Obtaining organic search engine traffic from Google is a significant traffic driver for our marketplaces. If Google modified the search engine algorithms that control our page rankings, we may experience a significant negative impact on the traffic coming to our marketplaces. A decrease in traffic would reduce the number of new buyers and sellers on our marketplaces and could harm our business.

Additionally, our marketing technology relies heavily on our ability to track our promotional campaign performance across marketing channels (i.e., email, search engines, social media and third-party banner ads). If industry leading software browsers, such as Google Chrome, Microsoft Edge, or Apple Safari, disable user analytics tracking or other similar capabilities, our ability to track our promotional campaign performance could be affected, which could in turn prevent us from fully optimizing the marketing spend associated with our promotional campaigns. Like many other e-commerce marketplaces, Apple’s recent upgrades to provide greater transparency as to Identifier for Advertisers (IDFA) has, with respect to some categories of assets, made it harder and more expensive for us to target customers with the interest in purchasing those categories of assets.

We are ~~exposed~~required to ~~risks related~~maintain the privacy and security of personal and business information amidst multiplying threat landscapes and in compliance with privacy and data protection regulations globally. Failure to ~~cybersecurity and protection of confidential information.~~

~~We retain highly confidential information on behalf of~~do so could damage our business, including our reputation with sellers, buyers and ~~sellers in~~employees, cause us to incur substantial additional costs, and make us subject to litigation and regulatory action.

Increased security threats and more sophisticated cyber misconduct pose a risk to our e-commerce marketplaces, information technology systems, networks, and services. We rely upon IT systems and databases. Although we maintain security features in our systems designed to protect user information and prevent data loss and other security breaches, such measures cannot provide absolute security and our operations may be susceptible to breaches, including from circumvention of security systems, denial of service attacks or other cyber-attacks, hacking, computer viruses or malware, technical malfunction, employee error, malfeasance, physical breaches, system disruptions or other disruptions. For example, in 2018, we experienced a data breach incident that involved an employee’s email account and may have resulted in the exposure of personally identifiable information of our employees. We cannot be certain that the measures and processes taken by us to address this incident will prevent harm to our employees from the incident or prevent all similar events in the future.

Disruptions from cybersecurity events may jeopardize the security of information stored in and transmitted through our systems. An increasing number of websites, including those owned by several other large Internet and offline companies, have disclosed breaches of their security,networks, some of which have involved sophisticated and highly targeted attacks on portions of their websites or infrastructure. The techniques used to obtain unauthorized access, disable, or degrade service, or sabotage systems, change frequently, may be difficult to detect for a long time, and often are ~~not recognized until launched against a target. Certain efforts may be state sponsored and supported~~managed by significant financial and technological resources and therefore may be even more difficult to detect. We may not anticipate these techniques or implement adequate preventive measures. We currently expend, and may be required to expend significant additional capital and other resources, to protect against such security breaches or to alleviate problems caused by such breaches. Our insurance coverage may be inadequate to compensate us for any related losses we incur.

~~These issues are likely to become more difficult as we expand our operations. Any breach~~third parties, in connection with virtually all of our ~~security measures, or even a perceived breach of our security measures, could cause us to lose sellers or buyers, suffer material harm~~business activities. Additionally, we collect, store and process information relating to our business, ~~financial condition, operating results~~sellers, buyers and ~~reputation or be subject~~employees. Operating these IT systems and networks, and processing and maintaining this data, in a secure manner, is critical to ~~regulatory actions, sanctions or other statutory penalties, litigation, or liability for failure to safeguard~~ our ~~sellers’~~business operations and ~~buyers’ information. Further, losing~~strategy. Losing confidential seller or buyer information could also expose us to the risk of liability and costly litigation. In addition, if there is any perception that we cannot protect our users’ confidential information, we may lose the ability to retain existing, and attract new, sellers and buyers, and therefore our revenue could decline.

~~Shipment~~ Increased remote work due to the COVID-19 pandemic has also increased the possible attack surfaces. Threats designed to gain unauthorized access to systems, networks and data, both ours and third parties with whom we work, are increasing in frequency and sophistication. Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crimes and advanced persistent threats. Phishing attacks have emerged as particularly prominent, including as vectors for ransomware attacks, which have increased in breadth and frequency for the Company. While we train our employees as part of ~~merchandise sold in~~ our ~~marketplaces~~security efforts, that training cannot be completely effective. These threats pose a risk to the security of our systems and networks and the confidentiality, integrity, and availability of our data. It is possible that our IT systems and networks, or those managed by third parties such as cloud providers or suppliers that otherwise host confidential information, could have vulnerabilities, which could go unnoticed for a period of time. While our cybersecurity and compliance efforts seek to mitigate such risks, there can be ~~delayed~~no guarantee that the actions and controls we and our third-party service providers have implemented and are implementing, will be sufficient to protect our systems, information or ~~disrupted by factors beyond our control~~other property. We currently expend, and we ~~could lose buyers~~may be required to expend, significant additional capital and ~~sellers.~~

~~We rely upon third-party carriers~~other resources to protect against such ~~as United Parcel Service,~~security breaches or ~~UPS,~~to alleviate problems caused by such breaches. Our insurance coverage may be inadequate to compensate us for timely delivery of our merchandise shipments. We are subject to carrier disruptions and increased costs due to factors beyond our control, including labor difficulties, inclement weather, terrorist activity and increased fuel costs. In addition,any related losses we do not have a long-term agreement with UPS or any other third-party carriers, and we cannot be sure that our relationship with UPS will continue on terms favorable to us, if at all. If our relationship with UPS is terminated or impaired or if UPS cannot deliver merchandise for us, we would have to use alternative carriers for the shipment of products to our buyers. We may not be able to engage alternative carriers timely or on terms favorable to us. Potential adverse consequences may include:incur.

•~~reduced visibility of order status and package tracking;~~

•~~delays in merchandise receipt and delivery;~~

•~~increased cost of shipment; and~~

•~~reduced shipment quality, which may damage merchandise.~~

Any failure to receive merchandise at our distribution centers or deliver products to our buyers in a timely and accurate manner could lead to seller or buyer dissatisfaction and cause us to lose sellers and buyers.

An interruption in the operations of our buyer and seller support service system or our warehouse distribution centers could significantly harm our business and operating results.

Our business depends, to a large degree, on the provision of effective support services to our buyers and sellers, and on effective distribution center operations (including leased commercial warehouse distribution space). These operations could be harmed by several factors, including any material disruption or slowdown at our distribution centers resulting from labor disputes, changes in the terms of our underlying lease agreements, telecommunications failures, power or service outages, human error, terrorist attacks, natural disasters, government mandated business closures and shelter-in-place guidelines designed to contain the spread of epidemic or pandemic disease or other events.

If we fail to accurately predict our ability to sell ~~merchandise~~assets in which we take inventory risk and credit risk our margins may decline.

Under our purchase transaction model, we purchase ~~merchandise~~assets and assume the risk that the ~~merchandise~~assets may sell for less than we paid for ~~it.~~them. We assume general and physical inventory and credit ~~risk.~~risk with respect to these assets. These risks are especially significant because some of the goods we purchase and resell on our websites are impacted by rapid technological change, obsolescence and price erosion, and because we sometimes make large purchases of particular types of inventory or industrial equipment when manufacturing facilities or campuses close. In addition, we do not typically receive warranties on the ~~merchandise~~assets we purchase and, as a result, we must resell or dispose of any returned goods on an as-is basis, which limits the types of buyers willing to purchase our ~~merchandise. Historically, the amount of disposed goods (which includes returned goods we have not resold) has been less than 2% of the goods we have purchased.~~assets. To manage our inventory successfully, we must maintain enough buyer demand to sell ~~merchandise~~assets for a reasonable financial return. We may overpay for the acquired ~~merchandise~~assets if we miscalculate buyer demand or if the acquired ~~merchandise is~~assets are not as desirable as we predicted. If ~~merchandise is~~assets are not attractive to our buyer base, we may have to take significant losses resulting from lower sale prices, which could reduce our revenue and margins. Declines in commodity prices may also reduce the profit we can realize in reselling scrap or salvage assets. For example, we may not sell our scrap or salvage inventory for amounts above its cost and we may incur a loss in products we handle for our commercial sellers.

Occasionally, in our ~~capital assets~~CAG marketplace, we make very significant inventory acquisitions, such as the purchase of semi-conductor and oil and gas equipment and biopharma and metal-working machinery, for later resale on our energy and industrial marketplaces. We plan to continue to opportunistically make such acquisitions. The risks described above are heightened in these acquisitions due to their size and, at times, the limited market for the assets we acquire. ~~If we obtain~~Obtaining financing to fund such acquisitions ~~such financing~~ will increase our costs, which will decrease any profits we receive from the sale of the acquired assets.

As we grow our business, we may increase the ~~merchandise~~assets we purchase directly from sellers, resulting in increased inventory levels and related risks, including increased risk of losses on the sale of the inventory acquired. Any such increase would require the use of additional working capital and any funds so used would not be available for other purposes.

Our quarterly operating results have fluctuated in the past and may do so in the future, which could cause volatility in our stock price.

Our prior operating results have fluctuated due to changes in our business and the e-commerce industry. Similarly, our future operating results may vary significantly from quarter to quarter due to many factors, including factors beyond our control. You should not rely on period-to-period comparisons of our operating results as an indication of our future performance. Factors that may, among others, affect our quarterly operating results include the following:

•our ability to increase sales to existing buyers, attract and retain new buyers and satisfy buyer demands;

•our ability to retain and expand our base of sellers;

•entry into, or the modification, termination or expiration of, ~~material~~ contracts;

•the volume, size, timing and completion rate of transactions in our marketplaces, including variability due to the timing of large, project-based activities;

•changes in the supply and demand for and the volume, price, mix and quality of our supply of surplus and salvage assets;

•introduction of new or enhanced websites, services or product offerings by us or our competitors, which may affect our margins;

•implementation costs of new contracts, particularly those requiring custom integrations and value-added services;

•changes in our pricing policies or the pricing policies of our competitors;

•changes in the conditions and economic prospects of the e-commerce industry or the economy generally, which could alter current or prospective buyers' and sellers' priorities;

•the extent to which use of our services is affected by spyware, viruses, phishing and other spam emails, denial of service attacks, data theft, computer intrusions, outages and similar events;

•event-driven disruptions such as war, terrorism, armed hostilities, disease and natural disasters;

•changes in energy and commodities prices, including the timing and speed of recovery in energy sector macro conditions;

•seasonal patterns in selling and purchasing activity; and

•costs related to acquisitions of technology or equipment.

Our operating results may fall below the expectations of market analysts and investors in some future periods. If this occurs, even temporarily, it could cause volatility in our stock price.

20Our stock price has been volatile, and your investment in our common stock could decline in value.

~~If we cannot attract~~Worldwide financial crises have led to an increase in the overall volatility of the stock market. Increased volatility and ~~retain skilled employees,~~other broad market and industry factors may adversely affect the market price of our ~~business may be harmed.~~

~~Our future success depends on~~common stock, regardless of our ~~ability to continue to attract, retain and motivate highly skilled employees, particularly employees with sales, marketing, operations and technology expertise. Competition for employees~~actual operating performance. Other factors that could cause fluctuation in our ~~industry is intense. We have experienced occasional difficulty~~stock price may include:

•actual or anticipated variations in ~~attracting~~quarterly operating results;

•changes in financial estimates by us or by a securities analyst who covers our stock;

•publication of research reports about our company or industry;

•conditions or trends in our industry;

•stock market price and volume fluctuations of other publicly traded companies and, in particular, those whose business involves the ~~personnel to support~~Internet and e-commerce;

•announcements by us or our competitors of significant contracts (or the amendment or loss of such contracts), acquisitions, commercial relationships, strategic partnerships or divestitures;

•announcements by us or our competitors of technological innovations, new services or service enhancements;

•announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;

•the passage of legislation or other regulatory developments that adversely affect us, our sellers or buyers, or our industry;

•additions or departures of key personnel;

•sales of our common stock, including sales of our common stock by our directors and officers or specific stockholders; and

•general global economic and/or political conditions and slow or negative growth of related markets.

Volatility in the market price of shares may prevent investors from being able to sell their shares of common stock at prices they view as attractive. In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our ~~business,~~management's attention and we may experience similar difficulties. If we cannot attract, assimilate and retain employees with the skills we require, we may not grow our business and revenue as expected and we could experience increased turnover, decreased levels of buyer and seller service, low morale, inefficiency or internal control failures.resources.

The seasonality of our business places increased strain on our operations.

We experience seasonality in each portion of our ~~business. We~~business at various times during the year. As a result, we expect a disproportionate amount of transactions on our marketplaces to occur at certain times during the year. If we cannot effectively manage increased demand, or the increased flow of goods we typically experience during these times, it could adversely affect our revenue and our future growth. If too many buyers and sellers access our websites within a short period of time due to increased demand, we may experience system interruptions that make our websites unavailable or prevent us from providing efficient service, which may reduce our ~~GMV~~financial and operational results and the attractiveness of our value-added services. In addition, we may not adequately staff our distribution centers during these peak periods. If we cannot staff warehouses adequately, we may not be able to process ~~surplus~~ assets quickly enough which, in turn, could mean dissatisfaction of sellers ~~and reduced GMV~~ or increased third party storage costs and reduced profitability.

If we fail to identify, finance and integrate acquisitions, our future operating results may be materially adversely affected.

We have expanded our business in part through acquisitions ~~and~~such as the acquisition of Bid4Assets, Inc in November 2021. We may continue to do ~~so in the future.~~so. The success of any future growth strategy involving acquisitions will depend on our ability to identify, and the availability of, suitable acquisition candidates. We may incur costs in connection with a potential acquisition but may ultimately be unable or unwilling to consummate the proposed transaction for various reasons. In addition, acquisitions involve numerous risks, including our ability to successfully integrate the acquired businesses and operations with our other businesses and realize the anticipated benefits of the acquisitions. If we cannot achieve these objectives in a cost-effective and timely manner, we may not realize the anticipated benefits of the acquisition or it may take us longer to realize the benefits of the acquisition than we expect. Acquired operations outside the U.S. may present unique challenges or increase our exposure to risks associated with foreign operations, including foreign currency risks and risks associated with local regulatory regimes.

The integration process could cause the loss of key employees, buyers, sellers or other vendors, increase our operating or other costs, decrease our profit margins or disrupt our other businesses, each of which could impair our ability to achieve the anticipated benefits of the acquisition. Our efforts to integrate acquired businesses will divert management's attention and resources from our other businesses. Any failure to timely and cost-effectively realize the anticipated benefits of the acquisition could have a material adverse effect on our revenues, expenses and operating results.

Acquisitions could cause dilutive issuances of equity securities, the incurrence of debt, one-time write-offs of goodwill and substantial amortization expenses of other intangible assets. We may not obtain any required acquisition financing on favorable terms, or at all, which could make it impossible or costlier to acquire other businesses. If we can obtain financing, the terms may be onerous and restrict our operations. Further, certain acquisitions may be subject to regulatory approval, which can be time-consuming and costly to obtain, and the terms of such regulatory approvals may impose limitations on our ongoing operations or require us to divest assets or lines of business.

Our international operations expose us to several risks.

Our international activities are significant to our revenues and profits, and we may continue to expand internationally, including through acquisitions, organic growth and through joint ventures or strategic alliances with third parties. We are required to comply with the laws of the countries or markets in which we operate. In addition, because our services are accessible worldwide and facilitate the sales of goods and provide services to users worldwide, one or more jurisdictions may claim that we or our users are required to comply with their laws based on the location of our servers, or one or more of our users, or location of the assets or service being sold or provided.

It is costly to establish, develop, and maintain international operations and websites, and promote our brand internationally. Our international operations may not be profitable on a sustained basis or at all. In addition to the risks described elsewhere in this section, our international operations are subject to several risks, including:

•local economic and political conditions, or civil unrest that may disrupt economic activity in affected countries;

•government regulation of e-commerce and other services, competition, and restrictive governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs), nationalization, and restrictions on foreign ownership;

•restrictions on sales or distribution of certain assets or services and uncertainty regarding liability for assets and services, including uncertainty because of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations, and practices regarding the enforcement of intellectual property rights;

•business licensing or certification requirements, such as for imports, exports, and web services;

•limitations on the repatriation and investment of funds and foreign currency exchange restrictions;

•shorter payable and longer receivable cycles and the resultant negative impact on cash flow;

•laws and regulations regarding consumer and data protection, privacy, network security, encryption, payments, and restrictions on pricing or discounts;

•lower levels of consumer spending and fewer opportunities for growth compared to the U.S.;

•lower levels of credit card usage and increased payment risk;

•different employee/employer relationships and the existence of works councils;

•compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting certain payments to government officials and other third parties;

•laws and policies of the U.S. and other jurisdictions affecting trade, foreign investment, loans, and taxes; and

•geopolitical events, including war and terrorism.

If we expand internationally through joint ventures or strategic alliances, we will also face counterparty risk in addition to the risks described above. If any counterparty to our joint ventures or strategic alliances is unwilling or unable to perform its obligations to us, we may not realize the benefits of such arrangements and we may experience material unanticipated problems, expenses and liabilities.

Our international operations expose us to foreign exchange fluctuations that could harm our operations.

We conduct business in many countries around the world and receive fees and pay expenses (including salaries to our international workforce) in several different currencies despite reporting our financial results in U.S. dollars. As a result, our financial results are impacted by fluctuations in foreign currency rates. The results of our foreign subsidiaries are translated from the local currency to U.S. dollars for financial reporting purposes. For example, if the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated revenues and expenses will result in increased U.S. dollar denominated revenues and expenses. These factors and others may harm our business and our results of operations. In addition, currency exchange rates may negatively affect our results if we pay for inventory using a different currency than we receive when we sell the inventory.

We may need additional financing in the future, which may not be available on favorable terms, if at all.

We may need additional funds to finance our operations, as well as to enhance our services, acquire inventory for our businesses, fund initiatives, respond to competitive pressures, acquire complementary businesses or technologies or otherwise support our growth. We may also require additional funds if vendors and other third parties from whom we purchase inventory, other goods or services extend less favorable credit terms to us. Our business may not generate the cash needed to finance such requirements. Although we do have an existing credit facility with Wells Fargo Bank, National Association from which we may draw funds, there may be situations in which we seek funding through other sources. If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our existing stockholders would be reduced, and these securities may have rights, preferences or privileges senior to those of our common stock. The general economic and capital market conditions in the United States and other parts of the world can deteriorate significantly, limiting access to capital and increasing the cost of capital. A large degree of economic uncertainty remains both domestically and abroad, which can adversely affect access to capital, and the cost of capital. If adequate funds are not available or are not available on acceptable terms, our ability to enhance our services, fund strategic initiatives, respond to competitive pressures, take advantage of business opportunities or grow our business would be limited, and we might need to restrict our operations and initiatives.

Global economic conditions, including those from macro-trends, global events and the COVID-19 pandemic, may harm our business and results of operations.

Our overall performance depends in part on worldwide economic conditions. Global financial developments, downturns and global health crises or pandemics may harm us, including due to disruptions or restrictions on our employees’ ability to work and travel. The United States and other key international economies have been affected from time to time by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies, outbreaks of COVID-19 and the resulting impact on business continuity and travel, supply chain disruptions, inflation and overall uncertainty with respect to the economy, including with respect to tariff and trade issues.

For example, inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation may result in increases in our operating costs (including our labor costs). In addition, the Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.

Additionally, financial markets around the world experienced volatility following the invasion of Ukraine by Russia in February 2022, a conflict which continues to contribute to uncertainty and financial market volatility. In response to the invasion, the United States, the United Kingdom and the European Union, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability and/or supply chain continuity, in both Europe and globally, and has introduced significant uncertainty into global markets. Our business and results of operations may be adversely affected by the ongoing conflict between Ukraine and Russia, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict. If global economic conditions remain uncertain or deteriorate further, including as a result of the Russia-Ukraine conflict, COVID-19 or other disruptions, we could see a reduction in the ability of international buyers and sellers to conduct business due to travel restrictions impacting the ability of: sellers and their agents to travel to prepare assets for sale; buyers travelling to inspect assets; sellers and buyers completing international transactions requiring assets to cross export and import border control points; and the overall willingness of sellers and buyers to decommission capital assets and engage in cross-border transactions. These potential scenarios could have a material advise effect on our business. Separately, any factors that reduce cross border trade or make such trade more difficult could harm our business. Increasing costs, such as increasing tariffs and trade wars between nations, may make international trade less profitable and adversely affect our global business.

