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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, ~~for any reason,~~ 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 ~~subject~~impacted by fluctuations in foreign currency rates. The results of our foreign subsidiaries are translated from the local currency to ~~extensive anti-corruption laws~~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 ~~regulations.~~

~~Due~~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. We currently maintain a line of credit facility with Wells Fargo Bank, National Association (Wells Fargo NA) that allows for a maximum revolver to be drawn-upon of $25.0 million, access to which expires on March 31, 2025. As of September 30, 2023, the Company had not outstanding borrowings on this line of credit facility.

Although we have this existing line of credit facility with Wells Fargo NA from which we may draw funds, there may be situations in which we seek funding through other sources. Further, upon expiration of this line of credit facility, the borrowing amount, interest rates, or related terms may no longer be favorable to the ~~international scope~~Company. 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 ~~we are subject~~and initiatives.

Global economic conditions, including those from macro-trends and global events, 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, labor shortages, labor unrest, pandemics, natural disasters, supply chain disruptions, inflation, and overall uncertainty with respect to the ~~U.S. Foreign Corrupt Practices Act,~~economy, including with respect to tariff and trade issues.

For example, inflation rates, particularly in the ~~U.K. Bribery Act~~United States, continue to increase to levels not seen in years, and similar foreign anti-corruption laws. These laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence foreign government officials for the purpose of obtaining or retaining business, or obtaining an unfair advantage. Global enforcement of these laws has increased ~~substantially in recent years. Violations of anti-corruption laws or regulations by our employees or by intermediaries acting on our behalf~~inflation may result in ~~severe criminal~~increases in our operating costs (including our labor costs). In addition, the Federal Reserve and other central banks have 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.

Ongoing armed conflicts around the world, such as the invasion of Ukraine by Russia and recently, the conflict in and adjacent to Israel, could create or ~~civil~~exacerbate risks facing our business. The Russia-Ukraine conflict specifically results in numerous countries, including the United States, imposing significant new sanctions and export controls against Russia, Russian banks, and certain Russian individuals. These armed conflicts have resulted and could ~~disrupt our business, and~~continue to result in, andisruptions to trade, commerce, pricing stability, and/or supply chain continuity, in both Europe and globally, and has introduced significant uncertainty into the global markets. If global economic conditions remain uncertain or deteriorate further, particularly to the extent such conflicts escalate to involve additional countries, we could see potential scenarios having a material adverse effect on our ~~reputation,~~ business such as 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. 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.

We believe that other potential conflicts that could result in similar disruption could include a military conflict between mainland China and Taiwan, possible international intervention and sanctions, and the resulting potential disruption to the operations of our CAG and Machinio teams in China. Moreover, in addition to our operations, in the case of a military conflict between China and Taiwan, global manufacturers would likely lose access to advanced semiconductor chips and other products that are sourced from Taiwan. Such a conflict would also likely limit access to key Chinese ports and exporters due to both military actions and potential international sanctions, which would create significant disruption for a variety of industries that we serve that rely on supply chain in China.

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

Our revenues could decrease if there was significant erosion in the supply of, demand for, or market values of surplus assets, which could adversely affect our financial condition and results of ~~operations or~~operations. We have no control over any of the factors that affect the supply of, and demand for, surplus assets, and the circumstances that cause market values to fluctuate including, among other things, economic uncertainty, global geopolitical climate, disruptions to credit and financial ~~condition.~~

markets, lower commodity prices, and our buyers’ restricted access to capital. Recent economic conditions have caused fluctuations in the supply, mix, and market values of surplus assets available for sale, which has a direct impact on our revenues. In addition, price competition and the availability of surplus 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 market values of such assets.

Legal and Regulatory Risks

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

The laws and regulations related to the Internet and ~~ecommerce~~e-commerce are evolving. These laws and regulations relate to issues such as user privacy, freedom of expression, pricing, fraud, quality of ~~products~~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" and~~"auctions," the liability of traditional "auctioneers" in conducting auctions ~~as well as the~~and handling of 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, ~~or otherwise~~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 ~~as a result~~because of any such allegations, or ~~as a result~~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.

~~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, among other things, 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.

In addition, ~~for specified categories of property we purchase under~~if our vendor contracts with the DoD for resale, we are required to (1) obtain an end-use certificate from the prospective buyer describing the nature of the buyer's business, describing the expected disposition and specific end-use of the property, and acknowledging the applicability of pertinent export control and economic sanctions laws and (2) confirm that each buyer has been cleared to purchase export-controlled items.

~~We may incur significant costs or be required to modify our business to comply with these requirements. If we are alleged to have violated any of these~~sellers violate laws or regulations, ~~we may be subject~~or implement practices regarded as unethical, unsafe, or hazardous 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, wethe environment, it could ~~suffer serious harm to~~damage our reputation, ~~if allegations of impropriety are made against us, whether or not true.~~

~~We are exposed to risks related to cybersecurity~~limit our growth, and ~~protection of confidential information.~~

We retain highly confidential information on behalf of our buyers and sellers in our systems and databases. Although we maintain security features in our systems that are 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. These disruptions 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, 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 by significant financial and technological resources and therefore may be even more difficult to detect. As a result, we may be unable to anticipate these techniques or to implement adequate preventative measures. As the Department of Defense is one of our sellers, our systems may be especially targeted by such malicious attackers. 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. These issues are likely to become more difficult as we expand our

~~operations. Any breach of our security measures, or even a perceived breach of our security measures, could cause us to lose sellers or buyers, suffer material harm to~~negatively affect our business, prospects, financial condition, ~~operating~~and results ~~and reputation or be subject to regulatory actions, sanctions or other statutory penalties, litigation, liability for failure to safeguard our sellers’ and buyers’ information. Further, the loss~~ of 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 our revenue could decline.

operations.

If we ~~fail to comply with increasing levels of regulation relating to~~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 ~~as well as~~and the public, which could ~~influence~~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 ~~various~~ 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 (a) persons or entities that appear on lists of restricted or prohibited parties maintained by the United States or other governments or (b) countries, regimes, or nationals that are the target of applicable economic sanctions or other embargoes. Such laws could become even more restrictive and cover a wider array of assets in the event of escalations of a conflict between China and Taiwan.

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 ~~products~~assets we ~~sell~~.

sell.

Some ~~of the products~~assets we sell through our ~~ecommerce~~e-commerce marketplaces ~~or through our IronDirect business~~ 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 byif, for example, the ~~fact that we sell products manufactured by third parties. For example, if~~manufacturers of the ~~manufacturers~~relevant assets do not have ~~sufficient~~enough protection from such ~~claims, we may be subject to claims relating to the products in question.~~claims. Defense of any such actions could be costly and involve significant time and attention of our management and commitment of other resources, may ~~result in~~cause us to incur monetary liabilities or penalties, and may require us to change our business in anways adverse ~~manner. Although we maintain liability insurance, we~~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~~commercially reasonable terms, or at all. In addition, some of our agreements with our vendors and sellers do not indemnify us ~~from~~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 ~~one~~such an audit uncovers improper or ~~more states successfully assert~~illegal activities, we could be subject to civil and criminal penalties and administrative sanctions and we 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 ~~should collect sales~~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 ~~taxes on~~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 ~~sale~~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 ~~merchandise~~operations, we are subject to the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-corruption laws of other countries. These laws generally prohibit companies and their intermediaries from making improper payments or ~~the merchandise~~providing anything of ~~third parties that we offer for sale~~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 ~~websites, our business could be harmed.~~

The application of indirect taxes (such as sales and use tax, value-added tax ("VAT"), goods and services tax, business tax and gross receipt tax) to ecommerce 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 ecommerce. In many cases, it is not clear how existing statutes apply to the Internetbehalf may result in severe criminal or ecommerce. In addition, governments around the world are increasingly looking for ways to increase revenues, which has resulted in discussions about tax reform and other legislative action to increase tax revenues, including through indirect taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain.

We are currently required to collect and remit sales taxes in all states for shipment of goods from our DoD vendor contracts. We also collect and remit sales or other similar taxes in respect of shipments of other 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 currently do not collect and remit sales taxes could subject shipments into such states to state sales taxes under current or future laws.

U.S. Supreme Court decisions restrict the imposition of obligations to collect state and local taxes with respect to sales made over the Internet. However, a number of states have adopted or are considering laws that levy additional taxes on Internet access and electronic commerce transactions. Congress is also considering legislation allowing states to require out-of-state sellers to collect sales and use taxes for ecommerce transactions. It is not possible to predict with any degree of certainty the outcome of these initiatives or the impact of these initiatives oncivil sanctions, disrupt our business, and ~~marketing strategies that we are considering~~adversely affect our reputation, business, and results of operations or ~~may consider in the future.~~

An unfavorable change in U.S. Supreme Court guidance related to sales tax, or a successful assertion by one or more jurisdictions that our sale of merchandise in such jurisdiction is subject to sales or other taxes may result in material tax liabilities, interest and penalties. A change in state or federal laws, or our business model, business strategy, or marketing initiatives may require us to collect sales tax on transactions in which we do not currently collect such tax. These developments,

~~should they occur, may result in 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 ecommerce providers is complex and evolving. On January 1, 2015, changes to the rules determining the place of supply (and thus the country of taxation) for all European Union based providers of electronically supplied services were implemented that require that we pay VAT based on the residence or normal place of business of our buyers. These changes may result in our paying a higher rate of VAT or VAT on a higher number of transactions. Additionally, we pay input VAT on applicable taxable purchases within the various countries in which we operate. In most cases, we are entitled to reclaim this input VAT from the various 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 are not entitled to 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, as well as the proper calculation of such taxes. Should any new taxes become applicable or if the taxes we pay are found to be deficient, our business could be harmed.

financial condition.

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

We ~~are aware that other companies operating online auction or liquidation services have~~ periodically ~~received~~receive complaints of fraudulent activities of buyers or sellers on ~~their websites,~~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. ~~We may receive similar~~From time to time, we have received complaints ifthat our sellers or buyers trading in our marketplaces are alleged to have engaged in fraudulent or unlawful activity. In addition, we may suffer losses ~~as a result~~because of purchases paid for with fraudulent credit card data even though the associated financial institution approved payment. ~~In the case of~~If a transaction is disputed, ~~transactions,~~ we may not be able to require users of our services to ~~fulfill their obligations 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 ~~as a result~~because of fraudulent conduct by third parties or ~~the~~ failure to satisfactorily settle disputes related to transactions on our websites could damage our reputation, cause us to lose sellers and buyers and ~~adversely affect~~hurt our ability to grow our business.

~~False or defamatory statements transmitted through our services could harm our reputation and affect our ability to attract sellers and buyers.~~

The law relating to the liability of online services companies for information carried on or disseminated through their services is currently unsettled. Claims could be made against online services companies under both the U.S. and foreign law for defamation, libel, invasion of privacy, negligence, copyright or trademark infringement, or other theories based on the nature and content of the materials disseminated through their services. Our website allows users to make comments regarding the online auction industry in general and other users and their merchandise in particular. Although all such comments are generated by users and not by us, we are aware that claims of defamation or other injury have been made against other companies operating auction services in the past and could be made in the future against us for comments made by users. If we are held liable for information provided by our users and carried on our service, we could be directly harmed and may be forced to implement measures to reduce our liability. This may require us to expend substantial resources or discontinue certain service offerings, which could negatively affect our operating results. In addition, the increased attention focused upon liability issues as a result of these lawsuits and legislative proposals could harm our reputation and affect our ability to attract sellers and buyers.

