 Customer payables 28,039 34,265 Current portion of note payable — 10,000 Total current liabilities 73,298 109,383 Acquisition earn out payables 18,299 — Note payable, net of current portion — 32,000 Deferred taxes and other long-term liabilities 9,221 9,022 Total liabilities 100,818 150,405 Stockholders’ equity: Common stock, $0.001 par value; 120,000,000 shares authorized; 31,693,239 shares issued and 31 31 outstanding at June 30, 2013; 31,138,111 shares issued and outstanding at September 30, 2012 Additional paid-in capital 200,059 182,361 Accumulated other comprehensive income (2,211 ) 1,246 Retained earnings 97,060 66,365 Total stockholders’ equity 294,939 250,003 Total liabilities and stockholders’ equity $ 395,757 $ 400,408 Liquidity Services,Inc. and Subsidiaries Consolidated Statements of Operations (Dollars in Thousands, Except Share and Per Share Data) Three Months Ended Nine Months Ended June 30, June 30, 2013 2012 2013 2012 Revenue $ 99,673 $ 105,601 $ 307,202 $ 313,405 Fee revenue 24,526 15,672 69,526 39,624 Total revenue 124,199 121,273 376,728 353,029 Costs and expenses: Cost of goods sold 49,977 49,187 147,045 147,497 (excluding amortization) Profit-sharing 8,649 10,245 27,002 34,117 distributions Technology and 21,851 15,943 66,800 47,528 operations Sales and 10,127 7,364 30,428 20,809 marketing General and 10,096 8,639 35,907 24,672 administrative Amortization of contract 2,407 2,020 7,023 6,059 intangibles Depreciation and 1,984 1,477 5,952 4,508 amortization Acquisition 239 1,109 5,826 (5,562 ) costs Total costs 105,330 95,984 325,983 279,628 and expenses Income from 18,869 25,289 50,745 73,401 operations Interest and other (56 ) (517 ) 772 (1,625 ) (expense) income, net Income before provision for 18,813 24,772 51,517 71,776 income taxes Provision for (7,525 ) (9,909 ) (20,822 ) (29,025 ) income taxes Net income $ 11,288 $ 14,863 $ 30,695 $ 42,751 Basic earnings per common $ 0.36 $ 0.48 $ 0.97 $ 1.39 share Diluted earnings per $ 0.35 $ 0.45 $ 0.94 $ 1.30 common share Basic weighted average shares 31,651,061 31,140,261 31,565,109 30,791,297 outstanding Diluted weighted 32,540,187 33,183,165 32,642,046 32,781,370 average shares outstanding Liquidity Services,Inc. and Subsidiaries Consolidated Statements of Cash Flows (In Thousands) Three Months Ended June 30, Nine Months Ended June 30, 2013 2012 2013 2012 Operating activities Net income $ 11,288 $ 14,863 $ 30,695 $ 42,751 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and 4,391 3,497 12,975 10,567 amortization Gain on early extinguishment of — — (1,000 ) — debt Stock compensation 2,927 3,537 10,229 8,655 expense Inventory allowance (376 ) (736 ) (1,109 ) (776 ) Doubtful accounts (136 ) (88 ) (243 ) (217 ) Incremental tax benefit from (698 ) (5,850 ) (6,074 ) (15,188 ) exercise of common stock options Changes in operating assets and liabilities: Accounts receivable (4,461 ) (495 ) (6,352 ) (1,066 ) Inventory (2,153 ) (2,040 ) (5,932 ) (4,515 ) Prepaid expenses 5,259 237 3,292 13,513 and other assets Accounts payable 1,518 (10,020 ) 2,284 (5,929 ) Accrued expenses (2,589 ) 3,367 (8,608 ) 5,912 and other Profit-sharing distributions (1,501 ) (3,179 ) (1,228 ) (4,329 ) payable Customer payables (6,812 ) (2,393 ) (6,226 ) (167 ) Acquisition earn 91 41 (6,077 ) (10,068 ) out payables Other liabilities (339 ) (39 ) 199 128 Net cash provided by operating 6,409 702 16,825 39,271 activities Investing activities Increase in goodwill and intangibles and (21 ) (23 ) (14,719 ) (80,063 ) cash paid for acquisitions Purchases of property and (1,388 ) (769 ) (3,909 ) (2,828 ) equipment Net cash used in investing (1,409 ) (792 ) (18,628 ) (82,891 ) activities Financing activities Repurchases of — (29,999 ) — (29,999 ) common stock Repayment of notes — — (39,000 ) — payable Payment of acquisition — — (8,185 ) — contingent liabilities Proceeds from exercise of common 890 4,071 1,394 14,022 stock options (net of tax) Incremental tax benefit from 698 5,850 6,074 15,188 exercise of common stock options Net cash provided by (used in) 1,588 (20,078 ) (39,717 ) (789 ) financing activities Effect of exchange rate differences on (459 ) (5 ) 65 (21 ) cash and cash equivalents Net increase (decrease) in cash 6,129 (20,173 ) (41,455 ) (44,430 ) and cash equivalents Cash and cash equivalents at 57,198 104,832 104,782 129,089 beginning of the period Cash and cash equivalents at end $ 63,327 $ 84,659 $ 63,327 $ 84,659 of period Supplemental disclosure of cash flow information Cash paid for $ 1,728 $ 9,316 $ 12,221 $ 11,761 income taxes Cash paid for 6 12 2,029 52 interest Note payable issued in connection with — — — 40,000 acquisition Contingent purchase — — 23,146 1,196 price accrued Contact: Liquidity Services, Inc. Julie Davis Director of Investor Relations 202-558-6234 email@example.com
Liquidity Services, Inc. Announces Third Quarter Fiscal Year 2013 Financial Results
Press spacebar to pause and continue. Press esc to stop.