Decreases in the supply of, demand for, or market values of surplus and salvage assets, could harm our business.

Our revenues could decrease if there was significant erosion in the supply of, demand for, or market values of surplus and salvage assets, which could adversely affect our financial condition and results of operations. We have no control over any of the factors that affect the supply of, and demand for, surplus and salvage assets, and the circumstances that cause market values to fluctuate - including, among other things, economic uncertainty, global geopolitical climate, disruptions to credit and financial markets, lower commodity prices, and our buyers’ restricted access to capital - are beyond our control. Recent economic conditions have caused fluctuations in the supply, mix and market values of surplus and salvage assets available for sale, which has a direct impact on our revenues. In addition, price competition and the availability of surplus and salvage assets directly affect the supply of, demand for, and market value of such assets. For example, when the demand for used vehicles increases, the prices are also likely to increase, making it more costly for potential buyers to find suitable replacements for their existing vehicles. As a result, potential buyers may retain their existing vehicles for longer periods of time, further decreasing supply. These factors could impact the overall profitability of used vehicle sales on our marketplaces because although used vehicles are selling for higher prices, fewer vehicles are being sold. Climate change initiatives, including significant changes to engine emission standards applicable to certain types of assets, may also adversely affect the supply of, demand for and the market values of such assets.

Legal and Regulatory Risks

We face legal uncertainties relating to the internet in general and to the e-commerce industry in particular and may become subject to costly government regulation.

The laws and regulations related to the internet and e-commerce are evolving. These laws and regulations relate to issues such as user privacy, freedom of expression, pricing, fraud, quality of assets and services, taxation, advertising, intellectual property rights and information security. Laws governing issues such as property ownership, title registration, security interests in assets, copyrights and other intellectual property issues, taxation, libel and defamation, obscenity and personal privacy could also affect our business. Laws adopted prior to the advent of the internet may not contemplate or address the unique issues of the Internet and related technologies and it is not clear how they will apply. Current and future laws and regulations could increase our cost of doing business and/or decrease the demand for our services.

Our auction business may be subject to a variety of additional costly government regulations.

Many states and other jurisdictions have regulations governing the conduct of traditional "auctions," the liability of traditional "auctioneers" in conducting auctions and handling property by "secondhand dealers", which may apply to online auction services. In addition, certain states have laws or regulations that expressly apply to online auction services. We expect to continue to incur costs in complying with these laws and could be subject to fines or other penalties for any failure to comply with these laws. We may be required to make changes in our business to comply with these laws, which could increase our costs, reduce our revenue, cause us to prohibit the listing of certain items or restrict certain listing formats in some locations, any of which may adversely affect our financial condition or operating results.

In addition, the body of law regarding the potential liability of an online auction service for the activities of its users is not clear. Users of our websites may not always comply with our terms and conditions or with laws and regulations applicable to them and their transactions. It is possible that we may be subject to allegations of civil or criminal liability for any unlawful activities conducted by sellers or buyers. Any costs we incur because of any such allegations, or because of actual or alleged unlawful transactions using our marketplaces, or in our efforts to prevent any such transactions, may harm our opportunities for future revenue growth. In addition, any negative publicity we receive regarding any such transactions or allegations may damage our reputation, our ability to attract new sellers and buyers and our business.

In addition, if our sellers violate laws or regulations, or implement practices regarded as unethical, unsafe, or hazardous to the environment, it could damage our reputation, limit our growth, and negatively affect our business, prospects, financial condition and results of operations.

If we violate privacy regulations, our business could suffer harm.

We are subject to regulation at the federal, state and international levels relating to privacy and the use of third-party data, including personal user information and employee data. These statutory and regulatory requirements are evolving, increasing in complexity and number, sometimes conflicting and may change significantly. How companies collect, process, use, store, share or transmit personal and employee data is subject to increasing scrutiny by governments and the public, which could accelerate the adoption of additional legislation or regulation. New statutory or regulatory developments may restrict our ability to collect and use demographic and personal information from our buyers and our sellers, which could be costly or harm our marketing efforts. Further, there may be conflicts among the privacy and data protections laws adopted by the countries in which we operate. Judicial and regulatory application and interpretation of these statutory and regulatory requirements are often uncertain and may also limit our marketing efforts. Compliance with regulations regarding privacy, security and protection of user and employee data, increased government or private enforcement, and changing public attitudes about data privacy, may increase the cost of growing our business and require us to expend significant capital and other resources. Our failure to comply with these federal, state and international laws and regulations could subject us to lawsuits, fines, criminal penalties, statutory damages, adverse publicity and other costs which could decrease our profitability.

Certain categories of assets sold on our marketplaces are subject to government restrictions.

We sell assets, such as scientific instruments, information technology equipment and aircraft parts, that are subject to export control and economic sanctions laws, among other laws, imposed by the United States and other governments. Such restrictions include the U.S. Export Administration Regulations, the International Traffic in Arms Regulations, and economic sanctions and embargo laws administered by the Office of the Foreign Assets Control Regulations. These restrictions prohibit us from selling property to (1) persons or entities that appear on lists of restricted or prohibited parties maintained by the United States or other governments or (2) countries, regimes, or nationals that are the target of applicable economic sanctions or other embargoes.

We may incur significant costs or be required to modify our business to comply with these requirements. If we are alleged to have violated these laws or regulations we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with U.S. federal government agencies. In addition, we could suffer serious harm to our reputation if allegations of impropriety are made against us, whether or not true.

We may be subject to product liability claims if people or property are harmed by the assets we sell.

Some assets we sell through our e-commerce marketplaces may expose us to product liability claims relating to personal injury, death, or environmental or property damage, and may be the subject of product recalls or other actions. Our exposure to product liability claims may be increased if, for example, the manufacturers of the relevant assets do not have enough protection from such claims. Defense of any such actions could be costly and involve significant time and attention of our management and commitment of other resources, may cause us to incur monetary liabilities or penalties, and may require us to change our business in ways adverse to us. We cannot be certain that our insurance coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on commercially reasonable terms, or at all. In addition, some of our agreements with our vendors and sellers do not indemnify us against product liability.

Unfavorable findings resulting from audit or investigation could subject us to a variety of penalties and sanctions, could negatively impact our future operating results and could force us to adjust previously reported operating results.

Many of our sellers, including large commercial corporations and governmental entities, have the right to audit our performance under our contracts. Any adverse findings from audits or reviews of our performance could result in a significant adjustment to our previously reported operating results. The results of an audit could significantly limit the volume and type of assets made available to us, resulting in lower revenue and profitability. If such an audit uncovers improper or illegal activities, we could be subject to civil and criminal penalties, administrative sanctions and could suffer serious harm to our reputation. Government and law enforcement agencies may also investigate our activities under contracts with commercial businesses and governmental entities. If such an investigation alleges that we engaged in improper or illegal activities, we could be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with government agencies. If, as the result of a government audit or investigation, or for any other reason, we are suspended or debarred from contracting with governments generally, or any specific agency, if our reputation or relationship with government agencies is impaired, or if any government otherwise ceases doing business with us or significantly decreases the amount of business it does with us, our revenue and profitability could substantially decrease.

Our operations are subject to extensive anti-corruption laws and regulations.

Due to the international scope of our operations, we are subject to the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-corruption laws of other countries. These laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence foreign government officials to obtain or retain business or obtain an unfair advantage. Global enforcement of these laws has increased substantially in recent years. Our practices and policies to promote compliance with such laws and regulations may not be effective and violations of anti-corruption laws or regulations by our employees or by intermediaries acting on our behalf may result in severe criminal or civil sanctions, disrupt our business and adversely affect our reputation, business and results of operations or financial condition.

Fraudulent activities involving our websites and disputes relating to transactions on our websites may cause us to lose sellers and buyers and hurt our ability to grow our business.

We periodically receive complaints of fraudulent activities of buyers or sellers on our marketplace, including disputes over the quality of goods and services, unauthorized use of credit card and bank account information and identity theft, credit chargebacks that are fraudulent in nature, potential breaches of system security, and infringement of third-party copyrights, trademarks and trade names or other intellectual property rights. From time to time, we have received complaints that our sellers or buyers trading in our marketplaces are alleged to have engaged in fraudulent or unlawful activity. In addition, we may suffer losses because of purchases paid for with fraudulent credit card data even though the associated financial institution approved payment. If a transaction is disputed, we may not be able to require users of our services to make required payments or to deliver promised goods. We also may receive complaints from buyers about the quality of purchased goods, requests for reimbursement or communications threatening or commencing legal actions against us. Negative publicity generated because of fraudulent conduct by third parties or failure to satisfactorily settle disputes related to transactions on our websites could damage our reputation, cause us to lose sellers and buyers and hurt our ability to grow our business.

Some provisions of our charter, bylaws and Delaware law inhibit potential acquisition bids.

Our corporate documents and Delaware law contain provisions that may enable our board of directors to resist a change in control of our company even if a change in control were to be considered favorable by you and other stockholders. These provisions include: a staggered board of directors; a prohibition on actions by our stockholders by written consent; limitations on persons authorized to call a special meeting of stockholders; the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; advance notice procedures required for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; and the requirement that board vacancies be filled by a majority of our directors then in office.

These provisions could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions you desire. In addition, our bylaws provide that the Delaware Court of Chancery will be the exclusive forum for certain types of legal action (or, if the Court of Chancery does not have jurisdiction, another state court or a federal court within Delaware). This provision may make it more difficult for you and other stockholders to challenge certain corporate actions we take.

We may not adequately protect or enforce our intellectual property rights, which could harm our reputation and negatively affect the growth of our business.

We regard our intellectual property, particularly domain names, copyrights and buyer database trade secrets, as critical to our success. We rely on contractual restrictions and copyright and trade secret laws to protect our proprietary rights, know-how, information and technology. Despite these protections, a third party could copy or otherwise obtain and use our intellectual property without authorization or independently develop similar intellectual property.

We currently are the registered owners of several Internet domain names, including www.liquidation.com, www.govdeals.com, www.allsurplus.com, www.secondipity.com, www.go-dove.com, www.machinio.com, www.machineryhost.com and www.bid4assets.com. We pursue the registration of our domain names in the U.S. and internationally. We have no patents or registered copyrights. Effective patent, copyright, trademark, service mark, trade secret and domain name protection are expensive to maintain and may require litigation to enforce. We have licensed in the past, and expect to license in the future, certain of our proprietary rights, such as trademarks or copyrighted material, to others. These licensees may take actions that diminish the value of our proprietary rights or harm our reputation. Our competitors may adopt trade names or domain names similar to ours, impeding our ability to promote our marketplaces and possibly leading to buyer or seller confusion. In addition, we could face trade name, trademark or service mark infringement claims brought by owners of other registered or unregistered trademarks or service marks, including trademarks or service marks that may incorporate variations of our marketplace names. Any claims related to our intellectual property or confusion related to our marketplaces could damage our reputation and negatively affect the growth of our business.

Assertions that we infringe on intellectual property rights of others could result in significant costs and substantially harm our business and operating results.

Third parties may assert that we have infringed their intellectual property rights in technology or otherwise based on our internally developed systems or use of licensed third-party technology to operate our online auction platform and related websites. Third parties also could assert intellectual property infringement claims against the parties from whom we license technology. If we are forced to defend against any infringement claims, whether they are with or without merit or are determined in our favor, we may face costly litigation, diversion of technical and management personnel and/or delays in completion of sales. Furthermore, the outcome of a dispute may require us to change technology, develop non-infringing technology or enter into royalty or licensing agreements. A switch to different technology could interrupt our business. Internal development of a non-infringing technology may be expensive and time-consuming, if we are able to successfully develop such technology at all. Royalty or licensing agreements, if required, may be unavailable on terms acceptable to us, or at all. Incurrence of any of these costs could negatively impact our operating results.

General Business Risks

Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business, operating results and stock price.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include in our annual report a report containing management's assessment of the effectiveness of our internal controls over financial reporting as of the end of our fiscal year and a statement as to whether or not such internal controls are effective. Compliance with these requirements has resulted in, and is likely to continue to result in, significant costs and the commitment of time and operational resources. Recently completed initiatives, as well as other changes in our business (including initiatives to invest in information systems, transition particular functions to third party providers, and acquire new businesses such as Bid4Assets and Machinio) have and will necessitate modifications to our internal controls. We cannot be certain that our design for internal control over financial reporting, or any changes to be made, will enable management to determine that our internal controls are effective for any period. If we cannot conclude that our internal controls over financial reporting are effective, market perception of our financial condition and the trading price of our stock may be adversely affected, and seller and buyer perception of our business may suffer.

Our internal control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or agents, or by third parties with whom we work. Internal controls may become less effective over time because of, among other things, changes in conditions, failures to comply with our policies and procedures or new business that strains our system of internal controls.

Changes in accounting and reporting policies or practices may affect our financial results, which may affect our stock price.

Our accounting policies are fundamental to determining and understanding our financial results and condition. Some require our management to use estimates and make subjective and complex judgments about matters that are uncertain. Factors may arise over time that lead us to change our estimates and judgments. Sometimes, our management must use judgment to select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet may cause us to report materially different results than would have been reported under a different alternative. Any changes in accounting policies or methods could reduce our net income, which reductions may be independent of changes in our operations. These reductions in reported net income could cause our stock price to decline.

Damage to our reputation could harm our business.

Our positive reputation is based on our core values of integrity, customer focus, ~~relentless~~continuous improvement, innovation, ~~to support leadership,~~ mutual trust and accountability, shared success and doing well and doing good. Our ability to attract and retain highly skilled employees, clients and buyers, and to successfully do business would be harmed if our reputation was damaged. Harm to our reputation can arise from numerous sources, including, among others, employee misconduct, security breaches, compliance failures, litigation or regulatory outcomes or governmental investigations. Our reputation could also be harmed by the failure or perceived failure of an affiliate, joint-venture, or a vendor or other third party with which we do business, to comply with laws or regulations. In addition, our reputation or prospects may be significantly damaged by adverse publicity or negative information regarding us, whether or not true, that may be posted on social media, non-mainstream news services or other parts of the internet, and this risk can be magnified by the speed and pervasiveness with which information is disseminated through those channels. Should any of these or other events or factors that can undermine our reputation occur, the additional costs and expenses that we may need to incur to address the issues giving rise to the damage to our reputation may adversely affect our earnings and results of operations. Any damage to our reputation could impair our ability to retain existing or attract new customers, investors and employees.

We carry a significant amount of goodwill on our balance sheet.

As of September 30, 2022, we had goodwill of $88.9 million. The future occurrence of a potential indicator of impairment, such as a significant adverse change in business climate, an adverse action or assessment by a regulator, unanticipated competition, a material negative change in relationships with significant customers, strategic decisions made in response to economic or competitive conditions, loss of key personnel, or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or disposed of, could result in goodwill impairment charges. We have recorded goodwill impairment charges in the past, and such charges materially affected our historical results of operations. For additional information, see Note 7 - Goodwill, to the accompanying consolidated financial statements.

2131

~~We face legal uncertainties relating to the internet in general and to the e-commerce industry in particular and may become subject to costly government regulation.~~

The laws and regulations related to the internet and e-commerce are evolving. These laws and regulations relate to issues such as user privacy, freedom of expression, pricing, fraud, quality of products and services, taxation, advertising, intellectual property rights and information security. Laws governing issues such as property ownership, copyrights and other intellectual property issues, taxation, libel and defamation, obscenity and personal privacy could also affect our business. Laws adopted prior to the advent of the internet may not contemplate or address the unique issues of the Internet and related technologies and it is not clear how they will apply. Current and future laws and regulations could increase our cost of doing business and/or decrease the demand for our services.

~~Our auction business may be subject to a variety of additional costly government regulations.~~

Many states and other jurisdictions have regulations governing the conduct of traditional "auctions," the liability of traditional "auctioneers" in conducting auctions and handling property by "secondhand dealers", which may apply to online auction services. In addition, certain states have laws or regulations that expressly apply to online auction services. We expect to continue to incur costs in complying with these laws and could be subject to fines or other penalties for any failure to comply with these laws. We may be required to make changes in our business to comply with these laws, which could increase our costs, reduce our revenue, cause us to prohibit the listing of certain items or restrict certain listing formats in some locations, which may adversely affect our financial condition or operating results.

~~If we violate increasing levels of regulation relating to privacy, our business could suffer harm.~~

We are subject to regulation at the federal, state and international levels relating to privacy and the use of third-party data, including personal user information and employee data. These statutory and regulatory requirements are evolving, increasing in complexity and number, and may change significantly. How companies collect, process, use, store, share or transmit personal and employee data is subject to increasing scrutiny by governments and the public, which could accelerate the adoption of additional legislation or regulation. New statutory or regulatory developments may restrict our ability to collect and use demographic and personal information from our buyers and our sellers, which could be costly or harm our marketing efforts. Further, there may be conflicts among the privacy and data protections laws adopted by the countries in which we operate. Judicial and regulatory application and interpretation of these statutory and regulatory requirements are often uncertain and may also limit our marketing efforts. Compliance with regulations regarding privacy, security and protection of user and employee data, increased government or private enforcement, and changing public attitudes about data privacy, may increase the cost of growing our business and require us to expend significant capital and other resources. Our failure to comply with these federal, state and international laws and regulations could subject us to lawsuits, fines, criminal penalties, statutory damages, adverse publicity and other costs which could decrease our profitability.

~~Certain categories of merchandise sold on our marketplaces are subject to government restrictions.~~

We sell merchandise, such as scientific instruments, information technology equipment and aircraft parts, that is subject to export control and economic sanctions laws, among other laws, imposed by the United States and other governments. Such restrictions include the U.S. Export Administration Regulations, the International Traffic in Arms Regulations, and economic sanctions and embargo laws administered by the Office of the Foreign Assets Control Regulations. These restrictions prohibit us from selling property to (1) persons or entities that appear on lists of restricted or prohibited parties maintained by the United States or other governments or (2) countries, regimes, or nationals that are the target of applicable economic sanctions or other embargoes.

~~with U.S. federal government agencies. In addition, we could suffer serious harm to our reputation if allegations of impropriety are made against us, whether or not true.~~

~~We are regularly subject to general litigation and other claims that could adversely affect our business.~~

Our business is regularly subject to claims, lawsuits and other proceedings regarding intellectual property, securities, labor and employment, commercial disputes, the provision of services and other matters. The outcome and impact of such claims, lawsuits and proceedings cannot be predicted with certainty. Regardless of the outcome, such proceedings can have an adverse impact on us because of legal costs, diversion of management resources and other factors. It is possible that a resolution of one or more of such proceedings could require us to make substantial payments to satisfy judgments, fines or penalties or to settle claims or proceedings, any of which could harm our business.

~~We may be subject to product liability claims if people or property are harmed by the products we sell.~~

Some products we sell through our e-commerce marketplaces may expose us to product liability claims relating to personal injury, death, or environmental or property damage, and may be the subject of product recalls or other actions. Our exposure to product liability claims may be increased if, for example, the manufacturers of the relevant products do not have enough protection from such claims. Defense of any such actions could be costly and involve significant time and attention of our management and commitment of other resources, may cause us to incur monetary liabilities or penalties, and may require us to change our business in ways adverse to us. We cannot be certain that our insurance coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. In addition, some of our agreements with our vendors and sellers do not indemnify us against product liability.