~~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. The LiquidityOne Transformation initiative, as well as other changes in our business, including initiatives to invest in information systems or to transition particular functions to third party providers, will necessitate modifications to our internal controls. We cannot be certain that our current design for internal control over financial reporting, or any changes to be made, will be sufficient to enable management to determine that our internal controls are effective for any period, or on an ongoing basis. If we are unable to assert 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, agents or third parties with whom we work. Internal controls may become less effective over time as a result 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 of these policies 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. In some cases, 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 result in us reporting 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 fourth quarter, and full fiscal year 2016 were affected by our recording of a valuation allowance against our deferred tax assets and by our recording of an impairment of goodwill.

~~The success of our business depends on our ability to market quality products that meet our buyers' needs.~~

Our business relies on continued demand for the products we offer. To compete effectively, we must offer products that appeal to our buyers. This is dependent on a number of factors, including our ability to acquire products that meet the quality, performance and price expectations of our buyers and our ability to develop effective sales, advertising and marketing programs. Failure to continue to offer competitive products to the marketplace, to supply products that meet applicable regulatory requirements, or to predict market demands for, or gain market acceptance of, such products, could have a negative impact on our business, results of operations and financial condition.

~~Our stock price has been volatile, and your investment in our common stock could suffer a 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 ecommerce;~~

~~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.~~

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 management's attention and resources.

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

bids.

Our corporate documents and Delaware law contain provisions that may enable our ~~board~~Board of ~~directors~~Directors to resist a change in control of our ~~company~~Company even if a change in control were to be considered favorable by you and other stockholders. These provisions include:

a staggered ~~board~~Board of ~~directors;~~

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~~Board of Director 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.~~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 Risk Factors

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) have necessitated, and will continue to 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, continuous improvement, innovation, 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, 2023, we had goodwill of $89.4 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.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

Not ~~Applicable~~

applicable.

Item 2. Properties.

~~We lease~~

As a remote-first organization, the Company continues to reduce or eliminate its leases of administrative spaces where practicable, including a 48% reduction to the size of the Company's Corporate Headquarters during the year ended September 30, 2023.

The Company leases the following ~~properties:~~

properties as of September 30, 2023:



Purpose	Location	Segment	Square Feet		Lease Expiration Date
Corporate Headquarters	Bethesda, ~~MD,~~Maryland, USA	~~18,412~~ Corporate & Other	4,027	~~April 30, 2023~~	January 31, 2029
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	~~127,144~~ RSCG	127,144		January 31, 2026
Warehouse	Hebron, Kentucky, USA	RSCG	101,614		July 31, 2025
Warehouse	Kenilworth, NJ, USA	CAG	10,507		December 31, ~~2020~~2026
Warehouse	~~Plainfield, Indiana, USA~~	~~187,704~~		~~April 30, 2019~~
~~Warehouse~~	North Las Vegas, Nevada, USA	~~102,400~~ RSCG	102,400	~~March 31, 2021~~	June 30, 2026
~~Administrative~~ Warehouse	~~Scottsdale,~~ Phoenix, Arizona, USA	~~23,536~~ RSCG	84,690		January 31, 2027
Warehouse	Pittston, Pennsylvania, USA	RSCG	108,536		January 7, 2027
Warehouse	Plainfield, Indiana, USA	RSCG	187,704		April 30, 2024
Administrative	Montgomery, Alabama, USA	GovDeals	19,762		December 31, ~~2020~~2023
Administrative	Plano, Texas USA	~~12,234~~ Corporate & Other	2,280	~~December 31, 2021~~
~~Warehouse~~	~~Obetz, Ohio, USA~~	~~340,000~~		~~February 28, 2019~~
~~Warehouse~~	~~Oklahoma City, Oklahoma, USA~~	~~319,000~~		~~June~~ November 30, ~~2021~~
~~Warehouse~~	~~Columbus, Ohio, USA~~	~~516,174~~		~~December 31,2017~~
~~Storage Lot~~	~~Oklahoma City, Oklahoma, USA~~	~~435,600~~		~~June 30, 2021~~
~~Administrative~~	~~Montgomery, Alabama, USA~~	~~14,950~~		~~September 30, 2019~~
~~Administrative~~	~~Houston, Texas, USA~~	~~12,422~~		~~March 31, 2018~~
~~Storage Lot~~	~~Fontana, California, USA~~	~~511,830~~		~~May 31, 2022~~
~~Testing Facility~~	~~Asheville, NC, USA~~	~~1,502,820~~		~~December 31, 2017~~
~~Warehouse~~	~~Hayward, California, USA~~	~~24,600~~		~~October 31, 2018~~
~~Warehouse~~	~~Hazelwood, Missouri, USA~~	~~21,368~~		~~December 31, 2017~~
~~Warehouse~~	~~Atlanta, Georgia, USA~~	~~47,636~~		~~May 31, 2018~~
~~Administrative~~	~~London, GBR~~	~~3,430~~		~~May 6, 2022~~
~~Warehouse~~	~~Brampton, Canada~~	~~53,621~~		~~August 31, 2020~~
~~Warehouse~~	~~E. Brunswick, NJ, USA~~	~~38,400~~		~~December 31, 2020~~2025

In addition, we lease various administrative spaces in North America totaling ~~40,210~~5,074 square feet, in Europe ~~4,000~~totaling 500 square feet, and in Asia ~~9,088~~totaling 3,747 square feet. We also own a 420,000 square ~~feet~~foot warehouse located in North Wilkesboro, North Carolina, USA. ~~Our servers are housed in data centers in Ashburn, Virginia, which is managed by Equinix, Inc.~~

Item 3. Legal Proceedings.

From time to time, we may become involved in litigation relating to claims arising in the ordinary course of ~~our~~the business.

~~Howard v. Liquidity Services, Inc., et al.,Civ. No. 14-1183 (D. D. C. 2014)~~.

~~On July 14, 2014, Leonard Howard filed a putative class action complaint~~ Information regarding the Company's legal proceedings can be found in the United States District Court for the District of Columbia (the ‘‘District Court’’) against Liquidity Services and our chief executive officer, chief financial officer, and chief accounting officer, on behalf of stockholders who purchased our common stock between February 1, 2012, and May 7, 2014. The complaint alleged that the defendants violated Sections 10(b) and 20(a)Note 15 - Legal Proceedings, of the Securities Exchange Act of 1934 by, among other things, misrepresenting our growth initiative, growth potential, and financial and operating conditions, thereby artificially inflating our stock price, and sought unspecified compensatory damages and costs and expenses, including attorneys’ and experts’ fees. On October 14, 2014,accompanying Notes to the Court appointed Caisse de Dépôt et Placement du Québec and the Newport News Employees’ Retirement Fund as co-lead plaintiffs. The plaintiffs filed an amended complaint on December 15, 2014, which alleges substantially similar claims, but which does not name the chief accounting officer as a defendant. On March 2, 2015, we moved to dismiss the amended complaint for failure to state a claim or plead fraud with the requisite particularity. On March 31, 2016, the Court granted that motion in part and denied it in part. Only the claims related to our retail division were not dismissed. On May 16, 2016, we answered the amended complaint. Plaintiffs’ class certification motion was granted on September 6, 2017. The scheduling order in this action requires that fact discovery be completed by February 23, 2018, and that expert discovery be completed by July 27, 2018.

~~We believe the allegations in the amended complaint are without merit and cannot estimate a range of potential liability, if any, at this time.~~

~~Billard v. Angrick, et al.,Civ. No. 16-1612-BAH (D. D. C. 2016) andSlingerland v. Angrick, et al.,Civ. No. 16-1725-BAH (D. D. C. 2016)~~.

On February 2, 2017, plaintiff David Girardi filed a putative derivative complaint in the Court of Chancery of the State of Delaware (the “Court of Chancery”), and on February 7, 2017, plaintiff Harold Slingerland filed a putative derivative complaint in the Court of Chancery. On March 9, 2017, plaintiffs Girardi and Slingerland filed a consolidated putative derivative complaint in the Court of Chancery, purportedly on our behalf. The consolidated complaint names as defendants our chief executive officer and chief financial officer, as well as certain other individuals who served on our Board of Directors between 2012 and 2014, and seeks recovery from those individuals, not from us. The complaint asserts that, among other things, the defendants breached their fiduciary duties to us and our stockholders by causing or allowing us to make the same misstatements that are alleged in the amended complaint in the Howard action, and for alleged trading in our securities while in possession of material non-public information. The defendants have filed a motion to dismiss the complaint in its entirety. On November 27, 2017, the Court of Chancery granted the defendants’ motion to dismiss.

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 ~~The NASDAQ~~Nasdaq Stock Market under the symbol LQDT since February 23, 2006. ~~The following table sets forth the intra-day high and low per share bid price of our common stock as reported by The NASDAQ Stock Market for the periods indicated.~~

Fiscal year ended September 30, 2016 Low High
First Quarter $ 6.20
$ 9.19
Second Quarter $ 4.42
$ 6.58
Third Quarter $ 5.10
$ 7.84
Fourth Quarter $ 7.06
$ 11.25
Fiscal year ended September 30, 2017

First Quarter $ 8.05
$ 11.49
Second Quarter $ 7.50
$ 10.45
Third Quarter $ 6.05
$ 8.05
Fourth Quarter $ 5.50
$ 7.10

Holders

As of November ~~21, 2017,~~13, 2023, there were approximately ~~1,757~~10,345 beneficial holders of our common stock and 1826 holders of record of our common stock.

~~Dividend Policy~~

~~Since becoming a public company on February 22, 2006, we~~

Dividends

We have not paid any cash dividends on our common stock, and ~~currently anticipate that~~ we have no present intention to do so. Payment of cash dividends, if any, will ~~continue to retain any future earnings to finance the growth~~be determined by our Board of Directors after consideration of our ~~business.~~

financial condition, operating results, current and anticipated cash needs and other relevant factors.

Recent Sales of Unregistered Securities

None.

Stock Performance Graph

*$100 invested on 9/30/1218 in stock or index, including reinvestment of dividends. Fiscal year ending September 30.

~~Item 6. Selected Financial Data.~~

~~You should read~~

Issuer Repurchases of Equity Securities

The following table presents information about our repurchases of common stock that were made during 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 yearsthree months ended September 30, ~~2017, 2016~~2023 (in millions, except share and ~~2015~~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, 2023		9	$	15.53		9	$	1.8
August 1 to August 31, 2023		490		18.64		—		1.8
September 1 to September 30, 2023		—		—		—		17.0
Total		499				9

(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, 2023, participants surrendered 490 shares of common stock in the exercise of stock options. 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 September 8, 2023, the ~~consolidated balance sheet data as~~Company's Board of Directors authorized a new stock repurchase plan of up to $15.2 million. As of September 30, ~~2017 and 2016 are derived from, and are qualified by reference~~2023, the Company had $17.0 million of remaining authorization to our consolidated financial statements that have been audited by Ernst & Young LLP, an independent registered public accounting firm, and that are included in this Annual Report on Form 10-K. The consolidated statement of operations data for the years ended September 30, 2014 and 2013, and the consolidated balance sheet data as of September 30, 2015, 2014 and 2013 are derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K.