Many of our sellers, including large commercial corporations and federal, state and local governments, have the right to audit our performance under our contracts. Any adverse findings from audits or reviews of our performance could result in a significant adjustment to our previously reported operating results. The results of an audit could significantly limit the volume and type of merchandise made available to us, resulting in lower GMV, revenue and profitability. If such a government audit uncovers improper or illegal activities, we could be subject to civil and criminal penalties, administrative sanctions and could suffer serious harm to our reputation. Government and law enforcement agencies may also investigate our activities under contracts with commercial businesses and federal, state, local and municipal governments. If such an investigation alleges that we engaged in improper or illegal activities, we could be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with government agencies. If, as the result of a government audit or investigation, or for any other reason, we are suspended or debarred from contracting with the federal or other governments generally, or any specific agency, if our reputation or relationship with government agencies is impaired, or if any government otherwise ceases doing business with us or significantly decreases the amount of business it does with us, our revenue and profitability could substantially decrease.

~~Our operations are subject to extensive anti-corruption laws and regulations.~~

~~Our international operations expose us to several risks.~~

•~~local economic and political conditions, or civil unrest that may disrupt economic activity in affected countries;~~

•restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products and services, including uncertainty because of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations, and practices regarding the enforcement of intellectual property rights;

•~~business licensing or certification requirements, such as for imports, exports, and web services;~~

•~~limitations on the repatriation and investment of funds and foreign currency exchange restrictions;~~

•~~shorter payable and longer receivable cycles and the resultant negative impact on cash flow;~~

•~~laws and regulations regarding consumer and data protection, privacy, network security, encryption, payments, and restrictions on pricing or discounts;~~

•~~lower levels of consumer spending and fewer opportunities for growth compared to the U.S.;~~

•~~lower levels of credit card usage and increased payment risk;~~

•~~different employee/employer relationships and the existence of works councils;~~

•~~compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting certain payments to government officials and other third parties;~~

•~~laws and policies of the U.S. and other jurisdictions affecting trade, foreign investment, loans, and taxes; and~~

•~~geopolitical events, including war and terrorism.~~

If one or more states assert that we should collect sales or other taxes on the sale of our merchandise or the merchandise of third parties we offer for sale on our websites, our business could be harmed.

Applying indirect taxes (such as sales and use tax, value-added tax, or VAT, goods and services tax, including “digital services tax”, business tax and gross receipt tax) to e-commerce businesses is a complex and evolving issue. Many of the fundamental statutes and regulations that impose these taxes were established before the adoption and growth of the Internet and e-commerce. Often, it is not clear how existing statutes apply to e-commerce services. In addition, governments around the world are looking for ways to increase revenues, which has resulted in legislative action, including new taxes on services and gross revenues and through other indirect taxes. Many transactions occur during the ordinary course of business for which the ultimate tax determination is uncertain.

We are required to collect and remit sales taxes under certain agreements that we have with sellers. We also collect and remit sales or other similar taxes relating to shipments of goods into states in which we have a substantial presence. In addition, as we grow our business, any new operation in states in which we do not collect and remit sales taxes could subject shipments into such states to state sales taxes under current or future laws.

In June 2018, the U.S. Supreme Court ruled in favor of South Dakota in a case involving a South Dakota law that requires out-of-state sellers to collect sales tax from South Dakota customers if the sellers satisfy certain thresholds. This decision overrules a previous case that required a company to have a physical presence in a state before it could require tax collection. A number of states have adopted or are considering laws that require marketplace facilitators to collect and remit taxes on behalf of its marketplace sellers. These rules increase our tax compliance costs and risks related to transactions conducted on our marketplaces. Changes in state or federal laws, or our business model, business strategy, or marketing initiatives may require us to collect tax where we do not currently collect such tax. These developments may cause a decrease in future sales, may decrease our ability to compete, increase our compliance costs or otherwise harm our business.

Similar issues exist outside of the United States, where the application of VAT or other indirect taxes on e-commerce providers is complex and evolving. For example, we pay input VAT on applicable taxable purchases within the various countries in which we operate. Usually, we may reclaim this input VAT from the relevant countries. However, the application of the laws and rules that allow such reclamation is sometimes uncertain. A successful assertion by one or more countries that we may not reclaim VAT could harm our business. In certain jurisdictions, we collect and remit indirect taxes on our fees and pay taxes on our purchases of goods and services. However, tax authorities may raise questions about our calculation, reporting and collection of taxes and may ask us to remit additional taxes. Should any new taxes become applicable or if the taxes we pay are deficient, our business could be harmed.

~~Our international operations expose us to foreign exchange fluctuations that could harm our operations.~~

We conduct business in many countries around the world and receive fees and pay expenses (including salaries to our international workforce) in several different currencies despite reporting our financial results in U.S. dollars. As a result, our financial results are impacted by fluctuations in foreign currency rates. The results of our foreign subsidiaries are translated from the local currency to US dollars for financial reporting purposes. For example, if the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated revenues and expenses will result in increased U.S. dollar denominated revenues and expenses. These factors and others may harm our business and our results of operations. In addition, currency exchange rates may negatively affect our results if we pay for inventory using a different currency than we receive when we sell the inventory.

~~Fraudulent activities involving our websites and disputes relating to transactions on our websites may cause us to lose sellers and buyers and hurt our ability to grow our business.~~

We periodically receive complaints of fraudulent activities of buyers or sellers on our marketplace, including disputes over the quality of goods and services, unauthorized use of credit card and bank account information and identity theft, potential breaches of system security, and infringement of third-party copyrights, trademarks and trade names or other intellectual property rights. From time to time, we have received complaints that our sellers or buyers trading in our marketplaces are alleged to have engaged in fraudulent or unlawful activity. In addition, we may suffer losses because of purchases paid for with fraudulent credit card data even though the associated financial institution approved payment. If a transaction is disputed, we may not be able to require users of our services to make required payments or to deliver promised goods. We also may receive complaints from buyers about the quality of purchased goods, requests for reimbursement or communications threatening or commencing legal actions against us. Negative publicity generated because of fraudulent conduct by third parties or failure to satisfactorily settle disputes related to transactions on our websites could damage our reputation, cause us to lose sellers and buyers and hurt our ability to grow our business.

~~Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business, operating results and stock price.~~

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include in our annual report a report containing management's assessment of the effectiveness of our internal controls over financial reporting as of the end of our fiscal year and a statement as to whether or not such internal controls are effective. Compliance with these requirements has resulted in, and is likely to continue to result in, significant costs and the commitment of time and operational resources. Recently completed initiatives, as well as other changes in our business, including initiatives to invest in information systems or to transition particular functions to third party providers, have and will necessitate modifications to our internal controls. We cannot be certain that our design for internal control over financial reporting, or any changes to be made, will enable management to determine that our internal controls are effective for any period. If we cannot conclude that our internal controls over financial reporting are effective, market perception of our financial condition and the trading price of our stock may be adversely affected, and seller and buyer perception of our business may suffer.

~~Changes in accounting and reporting policies or practices may affect our financial results, which may affect our stock price.~~

Our accounting policies are fundamental to determining and understanding our financial results and condition. Some require our management to use estimates and make subjective and complex judgments about matters that are uncertain. Factors may arise over time that lead us to change our estimates and judgments. Sometimes, our management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet may cause us to report materially different results than would have been reported under a different alternative. Any changes in accounting policies or methods could reduce our net income, which reductions may be independent of changes in our operations. These reductions in reported net income could cause our stock price to decline. For example, our operating results for the year ended September 30, 2019 were affected by the required adoption of ASC 606, ~~Revenue from Contracts with Customers. Similar impacts related to changes in accounting policies may occur in the future.~~

~~Our stock price has been volatile, and your investment in our common stock could decline in value.~~

The worldwide financial crisis led to an increase in the overall volatility of the stock market. Despite improved stock market performance, the increased volatility and other broad market and industry factors may adversely affect the market price of our

~~common stock, regardless of our actual operating performance. Other factors that could cause fluctuation in our stock price may include:~~

•~~actual or anticipated variations in quarterly operating results;~~

•~~changes in financial estimates by us or by a securities analyst who covers our stock;~~

•~~publication of research reports about our company or industry;~~

•~~conditions or trends in our industry;~~

•~~stock market price and volume fluctuations of other publicly traded companies and, in particular, those whose business involves the Internet and e-commerce;~~

•~~announcements by us or our competitors of significant contracts (or the amendment or loss of such contracts), acquisitions, commercial relationships, strategic partnerships or divestitures;~~

•~~announcements by us or our competitors of technological innovations, new services or service enhancements;~~

•~~announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;~~

•~~the passage of legislation or other regulatory developments that adversely affect us, our sellers or buyers, or our industry;~~

•~~additions or departures of key personnel;~~

•~~sales of our common stock, including sales of our common stock by our directors and officers or specific stockholders; and~~

•~~general economic conditions and slow or negative growth of related markets.~~

~~Some provisions of our charter, bylaws and Delaware law inhibit potential acquisition bids that some investors may consider favorable to management.~~

•~~a staggered board of directors;~~

•~~a prohibition on actions by our stockholders by written consent;~~

•~~limitations on persons authorized to call a special meeting of stockholders;~~

•~~the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;~~

•~~advance notice procedures required for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; and~~

•~~the requirement that board vacancies be filled by a majority of our directors then in office.~~

~~We may need additional financing in the future, which may not be available on favorable terms, if at all.~~

We may need additional funds to finance our operations, as well as to enhance our services, acquire inventory for our businesses, fund initiatives, respond to competitive pressures, acquire complementary businesses or technologies or otherwise support our growth. We may also require additional funds if vendors and other third parties from whom we purchase inventory, other goods or services extend less favorable credit terms to us. Our business may not generate the cash needed to finance such requirements. We do not have a credit facility with third-party lenders from which we may draw funds. If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our existing stockholders would be reduced, and these securities may have rights, preferences or privileges senior to those of our common stock. The general economic and capital market conditions in the United States and other parts of the world can deteriorate significantly, limiting access to capital and increasing the cost of capital. A large degree of economic uncertainty remains both domestically and abroad, which can adversely affect access to capital, and the cost of capital. If adequate funds are not available or are not available on

acceptable terms, our ability to enhance our services, fund strategic initiatives, respond to competitive pressures, take advantage of business opportunities or grow our business would be limited, and we might need to restrict our operations and initiatives.

~~We may not adequately protect or enforce our intellectual property rights, which could harm our reputation and negatively affect the growth of our business.~~

We regard our intellectual property, particularly domain names, copyrights and trade secrets, as critical to our success. We rely on contractual restrictions and copyright and trade secret laws to protect our proprietary rights, know-how, information and technology. Despite these protections, a third party could copy or otherwise obtain and use our intellectual property without authorization or independently develop similar intellectual property.

We currently are the registered owners of several Internet domain names, including www.liquidation.com, www.govdeals.com, www.networkintl.com, www.secondipity.com, www.go-dove.com and www.machinio.com. We pursue the registration of our domain names in the U.S. and internationally. We have no patents or registered copyrights. Effective patent, copyright, trademark, service mark, trade secret and domain name protection are expensive to maintain and may require litigation to enforce. We have licensed in the past, and expect to license in the future, certain of our proprietary rights, such as trademarks or copyrighted material, to others. These licensees may take actions that diminish the value of our proprietary rights or harm our reputation. Our competitors may adopt trade names or domain names similar to ours, impeding our ability to promote our marketplaces and possibly leading to buyer or seller confusion. In addition, we could face trade name, trademark or service mark infringement claims brought by owners of other registered or unregistered trademarks or service marks, including trademarks or service marks that may incorporate variations of our marketplace names. Any claims related to our intellectual property or confusion related to our marketplaces could damage our reputation and negatively affect the growth of our business.

~~Assertions that we infringe on intellectual property rights of others could result in significant costs and substantially harm our business and operating results.~~

Third parties may assert that we have infringed their intellectual property rights in technology or otherwise. We use internally developed systems and licensed technology to operate our online auction platform and related websites. Third parties could assert intellectual property infringement claims against us based on our internally developed systems or use of licensed third-party technology. Third parties also could assert intellectual property infringement claims against parties from whom we license technology. If we are forced to defend against any infringement claims, whether they are with or without merit or are determined in our favor, we may face costly litigation, diversion of technical and management personnel and/or delays in completion of sales. Furthermore, the outcome of a dispute may require us to change technology, develop non-infringing technology or enter into royalty or licensing agreements. A switch to different technology could interrupt our business. Internal development of a non-infringing technology may be expensive and time-consuming, if we are able to successfully develop such technology at all. Royalty or licensing agreements, if required, may be unavailable on terms acceptable to us, or at all. Incurrence of any of these costs could negatively impact our operating results.

~~Global and regional economic conditions could harm our business.~~

Our operations and performance depend significantly on global and economic conditions. Adverse economic conditions and events, including uncertainties and instability in economic and market conditions caused by the United Kingdom’s vote to exit the European Union, could have an adverse and negative impact on companies and customers with which we do business. This could have a material adverse effect on our business including by reducing the volume and prices of transactions on our marketplaces. Separately, any factors that reduce cross border trade or make such trade more difficult could harm our business. Increasing costs, such as increasing tariffs, would make international trade less profitable and adversely affect our global business.

Item 1B. Unresolved Staff Comments.

~~Not Applicable~~None.

Item 2. Properties.

We lease the following properties as of September 30, ~~2019:~~2022:

Purpose

Location

Segment

Square Feet

Lease Expiration Date

Corporate Headquarters

Bethesda, Maryland, USA

Corporate & Other

~~18,412~~7,774

April 30, 2023

Warehouse

~~Dallas,~~Atlanta, Georgia, USA

GovDeals

47,636

May 31, 2024

Warehouse

Brampton, Canada

RSCG

53,621

August 31, 2025

Warehouse

E. Brunswick, NJ, USA

CAG

4,800

December 31, 2025

Warehouse

Garland, Texas, USA

RSCG

127,144

~~December~~January 31, ~~2020~~2026

Warehouse

~~Plainfield, Indiana,~~Hebron, Kentucky, USA

RSCG

~~187,704~~

101,614

~~April~~July 31, 2025

Warehouse

Kenilworth, NJ, USA

CAG

10,507

December 31, 2022

Warehouse

Las Vegas, Nevada, USA

RSCG

32,000

November 30, ~~2024~~2022

Warehouse

Lithia Springs, Georgia, USA

GovDeals

13,000

December 31, 2022

Warehouse

North Las Vegas, Nevada, USA

RSCG

102,400

June 30, 2026

Warehouse

~~March~~Phoenix, Arizona, USA

RSCG

84,690

January 31, ~~2021~~2027

Warehouse

Pittston, Pennsylvania, USA

RSCG

108,536

January 7, 2027

Warehouse

Plainfield, Indiana, USA

RSCG

187,704

April 30, 2024

Administrative

~~Scottsdale, Arizona,~~Montgomery, Alabama, USA

~~CAG~~GovDeals

~~23,536~~19,762

December 31, ~~2020~~2023

Administrative

Plano, Texas USA

Corporate & Other

~~12,234~~

2,280

~~December 31, 2021~~

~~Administrative~~

~~Montgomery, Alabama, USA~~

~~GovDeals~~

~~14,950~~

~~December 31, 2023~~

~~Administrative~~

~~Houston, Texas, USA~~

~~CAG~~

~~9,693~~

~~May 31, 2020~~

~~Storage Lot~~

~~Fontana, California, USA~~

~~GovDeals~~

~~511,830~~

~~May 31, 2022~~

~~Warehouse~~

~~Florence, Kentucky, USA~~

~~RSCG~~

~~102,616~~

~~January 31, 2021~~

~~Administrative~~

~~London, GBR~~

~~CAG~~

~~3,430~~

~~June 5, 2022~~

~~Warehouse~~

~~Brampton, Canada~~

~~RSCG~~

~~53,621~~

~~August 31, 2020~~

~~Warehouse~~

~~E. Brunswick, NJ, USA~~

~~CAG~~

~~9,600~~

~~December 31, 2020~~

~~Administrative~~

~~Berlin, Germany~~

~~Machinio~~

~~3,143~~

~~July 31, 2022~~

~~Administrative~~

~~Chicago, Illinois, USA~~

~~Machinio~~

~~4,298~~

~~December 31, 2021~~

~~Warehouse~~

~~Atlanta, Georgia, USA~~

~~GovDeals~~

~~47,636~~

~~May 31, 2021~~November 30, 2025

In addition, we lease various administrative spaces in North America totaling ~~18,952 square feet, in Europe, 1,690~~7,864 square feet and in Asia, ~~4,980~~3,747 square feet. We also own a 420,000 square foot warehouse located in North Wilkesboro, North Carolina, USA.

Item 3. Legal Proceedings.

From time to time, we may become involved in litigation relating to claims arising in the ordinary course of the business. ~~There are no other claims or actions pending or threatened against us that, if adversely determined, would in~~Information regarding the Company's ~~management's judgment have a material adverse effect on~~legal proceedings can be found in Note 15 - Legal Proceedings, of the ~~Company.~~accompanying Notes to the Consolidated Financial Statements.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

~~Price Range of Common Stock~~Market Information

Our common stock has been traded on Nasdaq Stock Market under the symbol LQDT since February 23, 2006.

Holders

As of ~~December 6, 2019,~~November 15, 2022, there were approximately ~~1,825~~10,748 beneficial holders of our common stock and 26 holders of record of our common stock.

2832

Dividends

We have not paid any cash dividends on our common stock, and we have no present intention to do so. Payment of cash dividends, if any, will be determined by our Board of Directors after consideration of our financial condition, operating results, current and anticipated cash needs and other relevant factors.

Stock Performance Graph

*$100 invested on 9/30/1417 in stock or index, including reinvestment of dividends. Fiscal year ending September 30.

~~Item 6. Selected Financial Data.~~

You should read the following selected consolidated financial data together with our consolidated financial statements and the related notes, and with "Management's Discussion and Analysis of Financial Condition and Results of Operations," included elsewhere in this Annual Report on Form 10-K. The consolidated statement of operations data for the years ended September 30, 2019, 2018 and 2017 and the consolidated balance sheet data as of September 30, 2019 and 2018 are derived from, and are qualified by reference to, our consolidated financial statements that are included in this Annual Report on Form 10-K. The consolidated statement of operations data for the years ended September 30, 2016 and 2015, and the consolidated balance sheet data as of September 30, 2017, 2016 and 2015 are derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K, adjusted for the retrospective adoption of new accounting standards as applicable.

2933

Year ended September 30,
2015 2016 2017 2018 2019
(dollars in thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue $ 315,668 $ 233,828 $ 188,570 $ 149,677 $ 147,889
Fee revenue 81,457 82,626 81,445 74,837 78,636
Total revenue 397,125 316,454 270,015 224,514 226,525
Costs and expenses:
Cost of goods sold 166,009 143,127 126,227 100,087 102,414
Seller distributions 28,093 11,214 19,298 14,715 10,831
Technology and operations 99,550 93,405 82,988 60,786 51,594
Sales and marketing 41,465 37,570 35,211 33,703 36,703
General and administrative (8) 41,560 39,969 36,079 30,493 34,249
Depreciation and amortization 9,235 6,502 5,796 4,599 5,091
Acquisition costs and impairment of goodwill and long-lived assets 147,414 19,037 1,009 467 102
Business disposition loss 7,963 — — — —
Other operating expenses (1) 273 — 3,651 1,392 5,049
Total costs and expenses 541,562 350,824 310,259 246,242 246,033
Loss from operations (144,437) (34,370) (40,244) (21,728) (19,508)
Interest income and other income, net (8) (51) (1,469) (606) (785) (1,448)
Loss before provision for income taxes (144,386) (32,901) (39,638) (20,943) (18,060)
Provision (benefit) for income taxes (39,571) 27,025 (451) (9,328) 1,200
Net loss $ (104,815) $ (59,926) $ (39,187) $ (11,615) $ (19,260)
Basic earnings per common share $ (3.50) $ (1.96) $ (1.25) $ (0.36) $ (0.58)
Diluted earnings per common share $ (3.50) $ (1.96) $ (1.25) $ (0.36) $ (0.58)
Basic weighted average shares outstanding 29,987,985 30,638,163 31,402,921 32,095,491 33,062,976
Diluted weighted average shares outstanding 29,987,985 30,638,163 31,402,921 32,095,491 33,062,976
Non-GAAP Financial Measures:
EBITDA (2) $ (134,980) $ (27,616) $ (34,204) $ (16,794) $ (14,417)
Adjusted EBITDA (2) 33,075 3,668 (21,595) (7,334) (1,596)
Supplemental Operating Data:
Gross merchandise volume (3) $ 798,977 $ 642,078 $ 629,330 $ 626,406 $ 639,876
Completed transactions (4) 567,000 600,000 576,000 567,000 607,000
Total registered buyers (5) 2,845,000 2,986,000 3,171,000 3,357,000 3,580,000
Total auction participants (6) 2,483,000 2,417,000 2,290,000 2,079,000 2,085,000
Issuer Purchases of Equity Securities

The following table presents information about our repurchases of common stock that were made during the three months ended September 30, 2022 (in millions, except share and per share amounts):


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as a Part of a Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program(1)
July 1 to July 31, 2022	—	$	—	—	$	6.6
August 1 to August 31, 2022	19,161	19.76		—	6.6
September 1 to September 30, 2022	—	—		—	6.6
Total	19,161			—

(1)Separate from the share repurchase program, our stock incentive plans allow for participants to exercise stock options by surrendering shares of common stock equivalent in value to the exercise price due. During the three months ended September 30, 2022, participants surrendered 19,161 shares of common stock in the exercise of stock options, respectively. Any shares surrendered to the Company in this manner are not available for future grant.