Year ended September 30,
2013 2014 2015 2016 2017
(dollars in thousands, except per share data)
Consolidated Statement of Operations Data:

Revenue $ 404,041
$ 388,671
$ 315,668
$ 233,828
$ 188,570
Fee revenue 101,815
106,990
81,457
82,626
81,445
Total revenue 505,856
495,661
397,125
316,454
270,015
Costs and expenses:

Cost of goods sold 199,494
211,659
166,009
143,127
126,227
Profit-sharing distributions/Client distributions 35,944
35,055
28,093
11,214
19,298
Technology and operations 90,052
108,160
99,550
93,405
82,988
Sales and marketing 40,170
41,451
41,465
37,570
35,211
General and administrative 48,950
48,928
41,338
39,717
35,835
Depreciation and amortization 17,374
16,595
9,235
6,502
5,796
Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets 5,921
(18,384 ) 147,414
19,037
1,009
Business disposition loss —
—
7,963
—
—
Other operating expenses (1) —
1,780
273
—
3,651
Total costs and expenses 437,905
445,244
541,340
350,572
310,015
Income (loss) from continuing operations 67,951
50,417
(144,215 ) (34,118 ) (40,000 )
Interest income (expense) and other income (expense), net 704
(370 ) 171
(1,217 ) (362 )
Income (loss) from continuing operations before income taxes 68,655
50,047
(144,386 ) (32,901 ) (39,638 )
Provision (benefit) for income taxes 27,551
19,657
(39,571 ) 27,025
(451 )
Net income (loss) $ 41,104
$ 30,390
$ (104,815 ) $ (59,926 ) $ (39,187 )

Basic earnings (loss) per common share:

Basic earnings per common share $ 1.30
$ 0.97
$ (3.50 ) $ (1.96 ) $ (1.25 )
Diluted earnings (loss) per common share:

Diluted earnings per common share $ 1.26
$ 0.97
$ (3.50 ) $ (1.96 ) $ (1.25 )
Basic weighted average shares outstanding 31,616,926
31,243,932
29,987,985
30,638,163
31,402,921
Diluted weighted average shares outstanding 32,657,236
31,395,301
29,987,985
30,638,163
31,402,921
Non-GAAP Financial Measures:

EBITDA from continuing operations(2) $ 85,325
$ 67,012
$ (134,980 ) $ (27,616 ) $ (34,204 )
Adjusted EBITDA from continuing operations(2) 104,625
63,013
33,075
3,668
(21,595 )
Supplemental Operating Data:

Gross merchandise volume from continuing operations(3) $ 973,325
$ 931,556
$ 798,977
$ 642,078
$ 629,330
Completed transactions(4) 530,000
547,000
567,000
574,000
530,000
Total registered buyers(5) 2,424,000
2,615,000
2,845,000
2,986,000
3,171,000
Total auction participants(6) 2,458,000
2,538,000
2,483,000
2,417,000
2,290,000

As of September 30,
2013 2014 2015 2016 2017
(in thousands)
Consolidated Balance Sheet Data

Cash, cash equivalents and short-term investments $ 95,109
$ 62,598
$ 95,465
$ 134,513
$ 94,348
Working capital(7) 79,289
77,935
119,225
99,424
68,166
Total assets 421,344
431,718
288,488
260,109
215,229
Total liabilities 106,465
114,735
72,486
97,498
82,593
Total stockholders' equity 314,879
316,983
216,002
162,611
132,636

repurchase shares through December 31, 2025.

Item 6. [Reserved]


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

~~(2)~~

EBITDA from continuing operations and adjusted EBITDA from continuing operations 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 for income taxes; (c) amortization of contract intangibles; and (d) depreciation and amortization. Our definition of adjusted EBITDA is different from EBITDA because we further adjust EBITDA for stock based compensation expense, acquisition costs such as transaction expenses and changes in earn out estimates, business realignment expense, goodwill and long-lived assets impairment, and business disposition loss. 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 through our marketplaces during a given period.~~


~~(4)~~	~~Completed transactions represent the number of auctions in a given period from which we have recorded revenue.~~


~~(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.~~

~~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:~~

The amortization of contract intangibles relates to the amortization of the Scrap Contract beginning in June 2005, the Wal-Mart Agreement beginning in October 2011, and an assumed contract associated with the National Electronic Service Association (NESA) acquisition on November 1, 2012. Depreciation and amortization expense primarily relates to property and equipment. 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.

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.

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.

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.

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.

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 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.

~~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:~~

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.~~

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,
2013 2014 2015 2016 2017
(in thousands)
Net income (loss) from continuing operations $ 41,104
$ 30,390
$ (104,815 ) $ (59,926 ) $ (39,187 )
Interest and other (income) expense, net (704 ) 370
171
(1,217 ) (362 )
Provision (benefit) for income taxes 27,551
19,657
(39,571 ) 27,025
(451 )
Depreciation and amortization 17,374
16,595
9,235
6,502
5,796
EBITDA from continuing operations 85,325
67,012
(134,980 ) (27,616 ) (34,204 )
Stock compensation expense 13,379
12,605
12,405
12,247
7,377
Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets 5,921
(18,384 ) 147,414
19,037
1,009
Business disposition loss —
—
7,963
—
—
Business realignment expenses* —
1,780
273
—
4,223

Adjusted EBITDA from continuing operations $ 104,625
$ 63,013
$ 33,075
$ 3,668
$ (21,595 )

* Business realignment expenses, which are excluded from Adjusted EBITDA, are included in Other operating expenses on the Statement of Operations. See Note 14 to Notes to Consolidated Financial Statements for further detail.

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

Our business delivers value to shareholders by ~~operating~~unleashing the intrinsic value of surplus through our online marketplace platforms. These platforms ignite and enable a ~~network~~self-reinforcing cycle of ~~leading ecommerce marketplaces that enable~~value creation where buyers and sellers ~~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~~greater numbers. The result of new, surplus, and scrap assets presented with digital images and other relevant product information. Additionally, we enable 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 broad range of services include program management, valuation, asset management, reconciliation, Return to Vendor ("RTV") and Returns Management Authorization ("RMA"), refurbishment and recycling, fulfillment, marketing and sales, warehousing and transportation, buyer support, and compliance and risk mitigation. 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 network of marketplaces includes: www.liquidation.com, www.govliquidation.com, www.govdeals.com, www.networkintl.com, www.secondipity.com, www.go-dove.com, www.unclesamsretailoutlet.com, www.irondirect.com, and www.auctiondeals.com. We have over 10,000 sellers, including Fortune 1000 and Global 500 organizations as well as federal, state, and local government agencies. We have three reportable segments, Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), and GovDeals. See Note 16 in the Notes to the Consolidated Financial Statements for Segment Information.

~~We believe our ability to create liquid marketplaces for surplus and salvage assets generates~~this cycle is a continuous flow of goods ~~from our corporate~~that becomes increasingly valuable as more participants join the platforms, thereby creating positive network effects that benefit sellers, buyers, and government sellers. This flow of goods in turn attracts an increasing number of professional buyers to our marketplaces. During fiscal year 2017, the number of registered buyers grew from approximately 2,986,000 to approximately 3,171,000, or 6.2%.shareholders. During the past three fiscal years, we have conducted over ~~1,671,000~~2.6 million online transactions generating ~~approximately $2.1~~$3.2 billion in gross merchandise volume or 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.

During the year ended September 30, 2023, the number of registered buyers grew from 4.9 million to 5.1 million. We believe the continuous flow of goods in our marketplaces attracts a growing buyer base which creates a ~~virtual~~self-sustaining cycle for our buyers and sellers. We generated GMV of $1.203 billion and revenue of $314.5 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 during the year ended September 30, 2023. Our GMV has grown at a compound annual growth rate of 13.9% since 2018.

On November 1, 2021, our GovDeals segment 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.

Operating Segments

The Company has four reportable segments under which we conduct business: GovDeals, Capital Assets Group (CAG), Retail Supply Chain Group (RSCG), and Machinio. Further information and operating results of our reportable segments can be found in Note 16 - Segment Information.

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GovDeals. The GovDeals reportable segment provides solutions that enable government entities including city, county, state and federal agencies located in the United States and Canada and related commercial businesses to sell surplus property and real estate assets through our GovDeals and Bid4Assets marketplaces (see Note 3 - Bid4Assets Acquisition).

~~Our revenue.~~•

RSCG. The RSCG reportable segment consists of marketplaces that enable corporations located in the United States and Canada to sell excess, returned, and overstocked consumer goods. RSCG also offers a suite of services that includes returns management, asset recovery, and e-commerce solutions. This segment uses multiple selling channels across our network of marketplaces and others to optimize the best combination of velocity, volume, and value.

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CAG. The CAG reportable segment provides solutions to sellers and consists of marketplaces that enable commercial businesses to sell surplus assets. The core verticals in which CAG operates include industrial manufacturing, oil and gas, heavy equipment, biopharma, and electronics. CAG also offers a suite of services that includes surplus management, asset valuation, asset sales and marketing. CAG benefits from a global base of buyers and sellers enabling the sale and redeployment of assets wherever they’re most likely to generate the best value and highest use across the world. This segment primarily uses the AllSurplus and GovDeals marketplaces.

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Machinio. The Machinio reportable segment operates a global search engine platform for listing used equipment for sale in the construction, machine tool, transportation, printing and agriculture sectors. Machinio also offers the Machinio System service that provides equipment sellers with a suite of online marketing tools that includes website hosting, email marketing, and inventory management, to support and enable equipment sellers’ online business.

Macroeconomic Conditions

Supply chain challenges and shifting consumer sentiment. Constraints in the production of new vehicles and heavy equipment, particularly as it relates to new fleet sales, are continuing to impact the supply of used vehicles available for sale on our marketplaces, while used car market price indices are simultaneously experiencing heightened volatility. In addition, general consumer behavior appears to be more cautious, focused more on essential goods and travel with limited discretionary high-value purchases. These conditions are impacting our financial performance and may continue to do so while these conditions persist, or if similar challenges emerge in other key asset categories.

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. 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.

International armed conflicts. The global financial markets have experienced volatility subsequent to the invasion of Ukraine by Russia in February 2022, a conflict which remains ongoing, as well as the recent conflict in and adjacent to Israel. The Russia-Ukraine conflict specifically resulted in numerous countries, including the United States, imposing significant new sanctions and export controls against Russia, Russian banks, and certain Russian individuals. These armed conflicts have further heightened global supply chain disruptions and impacted the international trade markets. For the year ended September 30, 2023, the Company's total revenues directly associated with Russia, Ukraine, and Israel were not material to our consolidated financial results. We will continue monitoring these armed conflicts around the world 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:

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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;

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

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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;

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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;

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

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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.

Revenues

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

models:

Purchase model. Under our purchase transaction model, we recognize revenue within the 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 ~~vendors~~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 ~~primary obligor, and take general and physical inventory risks and credit risk under this~~principal in purchase transaction model sales, we recognize as revenue the sale price paid by the buyer upon completion of a transaction. ~~Also included in the~~The proceeds paid by buyers ~~are~~also include transaction fees, ~~charged to the buyers,~~ referred to as buyer premiums. Revenue from our purchase transaction model accounted for approximately 69.8%, 73.8%, and 79.3% of our total revenue for the fiscal years ended September 30, 2017, 2016 and 2015, respectively. Included in these amounts is revenue earned from the sale of property obtained via the Scrap contract, where the price we pay DoD for the property is based on a revenue share model, and which accounted for approximately 11.1%, 10.2%, and 15.3%, of our total revenue for the fiscal years ended September 30, 2017, 2016, and 2015, respectively. The merchandise sold under our purchase transaction model accounted for approximately 28.6%, 36.4%, and 40.3%, of our GMV for the fiscal years ended September 30, 2017, 2016 and 2015, respectively. The revenue from our purchase transaction model is recognized within the Revenue line item on the Consolidated Statements of Operations.