From time to time, we have been authorized to repurchase issued and outstanding shares of our common stock under a share repurchase program approved by our Board of Directors. Share repurchases may be made through open market purchases, privately negotiated transactions or otherwise, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The repurchase program may be discontinued or suspended at any time and will be funded using our available cash.

On May 13, 2022, our Board of Directors authorized a new stock repurchase plan of up to $12 million of our outstanding shares of common stock through June 30, 2024 (the May 2022 Repurchase Plan). As of September 30, 2022, the Company had $6.6 million of remaining authorization to repurchase shares under the May 2022 Stock Repurchase Plan. On December 6, 2022, the Company's Board of Directors authorized the repurchase of up to an additional $8.4 million of the Company's outstanding shares of common stock through December 31, 2024.

As of September 30,
2015 2016 2017 2018 2019
(in thousands)
Consolidated Balance Sheet Data
Cash, cash equivalents and short-term investments $ 95,465 $ 134,513 $ 94,348 $ 78,448 $ 66,497
Working capital (7) 119,225 99,424 68,166 34,512 21,103
Total assets 288,488 260,109 215,229 201,832 187,283
Total liabilities 72,486 97,498 82,593 72,178 71,108
Total stockholders' equity 216,002 162,611 132,636 129,654 116,175

~~(1)~~The Company has reclassified certain business realignment expenses in 2015 to conform to the current year presentation. The reclassification had no effect on total operating expenses, net income, or cash flows.

~~(2)~~EBITDA and adjusted EBITDA are supplemental non-GAAP financial measures. GAAP means generally accepted accounting principles in the United States. EBITDA is equal to net income plus (a) interest income (expense) and other income (expense), net; (b) provision (benefit) for income taxes; and (c) depreciation and amortization. Our definition of Adjusted EBITDA differs from EBITDA because we further adjust EBITDA for stock-based compensation expense, acquisition costs such as transaction expenses and changes in contingent consideration estimates, losses on business dispositions, business realignment expense, deferred revenue purchase accounting adjustments, and goodwill and long-lived asset impairment. For a description of our use of EBITDA and adjusted EBITDA and a reconciliation of these non-GAAP financial measures to net income, see the discussion and related table below.

~~(3)Gross merchandise volume is the total sales value of all merchandise sold by us or our sellers through our marketplaces or by us through other channels during a given period of time.~~

~~(4)~~Completed transactions represent the number of transactions in a given period from which we have recorded revenue. Certain prior period amounts have been revised to conform with the current period presentation, which now includes completed B2C transactions.

~~(5)Total registered buyers as of a given date represent the aggregate number of persons or entities who have registered on one of our marketplaces.~~

~~(6)~~For each auction we manage, the number of auction participants represents the total number of registered buyers who have bid one or more times on that auction, and total auction participants for a given period is the sum of the auction participants in each auction conducted during that period.

~~(7)Working capital is defined as current assets minus current liabilities.~~

~~(8)~~As a result of adoption of ASU 2017-07 the Company retrospectively reclassified in the consolidated statement of operations the components of net periodic benefit other than the service cost component from General and administrative, a component of loss from operations, to Interest and other income, net, which is outside of loss from operations. See Note 2 for impact for the years ended September 30, 2019, 2018 and 2017. The impact for the years ended September 30, 2016 and 2015 was $252 thousand and $222 thousand, respectively.

~~We believe non-GAAP financial measures, such as EBITDA and adjusted EBITDA, are useful to an investor in evaluating our performance for the following reasons:~~

1.Depreciation and amortization expense relates to property and equipment, and intangible assets. Both of these expenses are non-cash charges that have significantly fluctuated over the past five years. As a result, we believe that adding back these non-cash charges to net income is useful in evaluating the operating performance of our business on a consistent basis from year to year.

2.As a result of varying federal and state income tax rates, we believe that presenting a financial measure that adjusts net income for provision for income taxes is useful to investors when evaluating the operating performance of our business on a consistent basis from year to year.

3.The authoritative guidance for stock-based compensation requires all share-based payments to employees, including grants of employee stock options, restricted stock and stock appreciation rights to be recognized in the income statement based on their estimated fair values. We believe adjusting net income for this stock-based compensation expense is useful to investors when evaluating the operating performance of our business on a consistent basis from year to year.

4.We believe adjusting net income for acquisition and disposition related transaction expenses and changes in contingent consideration is useful to investors when evaluating the operating performance of our business on a consistent basis from year to year.

5.We believe adjusting net income for business realignment expense is useful to investors when evaluating the operating performance of our business on a consistent basis from year-to-year, as these expenses are outside our ordinary course of business.

Item 6.We believe isolating non-cash charges, such as amortization and depreciation, and other items, such as impairment costs incurred outside our ordinary course of business, provides additional information about our cost structure, and, over time, helps track our performance.

7.We believe EBITDA and adjusted EBITDA are important indicators of our operational strength and the performance of our business because they provide a link between profitability and operating cash flow.

8.~~We also believe that analysts and investors use EBITDA and adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry.~~

~~Our management uses EBITDA and adjusted EBITDA:~~

1.as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis by removing the impact of items not directly resulting from our core operations;

2.~~for planning purposes, including the preparation of our internal annual operating budget;~~

3.~~to allocate resources to enhance the financial performance of our business;~~

4.~~to evaluate the effectiveness of our operational strategies; and~~

5.~~to evaluate our capacity to fund capital expenditures and expand our business.~~

EBITDA and adjusted EBITDA as calculated by us are not necessarily comparable to similarly titled measures used by other companies. In addition, EBITDA and adjusted EBITDA: (a) do not represent net income or cash flows from operating activities as defined by GAAP; (b) are not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered as alternatives to net income, income from operations, cash provided by operating activities or our other financial information as determined under GAAP.

We prepare adjusted EBITDA by adjusting EBITDA to eliminate the impact of items that we do not consider indicative of our core operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. As an analytical tool, adjusted EBITDA is subject to all of the limitations applicable to EBITDA. Our presentation of adjusted EBITDA should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.

~~The table below reconciles income from continuing operations to EBITDA and adjusted EBITDA from continuing operations for the periods presented.~~

Year ended September 30,
2015 2016 2017 2018 2019
(in thousands)
Net loss $ (104,815) $ (59,926) $ (39,187) $ (11,615) $ (19,260)
Interest expense and other (income) expense, net¹
171 (1,217) (362) (450) (1,101)
Provision (benefit) for income taxes (39,571) 27,025 (451) (9,328) 1,200
Depreciation and amortization 9,235 6,502 5,796 4,599 5,091
EBITDA from continuing operations (134,980) (27,616) (34,204) (16,794) (14,070)
Stock compensation expense²
12,405 12,247 7,377 6,597 6,823
Acquisition costs and impairment of goodwill and long-lived assets³
147,414 19,037 1,009 467 102
Business disposition loss 7,963 — — — —
Business realignment expenses⁴
273 — 4,223 1,942 1,578
Fair value adjustment to acquisition earn-out liability³
— — — — 3,500
Deferred revenue purchase accounting adjustment — — — 454 818

Adjusted EBITDA from continuing operations $ 33,075 $ 3,668 $ (21,595) $ (7,334) $ (1,249)

⁽¹⁾~~Interest expense and other income, net excludes non-services pension and other postretirement benefit expense.~~ [Reserved]

⁽²⁾~~Excludes the impact of forfeitures of stock awards by employees terminated by business realignment actions. That impact is included in the business realignment expense line.~~

⁽³⁾ ~~Acquisition costs and impairment of long-lived assets, and fair value adjustments to acquisition earn-out liability are included in Other operating expenses on the Statements of Operations.~~

⁽⁴⁾Business realignment expense includes the amounts accounted for as exit costs under ASC 420 as described in Note 14 to the Consolidated Financial Statements, and the related impacts of business realignment actions subject to other accounting guidance. Those related impacts were $317 thousand for the year ended September 30, 2019, due to forfeitures of stock awards by terminated employees. No related impacts were associated with the other periods presented.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our consolidated financial statements and related notes ~~and the information contained under the caption "Selected Consolidated Financial Data"~~ contained elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could vary materially from those indicated, implied, or suggested by these forward-looking statements as a result of many factors, including those discussed under "Risk Factors" and elsewhere in this Annual Report on Form 10-K.

Overview

About us. Liquidity Services is a leading global commerce company providing trusted marketplace platforms that power the circular economy. We ~~operate~~create a ~~network~~better future for organizations, individuals, and the planet by capturing and unleashing the intrinsic value of ~~e-commerce~~surplus. We connect millions of buyers and thousands of sellers through our leading auction marketplaces, ~~that~~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 marketplace platforms. These platforms ignite and enable a self-reinforcing cycle of value creation where buyers and sellers continue to ~~transact~~attract one another in an efficient, automated environment offering over 500 product categories. Our marketplaces provide professional buyers access to a global, organized supply of new, surplus, and scrap assets presented with digital images and other relevant product information. Additionally, we enable our corporate and government sellers to enhance their financial return on offered assets by providing a liquid marketplace and value-added services that encompass the consultative management, valuation, and sale of surplus assets. Our services include program management, valuation, asset management, reconciliation, refurbishment and recycling, fulfillment, marketing and sales, warehousing and transportation, buyer support, compliance and risk mitigation, as well as self-directed service tools for its sellers. We organize the products on our marketplaces into categories across major industry verticals such as consumer electronics, general merchandise, apparel, scientific equipment, aerospace parts and equipment, technology hardware, energy equipment, industrial capital assets, fleet and transportation equipment and specialty equipment. Our marketplaces are: www.liquidation.com, www.govdeals.com, www.networkintl.com, www.secondipity.com, and www.go-dove.com. We also operate a global search engine for used machinery and equipment at www.machinio.com. We have over 13,000 sellers, including Fortune 1000 and Global 500 organizations as well as federal, state, and local government agencies. We have four reportable segments, Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), GovDeals, and Machinio. See Note 16 to the Consolidated Financial Statements for further information on our reportable segments.

~~We believe our ability to create liquid marketplaces for surplus and salvage assets generates~~ever-increasing numbers. The result is a continuous flow of goods ~~from~~that becomes increasingly valuable as more participants join the platform, thereby creating positive network effects that benefit sellers, buyers, and shareholders. During the past three fiscal years, we have conducted over 2.2 million online transactions generating $2.7 billion in gross merchandise volume or GMV. GMV is the total sales value of all merchandise sold by us or our ~~corporate and government sellers. This flow~~sellers through our marketplaces or by us through other channels during a given period of ~~goods in turn attracts an increasing number of professional buyers to our marketplaces.~~ time.

During ~~2019,~~the year ended September 30, 2022, the number of registered buyers grew from ~~3,357,000~~4.0 million to ~~3,580,000, or 6.6%. During the past three years, we have conducted over 1,750,000 online transactions generating $1.9 billion in gross merchandise volume or GMV.~~4.9 million. We believe the continuous flow of goods in our marketplaces attracts a growing buyer base which creates a self-sustaining cycle for our buyers and sellers. We generated GMV of $1,145.4 million and revenue of $280.1 million through multiple sources, including transaction fees from sellers and buyers, proceeds from the sale of products we purchased from sellers, and value-added service charges. Our GMV has grown at a compound annual growth rate of 12.5% since 2006.

Results from our operations are organized into four reportable segments: GovDeals, Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), and Machinio. See Note 16 - Segment Information to the consolidated financial statements for more information regarding our segments.

On November 1, 2021, we acquired Bid4Assets, Inc. (Bid4Assets), a Maryland corporation based in Silver Spring, MD. Bid4Assets is a leading online marketplace focused on conducting real property auctions for the government, including tax foreclosure sales and sheriff's sales. The results of Bid4Assets' operations are included within our GovDeals reportable segment. See Note 3 - Bid4Assets Acquisition for more information regarding this transaction.

Macroeconomic Conditions

COVID-19 Pandemic. The Company has been closely monitoring the COVID-19 pandemic. In April 2020, the Company experienced the largest impacts on its operations thus far stemming from the initial actions taken by governments and the private sector to limit the spread of COVID-19. The restrictions on economic activity were caused, in part, by business closures, limitations on the operations of business activity and significant prioritization of essential business functions. Since May 2020, we have seen subsequent increases in GMV and revenues as businesses and governments re-opened from government ordered closures which, combined with cost control measures, generated positive net income since the third quarter of fiscal 2020. However, COVID-19 and its variants continue to impact the global economy, supply chains, and the ability to conduct commerce due to ongoing travel restrictions in various countries, and lockdowns reintroduced within regions of China. Additionally, the COVID-19 pandemic in combination with various macroeconomic factors, has impacted the supply chain of new vehicles, and construction and heavy equipment production, which in turn ~~attracts~~negatively affected the supply of used vehicles and construction and heavy equipment being sold in North America.

At this time, the likelihood, magnitude and timing of business developments across our reportable segments are difficult to predict given the current economic uncertainty, unknown duration and overall impact of the global pandemic. As a result, prior trends in the Company's results of operations may not be applicable throughout the duration of the COVID-19 pandemic. Throughout the COVID-19 pandemic, the Company has actively monitored its liquidity position and working capital needs. The Company believes that its liquidity position and working capital are more than sufficient to meet its projected needs.

Effects of Inflation. Rising inflation in both the U.S. and internationally has weighed on the global economy, increasing prices for energy, shipping, and labor, among other areas of the macroeconomic environment. These events have caused a rise in borrowing costs as well, partly driven by actions taken by central banks to curb rising inflation. Currently, the Company is unable to predict the likelihood, magnitude and timing of inflationary risk to our business, if any. However, the Company does not believe inflation has had a material effect on our operating expenses. As a marketplace operator, the GMV, revenues and costs of revenues that result from our primarily auction-based sales may be influenced by macroeconomic factors, including but not limited to inflation, whose impacts may vary across each of our individual asset classes.

Russia-Ukraine Conflict. The global financial markets have experienced volatility subsequent to the invasion of Ukraine by Russia in February 2022, a conflict which remains ongoing. In response to the invasion, numerous countries, including the United States, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals. The conflict has further heightened global supply chain disruptions and impacted the international trade and energy markets. For the year ended September 30, 2022, the Company's total revenues directly associated with Russia and Ukraine were not material to our consolidated financial results. We will continue monitoring the events in Ukraine and any potential future impacts on our business.

See Part I, Item 1A, Risk Factors, for an additional discussion of risks related to global economic conditions including those discussed above.

Industry Trends

We believe there are several industry trends positively impacting the long-term growth of our business including:

•the increase in volume of returned merchandise handled both online and in stores as online and omni-channel retail grow as a percentage of overall retail sales;

•the increase in government regulations and the need for corporations to have sustainability solutions with verifiable recycling and remarketing of surplus assets;

•the increase in outsourcing surplus disposition and end-of-life assets by corporations and government entities as they focus on reducing costs, improving transparency, compliance and working capital, and increasingly prefer service providers with proven track records, innovative scalable solutions and the ability to make a strategic impact in the reverse supply chain;

•an increase in buyer demand for surplus merchandise as consumers trade down by purchasing less expensive goods and seek greater value from their purchases, which could impact our long term growth;

•the increase in demand from sellers and ~~transactions.~~buyers to transact in a low touch, online solution as compared to live, in-person auctions or public sale events; and

On July 10, 2018, we acquired 100% of Machinio Corp., (“Machinio”), a privately-owned company based in Chicago, Illinois, with a second office in Berlin, Germany. Machinio operates a global online platform for listing used equipment for sale •in the ~~construction, machine tool, transportation, printing~~long-term we expect innovation in the retail supply chain will increase the pace of product obsolescence and, ~~agriculture sectors. See Note 4 to~~therefore, increase the ~~Consolidated Financial Statements for further information on this acquisition.~~supply of surplus assets.

~~Our revenue.~~Revenues

Substantially all of our revenue is earned through the following transaction models:

Purchase model. Under our purchase transaction model, we recognize revenue within the ~~Revenue~~Purchase revenues line item on the Consolidated Statements of Operations from the resale of inventory that we purchased from sellers. We consider these sellers to be our vendors. We pay our sellers either a fixed amount or a portion of the net or gross proceeds received from our completed sales based on the value we receive from the sale, in some cases, after deducting a required return to us that we have negotiated with the seller. Because we are the principal in purchase transaction model sales, we recognize as revenue the sale price paid by the buyer upon completion of a transaction. The proceeds paid by buyers also include transaction fees, referred to as buyer premiums. Revenue from our purchase transaction model accounted for ~~65.3%~~54%, ~~66.7%~~57% and ~~69.8%~~62%, of our total revenue for the years ended September 30, ~~2019, 2018~~2022, 2021 and ~~2017,~~2020, respectively. These amounts included sales of commercial merchandise sourced from multiple vendor contracts with Amazon.com, Inc. by our RSCG segment. The commercial merchandise we purchased under ~~this contract~~these contracts represented ~~43.6%~~55%, ~~33.7%~~61% and ~~21.8%~~55%, of Cost of goods sold for the years ended September 30, ~~2019, 2018~~2022, 2021 and 2017, respectively. Purchase model revenues also include revenue earned from the sale of property obtained under the Scrap Contract, which concluded on September 30, 2019, and accounted for 7.4%, 10.2% and

~~11.1%, of our total revenue for the years ended September 30, 2019, 2018 and 2017,~~2020, respectively. The merchandise sold under our purchase transaction model accounted for ~~23.0%~~14%, ~~22.9%~~16% and ~~28.6%~~21%, of our GMV for the years ended September 30, ~~2019, 2018~~2022, 2021 and ~~2017.~~2020.

Consignment model—fee revenue. Under our consignment transaction model, we enable our sellers to sell goods they own in our marketplaces, and we charge them a commission fee based on the gross or net proceeds received from such sales. The revenue from our consignment transaction model is recognized upon auction close or upon collection of auction proceeds, depending upon the settlement service level selected by the seller. Revenue under the consignment model is recorded within the ~~Fee Revenue~~Consignment and other fee revenues line item on the Consolidated Statements of Operations. Because we are the agent in consignment model sales, our commission fee revenue, which we refer to as seller commissions, represents a percentage of the sales price the buyer pays upon completion of a transaction. We vary the percentage amount of the seller commission depending on the various value-added services we provide to the seller to facilitate the transaction. For example, we generally increase the percentage amount of the commission if we take possession, handle, ship, or provide enhanced product information for the merchandise. In most cases we collect the seller commission by deducting the appropriate amount from the sales proceeds prior to the distribution to the seller after completion of the transaction. In addition to seller commissions, we also collect buyer premiums. Revenue from our consignment model accounted for ~~29.4%~~38%, ~~30.3%~~36% and ~~24.4%~~32%, of our total revenue for the years ended September 30, ~~2019, 2018~~2022, 2021 and ~~2017,~~2020, respectively, and ~~for 77.0%~~86%, ~~77.1%~~84% and ~~71.4%~~79%, of our GMV for the years ended September 30, ~~2019, 2018~~2022, 2021 and ~~2017,~~2020, respectively.