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. ~~This~~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 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 ~~their~~the distribution to the seller after completion of the transaction. In addition to ~~the~~ seller commissions, we also collect ~~transaction fees charged to buyers, referred to as~~ buyer premiums. Revenue from our consignment transaction model accounted for approximately 24.4%, 20.9%, 20.6%, of our total revenue for the fiscal years ended September 30, 2017, 2016 and 2015, respectively, and for approximately 71.4%, 64.6%, and 59.7%, of our GMV for the fiscal years ended September 30, 2017, 2016 and 2015, respectively. The

Other — fee revenue. We also earn non-consignment fee revenue from ~~our consignment transaction model~~Machinio's subscription services, as well as other services including asset valuation, product handling, and storage fees. Non-consignment fee revenue is ~~recognized~~recorded within the ~~Fee Revenue~~Consignment and other fee revenues line item on the Consolidated Statements of Operations.

~~We also earn non-consignment fee revenue, which is largely made up~~

Transaction Model Mix. Most of ~~service revenue related to~~ our Surplus contract. This revenue is recognized within the Fee revenue line item on our Consolidated Statements of Operations, and is discussed in further detail in Note 3 - Significant Contracts of the Notes to our Consolidated Financial Statements.

~~We collect a buyer premium on substantially all~~ transactions are conducted under the ~~transaction models we offer to sellers. Buyer premiums are calculated as a percentage of the sale price of the merchandise sold~~consignment model, which represented 85.8%, 86.3%, and ~~are paid to us by the buyer. Buyer premiums are in addition to the price of the merchandise.~~

~~Industry trends.~~ ~~We believe there are several industry trends positively impacting the growth~~83.6% of our business including: (1) the increase in the adoption of the Internet by businesses to conduct ecommerce both in the United States and abroad; (2) 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; (3) the increase in government regulations and the need for corporations to have sustainability solutions necessitating verifiable recycling and remarketing of surplus assets; (4) 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; (5) 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 (6) in the long-term we expect innovation in the retail supply chain will increase the pace of product obsolescence and, therefore, the supply of surplus assets.

~~Our Vendor Agreements~~

~~Our DoD agreements.~~ ~~We have two vendor contracts with the DoD pursuant to which we acquire, manage and sell excess property:~~

~~Surplus Contract.~~ The Surplus contract is a competitive-bid contract under which we acquire, manage and sell usable DoD surplus personal property turned into the DLA. Surplus property generally consists 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. The Surplus contract requires us to purchase substantially all usable non-rolling stock surplus property offered by the DoD at 4.35% of the DoD’s original acquisition value (OAV). The current Surplus contract, which is the third such contract awarded to us since 2001, became effective in December 2014, covers only non-rolling stock and has a base term of two years with four one-year options to extend. The prior, or second, Surplus contract required us to purchase substantially all rolling and non-rolling usable surplus property offered by the DoD at 1.8% of the DoD’s OAV; the wind-down period under the second Surplus contract was in effect until January 2017 to allow for the continued processing of usable Recycling Control Point (RCP) non-rolling stock surplus property. The Surplus contract permits either party to terminate the contract for convenience. The initial two-year base period of the current Surplus contract ended in December 2016. On December 6, 2016, the DLA notified the Company that it was exercising the first one-year extension option. The Surplus contract now extends through December 14, 2017. There are three remaining one-year options to extend the current Surplus contract, exercisable by the DLA. Transactions under this contract follow the purchase transaction model described above. Notwithstanding the options to extend, the DLA held a pre-proposal conference on August 2, 2017 in which the DLA explained a plan to conduct a solicitation for the disposal of surplus DoD assets in the near future. On October 11, 2017, the DLA published a Request for Technical Proposal ("RFTP") for the sale of surplus, useable non-rolling stock property. The DLA intends to award two term contracts which are intended to replace our current Surplus contract. The DLA has also reserved its right to renew our current Surplus contract. See Note 18 (Subsequent Event) in the Notes to the Consolidated Financial Statements for information about the bidding on the DLA’s Request for Technical Proposal, which was issued subsequent to September 30, 2017.

We currently earn fees for services provided under the Surplus contract. Service fees may vary month-to-month based on services rendered, agreed pricing and volume of goods. Pricing declines negatively affected revenue under the Surplus contract beginning in the quarter ended June 30, 2017, and we anticipate service fee revenue will continue to decline over several quarters due to anticipated additional pricing declines. Revenue under the Surplus contract was negatively affected for the twelve months ended September 30, 2017, as a result of an approximate $2.0 million decrease in service revenues due to lower pricing compared to the pricing in effect through the quarter ended March 31, 2017. Applying the additional lower pricing declines currently planned, revenue under the Surplus contract would have been lower by approximately $5.0 million for the twelve months ended September 30, 2017. Assuming the DoD exercises the next renewal option under the Surplus contract, we anticipate that the results of the second quarter of fiscal year 2018 will fully reflect the impact of the new reduced service fees.

Resale of surplus property that we purchased, as well as services we provided to the DoD under the Surplus Contract accounted for 27.6%, 31.0%, and 24.7%, of our revenue and 9.4%, 12.7%, and 12.3%, of ourconsolidated GMV for the ~~fiscal~~ years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015, respectively. This contract is included within our CAG segment.~~

~~The DoD has broad discretion to determine what property will be made available for sale to us under~~2021, respectively; however, only the ~~Surplus Contract and may retrieve or restrict property previously sold to us for national security, public safety, or other reasons or if the property is otherwise needed to support the mission~~consignment fee, representing a small portion of the ~~DoD.~~

~~Scrap Contract.~~ On April 8, 2016, the DLA awarded us the second Scrap contract. Under the second Scrap contract, we acquire scrap property from the DLA and pay the DLA a revenue-sharing payment equal to 64.5% of the gross resale proceeds. The Scrap contractconsignment GMV, is a competitive-bid contract under which we acquire, manage and sell substantially all scrap property of the DoD turned into the DLA. Scrap property generally consists of items determined by the DoD to have no use beyond their base material content, such as metals, alloys, and building materials. We bear all of the costs for the sorting, merchandising and sale of the property. The second Scrap contract has a 36-month base term, commencing in the first quarter of fiscal year 2017, with two 12-month extension options exercisable by the DLA. Transactions under this contract follow the purchase transaction model described above.

Under the first Scrap contract, we acquired scrap property at a per pound price and disbursed to the DLA a percentage of the profits, most recently 65% of the amount realized from the sale of the inventory, after deduction for allowable expenses. We refer to these disbursement payments to the DoD as profit-sharing distributions. We recognized as revenue, ~~the gross proceeds from these sales. The DoD reimbursed us~~causing consignment revenues to account for certain direct expenses deemed to be payable by the DoD rather than by us. During fiscal year 2015, if our buyer base met certain small business criteria as defined in the contract, we received an additional incentive payment which was withheld from payments to the DLA. The prior Scrap contract expired on September 30, 2016.

~~Resale of scrap property that we purchased under the Scrap Contract accounted for 11.1%~~37.7%, ~~10.2%~~38.4%, and ~~15.3%,~~36.0% of our ~~revenue and 4.7%, 5.0%, and 7.6%, of our GMV~~total revenues for the ~~fiscal~~ years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015,~~2021, respectively. ~~This contract~~

Purchase model transactions are a smaller proportion of our consolidated GMV, representing 14.2%, 13.7%, and 16.4% of our consolidated GMV for the years ended September 30, 2023, 2022, and 2021, respectively. However, all of the GMV associated with the purchase model transaction is ~~included within~~generally able to be recognized as revenue, causing purchase revenues to account for 54.7%, 54.0%, and 56.8% of our ~~CAG segment.~~

total revenues for the years ended September 30, 2023, 2022, and 2021, respectively.

Other fee revenues accounted for 7.5%, 7.6%, and 7.2% of our total revenues for the years ended September 30, 2023, 2022, and 2021, respectively

Our Vendor Agreements

Commercial ~~Agreements~~

agreements. We have amultiple vendor ~~contract~~contracts with Amazon.com, Inc. under which we acquire and sell commercial merchandise. ~~The property we~~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. $5.8 million and $8.1 million of inventory purchased under ~~this contract represented approximately 21.8%, 12.1%, and 6.9%~~such contracts with Amazon.com, Inc. is included in our Inventory balances on our Consolidated Balance Sheets as of ~~cost of goods sold for the fiscal years ended~~ September 30, ~~2017, 2016~~2023 and ~~2015,~~2022, respectively. ~~This contract is included within our RSCG segment.~~

~~We have various~~Our vendor contracts with ~~Wal-Mart Stores, Inc., under which we purchase certain consumer products from Wal-Mart that have been removed from~~respect to sourcing or consigning merchandise for our RSCG segment generally reflect the sales stream of its retail operations. All of these agreements have customary commercial terms, which generally expire within a year and allow both parties to terminate for convenience with reasonable notice. We also had a long-term contract with Wal-Mart that was terminated effective December 8, 2014. As part of a final settlement of claims Wal-Mart paid us $7.5 million in February 2015.

~~On September 30, 2015, we sold certain assets related~~concentration dynamics inherent to the Jacobs Trading Company to a buyer, Tanager Acquisitions, LLC. In connection with the disposition, the buyer assumed certain liabilities related to the Jacobs Trading Company. The buyer issued to us a promissory note in the amount of $12.3 million. The divestiture of the Jacobs Trading Company resulted in an $8.0 million loss. The sale generated a tax loss that resulted in a $30.9 million cash benefit from prior year income taxes. We received $30.1 million of the cash benefit in March 2016, and additional $0.7 million of the cash benefit during the three months ended June 30, 2017. We expect to receive the remaining $0.1 million in fiscal year 2018.

During fiscal year 2017, we had over 600 corporate sellers who each sold in excess of $10,000 of surplus and salvage assets in our marketplaces. Our agreements with these sellers are generally terminable at will by either party.

retail industry.

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.~~

Gross merchandise volume or(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.~~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 fiscal~~for the year ~~2017 totaled $629.3 million.~~

ended September 30, 2023, was $1.203 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, ~~2017,~~2023, 2022, and 2021, we had ~~approximately 3,171,000~~5.1 million, 4.9 million, and 4.0 million, registered ~~buyers.~~

buyers, respectively. None of our buyers represented more than 10% of our revenue during the year ended September 30, 2023.

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. ~~For~~During the ~~fiscal year~~years ended September 30, ~~2017, approximately 2,290,000 total auction~~2023, 2022, and 2021, 3.3 million, 3.1 million, and 2.3 million participants participated in auctions on our ~~marketplaces.~~

marketplaces, respectively.

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 ~~fiscal year~~years ended September 30, ~~2017,~~2023, 2022, and 2021, we completed ~~approximately 530,000 transactions.~~

925,000, 933,000 and 703,000 transactions, respectively.