Other — fee revenue.

We also earn non-consignment fee revenue from Machinio's ~~sales listing~~Advertising and System subscription ~~service,~~services, as well as other services including returns management, ~~and~~ refurbishment of ~~assets. Prior to~~assets, and asset valuation services. Non-consignment fee revenue is recorded within the toConsignment and other fee revenues line item on the ~~wind-down~~Consolidated Statements of Operations. Other fee revenues accounted for 8%, 7% and 6% of our ~~operations under the Surplus Contract, we also earned non-consignment fee revenue from services provided under that contract.~~

~~Industry trends.~~ We believe there are several industry trends positively impacting the growth of our business including: (1) the increase in the volume of returned merchandise handled both online and in stores as online and omni-channel retail grow as a percentage of overall retail sales; (2) the increase in government regulations and the needTotal revenues for corporations to have sustainability solutions necessitating verifiable recycling and remarketing of surplus assets; (3) the increase in outsourcing by corporate and government organizations of disposition activities for surplus and end-of-life assets as they focus on reducing costs, improving transparency, compliance and working capital flows, and increasingly prefer service providers with a proven track record, innovative scalable solutions and the ability to make a strategic impact in the reverse supply chain, which we expect to increase our seller base; (4) an increase in buyer demand for surplus merchandise as consumers trade down by purchasing less expensive goods and seek greater value from their purchases, which results in lower per unit prices and margins in our retail goods vertical, and (5) in the long-term we expect innovation in the retail supply chain will increase the pace of product obsolescence and, therefore, increase the supply of surplus assets.

~~Our Vendor Agreements~~

~~DoD agreements.~~ ~~Historically, we had two material vendor contracts with the DoD, the Scrap Contract and the Surplus Contract. Both contracts are included in the results of our CAG segment.~~

~~Scrap Contract~~. Under the Scrap Contract, which concluded on September 30, 2019, we acquired, managed and sold all non-electronic scrap property of the DoD turned into the DLA, and paid the DLA a revenue-sharing payment equal to 64.5% of the gross resale proceeds. Scrap property generally consisted of items determined by the DoD to have no use beyond their base material content, such as metals, alloys, and building materials. We bore all of the costs for the sorting, merchandising and sale of the property. The resale transactions for scrap property sourced under this contract followed the purchase model.

~~Resale of scrap property that we purchased under the Scrap Contract accounted for 7.4%, 10.2% and 11.1% of our total revenues, and 2.6%, 3.6% and 4.7%, of our GMV, in~~ the years ended September 30, ~~2019, 2018,~~2022, 2021 and ~~2017,~~2020, respectively.

~~Surplus Contract~~. Under the Surplus Contract, which concluded on June 30, 2018, we acquired, managed and sold usable surplus personal property of the DoD turned into the DLA. We paid the DLA 4.35% of the DoD's original acquisition value for the surplus property, which consisted of items determined by the DoD to be no longer needed, and not claimed for reuse by any federal agency, such as electronics, industrial equipment, office supplies, scientific and medical equipment, aircraft parts, clothing and textiles. We retained 100% of the profits from the resale of the property and bore all of the costs for the merchandising and sale of the property. The resale transactions for surplus property sourced under this contract followed the purchase model.

Resale of surplus property that we purchased under the Surplus Contract, as well as services we provided to the DoD under the Surplus Contract, accounted for accounted for 0.0%, 12.4% and 27.6% of our total revenues, and 0.0%, 4.1% and 9.4% of our GMV, in the years ended September 30, 2019, 2018, and 2017, respectively.Our Vendor Agreements

Commercial agreements. We have multiple vendor contracts with Amazon.com, Inc. under which we acquire and sell commercial merchandise. While purchase model transactions account for less than 20% of our total GMV, the cost of inventory for purchase model transactions is the most significant component of our consolidated Costs of goods sold. The property we purchased under ~~this contract~~these contracts represented ~~43.6%~~55%, ~~33.7%~~61% and ~~21.8%~~55%, of cost of

goods sold for the years ended September 30, ~~2019, 2018~~2022, 2021 and ~~2017,~~2020, respectively. This contract is included within our RSCG segment. Our agreements with our other sellers are generally terminable at will by either party.

Key Business Metrics

Our management periodically reviews certain key business metrics for operational planning purposes and to evaluate the effectiveness of our operational strategies, allocation of resources and our capacity to fund capital expenditures and expand our business. These key business metrics include:

Gross merchandise volume (GMV). GMV is the total sales value of all merchandise sold by us or our sellers through our marketplaces or by us through other channels during a given period of time. 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 also provides a means to evaluate the effectiveness of investments that we have made and continue to make, including in the areas of buyer and seller support, value-added services, product development, sales and marketing, and operations. ~~The~~Our GMV ~~of goods sold in our marketplace during 2019 totaled $639.9 million.~~for the year ended September 30, 2022, was $1.1 billion.

Total registered buyers. We grow our buyer base through a combination of marketing and promotional efforts. A person becomes a registered buyer by completing an online registration process on one of our marketplaces. As part of this process, we collect business and personal information, including name, title, company name, business address and contact information, and information on how the person intends to use our marketplaces. Each prospective buyer must also accept our terms and conditions of use. Following the completion of the online registration process, we verify each prospective buyer’s e-mail address and confirm that the person is not listed on any banned persons list maintained internally or by the U.S. federal government. After the verification process, which is completed generally within 24 hours, the registration is approved and activated, and the prospective buyer is added to our registered buyer list.

Total registered buyers, as of a given date, represent the aggregate number of persons or entities who have registered on one of our marketplaces. We use this metric to evaluate how well our marketing and promotional efforts are performing. Total registered buyers exclude duplicate registrations, buyers who are suspended from utilizing our marketplaces and ~~those~~ buyers who have voluntarily removed themselves from our registration database. In addition, if we become aware of registered buyers that are no longer in business, we remove them from our database. As of September 30, ~~2019~~2022, 2021, and ~~2018,~~2020, we had ~~3,580,000~~4.9 million, 4.0 million, and ~~3,357,000~~3.8 million, registered buyers, respectively. Of the increase, approximately 16% is attributable to the Bid4Assets registered buyer base acquired during the three months ended December 31, 2021. None of our buyers represented more than 10% of our revenue during the year ended September 30, 2022.

Total auction participants. For each auction we manage, the number of auction participants represents the total number of registered buyers who have bid one or more times in that auction. As a result, a registered buyer who bids, or participates, in more than one auction is counted as an auction participant in each auction in which he or she participates. Thus, total auction participants for a given period is the sum of the auction participants in each auction conducted during that period. We use this metric to allow us to compare our online auction marketplaces to our competitors, including other online auction sites and traditional on-site auctioneers. In addition, we measure total auction participants on a periodic basis to evaluate the activity level of our base of registered buyers and to measure the performance of our marketing and promotional efforts. During the years ended September 30, ~~2019, 2018,~~2022, 2021, and ~~2017, 2,085,000, 2,079,000,~~2020, 3.1 million, 2.3 million, and ~~2,417,000 total auction~~1.9 million participants participated in auctions on our marketplaces, respectively. ~~Largely as a result of the wind-down of the Surplus Contract, there has been a decrease in auction participants during 2019 and 2018 compared with 2017.~~

Completed transactions. Completed transactions represents the number of auctions in a given period from which we have recorded revenue. Similar to GMV, we believe that completed transactions is a key business metric because it provides an additional measurement of the volume of activity flowing through our marketplaces. During the years ended September 30, ~~2019, 2018,~~2022, 2021, and ~~2017,~~2020, we completed ~~607,000, 567,000~~933,000, 703,000 and ~~576,000~~553,000 transactions, respectively.

Critical Accounting Policies and Estimates

The Company's consolidated financial statements, included in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K with their accompanying notes, have been prepared in accordance with GAAP, which requires management of the Company to make assumptions, judgments and estimates that affect amounts reported in its consolidated financial statements. Accounting policies and estimates are considered to be "critical" when ~~then~~ the nature of the estimate includes subjective or sensitive assumptions or judgments that can have a material impact on the financial condition or operating performance of the Company. Actual results may differ from these estimates.

We consider the following accounting policies to be critical: revenue recognition, business combinations, valuation of goodwill and ~~other~~ intangible assets, and income taxes. Refer to Note 2 - S~~Summary~~ummary of Significant Accounting Policies to the Company's consolidated financial statements for further details on these accounting policies.

3537

We consider the following accounting estimates to be critical: ~~business combinations (Note 4 and Note 12),~~ valuation of goodwill and ~~other~~ intangible assets ~~(Note 6~~(Notes 7 and 7)8, respectively), and income taxes (Note 10). Refer to these individually referenced notes and Note 2 - Summary of Significant Accounting Policies to the Company's consolidated financial statements for further details on these accounting estimates. The following discussion is a supplement to the disclosures referenced.

~~Valuation~~

Intangible assets. Intangible assets consist of ~~goodwill.~~contract intangibles, brand and technology, and patent and trademarks. Intangible assets are amortized using the straight-line method over their estimated useful lives. The preliminary fair value of acquired intangible assets, excluding goodwill, arising from the Bid4Assets acquisition was $16.5 million. This balance consisted of the following identified intangible assets, each with their own significant assumptions used, as follows:

•Contract Intangibles ~~Goodwill is allocated~~- We valued the contract intangibles using the multi-period excess earnings method, an income approach valuation model. The significant assumptions used in the income approach includes estimates about future expected cash flows from supplier contracts, the attrition rate, and the discount rate.

•Developed Software - We valued the developed software by applying the relief-from-royalty method, an income approach valuation model. The significant assumptions used in the relief-from-royalty method include estimates about future expected cash flows from the developed software, the royalty rate, the obsolescence factor and the discount rate.

•Trade Name - We valued the trade name acquired using a relief-from-royalty method. The significant assumptions used in the relief-from-royalty method include future expected cash flows from the trade name, the royalty rate, and the discount rate.

Earn-out liability. Shareholders of Bid4Assets are eligible to ~~our reporting units.~~receive up to $37.5 million in cash, payable based on Bid4Assets' achievement of trailing twelve-month EBITDA targets measured at the end of each calendar quarter until the quarter ended December 31, 2022. The ~~Company's reporting units are GovDeals, CAG, RSCG and Machinio.~~earn-out consideration was preliminarily fair valued at approximately $28.0 million as of the acquisition date. As of ~~July 1, 2019,~~September 30, 2022, $3.5 million in earn out payments have been made, and the ~~Company performed its annual impairment testing using a fair-value~~remaining earn-out fair value has been measured to be $0 based ~~test for all reporting units, and determined~~upon the expected performance through the final earn-out period ending December 31, 2022. The significant unobservable inputs used in the fair value ~~for each~~measurement categorized within Level 3 of the fair value hierarchy included estimated results of operations over the earn-out period, a high level of volatility of operating results given the nature of the business model and its ~~reporting units with goodwill balances substantially exceeded their carrying values except for~~economic environment create a wider range of potential outcomes over the ~~Machinio reporting unit, which exceeded its carrying~~earn-out period, and the discount rate.

Goodwill. Goodwill represents the costs in excess of the fair value ~~by approximately 11%. The Machinio reporting unit, which includes $14.6 million~~ of ~~goodwill, was~~net assets acquired through acquisitions by the ~~Company on July 10, 2018.~~Company. Pursuant to our preliminary purchase price allocation, goodwill arising from the acquisition was determined to be $30.1 million. See Note 3 -

~~The Company determined~~Bid4Assets Acquisition, for further information. As discussed in Note 13 – Fair Value Measurement, the fair value of the ~~Machinio reporting unit using~~Bid4Assets earn-out liability declined by $24.5 million during the fiscal year ended September 30, 2022, due to timing changes, which were not known nor knowable as of the acquisition date, impacting the level of auction events and transactions that are expected to occur during the earn-out period ending December 31, 2022. These timing changes have not reflected substantive changes to the long-term outlook for real estate sales within the GovDeals segment and were not considered a ~~discounted cash flow (DCF) analysis. The DCF analysis relied on significant assumptions and judgments surrounding the forecasts~~triggering event for testing goodwill or long-lived assets for impairment as of future cash flows over the five-year projection period, and the terminal growth rate of 2.5% applied thereafter. The cash flows were discounted at a weighted average cost of capital of 26%. The weighted average cost of capital includes a 20% company specific risk premium that captured the fact that Machinio business is smaller in size than comparable companies in its small stock risk premium decile, is in the earlier stages of developing its business models, and has limited historical financial results. The Company identified the company specific risk premium as being the most critical assumption in the DCF analysis and performed a sensitivity analysis that noted that the company specific risk premium would need to increase by over 250 basis points to impact the impairment testing result.September 30, 2022. The Company will continue to monitor ~~this reporting unit~~ for changes that could impact the recoverability of ~~goodwill, which will depend on Machinio's ability to grow in size, enhance~~ its ~~business models, and accumulate historical financial results, which will affect the company specific risk premium used in subsequent impairment tests.~~

goodwill.

Components of Revenue and Expenses

Revenue. Refer to the discussion in the Our revenue section above, and to Note 2 - Summary of Significant Accounting Policies to the Company's consolidated financial statements in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K for discussion of the Company's related accounting policies.

Cost of goods sold. Refer to Note 2 - Summary of Significant Accounting Policies, to the Company's consolidated financial statements in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K for discussion of the Company's ~~costs~~Costs of goods sold and related accounting policies.

~~Seller distributions.~~ ~~Under the Scrap Contract, we acquired scrap property from the DLA for resale and paid the DLA seller distributions equal to 64.5% of the gross resale proceeds.~~

Technology and operations.Technology expenses primarily consist ~~primarily~~ of the cost of technical staff ~~who~~(including stock compensation), third party services, licenses, and infrastructure, all as required to develop, configure, deploy, maintain, and ~~maintain~~secure our ~~marketplaces~~marketplace platforms, business operational systems, and ~~corporate infrastructure. These personnel also develop and upgrade the software systems that support our operations, such as sales processing.~~facilities. Technology expenses ~~also includes certain~~are net of the required capitalization of costs associated with enhancing our ~~e-commerce platform.~~marketplace platforms and other software development activities. Depreciation and amortization of capitalized software development costs, purchased software, acquired developed software intangible assets, and computer hardware are included within Depreciation and amortization in the accompanying Consolidated Statements of Operations. Technology expenses are presented separately from Costs of goods sold (excluding depreciation and amortization) in the Consolidated Statements of Operations, as these expenses provide for the general availability of our

marketplace platforms and other business operational systems and are not attributable to specific revenue generating transaction activity occurring on our marketplaces.

Because our marketplaces and support systems require frequent upgrades and enhancements to maintain viability, we have determined that the useful life for certain internally developed software is less than one year. As a result, we expense those costs as incurred. However, where we determine that the useful life of the internally developed software will be greater than one year, we capitalize development costs in accordance with ASC 350-40, Internal-use software. As such, we are capitalizing certain development costs associated with our e-commerce platform, as well as other software development activities.

Operations expenses consist primarily of ~~operating~~ costs to operate our distribution centers, including ~~buyer relations,~~ shipping logistics, inventory management, refurbishment, and ~~distribution center operating costs.~~administrative functions; costs to enhance our online auctions listings and provide customer support; and costs associated with field support and preparation and transfer of goods from sellers to buyers. Operations expenses include both internal and external labor costs, as well as other third-party charges. These costs are expensed as incurred.

Sales and marketing. Sales and marketing expenses include the cost of our sales and marketing personnel as well as the cost of marketing and promotional ~~activities.~~activities, including buyer and seller acquisition, as well as general brand marketing. These activities include online marketing campaigns such as paid search ~~advertising.~~advertising, as well as offline marketing efforts, trade shows, and marketing analytics.

General and administrative. General and administrative expenses include all corporate and administrative functions that support our operations and provide an infrastructure to facilitate our future growth. These expenses are generally more fixed in nature than our other operating expenses and do not significantly vary in response to the volume of merchandise sold through our marketplaces.

Depreciation and amortization. Depreciation and amortization ~~expenses~~ consist of depreciation of property and equipment, amortization of internally developed software, and amortization of intangible assets.

~~Acquisition costs and impairment~~Fair value adjustment of ~~goodwill and long-lived assets.~~acquisition earn-outs. ~~Acquisition costs and impairment~~Fair value adjustment of ~~goodwill and long-lived assets consist~~acquisition earn-outs consists of ~~expenses incurred to complete a business combination, and impairment of goodwill and long-lived assets.~~

~~Other operating expenses (income).~~ ~~Other operating expense includes~~ the change in fair value of ~~financial instruments~~earn-out consideration following a business combination.

Other operating expenses, net. Other operating expenses, net includes impairment of long-lived and ~~contingent consideration,~~other assets, impacts of lease terminations, as well as business realignment expenses, including those associated with restructuring initiatives and the exit of certain business operations.

Interest ~~(income) expense~~ and other ~~expense, net.~~income, net. Interest ~~(income) expense~~ and other ~~expense,~~income, net consists of interest income on ~~short-term investments and~~interest bearing checking accounts, money market funds, the prior promissory note issued to JTC, interest and unused commitment fees in connection with the Company's Credit Agreement, the components of net periodic pension (benefit) other than the service component, and impacts of foreign currency fluctuations.

Income taxes. During ~~2019, 2018~~the years ended September 30, 2022, 2021 and ~~2017, we~~2020, the Company had an effective income tax rate ~~for continuing operations~~ of ~~(6.6)%~~15.4%, ~~44.6%~~(84.7)% and ~~1.1%~~(26.9)%, respectively, which included federal, state and foreign income taxes.

3739

Results of Operations

The following table presents reportable segment GMV, revenue, segment gross profit (which is calculated as total revenue less cost of goods sold (exclusive of depreciation and amortization)), and segment gross profit ~~margin~~as a percentage of total revenue for the periods ~~indicated:~~indicated ($ in thousands):


		Year Ended September 30,
		2022			2021			2020
GovDeals:
	GMV	$	720,323		$	498,742		$	325,993
	Total revenue	59,352			49,579			32,806
	Segment gross profit	56,408			47,030			30,721
	Segment gross profit as a percentage of total revenue	95.0		%	94.9		%	93.6		%

RSCG:
	GMV	236,236			229,290			181,473
	Total revenue	166,100			158,806			136,491
	Segment gross profit	63,704			64,564			49,727
	Segment gross profit as a percentage of total revenue	38.4		%	40.7		%	36.4		%

CAG:
	GMV	188,813			158,736			112,384
	Total revenue	42,575			39,645			29,481
	Segment gross profit	29,120			29,324			22,714
	Segment gross profit as a percentage of total revenue	68.4		%	74.0		%	77.0		%

Machinio:
	GMV	—			—			—
	Total revenue	12,083			9,559			7,213
	Segment gross profit	11,471			8,992			6,813
	Segment gross profit as a percentage of total revenue	94.9		%	94.1		%	94.4		%

Corporate & Other, including elimination adjustments:
	GMV	—			—			—
	Total revenue	(60)			(57)			(51)
	Segment gross profit	(60)			(57)			(51)
	Segment gross profit as a percentage of total revenue	NM			NM			NM

Consolidated:
	GMV	1,145,372			886,768			619,850
	Total revenue	280,050			257,531			205,940

Year Ended September 30,
2019 2018 2017
GovDeals:
GMV $ 327,455 $ 305,628 $ 265,999
Total revenue 32,936 30,214 26,853
Gross profit 30,386 27,990 25,172
Gross profit margin 92.3 % 92.6 % 93.7 %
CAG:
GMV 155,855 186,071 242,271
Total revenue 60,242 88,025 145,131
Gross profit 32,679 48,873 71,934
Gross profit margin 54.2 % 55.5 % 49.6 %
RSCG:
GMV 156,096 131,042 116,295
Total revenue 127,321 101,954 95,032
Gross profit 44,967 33,009 30,050
Gross profit margin 35.3 % 32.4 % 31.6 %
Machinio:
GMV — — —
Total revenue 5,599 652 —
Gross profit 5,196 501 —
Gross profit margin 92.8 % 76.9 % — %
Corporate & Other:
GMV 469 3,665 4,765
Total revenue 428 3,668 2,999
Gross profit 52 (661) (2,666)
Gross profit margin 12.2 % (18.0) % (88.9) %
Consolidated:
GMV 639,876 626,406 629,330
Total revenue 226,526 224,514 270,014
Gross profit 113,281 109,712 124,489
Gross profit margin 50.0 % 48.9 % 46.1 %
NM = not meaningful

Year Ended September 30, ~~2019~~2022 Compared to Year Ended September 30, ~~2018~~2021

Segment Results

~~GovDeals.~~ GovDeals~~Revenue~~. Total revenues from our GovDeals reportable segment increased ~~9.0%~~19.7%, or ~~$2.7~~$9.8 million, due to a ~~7.1%~~44.4%, or ~~$21.8~~$221.6 million, increase in GMV ~~resulting~~ from ~~additional sales volume from~~adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and anreal estate. In addition, increased recovery rates on assets sold were driven by our growing buyer base, automated asset promotion tools, and favorable macroeconomic factors in certain asset categories, such as transportation assets. However, this has been partially offset by lower volumes of used vehicles made available for sale, as new vehicle production disruptions impact government agency vehicle fleet retirement timelines. As GovDeals real estate sales increase inthrough the ~~number~~integration with Bid4Assets, GovDeals revenue as a percent of ~~new sellers.~~GMV is expected to decline, as these higher value real estate sales are generally conducted at a lower take-rate than our traditional GovDeals asset categories. For that reason, revenue as a percentage of GMV decreased to 8.2% from 9.9% last year. As a result of the increase in revenues, segment gross profit ~~within this segment~~ increased ~~8.6%~~19.9%, or ~~$2.4~~$9.4 million. ~~Gross~~Segment gross profit ~~margin was~~as a percentage of total revenue remained relatively consistent between the periods.

~~CAG.~~ RSCG. Revenue from our RSCG reportable segment increased 4.6%, or $7.3 million due to a 3.0%, or $6.9 million, increase in GMV as it continues to diversify its client programs, sales channels, and ~~GMV~~its distribution network. Segment gross profit decreased by 1.3%, or $0.9 million, impacted by certain client returns management programs which provided fewer higher value products than in prior years, including for some of our low touch services. As a result, segment gross profit as a percentage of total revenue decreased by 2.3%.

CAG. Revenue from the CAG reportable segment ~~decreased 31.6%~~increased by 7.4%, or ~~$27.8~~$2.9 million ~~and 16.2%~~due to a 18.9%, or ~~$30.2~~$30.1 million, respectively. The conclusion of the Scrap and Surplus Contracts caused revenue and GMV to decline by $33.8 million and $31.5 million, respectively. Excluding the impact of the completed Scrap and Surplus Contracts, revenue increased by $6.1 million, or 16.3%,

~~driven by a $1.3 million, or 1.0%~~ increase in GMV driven by increasing opportunities to obtain and ansell inventory under our purchase model, and strong consignment sales in the energy and heavy equipment categories, partially offset by strong prior year consignment sales in the industrial category. Revenues did not increase at the same rate as GMV due to increases in the mix of transactions conducted ~~under~~with partner organizations. Segment gross profit decreased 0.7%, or $0.2 million. Segment gross profit as a percentage of total revenue decreased 5.6% due to inherent variations in the ~~purchase model. Gross profit within~~mix of assets sourced and sold by the CAG segment ~~decreased 33.1%~~in any given period, including increased international purchase transaction activity, some of which had lower than average margins due to incremental costs from COVID-19 related delays in conducting cross-border transactions. Further, challenged global supply chains are experiencing heightened disruptions from the Russian invasion of Ukraine and its impacts on international trade and energy markets, COVID-19 and other disruptions, which could limit the volume of assets made available for sale in any period.

Machinio. Revenue from our Machinio reportable segment increased 26.4%, or ~~$16.2~~$2.5 million, due to an increase in subscription activity through a ~~$14.2 million impact from the conclusion~~greater number of ~~the Scrap~~subscribers and ~~Surplus Contracts, and the impact~~increased pricing. As a result of the increase in mix of transactions conducted under the purchase model. Gross profit margin declined from 55.5% to 54.2% due the increase in the mix of transactions conducted under the purchase model, partially offset by the conclusion of the Scrap and Surplus Contracts, which had lowerrevenues, segment gross profit ~~margins than the remaining business.~~

~~RSCG.~~ ~~Revenue from our RSCG segment~~ increased ~~24.9%~~27.6%, or $25.4 million due to a 19.1%, or $25.1 million, increase in GMV, an increase in the mix of transactions conducted under the purchase model, and an increase in the non-consignment fee services provided. Gross profit within the RSCG segment increased 36.2%, or $12.0 million, due to the impacts of the increased revenues, as well as improved margins on certain retail programs. Gross profit margin increased from 32.4% to 35.3% due the improved margins on certain retail programs, and the increase in non-consignment fee services provided.$2.5 million.

~~Machinio.~~ Machinio's revenues for the period represent $3.5 million related to new subscriptions and subscription renewals during fiscal 2019, and $2.1 million related to revenues recognized for subscriptions that started prior to fiscal 2019. Because Machinio was acquired on July 10, 2018, the prior period results only include revenues recognized subsequent to that date.

~~Corporate & Other.~~

~~The changes in revenue, GMV, gross profit and gross profit margin are due to the Company's decision to exit from the IronDirect business in January 2019.~~

Consolidated Results

The following table sets forth, for the periods indicated, our operating results (dollars in thousands):


	Year Ended September 30,
	2022		2021		$ Change		% Change
Purchase revenues	$	151,271	$	146,151	$	5,120	3.5	%
Consignment and other fee revenues	128,779		111,380		17,399		15.6	%
Total revenues	280,050		257,531		22,519		8.7	%
Costs and expenses from operations:
Cost of goods sold (excludes depreciation and amortization)	119,407		107,678		11,729		10.9	%

Technology and operations	55,522		47,673		7,849		16.5	%
Sales and marketing	43,224		37,635		5,589		14.9	%
General and administrative	28,282		28,938		(656)		(2.3)	%
Depreciation and amortization	10,322		6,969		3,353		48.1	%
Fair value adjustment of acquisition earn-outs	(24,500)		—		(24,500)		NM

Other operating expenses, net	388		1,470		(1,082)		(73.6)	%
Total costs and expenses	232,645		230,363		2,282		1.0	%
Income (loss) from operations	47,405		27,168		20,237		74.5	%
Interest and other income, net	(248)		(411)		163		(39.7)	%
Income (loss) before income taxes	47,653		27,579		20,074		72.8	%
Provision (benefit) for income taxes	7,329		(23,370)		30,699		NM
Net income (loss)	$	40,324	$	50,949	$	(10,625)	(20.9)	%

Year Ended September 30,
2019 2018 $ Change % Change
Revenue $ 147,889 $ 149,677 $ (1,788) (1.2) %
Fee revenue 78,636 74,837 3,799 5.1
Total revenue from operations 226,525 224,514 2,011 0.9
Costs and expenses from operations:
Cost of goods sold (excludes depreciation and amortization) 102,414 100,087 2,327 2.3
Seller distributions 10,831 14,715 (3,884) (26.4)
Technology and operations 51,594 60,786 (9,192) (15.1)
Sales and marketing 36,703 33,703 3,000 8.9
General and administrative 34,249 30,493 3,756 12.3
Depreciation and amortization 5,091 4,599 492 10.7
Acquisition costs and impairment of goodwill and long-lived assets 102 467 (365) (78.2)
Other operating expenses 5,049 1,392 3,657 262.7
Total costs and expenses 246,033 246,242 (209) (0.1)
Loss from operations (19,508) (21,728) 2,220 (10.2)
Interest income and other income, net (1,448) (785) (663) 84.5
Loss before provision for income taxes (18,060) (20,943) 2,883 (13.8)
Provision (benefit) for income taxes 1,200 (9,328) 10,528 (112.9)
Net loss $ (19,260) $ (11,615) $ (7,645) 65.8 %
NM = not meaningful

Total ~~Revenue.~~revenues. Total consolidated revenue increased ~~$2.0~~ $22.5 million, or ~~0.9%~~8.7%. Refer to the discussion of Segment Results above for discussion of the ~~increase~~decrease in revenue.

Cost of goods ~~sold.~~sold (excludes depreciation and amortization). Cost of goods sold increased ~~$2.3~~$11.7 million, or ~~2.3%. This included decreases of $15.8 million~~10.9%, which changed at a higher rate than Revenue primarily due to ~~the conclusion of the Surplus Contract~~an increase in purchase transactions at CAG and ~~$4.0 million due to the Company's decision to exit the IronDirect business in January 2019. These decreases were primarily offset by increases of $13.4 million in~~ RSCG, ~~and $7.9 million in CAG (excluding the Surplus Contract), driven by increases in revenues and the~~which also contained a more favorable mix of ~~transactions conducted under~~higher value returned products in the ~~purchase model.~~

~~Seller distributions.~~ ~~Seller distributions decreased $3.9 million, or 26.4%, due to lower sales under the Scrap Contract, which concluded on September 30, 2019.~~prior year.

Technology and operations expenses. Technology and operations expenses ~~decreased $9.2~~increased $7.8 million, or 15.1%. The decrease included $6.9 million due to the conclusion of the Scrap and Surplus contracts, $4.6 reductions in Corporate and CAG (excluding the Scrap and Surplus Contract) driven by benefits from restructuring and other organizational changes, and $0.5 million from the Company's decision to exit the IronDirect business in January 2019. These decreases were partially offset by a $3.0 million increase in RSCG and GovDeals driven by increased customer support16.5%, as we are increasing our technology and operations ~~expenses from the continued~~functions to continue our growth, ~~in those segments.~~including RSCG's expansion of its distribution network, and launching AllSurplus Deals as a new marketplace offering consumers deals for curbside pickup.

Sales and marketing expenses. Sales and marketing expenses increased ~~$3.0~~$5.6 million, or ~~8.9%~~14.9%, ~~due~~as we are increasing our sales and marketing functions to ~~a $1.6 million increase~~continue our growth, including promotional efforts to expand our market share in ~~sales expenses driven by the increases in revenues,~~key verticals, and ~~a $1.4 million increase in marketing expenses driven by increased promotional activities related~~ to promote new business initiatives including our ~~new e-commerce technology platform and development of our consolidated~~AllSurplus Deals consumer marketplace.

General and administrative expenses. General and administrative expenses ~~increased $3.8~~decreased $0.7 million, or ~~12.3%~~2.3%, primarily due to changes in expected attainment of certain variable compensation targets, and ~~was impacted~~partially offset by increased corporate support costs to support the anticipated growth resulting from the increases in ~~compensation expenses, as well as external costs associated with new accounting standard adoptions.~~our technology, operations, sales and marketing functions.

Depreciation and amortization ~~expenses.~~. Depreciation and amortization ~~expenses~~expense increased ~~$0.5~~$3.4 million, or ~~10.7%~~48.1%, primarily due to ~~a full year amortization expense recognized during 2019 on~~the increase in intangible assets ~~acquired as part~~following our acquisition of ~~Machinio acquisition~~Bid4Assets on ~~July 10, 2018.~~November 1, 2021.

~~Acquisition costs and impairment~~Fair value adjustment of ~~goodwill and long-lived assets.~~ acquisition earn-outs~~Acquisition costs and impairment~~. Fair value adjustment of ~~goodwill and long-lived assets were $0.1~~acquisition earn-outs reflects a $24.5 million ~~for~~non-cash gain due to a reduction in the year ended September 30, 2019, compared to $0.5 million for the year ended September 30, 2018. The acquisition costs incurred during the years ended September 30, 2019 and 2018 related to the acquisition of Machinio. There were no impairments recorded during either year.

~~Other operating expense.~~ Other operating expense of $5.0 million represents $1.6 million of business restructuring costs related to organizational changes, the conclusion of the Scrap Contract, and other cost saving actions, and $3.5 million related to the increase in fair value of the ~~Machinio~~Bid4Assets earn-out ~~liability. Other operating expense of $1.4 million~~liability during the year ended September 30, ~~2018 represents $1.9 million related to business restructuring costs, partially offset by $0.6 million of other miscellaneous income.~~2022. See Note 13 - Fair Value Measurement for further information.

Interest ~~income and other income, net.~~ ~~Interest income~~ and other income, net.Interest and other income, net increased ~~$0.7~~$0.2 million, ~~primarily~~ due to ~~increased holdings~~the effect of rising interest rates on our cash, cash equivalent and short-term ~~investments.~~investment holdings.

~~(Benefit) provision~~

Provision (benefit) for income taxes. ~~Income~~Provision (benefit) for income taxes increased ~~$10.5~~$30.7 million to an expense of ~~$1.2~~$7.3 million ~~for~~from a benefit of $23.4 million due to the $27.9 million release of our valuation allowance on U.S. deferred tax assets during the fiscal year ended September 30, ~~2019, from a benefit~~2021, and $2.8 million of ~~$9.3 million for the year ended September 30, 2018 due to benefits derived from the new Tax Act in fiscal year 2018, a valuation allowance charge and the impact of foreign,~~ state and ~~local taxes and permanent tax adjustments. The Company’s effective~~foreign income tax ~~rate~~expense. The Company's effective tax was ~~(6.6)%~~15.4% for the twelve months ended September 30, ~~2019.~~2022. The ~~2019~~2022 effective tax rate differed from the statutory federal rate of 21.0% primarily as a result of the ~~valuation allowance change and the~~ impact of foreign, state, and local income taxes and permanent ~~tax adjustments.~~

~~Net loss.~~ ~~Net loss for~~adjustments, the ~~year ended September 30, 2019, increased $7.6~~most significant of which was the exclusion of the $24.5 million ~~to $19.3 million, compared to a loss~~non-cash gain from the fair-market value adjustment of ~~$11.6 million for~~ the ~~year ended September 30, 2018, due to the reasons described above.~~Bid4Assets acquisition earn-out liability.

Year Ended September 30, ~~2018~~2021 Compared to Year Ended September 30, ~~2017~~2020

Segment Results

GovDeals. Revenue from our GovDeals segment increased ~~12.5%~~51.1%, or ~~$3.4~~$16.8 million, due to ~~additional sales volume~~a 53.0%, or $172.7 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate, and an increase in ~~the number of new sellers. GMV from~~recovery rates on assets sold, driven by our ~~GovDeals segment increased 14.9%, or $39.6 million, also due to additional sales volume from existing sellers~~growing buyer base, automated asset promotion tools, and ~~an increase~~favorable macroeconomic factors in ~~the number of new sellers. Gross profit within this segment increased 11.2%, or $2.8 million, to $28.0 million for the~~certain asset categories, such as transportation assets. The fiscal year ended September 30, ~~2018, from $25.2 million for~~2020 also contained the ~~year ended September 30, 2017, due to higher sales volume.~~

~~CAG.~~ ~~Revenue from~~negative impact of the ~~CAG~~economic restrictions put in place at the onset of the COVID-19 pandemic. As a result of the increase in revenues, segment ~~decreased 39.3%~~gross profit increased 53.1%, or ~~$57.1 million. Approximately $46.7~~$16.3 million, ~~of this change is due~~and segment gross profit margin increased from 93.6% to the wind-down of the Surplus Contract. Additionally, revenue under the Scrap Contract decreased by approximately $7.0 million as it experienced a lower volume of goods sold, as well as a change in mix of commodities to lower value commodities. The lower volume and unfavorable mix were partially offset by improved commodity prices. Also contributing to the decrease is lower sales volume within our CAG Commercial business for both purchase and consignment transaction models. GMV from our CAG segment decreased 23.2%, or $56.2 million. The wind-down of the Surplus contract resulted in a decrease in GMV of approximately $33.7 million. Approximately $15.4 million of the decrease in GMV related to reductions in both our purchase and consignment transaction models in our CAG Commercial business. Furthermore, a lower volume of goods sold under our94.9%.

Scrap Contract, as well as a change in mix of commodities to lower value commodities sold under that contract, partially offset by improved commodity prices, led to a further $7.0 million reduction in GMV. Gross profit within the CAG segment decreased 32.1%, or $23.1 million, to $48.9 million for the year ended September 30, 2018, from $71.9 million for the year ended September 30, 2017. This decrease can be attributed to the wind-down of the Surplus Contract and lower sales volumes described above.

RSCG. Revenue from our RSCG segment increased ~~7.3%~~16.3%, or ~~$6.9~~$22.3 million ~~for the year ended September 30, 2018. The~~due to a 26.3%, or $47.8 million, increase isin GMV driven by growing volumes within existing seller accounts and launching new programs with large and mid-sized and large retailers looking to capitalize on the secular growth in ~~both purchase and consignment model transaction revenue.~~online retail. Revenues did not increase at the same rate as GMV ~~from our RSCG segment increased 12.7%, or $14.7 million for the year ended September 30, 2018. The increase is again attributable~~due to ~~growth in both our purchase and consignment model transaction GMV during 2018. The lower overall~~an increase in ~~revenue compared to~~the mix of transactions conducted under the consignment model. As a result of the increase in ~~GMV is~~revenues, segment gross profit increased 29.8%, or $14.8 million. Segment gross profit margin increased from 36.4% to 40.7% due to ~~a change~~an increase in the mix ~~from purchase to~~of transactions conducted under the consignment model transactions. Gross profit within the RSCG segment increased 9.8%, or $3.0 million, to $33.0 million for the year ended September 30, 2018, from $30.1 million for the year ended September 30, 2017, due to the overall increase in revenue described above.and improved recovery rates on assets sold.

~~Machinio.~~ ~~Machinio was acquired on July 10, 2018. Revenue from Machinio relates to subscription fees charged to customers for promotional placement on its search engine.~~

~~Corporate & Other.~~CAG. Revenue from ~~Corporate & Other primarily relates~~the CAG segment increased by 34.5%, or $10.2 million due to ~~IronDirect and certain TruckCenter operations. The~~ a 41.2%, or $46.4 million increase in ~~revenue~~GMV due to continued growth of ~~approximately $0.7 million, is made up~~our industrial and heavy equipment categories, increases in purchase transactions across the EMEA and Asia-Pacific regions, and increased use of the consignment model internationally. Revenues did not increase at the same rate as GMV due to increases in transactions using partner organizations and in the mix of transactions conducted under the consignment model. As a ~~$2.6 million~~result of the increase in ~~revenue related~~revenues, segment gross profit increased 29.1%, or $6.6 million. Segment gross profit margin decreased from 77.0% to our IronDirect business, partially offset by a $2.0 million decrease in revenue related to our decision to exit certain TruckCenter operations in January 2017. Gross profit within Corporate & Other increased $2.0 million over prior year, attributable to a $1.9 million inventory write-down recorded within IronDirect during the third quarter of 2017.74.0%.

Machinio. Revenue from our Machinio segment increased 32.5%, or $2.3 million, due to an increase in subscription activity. As a result of the increase in revenues, segment gross profit increased 32.0%, or $2.2 million.