Critical Accounting Policies

~~Our discussion~~ and ~~analysis of our financial condition and results of operations are based upon our~~Estimates

The Company's consolidated financial statements, ~~which~~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. The preparation~~GAAP, which requires management of ~~these~~the Company to make assumptions, judgments and estimates that affect amounts reported in its consolidated financial ~~statements requires us~~statements. Accounting policies and estimates are considered to ~~make estimates and~~be "critical" when the nature of the estimate includes subjective or sensitive assumptions or judgments that ~~affect~~can have a material impact on the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. A “critical accounting estimate” is one which is both important to the portrayal of our financial condition ~~and results and requires management’s most difficult, subjective~~ or ~~complex judgments, often as a result~~operating performance of the need to make estimates about the effect of matters that are inherently uncertain. We continuously evaluate our critical accounting estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.Company. Actual results may differ from these ~~estimates under different assumptions or conditions.~~

~~Revenue recognition.~~ ~~For transactions in our ecommerce marketplaces, which generate substantially all of our revenue, we recognize revenue when all of~~estimates.

We consider the following ~~criteria are met:~~

~~a buyer submits the winning bid in an auction and, as a result, evidence of an arrangement exists, and the sale price has been determined;~~

~~the buyer has assumed risks and rewards of ownership; and~~

~~collection is reasonably assured.~~

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 not subject to significant collection risk, as goods are generally not shipped before payment is received.

~~Fee revenue is principally revenue earned under the consignment model, and is presented separately as it accounts for more than 10% of total revenue.~~

Transactions are also evaluated to determine whether we should report gross proceeds as revenue, for example, when we act as the principal in the arrangement, or if we should report revenue as our net commissions, for example, when we act as an agent. In arrangements in which we are deemedaccounting policies to be the primary obligor, bear physical and general inventory risk, and credit risk, we recognize as revenue the gross proceeds from the sale, including buyer’s premiums. In arrangements in which we act as an agent or broker on a consignment basis, without taking general or physical inventory risk, revenue is recognized based on the sales commissions that are paid to us by the sellers for utilizing our services; in this situation, sales commissions represent a percentage of the gross proceeds from the sale that the seller pays to us upon completion of the transaction.

~~We have evaluated our~~critical: revenue recognition, policy related to sales under our purchase transaction model and determined it is appropriate to account for these sales on a gross basis. The following factors were most heavily relied upon in our determination:

~~We are the primary obligor in the arrangement.~~

We are the seller in substance and in appearance to the buyer; the buyer contacts us if there is a problem with the purchase. Only we and the buyer are parties to the sales contract and the buyer has no recourse to the supplier. If the buyer has a problem, he or she looks to us, not the supplier.

~~The buyer does not and cannot look to the supplier for fulfillment or for product acceptability concerns.~~

~~We have general inventory risk.~~

We take title to the inventory upon paying the amount set forth in the contract with the supplier. Such amount is generally a percentage of the supplier’s original acquisition cost and varies depending on the type of the inventory purchased or a fixed nominal amount under our Scrap contract.

We are at risk of loss for all amounts paid to the supplier in the event the property is damaged or otherwise becomes unsaleable. In addition, under the previous Scrap contract, as payments made for inventory were excluded from the calculation for the profit-sharing distribution under our DoD contracts, we effectively bore inventory risk for the full amount paid to acquire the property (~~i.e., there was no sharing of inventory risk).~~

~~In fiscal year 2017, approximately 11.1% of our revenue was generated outside of the U.S.~~

~~Inventory.~~ ~~Inventory consists of products available for sale and is valued at the lower of cost or market value. This~~business combinations, valuation ~~requires us to make judgments based on currently available information about expected recoverable value.~~

~~Business combinations.~~ We recognize all assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. Acquisition-related costs are recognized separately from the acquisition and expensed as incurred. Generally, restructuring costs incurred in periods subsequent to the acquisition date are expensed when incurred. Subsequent changes to the purchase price (i.e., working capital adjustments) or other fair value adjustments determined during the measurement period are recorded as an adjustment to goodwill. All subsequent changes to a valuation allowance or uncertain tax position that relate to the acquired company and existed at the acquisition date that occur both within the measurement period and as a result of facts and circumstances that existed at the acquisition date are recognized as an adjustment to goodwill. All other changes in valuation allowances are recognized as a reduction or increase in income tax expense.

~~Valuation~~ of goodwill and ~~other intangible assets.~~ ~~We identify and value~~ intangible assets, ~~that we acquire in business combinations, such as customer arrangements, customer relationships~~ and ~~non-compete agreements, that arise from contractual or other legal rights or that are capable~~income taxes. Refer to Note 2 - Summary of ~~being separated or divided from~~Significant Accounting Policies to the ~~acquired entity~~Company's consolidated financial statements for further details on these accounting policies.

We consider the following accounting estimates to be critical: valuation of goodwill (Note 7), and ~~sold, transferred, licensed, rented or exchanged.~~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 of goodwill. Goodwill is allocated to our reporting units. The Company has determined our reporting units to consist of GovDeals, CAG, RSCG, and Machinio. Only the GovDeals, CAG, and Machinio reporting units maintain a goodwill balance.

As of July 1, 2023, the Company performed its annual goodwill impairment test using a quantitative fair-value based test for all reporting units maintaining a goodwill balance. The fair value test was performed utilizing the discounted cash flow method under the Income approach and the guideline company method under the Market approach, the results of ~~identified intangible assets is based upon an estimate of~~which were weighted 75:25, respectively, in the future economic benefits expected to result from ownership, which represents the amount at which the assets could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

ending determined fair value. We test our goodwill for impairment annually or more frequently if events or circumstances indicate impairment may exist. Examples of such events or circumstances could include a significant change in business climate, a loss of significant sellers or buyers, or a significant decline in stock price. We make a qualitative evaluation about the likelihood of goodwill impairment to determine whether we should calculatedetermined the fair value of a reporting unit. If our evaluation indicates a likelihood of goodwill impairment, we apply a two-step fair value-based test to assess goodwill for impairment of our four reporting units, which are the same as our four operating segments (RSCG, CAG, GovDeals, and IronDirect). The first step compares the fair value of a reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, we perform the second step, which compares the carrying amount of the reporting unit’s goodwill to the implied fair value of the goodwill. If the fair value of the goodwill is less than the carrying amount, an impairment loss would be recorded in our statements of operations. Intangible assets with definite lives are amortized over their estimated useful lives and are also reviewed for impairment if events or changes in circumstances indicate that their carrying amount may not be realizable.

Our management makes certain estimates and assumptions in order to determine the fair value of net assets and liabilities, including, among other things, an assessment of market conditions, projected cash flows, cost of capital and growth rates, which could significantly impact the reported value of goodwill and other intangible assets. Estimating future cash flows requires significant judgment, and our projections may vary from cash flows eventually realized. The valuations employ a combination of present value techniques to measure fair value, corroborated by comparisons to estimated market multiples. These valuations are based on a discount rate determined by our management to be consistent with industry discount rates and the risks inherent in our current business model.

Determining the fair value of a reporting unit requires the exercise of significant judgment, including judgments about the appropriate discount rates, terminal growth rates, weighted average costs of capital, exit multiples, and the amount and timing of expected future cash flows. The judgments used in determining the fair valueeach of our reporting units are based on significant unobservable inputs which causes the determination of the implied fair value of goodwill to fall within level three of the GAAP fair value hierarchy. The cash flows employed in the discounted cash flow analysis are based on the most recent budgets, forecasts, and business plans as well as various growth rate assumptions for years beyond the current business plan period. Discount rate assumptions are based on an assessment of the risk inherent in the future revenue streams and cash flows of the reporting unit. Various factors, including the failure to successfully implement our business plan for any of our reporting units, as well as other factors beyond our control, could have a negative effect on the fair value of such reporting unit, and increase the risk of further impairments of goodwill in the future.

A reporting unit represents a component of an operating segment that (a) constitutes a business, (b) has discrete financial information, and (c) its performance is reviewed by management. During fiscal year 2016 we concluded we had five reporting units-RSCG, CAG, GovDeals, TruckCenter, and IronDirect. On January 30, 2017, we decided to exit certain TruckCenter operations in order to focus our time and resources on our ecommerce marketplace strategy. As a result, as of September 30, 2017, we have four reporting units. We will continue to sell trucks and related equipment through our other ecommerce marketplaces.

We performed our annual goodwill and finite-lived intangible assets impairment assessment as of July 1, the first day of our fiscal fourth quarter. As a result, the annual goodwill impairment assessment was performed as of July 1, 2017, for fiscal

year 2017. We believed that changing the annual goodwill impairment assessment date allows for enhanced internal controls over financial reporting by providing additional time during the fiscal fourth quarter to perform necessary analyses and reviews.

During the three months ended December 31, 2014, we identified indicators of impairment, including the termination of the Wal-Mart Agreement on December 1, 2014, the significant decline in market capitalization during the quarter, and continued uncertainty in projections for fiscal year 2015 and beyond. As a result, we performed step one of our goodwill impairment test as of December 31, 2014. Based on step one of the goodwill impairment test as of the interim testing date, we determined that the carrying values of our two reporting units exceeded their fair values. Accordingly, step two of the goodwill impairment test was performed, where we determined the estimated fair values of the assets and liabilities of the reporting units. As a result of the step two test, we recorded a goodwill impairment charge of $85.1 million during the first quarter of fiscal year 2015.

As part of our annual goodwill impairment assessment as of September 30, 2015, we identified indicators of impairment, including a decline in market capitalization and continued uncertainty in projections for fiscal year 2016 and beyond. Based on the results of step one of our goodwill impairment analysis as of the fiscal year ended September 30, 2015, the carrying values of both of our two reporting units exceeded their fair value. Accordingly, we performed step two of the goodwill impairment test, where we determined the estimated fair value of the assets and liabilities of the impaired reporting units. As a result of the step two test, we recorded a goodwill impairment charge of $51.2 million during the fourth quarter of fiscal year 2015.

As part of our annual goodwill impairment assessment as of July 1, 2016, we identified indicators of impairment. Step one of our goodwill impairment analysis as of July 1, 2016, resulted in the carrying value exceeding fair value of one of our five reporting units that had goodwill. Accordingly, step two of the goodwill impairment test was performed, where we determined the estimated fair value of the assets and liabilities of the impaired reporting unit. As a result of the step two test, we recorded a goodwill impairment charge of $19.0 million during the fourth quarter of fiscal year 2016. The goodwill impairment was due to updated assumptions used in the fair value calculation.

As part of our fiscal year 2017 annual impairment assessment, we believed that certain events triggered moving to a step one evaluation of goodwill to identify potential impairment. As a result of the step one test, we determined that our remaining reporting units with goodwill ~~had fair values as of September 30, 2017, that~~balances substantially exceeded their ~~respective book values.~~

We recorded a $1.2 million impairment of a contract intangible associated with customer relationships in our IronDirect business. This impairment is included within Other Operating Expenses within the Consolidated Statement of Operations, and is mostly offset by an associated reversal of a liability under an earn-out provision. The net impact of these items on Other Operating Expenses is an expense of $0.2 million.

We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and other intangible assets, which totaled $45.8 million at September 30, 2017. Such events may include strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our base of buyers and sellers or material negative changes in our relationships with material buyers and sellers.