Consolidated Results

The following table sets forth, for the periods indicated, our operating results (dollars in thousands):


	Year Ended September 30,
	2021		2020		$ Change		% Change
Purchase revenues	$	146,151	$	127,580	$	18,571	14.6	%
Consignment and other fee revenues	111,380		78,360		33,020		42.1
Total revenues	257,531		205,940		51,591		25.1
Costs and expenses from operations:
Cost of goods sold (excludes depreciation and amortization)	107,678		96,016		11,662		12.1

Technology and operations	47,673		42,158		5,515		13.1
Sales and marketing	37,635		35,629		2,006		5.6
General and administrative	28,938		29,166		(228)		(0.8)
Depreciation and amortization	6,969		6,290		679		10.8
Fair value adjustment of acquisition earn-outs	—		200		(200)		NM

Other operating expenses, net	1,470		378		1,092		288.9
Total costs and expenses	230,363		209,837		20,526		9.8
Income (loss) from operations	27,168		(3,897)		31,065		NM
Interest and other income, net	(411)		(924)		513		(55.5)
Income (loss) before income taxes	27,579		(2,973)		30,552		NM
(Benefit) provision for income taxes	(23,370)		801		(24,171)		NM
Net income (loss)	$	50,949	$	(3,774)	$	54,723	NM

Year Ended September 30,
2018 2017 $ Change % Change
Revenue $ 149,677 $ 188,570 $ (38,893) (20.6) %
Fee revenue 74,837 81,445 (6,608) (8.1)
Total revenue from operations 224,514 270,015 (45,501) (16.9)
Costs and expenses from operations:
Cost of goods sold (excludes depreciation and amortization) 100,087 126,227 (26,140) (20.7)
Seller distributions 14,715 19,298 (4,583) (23.7)
Technology and operations 60,786 82,988 (22,202) (26.8)
Sales and marketing 33,703 35,211 (1,508) (4.3)
General and administrative 30,493 36,079 (5,586) (15.5)
Depreciation and amortization 4,599 5,796 (1,197) (20.7)
Acquisition costs and impairment of goodwill and long-lived assets 467 1,009 (542) (53.7)
Other operating expenses 1,392 3,651 (2,259) (61.9)
Total costs and expenses 246,242 310,259 (64,017) (20.6)
Loss from operations (21,728) (40,244) 18,516 (46.0)
Interest income and other income, net (785) (606) (179) 29.5
Loss before provision for income taxes (20,943) (39,638) 18,695 (47.2)
Provision (benefit) for income taxes (9,328) (451) (8,877) 1968.3
Net loss $ (11,615) $ (39,187) $ 27,572 (70.4) %
NM = not meaningful

~~Total~~ Revenue. Total consolidated revenue ~~decreased $45.5~~increased $51.6 million, or ~~16.9%~~25.1%. Refer to the discussion of Segment Results above for discussion of the decrease in revenue.

Cost of goods sold (excludes depreciation and amortization). Cost of goods sold increased $11.7 million, or 12.1%, which changed at a lower rate than revenue primarily due to lower cost of sales associated with purchase transactions, which benefited from higher recovery rates during the period, and an increase in the mix of transactions conducted under the consignment model.

Technology and operations. Technology and operations expenses increased $5.5 million, or 13.1%, to ~~$224.5~~support the increased transaction volumes in the RSCG and CAG segments.

Sales and marketing. Sales and marketing expenses increased $2.0 million, ~~for~~or 5.6%, primarily due to increase in marketing expenses to promote our consolidated marketplace and expand market share in key verticals.

General and administrative. General and administrative expenses were consistent between the year ended September 30, 2018, from $270.0 million for the year ended September 30, 2017, due primarily to a $57.1 million decrease in revenue from our CAG segment, partially offset by a $3.4 million increase in revenue from our GovDeals segment,2021 and ~~a $6.9 million increase in revenue from our RSCG segment. Total consolidated GMV decreased $2.9 million, or 0.5%, to $626.4~~2020.

million for the year ended September 30, 2018, from $629.3 million for the year ended September 30, 2017, due primarily to a $56.2 million decrease in GMV from our CAG segment, offset by a $39.6 million increase in GMV from our GovDeals segment, and an $14.7 million increase in GMV related to our RSCG segment.

~~Cost of goods sold.~~ Cost of goods sold decreased $26.1 million, or 20.7%, to $100.1 million, for the year ended September 30, 2018, from $126.2 million for the year ended September 30, 2017. Cost of goods sold decreased approximately $28.3 million attributable to a lower volume of sales under our Surplus Contract during the year ended September 30, 2018, due to the wind-down of that contract, as well as $1.7 million resulting from the exit of the TruckCenter land-based, live auction business in 2017. These decreases are slightly offset by an increase of $4.0 million in cost of goods sold within our RSCG business due to increased sales.

~~Seller distributions.~~ Seller distributions decreased $4.6 million, or 23.8%, to $14.7 million for the year ended September 30, 2018, from $19.3 million for the year ended September 30, 2017, due to lower sales under our Scrap Contract during the year ended September 30, 2018.

~~Technology and operations expenses.~~ Technology and operations expenses decreased $22.2 million, or 26.7%, to $60.8 million for the year ended September 30, 2018, from $83.0 million for the year ended September 30, 2017. Approximately $13.4 million of this decrease is due to a reduction in operations related costs. Approximately $9.2 million of this amount is the result of business realignment activities within our CAG and IronDirect businesses, as well as the exit of the TruckCenter land-based, live auction business in 2017. The remaining $8.9 million reduction in overall technology and operations expenses can be attributed to an approximate $6.2 million reduction in technology costs related to internal and contract IT labor, with the remainder of the balance related to other miscellaneous IT costs, including those to various service providers.

~~Sales and marketing expenses.~~ Sales and marketing expenses decreased $1.5 million, or 4.3%, to $33.7 million for the year ended September 30, 2018, from $35.2 million for the year ended September 30, 2017, due to a decreased spend on marketing and promotion materials.

~~General and administrative expenses.~~ General and administrative expenses decreased $5.5 million, or 15.3%, to $30.5 million for the year ended September 30, 2018, from $36.1 million for the year ended September 30, 2017. Included within this decrease are reductions in overall staff cost of approximately $4.8 million primarily resulting from business realignment and

~~restructuring initiatives.~~

Depreciation and amortization ~~expenses.~~. Depreciation and amortization ~~expenses decreased $1.2~~expense increased $0.7 million, or ~~20.7%~~10.8%, ~~to $4.6 million for the year ended September 30, 2018, from $5.8 million for the year ended September 30, 2017,~~ due to an ~~intangible asset having been fully amortized~~increase in ~~2017.~~

~~Acquisition costs and impairment~~amortization of ~~goodwill and long-lived assets.~~ Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets amounted to approximately $0.5 million, for the year ended September 30, 2018, compared to $1.0 million for the year ended September 30, 2017. The acquisition costs incurred during the year ended September 30, 2018capitalized software related to the ~~acquisition~~continued development and enhancement of Machinio. During 2017, the Company recorded $1.9 million of long-lived asset impairment charges, partially offset by a $0.9 million reversal of an earn-out liability. There were no impairments recorded during 2018.

~~Other operating expense.~~ Other operating expense of $1.4 million represents $1.9 million related to business restructuring costs (for further information, see Note 15), partially offset by an approximate $0.6 million increase in other miscellaneous income for the year ended September 30, 2018. Other operating expense of $3.7 million during 2017 represents $4.2 million related to business restructuring costs, partially offset by an approximate $0.6 million increase in the fair value of a right the Company held from its participation in certain principal transactions in the Company's CAG business, for the year ended September 30, 2017.

our marketplace platform and tools.

Interest ~~(income) expense~~ and other ~~expense,~~income, net.Interest ~~income~~ and other income, net increased ~~$0.2~~$0.5 million ~~to $0.8 million~~due the effect of ~~income for the year ended September 30, 2018, from $0.6 million of income for the year ended September 30, 2017.~~changes in foreign exchange rates.

(Benefit) provision for income taxes. ~~Income~~(Benefit) provision for income taxes decreased ~~$8.8~~$24.2 million to a benefit of ~~$(9.3)~~$23.4 million from an expense of $0.8 million due to a release of $27.9 million of valuation allowance netted against $3.3 million deferred tax expense and $1.2 million state and foreign income taxes. The Company's effective income tax rate was (84.7%) for the ~~year~~twelve months ended September 30, ~~2018, from a benefit of $(0.5) million for the year ended September 30, 2017 due to benefits derived~~2021. The 2021 effective tax rate differed from the ~~new Tax Act,~~statutory federal rate of 21.0% primarily as a result of the release of the valuation allowance ~~charge~~on deferred tax assets and the impact of foreign, state, and local taxes and permanent tax adjustments. The Company’s effective income tax rate was 44.6% for the twelve months ended September 30, 2018. The 2018 effective tax rate differed from the statutory federal rate of 24.5% primarily as a result of benefits derived from the new Tax Act, the valuation allowance charge and the impact of foreign, state, and local income taxes and permanent tax adjustments.

~~Net loss.~~ ~~Net loss for the year ended September 30, 2018, improved $27.6 million, to $11.6 million, compared to a loss of $39.2 million for the year ended September 30, 2017, due to the reasons described above.~~

4244

Non-GAAP Financial Measures

Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA. Non-GAAP EBITDA is a supplemental non-GAAP financial measure and is equal to Net income (loss) plus Interest and other expense (income), net excluding the non-service components of net periodic pension (benefit); Provision (benefit) for income taxes; and Depreciation and amortization. Interest and other expense (income), net, can include non-operating gains and losses, such as from foreign currency fluctuations. Our definition of Non-GAAP Adjusted EBITDA differs from Non-GAAP EBITDA because we further adjust Non-GAAP EBITDA for stock-based compensation expense, acquisition costs such as transaction expenses and changes in earn out estimates, business realignment expense, deferred revenue purchase accounting adjustments, and goodwill and long-lived asset impairment.

We believe Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA are useful to an investor in evaluating our performance for the following reasons:

•Depreciation and amortization expense primarily relates to property and equipment and the amortization of intangible assets. These expenses are non-cash charges that have fluctuated significantly in the past. As a result, we believe that adding back these non-cash charges is useful in evaluating the operating performance of our business on a consistent basis from year-to-year.

•As a result of varying federal and state income tax rates, we believe that presenting a financial measure that adjusts for provision for income taxes is useful to investors when evaluating the operating performance of our business on a consistent basis from year to year.

•The authoritative guidance for stock-based compensation requires all share-based payments to employees, including grants of employee stock options, restricted stock and stock appreciation rights to be recognized in the income statement based on their estimated fair values over the requisite vesting period. We believe adjusting for this stock-based compensation expense is useful to investors when evaluating the operating performance of our business on a consistent basis from year to year.

•The authoritative guidance related to business combinations requires the initial recognition of contingent consideration at fair value with subsequent changes in fair value recorded through the Consolidated Statements of Operations and disallows the capitalization of transaction costs. We believe adjusting for these acquisition related expenses is useful to investors when evaluating the operating performance of our business on a consistent basis from year-to-year.

•We believe adjusting for business realignment expense is useful to investors when evaluating the operating performance of our business on a consistent basis from year-to-year, as these expenses are outside our ordinary course of business.

•We believe isolating non-cash charges, such as amortization and depreciation, and other items, such as impairment costs incurred outside our ordinary course of business, provides additional information about our cost structure, and, over time, helps track our performance.

•We believe Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA are important indicators of our operational strength and the performance of our business because they provide a link between profitability and operating cash flow.

•We also believe that analysts and investors use Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry.

Our management uses Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA:

•as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis as they remove the impact of items not directly resulting from our core operations;

•for planning purposes, including the preparation of our internal annual operating budget;

•to allocate resources to enhance the financial performance of our business;

•to evaluate the effectiveness of our operational strategies; and

•to evaluate our capacity to fund capital expenditures and expand our business.

Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA as calculated by us are not necessarily comparable to similarly titled measures used by other companies. In addition, Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA: (a) do not represent net income (loss) or cash flows from operating activities as defined by GAAP; (b) are not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered as alternatives to net income (loss), income (loss) from operations, cash provided by (used in) operating activities or our other financial information as determined under GAAP.

We prepare Non-GAAP Adjusted EBITDA by eliminating from Non-GAAP EBITDA the impact of items that we do not consider indicative of our core operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. As an analytical tool, Non-GAAP Adjusted EBITDA is subject to all of the limitations applicable to Non-GAAP EBITDA. Our presentation of Non-GAAP Adjusted EBITDA should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.

The table below reconciles Net income (loss) to Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA for the periods presented.


	Year ended September 30,
	2022		2021		2020

Net income (loss)	$	40,324	$	50,949	$	(3,774)
Interest and other expense (income), net(1)	126		(76)		(577)
Provision (benefit) for income taxes	7,329		(23,370)		801
Depreciation and amortization	10,322		6,969		6,290
Non-GAAP EBITDA	$	58,101	$	34,472	$	2,740
Stock compensation expense	8,482		6,947		5,660
Acquisition costs and impairment of goodwill and long-lived assets(2)	473		1,464		5

Business realignment expenses(2,3)	191		5		405
Fair value adjustments to acquisition earn-outs	(24,500)		—		200
Deferred revenue purchase accounting adjustment	—		—		3

Non-GAAP Adjusted EBITDA	$	42,747	$	42,888	$	9,013

(1) Interest and other expense (income), net excludes non-services pension and other postretirement benefit expense.

(2) Acquisition costs and impairment of goodwill and long-lived assets, as well as Business realignment expenses, are components of Other operating expenses, net on the Consolidated Statements of Operations.

(3) Business realignment expense includes the amounts accounted for as exit costs under ASC 420, Exit or Disposal Cost Obligations, and the related impacts of business realignment actions subject to other accounting guidance.

Liquidity and Capital Resources

Our operational cash needs primarily relate to working capital, including staffing costs, technology expenses, leases of real estate and equipment used in our operations, and capital used for inventory purchases, which we have funded through existing cash balances and cash generated from operations. From time to time, we may use our capital resources for other activities, such as contract start-up costs, joint ventures, share repurchases and acquisitions. As of September 30, ~~2019,~~2022, we had ~~$36.5~~$96.1 million in cash and cash equivalents, ~~as well as $30.0 million~~which we believe is sufficient to meet the Company’s anticipated cash needs one year from issuance of these financial statements.

Capital Expenditures

Our capital expenditures consist primarily of capitalized software, warehouse equipment, computers and purchased software, office equipment, furniture and fixtures, and leasehold improvements. The timing and volume of such capital expenditures in ~~short-term investments.~~the future will be affected by the addition of new sellers or buyers or expansion of existing seller or buyer relationships. We intend to fund those expenditures primarily from our existing cash balances and operating cash flows. Our capital expenditures for the year ended September 30, 2022 were $8.1 million. As of September 30, 2022, we had no significant outstanding commitments for capital expenditures.

Our future capital requirements will depend on many factors including our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the development and deployment of new marketplaces, the introduction of new value-added services and the costs to establish additional distribution centers. We may seek to enter agreements with respect to potential investments in, or acquisitions of, complementary businesses, products or technologies, which could also require us to seek additional equity or debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders. Additional debt would result in increased interest expense and could result in covenants that would restrict our operations. There is no assurance that such financing, if required, will be available in amounts or on terms acceptable to us, if at all.

~~In fiscal 2019,~~Credit Agreement

The Company maintains a $25.0 million Credit Agreement due March 31, 2024 (Credit Agreement). The Company may draw upon the Credit Agreement for general corporate purposes. Repayments of any borrowings under the Credit Agreement shall become available for redraw at any time by the Company. The interest rate on borrowings under the Credit Agreement is a variable rate per annum equal to the Daily Simple Secured Overnight Financing Rate (SOFR) in effect plus a margin ranging from 1.25% to 1.75%. Interest is payable monthly. During the year ended September 30, 2022, the Company did not make any draws under the Credit Agreement. As of September 30, 2022, the Company had no outstanding indebtedness under the Credit Agreement and our borrowing availability was $25.0 million.

The obligations under the Credit Agreement are unconditionally guaranteed by us and each of our existing and subsequently acquired or organized domestic subsidiaries and secured on a first priority basis by a security interest (subject to permitted liens) in substantially all assets owned by us, and each of our other domestic subsidiaries, subject to limited exceptions. The Credit Agreement contains certain financial and non-financial restrictive covenants including, among others, the requirement to maintain a minimum level of earnings before interest, income taxes, depreciation and amortization (EBITDA). The Credit Agreement contains a number of affirmative and restrictive covenants including limitations on mergers, consolidations and dissolutions, investments and acquisitions, indebtedness and liens, and dividends and other restricted payments. As of September 30, 2022, the Company was in full compliance with the terms and conditions of the Credit Agreement.

Working Capital Management

Most of our sales are recorded subsequent to receipt of payment authorization, utilizing credit cards, wire transfers, and PayPal, an Internet based payment system, as methods of payments. As a result, we ~~deployed our new e-commerce technology platform.~~ are not subject to significant collection risk, as goods are generally not shipped before payment is received.

The COVID-19 pandemic has caused the Company's GMV and revenues to fluctuate, and the Company initially implemented cost control measures to protect against the uncertainties created by the severe economic restrictions in its initial phases. From a cash flow perspective, the Company employed working capital management practices, primarily in the form of temporary extensions to vendor payment terms, and also experienced accumulation in its payables to sellers balance due to COVID-19 restrictions, which continue to be a factor in certain countries, causing some buyer delays in their ability to pick up purchased assets. The Company is prepared to reimplement these measures should it face conditions consistent with the initial phases of the COVID-19 pandemic.

We expect to continue ~~investment as we prepare for the launch of a new consolidated~~to invest in enhancements to our e-commerce technology platform, marketplace capabilities and ~~for the implementation of~~ tools for data-driven product ~~recommendation,~~recommendations, omni-channel behavioral marketing, expanded analytics, and ~~predictive analytics. In addition,~~buyer/seller payment optimization.

We intend to indefinitely reinvest the ~~retail supply transaction volume, which has a unique set of services, remains a part~~earnings of our ~~future integration plans. We may also invest in new business ventures, such as Machinio in July 2018, for which~~foreign subsidiaries outside the United States. As a result, we ~~paid $16.7 million in cash and have contingent consideration in an amount up to $5.0 million payable in 2020.~~

We did not record a provision for deferred U.S. tax expense on the ~~undistributed earnings~~$8.6 million of ~~foreign subsidiaries because we intend to indefinitely reinvest the earnings of these foreign subsidiaries outside the United States. The amount of such~~ undistributed foreign earnings ~~was $2.8 million~~ as of September 30, ~~2019.~~2022. As of September 30, ~~2019,~~2022, and September 30, ~~2018, $21.0~~2021, $20.3 million and ~~$14.4~~$22.4 million, respectively, of cash and cash equivalents was held ~~overseas~~outside of the U.S.

Other Uses of Capital Resources

Bid4Assets, Inc. Acquisition. On November 1, 2021, the Company purchased all of the issued and outstanding shares of stock of Bid4Assets. Bid4Assets is a leading online marketplace focused on conducting real property auctions for the government, including tax foreclosure sales and sheriff's sales. Our investment through the acquisition of Bid4Assets will support continued growth in the GovDeals reportable segment, particularly in our real estate vertical.

The preliminary acquisition date fair value of the consideration transferred to the former shareholders of Bid4Assets was approximately $42.7 million consisting of $14.7 million in cash (net of working capital adjustments totaling $0.3 million) and earn-out consideration with a preliminary fair value of approximately $28.0 million. As part of the acquisition of Bid4Assets, former shareholders of Bid4Assets are eligible to receive earn-out consideration of up to $37.5 million in cash. See Note 3 - Bid4Assets Acquisition for further information.

During the twelve months ended September 30, 2022, the fair value of the earn-out liability was reduced by $24.5 million to $0.0 million, due to a decline in the auction events and transactions that are expected to be completed during the earn-out period ending December 31, 2022, which included extended timelines to advance legislation that allows for online auctions of foreclosed real estate in certain target markets, and other client specific delays in bringing foreclosed real estate to auction. These changes resulted from events occurring subsequent to the November 1, 2021, acquisition date and therefore, were not ~~available~~known nor knowable at that time.

Share Repurchases. From time to ~~fund domestic operations without incurring taxes upon repatriation.~~

~~We are~~time, we have been authorized to repurchase issued and outstanding shares of our common stock under a share repurchase program approved by our Board of Directors. Share repurchases may be made through open market purchases, privately negotiated transactions or otherwise, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The repurchase program may be discontinued or suspended at any time and will be funded using our available cash. ~~We did not~~

The Company had no remaining share repurchase authorization as of September 30, 2021. On December 6, 2021, the Company's Board of Directors authorized a new stock repurchase plan of up to $20 million of the Company's outstanding shares ~~under this program~~of common stock through December 31, 2023. The Company repurchased 1,159,066 shares for $20.0 million during the ~~years~~six months ended ~~September~~March 31, 2022.