~~Income taxes.~~ We account for income taxes using the asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and income tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for the years in which the taxes are expected to be paid or recovered. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such determination, we consider all available positive and negative evidence to estimate whether future taxable income will be generated to permit use of the existing deferred tax asset. A significant piece of subjective negative evidence evaluated was the cumulative loss incurred over the three-year period ended September 30, 2017, and projected losses in the near-term future. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

On the basis of the evaluation, we recorded a charge of $35.8 million to our valuation allowance during the fiscal year ended September 30, 2016. During the twelve months ended September 30, 2017, we recorded a charge of $10.1 million to our valuation allowance to recognize only the portion of our deferred tax asset that is more likely than not to be realized.

We apply the authoritative guidance related to accounting for uncertainty in income taxes. A benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. During the fiscal year ended September 30, 2017, we reduced our net operating loss carryforward by $3.0 million for unrecognized tax benefits related to federal and state exposures.

We provide for income taxes based on our estimate of federal and state tax liabilities. These estimates include, among other items, effective rates for state and local income taxes, estimates related to depreciation and amortization expense allowable for tax purposes, and the tax deductibility of certain other items. Our estimates are based on the information available to us at the time we prepare the income tax provision. We generally file our annual income tax returns several months after our fiscal year-end. Income tax returns are subject to audit by federal, state and local governments, generally years after the returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws.

~~Stock-based compensation.~~ We recognize share-based payments to employees, including grants of employee stock options, in the statements of operations based on their estimated fair values. We use the Black-Scholes option pricing model to estimate the fair values of share-based payments.

The above list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with little need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. See our audited financial statements and related notes, which contain accounting policies and other disclosures required by GAAP.

carrying value.

Components of Revenue and Expenses

Revenue. ~~We generate a large portion of our revenue from~~ Refer to the proceeds of sales of merchandise held in inventory. We also generate commission revenue from sales in our marketplaces of merchandise that is owned by others. Our revenue recognition practices are discussed in more detaildiscussion in the Our revenuesection above, ~~entitled “Critical~~and to Note 2 - Summary of Significant Accounting ~~Estimates~~.”

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. ~~Cost~~Refer to Note 2 - Summary of Significant Accounting Policies,tothe 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 of goods sold ~~includes the costs of purchasing~~ and ~~transporting property for auction, as well as credit card transaction fees.~~

~~Seller distributions.~~ ~~Under the current Scrap contract, we acquire scrap property from the DLA for resale~~related accounting policies.

Technology and ~~pay the DLA a revenue-sharing payment equal to 64.5%~~operations. Technology expenses primarily consist of the gross resale proceeds. We bear all of the costs for the sorting, merchandising and sale of the property. Our previous Scrap contract with the DoD was structured as a profit-sharing arrangement in which we purchased and took possession of all goods we received from the DoD at a contractual price per pound. After deducting allowable operating expenses, we disbursed to the DoD on a monthly basis a percentage of the profits of the aggregate monthly sales. We retained the remaining percentage of these profits after the DoD’s disbursement.

~~Technology and operations.~~ ~~Technology expenses consist primarily~~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 ~~LiquidityOne 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 Condensed Consolidated Statements of Operations. Technology expenses are presented separately from Costs of goods sold (excluding depreciation and amortization) in the Condensed 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.~~350-40, Internal-use software. As such, we are capitalizing certain development costs associated with our ~~LiquidityOne platform. During the second quarter of fiscal 2017, we determined that a seller~~marketplaces and buyer management module of the LiquidityOne platform was ready for its intended use. As such, we began amortizing the associated capitalized costs during the second quarter of fiscal year 2017. During the fourth quarter of fiscal year 2017, we launched our Network International energy marketplace on the new LiquidityOne platform. As such, we determined that additional modules of the LiquidityOne platform were ready for their intended use, and began amortizing the associated capitalized costs during the fourth quarter of fiscal year 2017.

support systems, as well as other software development activities.

Operations expenses consist primarily of ~~operating~~ costs to operate our network of warehouses, 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 lead generation, 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 and geofencing campaigns, 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. Components of these expenses include executive management and staff salaries, bonuses and related taxes and employee benefits; travel; headquarters rent and related occupancy costs; and legal and accounting fees. The salaries, bonus and employee benefits costs included as general and administrativeThese expenses are generally more fixed in nature than our other operating expenses and do not vary ~~directly with~~as significantly in response to the volume of merchandise sold through our marketplaces.

Depreciation and amortization. Depreciation and amortization ~~expenses~~ consist ~~primarily~~ of ~~the~~ depreciation of property and equipment, amortization of ~~amounts recorded in connection with the purchase of furniture, fixtures and equipment~~internally developed software, and amortization of intangible ~~assets from our acquisitions. Depreciation and amortization also~~assets.

Fair value adjustment of acquisition earn-outs. Fair value adjustment of acquisition earn-outs consists of the amortization of our contract intangibles associated with the Jacobs Trading acquisition on October 1, 2011, and the NESA transaction on November 1, 2012. The intangible asset created in conjunction with the acquisition of Jacobs Trading Company was valued at $33.3 million and was being amortized over 55 months on a straight-line basis. The amortization period was correlated to the base term of the Wal-Mart contract from the acquisition date, exclusive of renewal periods. Upon the early termination of the Wal-Mart contract in December 2014, we expensed the remaining amount of unamortized expense of approximately $10.3 million during the three months ended December 2014. The contract intangible asset created in conjunction with the NESA acquisition was written off in fiscal year 2015.

~~Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets.~~ Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets consist of expenses incurred to complete a business combination, adjustments to the value of an earn-out, and impairment of goodwill and long-lived assets. During fiscal year 2017, we reorganized our IronDirect business. As a result, we recorded approximately $0.9 million of net expense, comprised of a $1.2 million impairment of contract intangibles, and a $0.6 million impairment of fixed assets, partially offset by a $0.9 million reversal of an earn-out liability. In addition, as a result of exiting the TruckCenter land-based, live auction and retail business, we recorded a $0.1 million impairment of a covenant not to compete.

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

Other operating expenses, net. Other operating expenses, net includes impairment of long-lived and other assets, ~~and liabilities,~~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 interest-bearing checking accounts, money market funds, the prior promissory note ~~receivable related~~issued to JTC, interest and unused commitment fees in connection with the ~~sale~~Company's Credit Agreement, the components of net periodic pension (benefit) other than the ~~Jacobs Trading business, expenses related to our terminated credit facility,~~service component, and impacts of foreign currency fluctuations.

Income taxes.Income taxes include current and deferred income tax expense for the U.S. federal, state, and foreign jurisdictions. During ~~fiscal~~the years ~~2017, 2016~~ended September 30, 2023, 2022 and ~~2015, we~~2021, the Company had an effective income tax rate ~~for continuing operations~~ of ~~approximately 1.1%~~27.7%, ~~(82.1)%~~15.4% and ~~27.4%~~(84.7)%, respectively, which included federal, state, and foreign income taxes.

Results of Operations

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


	Year Ended September 30,
(dollars in thousands	2023			2022			2021
GovDeals:
GMV	$	726,124		$	720,323		$	498,742
Total revenue	$	62,010		$	59,352		$	49,579
Segment direct profit	$	58,810		$	56,408		$	47,030
Segment direct profit as a percentage of total revenue		94.8	%		95.0	%		94.9	%
RSCG:
GMV	$	285,574		$	236,236		$	229,290
Total revenue	$	200,218		$	166,100		$	158,806
Segment direct profit	$	68,068		$	63,704		$	64,564
Segment direct profit as a percentage of total revenue		34.0	%		38.4	%		40.7	%
CAG:
GMV	$	191,333		$	188,813		$	158,736
Total revenue	$	38,476		$	42,575		$	39,645
Segment direct profit	$	32,215		$	29,120		$	29,324
Segment direct profit as a percentage of total revenue		83.7	%		68.4	%		74.0	%
Machinio:
GMV	—				—			—
Total revenue	$	13,821		$	12,083		$	9,559
Segment direct profit	$	13,110		$	11,471		$	8,992
Segment direct profit as a percentage of total revenue		94.9	%		94.9	%		94.1	%
Consolidated:
GMV	$	1,203,031		$	1,145,372		$	886,768
Total revenue	$	314,462		$	280,050		$	257,531

NM = not meaningful

Year Ended September 30, 2023 Compared to Year Ended September 30, 2022

Segment Results

GovDeals. Total revenues from our GovDeals reportable segment increased $2.7 million, or 4.5%, due to a $5.8 million, or 0.8%, increase in GMV driven by increased marketplace activity for its surplus property categories, including the number of sellers and assets sold; however, supply chain challenges reduced the volume of used vehicles available to be sold during the first quarter of the current fiscal year and market prices for used vehicles remain volatile. Revenue grew at a greater rate than GMV due to marketplace pricing increases and a decline in the mix of lower take-rate foreclosed real estate properties available for auction. In periods where GovDeals real estate sales increase, GovDeals revenue as a percent of GMV would be expected to decline, as these higher value real estate sales are generally conducted at a lower take-rate than our traditional GovDeals asset categories. Segment direct profit increased by $2.4 million, or 4.3%, consistent with the increase in revenues. Segment direct profit as a percentage of total revenue remained consistent between the periods.

RSCG. Revenue from our RSCG reportable segment increased $34.1 million, or 20.5%, due to a $49.3 million, or 20.9%, rise in GMV due to access to recurring product flows from new and expanded client programs and network of warehouses, including expansion of our AllSurplus Deals direct-to-consumer storefront locations, a stronger holiday return and liquidations season, and favorable recovery rates at the points in the year where less inventory was available to buyers in the broader spot market. Segment direct profit increased by $4.4 million, or 6.8%, due to increased volumes. Segment direct profit as a percentage of total revenue decreased from 38.4% to 34.0%, due to changes in the product mix available as certain client programs made a higher volume of lower value products available for sale in the current year, in addition to $1.0 million in inventory provisions.

CAG. Revenue from the CAG reportable segment decreased by $4.1 million, or 9.6%. GMV increased by $2.5 million, or 1.3%, driven by increased consignment sales in our industrial and heavy equipment categories. Revenue declined despite the increase in GMV due to a lower mix of large spot purchase transactions with international clients. The increase in transactions conducted under the consignment model contributed to Segment direct profit increasing by $3.1 million, or 10.6%. Segment direct profit as a percentage of total revenue increased 15.3%, which may fluctuate due to inherent variations in the mix of assets sourced and sold by the CAG segment in any given period, due to a higher mix of consignment transactions conducted during the current year. Challenged global supply chains are experiencing heightened disruptions due to international tensions and other factors, which could limit the volume of assets made available for sale in any period.

Machinio. Revenue from our Machinio reportable segment increased 14.4%, or $1.7 million, due to price increases and continued growth in subscribers. As a result of the increase in revenues, Segment direct profit increased 14.3%, or $1.6 million. Segment direct profit as a percentage of total revenue remained relatively consistent between the periods.