On May 13, 2022, the Company's Board of Directors authorized the May 2022 Repurchase Plan. The Company repurchased 408,211 shares for $5.4 million during the three months ended June 30, ~~2019 or 2018.~~2022. As of September 30, ~~2019, we are~~2022, the Company may repurchase an additional $6.6 million of shares under the May 2022 Repurchase Plan.

On December 6, 2022, the Company's Board of Directors authorized tothe repurchase of up to an additional ~~$10.1~~$8.4 million inof the Company's outstanding shares ~~under this program.~~of common stock through December 31, 2024.

Off-Balance Sheet Arrangements

Most of our sales are recorded subsequent to receipt of payment authorization, utilizing credit cards, wire transfers, and PayPal, an Internet based payment system, as methods of payments. As a result, we are. We do not ~~subject to significant collection risk, as goods are generally not shipped before payment is received.~~have any transactions, agreements or other contractual arrangements that could be considered material off-balance sheet arrangements.

Changes in Cash Flows: ~~2019~~2022 Compared to ~~2018~~2021

Net ~~cash used in operating activities was $6.2 million for the year ended September 30, 2019, and net~~ cash provided by operating activities was ~~$0.6~~$44.8 million and $65.4 million for the years ended September 30, 2022 and 2021, respectively. The $20.6 million decrease in cash provided by operating activities between periods was attributable to cash flows associated with a higher Accounts receivables balance of $5.4 million driven by the completion of a significant international industrial partner purchase transaction during the year ended September 30, ~~2018. The $6.9 million increase in cash used in operations between periods was primarily attributable to increase in net loss~~2022, as well as ~~changes~~Accounts payable and Payables to sellers which together had a net decrease of $11.5 million due to reduced rates of change in ~~working capital from collections of receivables, sales of inventory and payables to sellers.~~the underlying transaction volumes during the current period. Our working capital accounts are subject to natural variations depending on the rate of change of our transaction volumes, the timing of cash receipts and payments, ~~however,~~and variations in our transaction volumes related to settlements between our buyers and sellers. As GovDeals real estate sales with settlement services increase through the integration with Bid4Assets, operating cash flow fluctuations from accounts payable and payables to sellers are expected to become more variable. The amount of cash received and settled will be substantially higher than our take rate on such transactions, and the timing of auction events, cash collection period, and payment of settlements relative to period end dates can potentially drive substantial cash movements to the extent the timing of such activities cross fiscal periods. There have been no other significant changes to the working capital requirements for the Company.

Net cash used in investing activities was $21.1 million for the year ended September 30, 2022, and $1.0 million for the year ended September 30, 2021. The $20.1 million increase in cash used in investing activities was driven by $11.2 million in cash paid at closing to acquire Bid4Assets on November 1, 2021, net of cash acquired (see Note 3 - Bid4Assets Acquisition for further information), a non-recurring collection of note receivable principal payments during the year ended September 30, 2021, totaling $4.3 million in connection with the JTC promissory note (see Note 2 - Summary of Significant Accounting Policies for further information), a $2.7 million increase in new property and equipment purchases from expansion of our distribution network, and $1.8 million in purchases of short-term investments.

Net cash used in financing activities was $31.9 million for the year ended September 30, 2022, and $34.7 million for the year ended September 30, 2021. The $2.7 million decrease in cash used by financing activities was primarily driven by $5.7 million of lower common stock repurchases in the current year and a $1.1 million decrease in taxes paid associated with net settlement of stock compensation awards. These were offset by an earn-out payment of $3.5 million in connect with the Bid4Assets acquisition.

Changes in Cash Flows: 2021 Compared to 2020

Net cash provided by operating activities was $65.4 million and $16.5 million for the year ended September 30, 2021 and 2020, respectively. The $48.9 million increase in cash provided by operations between periods was attributable to $33.2 million of higher net income as adjusted for non-cash items; changes in payables to sellers, driven by increasing transaction volumes; changes to accounts payable, accrued expenses and other liabilities driven by increasing transaction volumes and management of working capital; and partially offset by a $7.0 million increase in inventory driven by the continued growth in our RSCG and CAG segments. Our working capital accounts are subject to natural variations depending on the rate of change of our transaction volumes, the timing of cash receipts and payments, and variations in our transaction volumes related to settlements between our buyers and sellers. However, there have been no significant changes to the working capital requirements for the ~~Company, other than the Machinio earn-out that will be paid in fiscal 2020.~~Company.

Net cash ~~used in~~provided by (used in) investing activities was ~~$15.7~~$(1.0) million for the year ended September 30, ~~2019,~~2021, and ~~$37.1~~$28.6 million for the year ended September 30, ~~2018.~~2020. The $29.7 million decrease in cash provided by investing activities was driven by a $30.0 million net impact of maturities of Short-term investments as the ~~$16.7 million related~~Company transitioned to ~~the acquisition of Machinio~~using cash equivalent money market funds in ~~fiscal 2018, and a $10.0 million decrease in short-term investments purchased. These decreases were~~its treasury strategy. This activity was partially offset by ~~$3.0~~a $1.5 million ~~related~~increase in proceeds of principal payments from the JTC promissory note during the year ended September 30, 2021 due to receipt of $3.5 million from the First Amendment to the Forbearance Agreement with JTC ~~Note,~~ as ~~we received the 2019 annual payment in October 2019, after our fiscal year end. As~~ discussed in Note 2 - Summary of Significant Accounting ~~Policies~~ to the Company's consolidated financial statements, the Company concluded that it remains probable that the Company will collect the amounts related to the promissory note issued to JTC. However, the Company will continue to monitor for changes that could impact the recoverability of the promissory note, which will depend on JTC's subsequent operating performance and ability to make the payments required by the new repayment schedule. There was also a $1.8 million increase in capital expenditures, primarily related to our new e-commerce technology platform. Policies.

Net cash ~~provided by~~used in financing activities was ~~$0.5~~$34.7 million for the year ended September 30, ~~2019,~~2021, and ~~net cash provided by financing activities was $0.4~~$5.7 million for the year ended September 30, ~~2018.~~2020. The ~~change was primarily driven from an increase in proceeds from stock option exercises.~~

~~Changes in Cash Flows: 2018 Compared to 2017~~

Net cash provided by operating activities was $0.6 million for the year ended September 30, 2018, and net cash used in operating activities was $31.7 million for the year ended September 30, 2017. The $32.3$29.0 million increase in cash ~~provided by~~

~~operations between periods was primarily attributable to improved profitability as well as changes in working capital from collections of receivables and sales of inventory.~~

~~Net cash~~ used in investing activities was $37.1 million for the year ended September 30, 2018, and $7.9 million for the year ended September 30, 2017. Net cash used in investing activities during 2018 consisted primarily of purchasing short-term

investments and the acquisition of Machinio, and to a lesser extent, expenditures for capitalized software, purchases of equipment and leasehold improvements. Net cash used in investing activities during 2017 only consisted of expenditures for capitalized software, purchases of equipment and leasehold improvements.

~~Net cash provided~~ by financing activities ~~was $0.4~~primarily driven by $27.2 million ~~for the year ended September 30, 2018,~~to repurchase common stock and a $3.3 million increase in taxes paid associated with net ~~cash used in financing activities was $1.1 million for the year ended September 30, 2017. Net cash provided by financing activities for 2018 consisted~~settlement of stock compensation awards, primarily ~~of proceeds~~ from the ~~exercise~~vesting of ~~stock options.~~

~~Capital Expenditures.~~ ~~Our capital expenditures consist primarily~~awards with market conditions due to the achievement of ~~capitalized software, computers and purchased software, office equipment, furniture and fixtures, and leasehold improvements. The timing and volume of such capital expenditures~~increases in the future will be affected by the addition of new sellers or buyers or expansion of existing seller or buyer relationships. We intend to fund those expenditures primarily from operating cash flows. Our capital expenditures for the twelve months ended September 30, 2019 were $5.9 million. As of September 30, 2019, we had no significant outstanding commitments for capital expenditures.

We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next twelve months. Our future capital requirements will depend on many factors including our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the development and deployment of new marketplaces, the introduction of new value-added services and the costs to establish additional distribution centers. Although we are currently not a party to any definitive agreement with respect to potential investments in, or acquisitions of, complementary businesses, products or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders. Additional debt would result in increased interest expense and could result in covenants that would restrict our operations. There is no assurance that such financing, if required, will be available in amounts or on terms acceptable to us, if at all.

~~Contractual and Commercial Commitments~~

The table below represents our significant commercial commitments as of September 30, 2019. Operating and capital leases represent commitments to rent office and warehouse space, as well as equipment used in our operations. Other contractual cash obligations represent information technology commitments related to licensing fees, hardware maintenance and other. These items are not reflected on our balance sheets.

Total Less than
1 year 1 to 3
years 3 to 5
Years 5+ years
(in thousands)
Operating leases $ 13,447 $ 5,572 $ 5,830 $ 2,044 $ —
Capital leases 372 52 106 214 —
Other contractual cash obligations 4,770 3,461 1,309 — —
Total contractual cash obligations $ 18,589 $ 9,085 $ 7,245 $ 2,258 $ —

~~Off-Balance Sheet Arrangements~~

~~We do not have any transactions, obligations or relationships that could be considered material off-balance sheet arrangements.~~

~~Inflation~~

Inflation generally affects us by increasing our cost of labor and equipment. We do not believe that inflation had any material effect on our results of operations during the years ended September 30, 2019, 2018 and 2017.Company's share price.

New Accounting Pronouncements

Information regarding our adoption of new accounting and reporting standards is discussed in Note 2 to the consolidated financial statements included in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Interest rate sensitivity. As of September 30, 2019, we do not have any debt, but we do hold $30.0 million of short-term investments with interest rates between 1.97% and 2.8%. Changes in interest rates on these short-term investments are not expected to have a significant impact to our consolidated results of operations. Our investment policy requires us to invest funds in excess of current operating requirements. The principal objectives of our investment activities are to preserve principal, provide liquidity and maximize income consistent with minimizing risk of material loss. As of September 30, 2022, we hold cash and cash equivalents and short-term investments that are subject to varying interest rates based upon their maturities. A hypothetical 100 basis point decline in interest rates would impact our pre-tax earnings by less than $1.0 million on an annualized basis.

As of September 30, 2022, we do not have any debt, however, should the Company draw on our Letter of Credit in the future, such draw would incur interest as determined by the Daily Simple Secured Overnight Financing Rate (SOFR) in effect plus a margin ranging from 1.25% to 1.75%.

Exchange rate sensitivity. Because of the number of countries and currencies we operate in, movements in currency exchange rates may affect our results. We report our operating results and financial condition in U.S. dollars. Our U.S. operations earn revenues and incur expenses primarily in U.S. dollars.

Outside the United States, we ~~predominantly~~ generate revenues and incur expenses in ~~the~~both U.S. dollars and local ~~currency.~~currencies. Our primary foreign exchange exposures include British Pounds, Canadian Dollars, Chinese Yuan, Euros, and Hong Kong Dollars. When we translate the results and net assets of ~~these~~our international operations into U.S. dollars for financial reporting purposes, movements in exchange rates will affect our reported results. Volatile market conditions arising from ongoing macroeconomic conditions such as rising interest rates at federal banks and the Russian-Ukraine conflict, may result in significant changes in exchange rates, which could affect our results ~~and net assets.~~of operations expressed in U.S. dollars. A hypothetical 10% decrease in foreign exchange rates reduce our total expected revenues by approximately 1%. The potential impact on pre-tax earnings would be less as total expected expenses would also decrease.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements and accompanying notes are included in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Attached as exhibits to this Form 10-K are certifications of our Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as ~~amended.~~amended (Exchange Act). This "Controls and Procedures" section includes information concerning the controls and controls evaluation referred to in the certifications. The report of ~~Ernst~~Deloitte & ~~Young~~Touche LLP, our independent registered public accounting firm, regarding its audit of our internal control over financial reporting is set forth below in this section. This section should be read in conjunction with the certifications and the ~~Ernst~~Deloitte & ~~Young~~Touche LLP report for a more complete understanding of the topics presented.

Evaluation of Disclosure Controls and Procedures

Management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures and our internal control over financial reporting as of the end of the period covered by this Form 10-K. The controls evaluation was conducted under the supervision and with the participation of our Chief Executive Officer ~~Chief Financial Officer,~~ and Chief ~~Accounting~~Financial Officer. Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in our reports filed under the ~~Securities~~ Exchange Act, ~~of 1934 (“Securities Exchange Act reports”),~~ such as this Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Chief Executive Officer ~~Chief Financial Officer,~~ and Chief ~~Accounting~~Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our quarterly evaluation of disclosure controls includes an evaluation of some components of our internal control over financial ~~reporting, and internal~~reporting. Internal control over financial reporting is also separately evaluated on an annual basis for purposes of providing the management report which is set forth below.

The evaluation of our disclosure controls included a review of the controls' objectives and design, our implementation of the controls and their effect on the information generated for use in this Form 10-K. In the course of the controls evaluation, we reviewed identified data errors, control deficiencies and, where appropriate, sought to confirm that appropriate corrective actions, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including the Chief Executive Officer ~~Chief Financial Officer,~~ and Chief ~~Accounting~~Financial Officer, concerning the effectiveness of the disclosure controls can be reported in our periodic reports on Form 10-Q and Form 10-K. Many of the components of our disclosure controls are also evaluated on an ongoing basis by our finance organization. The overall goals of these various evaluation activities are to monitor our disclosure controls, and to modify them as necessary. Our intent is to maintain the disclosure controls as dynamic systems that change as conditions warrant.

Based upon the controls evaluation, our Chief Executive Officer ~~Chief Financial Officer,~~ and Chief ~~Accounting~~Financial Officer have concluded that, as of the end of the period covered by this Form 10-K, our disclosure controls were effective to ensure assurance that information required to be disclosed in our ~~Securities~~ Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that material information related to Liquidity Services and our consolidated subsidiaries is made known to management, including the Chief Executive Officer and Chief Financial ~~Officer, and~~

~~Chief Accounting~~ Officer, particularly during the period when our periodic reports are being prepared. We reviewed the results of management's evaluation with the Audit Committee of our Board of Directors.

Management Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the ~~company;~~Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP; and (iii) provide reasonable assurance regarding authorization to effect the acquisition, use or disposition of ~~company~~Company assets, as well as the prevention or timely detection of unauthorized acquisition, use or disposition of the ~~company's~~Company's assets that could have a material effect on the financial statements.

Management assessed our internal control over financial reporting as of September 30, ~~2019,~~2022, the end of our fiscal year. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Management's assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies and our overall control environment. This assessment is supported by testing and monitoring performed by our finance organization.

As permitted by SEC guidance with respect to newly acquired entities, management excluded Bid4Assets, which was acquired on November 1, 2022, from its assessment of internal control over financial reporting. The financial statements of Bid4Assets, Inc., constitute less than 2.5% of revenues and total assets (excluding goodwill and intangible assets which were integrated into the Company’s systems and control environment), in the consolidated financial statement amounts as of and for the year ended September 30, 2022. We are in the process of evaluating Bid4Assets' existing controls and procedures and integrating Bid4Assets into our internal control over financial reporting. See Note 3 - Bid4Assets Acquisition, in the Notes to the Consolidated Financial Statements for further discussion of the Bid4Assets acquisition and its impact on our consolidated financial statements.

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP.

Our independent registered public accounting firm, ~~Ernst~~Deloitte & ~~Young~~Touche LLP, independently assessed the effectiveness of the ~~company's~~Company's internal control over financial reporting. ~~Ernst~~Deloitte & ~~Young~~Touche LLP has issued an attestation report, which is included at the end of this section.

Inherent Limitations on Effectiveness of Controls

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Other inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting

During the three months ended September 30, ~~2019, the Company implemented accounting system and process changes related to the deployment of its new core e-commerce technology platform, and~~2022, no change occurred in ~~preparation for the adoption of ASC 2016-02,~~ ~~Leases (Topic 842), on October 1, 2019. These implementations and process changes resulted in changes to the Company's~~our internal ~~control over financial reporting. There have not been any other changes in the Company's internal control~~controls over financial reporting that ~~have~~ materially affected, or ~~are~~is reasonably likely to materially affect, ~~the Company's~~our internal ~~control~~controls over financial reporting.

4651

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Liquidity Services, Inc. ~~and Subsidiaries~~

Opinion on Internal Control over Financial Reporting

We have audited ~~Liquidity Services, Inc. and Subsidiaries’~~the internal control over financial reporting of Liquidity Services, Inc. and subsidiaries (the “Company”) as of September 30, ~~2019,~~2022, based on criteria established in Internal ~~Control—~~Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ~~(2013 framework) (the COSO criteria)~~(COSO). In our opinion, ~~Liquidity Services, Inc. and Subsidiaries (the Company)~~the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, ~~2019,~~2022, based on ~~the COSO criteria.~~criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also ~~have~~ audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the ~~2019~~ consolidated financial statements as of and for the fiscal year ended September 30, 2022, of the Company and our report dated December ~~10, 2019~~8, 2022, expressed an unqualified opinion ~~thereon.~~on those financial statements.

As described in Management Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Bid4Assets, Inc., which was acquired on November 1, 2021. The financial statements of Bid4Assets, Inc., constitute less than 2.5% of revenues and total assets (excluding goodwill and intangible assets which were integrated into the Company’s systems and control environment), in the consolidated financial statement amounts as of and for the year ended September 30, 2022. Accordingly, our audit did not include the internal control over financial reporting at Bid4Assets, Inc.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ ~~Ernst & Young~~Deloitte and Touche LLP

~~Tysons,~~McLean, Virginia

December ~~10, 2019~~8, 2022

4752

Item 9B. Other Information.

On December ~~4, 2019,~~6, 2022, the Company's Board of Directors authorized the repurchase of up to $8.4 million of the ~~Company increased~~Company's outstanding shares of common stock through December 31, 2024. This authorization is in addition to the ~~size~~$6.6 million remaining under the May 13, 2022 authorization to repurchase up to $12.0 million in shares through June 30, 2024. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and the existence of alternative investment opportunities. The repurchase program will be executed consistent with the Company's capital allocation strategy of prioritizing investment to grow the business over the long term.

Under the repurchase program, repurchases can be made from time to time using a variety of methods, including open market purchases, all in compliance with the rules of the Board of Directors from seven to eight members and appointed Kathy Dyer to the Board as a Class III director, effective January 1, 2020. Ms. Dyer’s term will expire at the Company’s 2021 Annual Meeting of Stockholders. She will serve on the Board’s Compensation Committee.

Ms. Dyer, age 62, is the founder and Chief Executive Officer of PivotWise, a strategic advisory firm and was Global Partner and a member of the senior leadership team at IBM Global Business Services from 2016 to 2018. From 2013 to 2015, she served as EVP and General Manger, Global Chief Marketing Officer, Merchant Services at American Express Company. She has been a Director of Noora Health since 2018.

Ms. Dyer’s compensation for her service as a director will be consistent with that of the Company’s other directors who are not employees of the Company, as described in the Company’s definitive proxy statement filed with theUnited States Securities and Exchange Commission ~~on January 22, 2019 under the caption “Compensation of Non-Employee Directors,” which portion of such proxy statement is incorporated herein by reference.~~(the “SEC”) and other applicable legal and regulatory requirements.

~~There are no arrangements or understandings between Ms. Dyer and any other persons pursuant to which Ms. Dyer was selected as a director. There have been no transactions involving~~

The repurchase program does not obligate the Company to acquire any particular amount of common shares, and the repurchase program may be suspended or discontinued at any ~~of its subsidiaries in which Ms. Dyer has or will have a direct or indirect material interest that are required to be disclosed by Item 404(a) of Regulation S-K.~~time at the Company’s discretion.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.