Consolidated Results

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


	Year Ended September 30,						Change
(in thousands)	2023			2022			$			%
Purchase revenues	$	172,089		$	151,271		$	20,818			13.8	%
Consignment and other fee revenues		142,373			128,779			13,594			10.6	%
Total revenue		314,462			280,050			34,412			12.3	%
Costs and expenses from operations:
Cost of goods sold (excludes depreciation and amortization)		142,322			119,407			22,916			19.2	%
Technology and operations		57,078			55,522			1,556			2.8	%
Sales and marketing		49,443			43,224			6,219			14.4	%
General and administrative		28,074			28,282			(208	)		(0.7	)%
Depreciation and amortization		11,255			10,322			933			9.0	%
Fair value adjustment of acquisition earn-outs		—			(24,500	)		24,500		NM
Other operating expenses, net		186			388			(202	)		(52.1	)%
Total costs and expenses		288,358			232,645			55,713			23.9	%
Income from operations		26,105			47,405			(21,300	)		(44.9	)%
Interest and other income, net		(2,912	)		(248	)		(2,664	)	NM
Income before provision for income taxes		29,016			47,653			(18,636	)		(39.1	)%
Provision for income taxes		8,039			7,329			710			9.7	%
Net income	$	20,978		$	40,324		$	(19,346	)		(48.0	)%

NM = not meaningful

Total revenues. Total consolidated revenue increased $34.4 million, or 12.3%. Refer to the discussion of ~~operations data expressed as~~Segment Results above for discussion of the increase in revenue.

Cost of goods sold (excludes depreciation and amortization). Cost of goods sold increased $22.9 million, or 19.2%, which changed at a ~~percentage of revenue.~~

Year ended September 30,
2017 2016 2015
Revenue 100.0 % 100.0 % 100.0 %
Costs and expenses:

Cost of goods sold 46.7
45.2
41.8
Seller distributions 7.1
3.5
7.1
Technology and operations 30.7
29.5
25.1
Sales and marketing 13.0
11.9
10.4
General and administrative 13.3
12.6
10.4
Depreciation and amortization 2.1
2.1
2.3
Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets 0.4
6.0
37.1
Business disposition loss —
—
2.0
Other operating expenses 1.4
—
0.1
Total costs and expenses 114.7
110.8
136.3
Loss from operations (14.7 ) (10.8 ) (36.3 )
Interest (income) expense and other expense, net (0.1 ) 0.4
—
Loss before provision for income taxes (14.6 ) (10.4 ) (36.3 )
(Benefit) provision for income taxes (0.2 ) 8.5
(10.0 )
Net loss (14.4 )% (18.9 )% (26.3 )%

~~The following table presents segment revenue, gross profit, and gross profit margin for the periods indicated:~~

Year Ended September 30,
2017 2016 2015
GovDeals:
Total revenue from operations $ 26,853
$ 22,802
$ 20,577
Gross profit 25,172
21,422
19,342
Gross profit margin 93.7 % 93.9 % 94.0 %

CAG:
Total revenue from operations 145,131
191,765
211,949
Gross profit 71,934
109,373
135,829
Gross profit margin 49.6 % 57.0 % 64.1 %

RSCG:
Total revenue from operations 95,032
94,218
161,813
Gross profit 30,050
29,903
46,656
Gross profit margin 31.6 % 31.7 % 28.8 %

Corporate & Other:
Total revenue from operations 2,999
7,669
2,786
Gross profit (2,666 ) 1,415
1,197
Gross profit margin (88.9 )% 18.5 % 42.9 %

Consolidated:
Total revenue from operations 270,015
316,454
397,125
Gross profit $ 124,490
$ 162,113
$ 203,023
Gross profit margin 46.1 % 51.2 % 51.1 %

~~Year Ended September 30, 2017 Compared to Year Ended September 30, 2016~~

~~Segment Results~~

~~GovDeals.~~ higher rate than Revenue ~~from our GovDeals segment increased 17.8%, or $4.1 million,~~primarily due to ~~additional sales volume from existing sellers and an increase~~our RSCG segment where changes in the ~~number~~product mix available as certain client programs made a higher volume of ~~new sellers. GMV from our GovDeals segment increased 17.5%, or $39.5 million, also due to additional sales volume from existing sellers and an increase~~lower value products available for sale in the ~~number of new sellers. Gross profit within this segment~~current year.

Technology and operations expenses. Technology and operations expenses increased ~~17.5%~~$1.6 million, or 2.8%, ~~or $3.8 million, to $25.2 million for the year ended September 30, 2017, from $21.4 million for the year ended September 30, 2016,~~primarily due to higher ~~sales volume. As a percentage~~technology labor costs supporting our continued marketplace modernization efforts, greater operations labor associated with the timing of ~~revenue, gross profit slightly decreased to 93.7%, from 93.9%.~~

~~CAG.~~ Revenue from the CAG segment decreased 24.3%, or $46.6 million, mostly due to lower volume related to our Surplus contract, a shift to lower value commodities sold within our Scrap contract, as well as a decrease in revenue within our industrial and energy verticals resulting from lower than expected volume and sales activity within those verticals. GMV from our CAG segment decreased 18.2%, or $53.9 million, due to lower volume related to our Surplus contract, a shift to lower value commodities sold within our Scrap contract, as well as a decrease in GMV within our industrial and energy verticals. Gross profit within the CAG segment decreased 34.2%, or $37.4 million, to $71.9 million for the year ended September 30, 2017, from $109.4 million for the year ended September 30, 2016. This decrease can be attributed to the overall lower revenue, and shift in mix of property under our Surplus contract to lower valued property, and the increase in the amount of distributions payable to the DLA under the new terms of the current Scrap contract. As a percentage of revenue, gross profit decreased to 49.6%, from 57.0%.

~~RSCG.~~ Revenue from our RSCG segment increased 0.9%, or $0.8 million for the year ended September 30, 2017. GMV from our RSCG segment increased 11.0%, or $11.5 million for the year ended September 30, 2017, due to growth in both existing and new accounts. Gross profit within the RSCG segment increased 0.5%, or $0.1 million, to $30.1 million for the year ended September 30, 2017, from $29.9 million for the year ended September 30, 2016. As a percentage of revenue, gross profit slightly decreased to 31.6%, from 31.7%.

~~Corporate & Other.~~ Revenue from Corporate & Other primarily relates to IronDirect and certain TruckCenter operations. The decrease in revenue of $4.7 million, is largely from declines in Truckcenter related to our decision earlier in the year to exit certain TruckCenter operations. Gross profit within Corporate & Other decreased $4.1 million over the prior year, mostly attributable to the exit of certain Truckcenter operations and a $3.1 million inventory valuation reserve within IronDirect during fiscal 2017.

~~Consolidated Results~~

~~Total Revenue.~~ Total consolidated revenue decreased $46.4 million, or 14.7%, to $270.0 million for the year ended September 30, 2017, from $316.5 million for the year ended September 30, 2016, due to a $46.6 million decrease in revenue fromtransactions at our CAG segment, and a ~~$4.7 million decrease in revenue primarily related to exiting certain TruckCenter operations, partially offset by a $4.1~~$1.0 million increase in ~~revenue from~~other variable compensation.

Sales and marketing expenses. Sales and marketing expenses increased $6.2 million, or 14.4%, due to the impact of our ~~GovDeals segment,~~market share expansion and client diversification efforts, as well as a ~~$0.8~~$1.3 million increase in ~~revenue from our RSCG segment. Total consolidated GMV decreased $12.7~~stock compensation expense and other variable compensation, a $1.2 million increase in bad debt expense, and the impact of other inflationary cost increases.

General and administrative expenses. General and administrative expenses were consistent between the years ended September 30, 2023, and 2022.

Depreciation and amortization. Depreciation and amortization expense increased $0.9 million, or ~~2.0%~~9.0%, primarily due to ~~$629.3~~a full year impact of the increase in amortization of intangible assets following our acquisition of Bid4Assets on November 1, 2021.

Fair value adjustment of acquisition earn-outs. Fair value adjustment of acquisition earn-outs decreased by $24.5 million ~~for~~due to the cumulative non-cash gain arising from the reduction in the fair value of the Bid4Assets earn-out liability during the prior year ended September 30, ~~2017, from $642.1 million for the year ended September 30, 2016, due to a $53.9 million decrease in GMV from our CAG segment,~~2022. Through and a $9.9 million decrease in GMV related to exiting certain TruckCenter operations, partially offset by a $39.5 million increase in GMV from our GovDeals segment, and an $11.5 million increase in GMV related to our RSCG segment.

~~Cost of goods sold.~~ Cost of goods sold decreased $16.9 million, or 11.8%, to $126.2 million, for the year ended September 30, 2017, from $143.1 million for the year ended September 30, 2016. A decrease of approximately $17.3 million is attributed to a decrease in transactions within our CAG segment, a $2.2 million decrease in cost of goods sold related to exiting certain TruckCenter operations, partially offset by a $0.7 million increase from our RSCG segment, and a $0.3 million increase from our GovDeals segment. Cost of goods sold increased to 46.7% of revenue, from 45.2% in the prior year, resulting from lower margins under the Surplus contract, as well as of the ~~decrease~~final measurement period ended December 31, 2022, $3.5 million in ~~revenue described above.~~

~~Seller distributions.~~ ~~Seller distributions~~earn-out payments were made, with no additional earn-out fair value remaining. See Note 13 - Fair Value Measurement for further information.

Interest and other income, net. Interest and other income, net increased ~~$8.1~~$2.7 million, ~~or 72.3%,~~due to ~~$19.3~~the effect of rising interest rates on our cash equivalent and short-term investment holdings.

Provision (benefit) for income taxes. Provision (benefit) for income taxes increased $0.7 million ~~for the year ended September 30, 2017,~~to an expense of $8.0 million from ~~$11.2~~an expense of $7.3 million ~~for the year ended September 30, 2016~~ due to the increase in state and deferred income taxes resulting from higher income in the ~~amount of distributions payable~~current year compared to ~~the DLA under the new terms~~prior year, exclusive of the ~~current Scrap contract. As a percentage of revenue, distributions increased to 7.1%~~$24.5 million non-cash gain from ~~3.5%, which is due to~~ the ~~increases described above.~~

~~Technology and operations expenses.~~ Technology and operations expenses decreased $10.4 million, or 11.1%, to $83.0 million for the year ended September 30, 2017, from $93.4 million for the year ended September 30, 2016. The decrease can be attributed to lower operational costs within our CAG industrial and energy verticals due to lower volume, less technology related consulting costs, higher capitalized labor costs, less reimbursable expenses under our Scrap contract, a decrease in staff costs due to lower volume related to both our Surplus and Scrap contracts, as well as the exit of certain TruckCenter operations.

~~As a percentage of revenue, technology and operations expenses increased to 30.7%, from 29.5%, primarily as a result~~fair-market value adjustment of the ~~decrease in revenue described above.~~

~~Sales and marketing expenses.~~ Sales and marketing expenses decreased $2.4 million, or 6.4%, to $35.2 million for the year ended September 30, 2017, from $37.6 million for the year ended September 30, 2016, due to a decrease in staff related costs. As a percentage of revenue, sales and marketing expenses increased to 13.0%, from 11.9% in the prior year, primarily as a result of the decrease in revenue described above.

~~General and administrative expenses.~~ General and administrative expenses decreased $3.9 million, or 9.8%, to $35.8 million for the year ended September 30, 2017, from $39.7 million for the year ended September 30, 2016, due to a decrease of insurance costs, as well as lower non-income tax regulatory costs. As a percentage of revenue, general and administrative expenses increased to 13.3%, from 12.6% in the prior year, primarily as a result of the decrease in revenue described above.

~~Depreciation and amortization expenses.~~ ~~Depreciation and amortization expenses decreased $0.7 million, or 10.8%, to $5.8 million for the year ended September 30, 2017, from $6.5 million for the year ended September 30, 2016.~~

~~Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets.~~ Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets amounted to approximately $1.0 million, for the year ended September 30, 2017, compared to $19.0 million for the year ended September 30, 2016. During fiscal 2017, the Company recorded $1.9 million of long-lived assets impairment charges, partially offset by a $0.9 million reversal of anBid4Assets acquisition earn-out liability. ~~During fiscal 2016 the Company recorded a goodwill impairment charge of $19.0 million related to one of its reporting units.~~

~~Other operating expense.~~ Other operating expense of $3.7 million 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 holds from its participation in certain principal transactions in theThe Company's ~~CAG business, for the year ended September 30, 2017. The Company did not incur other operating expense during the year ended September 30, 2016.~~

~~Interest (income) expense and other expense, net.~~ Interest (income) expense and other expense, net, decreased $0.9 million, to $0.4 million of income for the year ended September 30, 2017, from $1.2 million of income for the year ended September 30, 2016, primarily resulting from foreign exchange rate fluctuations.

~~(Benefit) provision for income taxes~~. Income taxes decreased $27.5 million, to a benefit of ($0.5 million) for the year ended September 30, 2017, from a provision of $27.0 million for the year ended September 30, 2016 due to a valuation allowance charge and the impact of foreign, state, and local taxes and permanenteffective tax ~~adjustments. The Company’s effective income tax rate~~ was ~~1.1%~~27.7% for the twelve months ended September 30, ~~2017.~~2023. The ~~2017~~2023 effective tax rate differed from the statutory federal rate of ~~35.0%~~21.0% primarily as a result of ~~the valuation allowance charge and~~ the impact of foreign, state, and local income taxes and permanent adjustments.

Year Ended September 30, 2022 Compared to Year Ended September 30, 2021

Segment Results

GovDeals. Total revenues from our GovDeals reportable segment increased 19.7%, or $9.8 million, due to a 44.4%, or $221.6 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real 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 through the integration with Bid4Assets, GovDeals revenue as a percent of 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 direct profit increased 19.9%, or $9.4 million. Segment direct profit as a percentage of total revenue remained relatively consistent between the periods.

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 its network of warehouses. Segment direct 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 direct profit as a percentage of total revenue decreased by 2.3%.

CAG. Revenue from the CAG reportable segment increased by 7.4%, or $2.9 million due to a 18.9%, or $30.1 million, increase in GMV driven by increasing opportunities to obtain and sell 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 with partner organizations. Segment direct profit decreased 0.7%, or $0.2 million. Segment direct profit as a percentage of total revenue decreased 5.6% due to inherent variations in the mix of assets sourced and sold by the CAG segment 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 experienced heightened disruptions from the Russian invasion of Ukraine and its impacts on international trade and energy markets, COVID-19 and other disruptions, which limited the volume of assets made available for sale.

Machinio. Revenue from our Machinio reportable segment increased 26.4%, or $2.5 million, due to an increase in subscription activity through a greater number of subscribers and increased pricing. As a result of the increase in revenues, segment direct profit increased 27.6%, or $2.5 million.

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 from operations		47,405			27,168			20,237			74.5	%
Interest and other income, net		(248	)		(411	)		163			(39.7	)%
Income 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	$	40,324		$	50,949		$	(10,625	)		(20.9	)%

NM = not meaningful

Total revenues. Total consolidated revenue increased $22.5 million, or 8.7%. 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 10.9%, which changed at a higher rate than Revenue primarily due to an increase in purchase transactions at CAG and RSCG, which also contained a more favorable mix of higher value returned products in the prior year.

Technology and operations expenses. Technology and operations expenses increased $7.8 million, or 16.5%, as we increased our technology and operations functions to continue our growth, including RSCG's expansion of its network of warehouses, and launching AllSurplus Deals as a new marketplace offering consumers deals for curbside pick-up.

Sales and marketing expenses. Sales and marketing expenses increased $5.6 million, or 14.9%, as we increased our sales and marketing functions to continue our growth, including promotional efforts to expand our market share in key verticals, and to promote new business initiatives including our AllSurplus Deals consumer marketplace.

General and administrative expenses. General and administrative expenses decreased $0.7 million, or 2.3%, primarily due to changes in expected attainment of certain variable compensation targets, and partially offset by increased corporate support costs to support the anticipated growth resulting from the increases in our technology, operations, sales and marketing functions.

Depreciation and amortization. Depreciation and amortization expense increased $3.4 million, or 48.1%, primarily due to the increase in intangible assets following our acquisition of Bid4Assets on November 1, 2021.

Fair value adjustment of acquisition earn-outs. Fair value adjustment of acquisition earn-outs reflects a $24.5 million non-cash gain due to a reduction in the fair value of the Bid4Assets earn-out liability during the year ended September 30, 2022. See Note 13 - Fair Value Measurement for further information.

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

Provision (benefit) for income taxes. Provision (benefit) for income taxes increased $30.7 million to an expense of $7.3 million from a benefit of $23.4 million due to the release of $27.9 million of our valuation allowance on U.S. deferred tax ~~adjustments.~~assets during the fiscal year ended September 30, 2021, and $2.8 million state and foreign income taxes. The Company's effective tax was 15.4% for the twelve months ended September 30, 2022. The 2022 effective tax rate differed from the statutory federal rate of 21.0% primarily as a result of the impact of foreign, state, and local income taxes and permanent adjustments, the most significant of which was the exclusion of the $24.5 million non-cash from the fair-market value adjustment of the Bid4Assets acquisition earn-out liability.

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 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:

•

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 ~~loss.~~ ~~Net loss~~income to Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA for the periods presented.


	Year ended September 30,
	2023			2022			2021
Net income	$	20,978		$	40,324		$	50,949
Interest and other (income) expense, net(1)		(2,859	)		126			(76	)
Provision (benefit) for income taxes		8,039			7,329			(23,370	)
Depreciation and amortization		11,255			10,322			6,969
Non-GAAP EBITDA	$	37,412		$	58,101		$	34,472
Stock compensation expense		8,191			8,482			6,947
Acquisition costs and impairment of goodwill and long-lived and other non-current assets(2)		252			473			1,464
Business realignment expenses(2,3)		—			191			5
Fair value adjustments to acquisition earn-outs		—			(24,500	)		—
Non-GAAP Adjusted EBITDA	$	45,855		$	42,747		$	42,888

(1)

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

(2)

Acquisition costs and impairment of long-lived and other non-current 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. The Company has not paid a dividend historically, nor do we have any intention to do so in the foreseeable future. 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, 2023, we had $110.3 million in cash and cash equivalents, 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 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, ~~2017, improved $20.7~~2023, were $5.4 million. As of September 30, 2023, 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 expand our network of warehouses. 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.

Credit Agreement

The Company maintains a $25.0 million ~~to $39.2 million, compared to a loss of $59.9 million for~~Credit Agreement with Wells Fargo Bank, National Associated (the Credit Agreement). During the year ended September 30, ~~2016, due~~2023, the Credit Agreement was amended to extend the maturity date by 12 months to March 31, 2025 (the First Amendment). No other changes, including with respect to the ~~reasons described above.~~

~~Year Ended September 30, 2016 Compared~~borrowing terms or capacities, were made to ~~Year Ended September 30, 2015~~

~~Segment Results~~

~~GovDeals.~~ ~~Revenue~~the Credit Agreement as a result of the First Amendment).

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 ~~our GovDeals segment increased 10.8%, or $2.2 million, due~~1.25% to additional sales volume from existing sellers and an increase in the number of new sellers. GMV from our GovDeals segment increased 13.9%, or $27.7 million, also due to additional sales volume from existing sellers and an increase in the number of new sellers. Gross profit within this segment increased 10.8%, or $2.1 million, to $21.4 million for1.75%. Interest is payable monthly. During the year ended September 30, ~~2016, from $19.3 million for~~2023, the ~~year ended September 30, 2015, due to the new business. As a percentage of revenue, gross profit slightly decreased to 93.9%, from 94.0%.~~

~~CAG.~~ Revenue from the CAG segment decreased 9.5%, or $20.2 million, due to lower commodity prices and a shift in property mix to lower valued property provided under the Scrap and Surplus Contracts. GMV from our CAG segment decreased 19.3%, or $71.0 million, due to lower commodity prices and a shift in property mix to lower valued property provided under the Scrap and Surplus Contracts. Gross profit within the CAG segment decreased 19.5%, or $26.5 million, to $109.4 million for the year ended September 30, 2016, from $135.8 million for the year ended September 30, 2015. This decrease can primarily be attributed to the changes in revenue described above. As a percentage of revenue, gross profit decreased to 57.0%, from 64.1%.

~~RSCG.~~ Revenue from our RSCG segment decreased 41.8%, or $67.6 million for the year ended September 30, 2016, due to the sale of the Jacobs Trading Company in September 2015, the wind down of the NESA refurbishment business in Canada, and reduced product flows within our retail vertical. GMV from our RSCG segment decreased 52.4%, or $115.5 million for the year ended September 30, 2016, due to the sale of the Jacobs Trading Company in September 2015, the wind down of the NESA refurbishment business in Canada, and reduced product flows within our retail vertical. Gross profit within the RSCG segment decreased 35.9%, or $16.8 million, to $29.9 million for the year ended September 30, 2016, from $46.7 million for the year ended September 30, 2015. As a percentage of revenue, gross profit increased to 31.7%, from 28.8%.

~~Corporate & Other.~~ Revenue from Corporate & Other primarily relates to IronDirect and certain TruckCenter operations. The increase in revenue of $4.9 million, is primarily the result of increases in revenue from IronDirect, which is a business that began operations in late fiscal 2015. Gross profit within Corporate & Other increased $0.2 million over the prior year, mostly attributable to the IronDirect business.

~~Consolidated Results~~

~~Total Revenue.~~ Total consolidated revenue decreased $80.7 million, or 20.3%, to $316.5 million for the year ended September 30, 2016, from $397.1 million for the year ended September 30, 2015, due to a $67.6 million decrease in revenue from our RSCG segment, and a $20.2 million decrease in revenue from our CAG segment, partially offset by a $2.2 million increase in revenue from our GovDeals segment, and a $4.9 million increase in revenue related to Corporate & Other. Total consolidated GMV decreased $156.9 million, or 19.6%, to $642.1 million for the year ended September 30, 2016, from $799.0 million for the year ended September 30, 2015, due to a $115.5 million decrease in GMV from our RSCG segment, and a $71.0 million decrease in GMV from our CAG segment, partially offset by a $27.7 million increase in GMV from our GovDeals segment, and a $1.9 million increase in GMV related to Corporate & Other.

~~Cost of goods sold.~~ Cost of goods sold (excluding amortization) decreased $22.9 million, or 13.8%, to $143.1 million for the year ended September 30, 2016 from $166.0 million for the year ended September 30, 2015. This decrease is primarily attributed to the sale of the Jacobs Trading Company, as well as the wind down of the NESA refurbishment business in Canada, both of which are in our RSCG segment. This decrease was partially offset by an increase in our CAG segment, specifically driven by the price we pay for inventory under the current Surplus Contract as well as a greater mix of deals in our CAG commercial marketplace in which we act as principal and incur greater transaction costs. In line with these changes, and the decrease in revenue, cost of goods sold increased as a percentage of revenue to 45.2%, from 41.8%.

~~Profit-sharing distributions.~~ Profit-sharing distributions decreased $16.9 million, or 60.1%, to $11.2 million for the year ended September 30, 2016 from $28.1 million for the year ended September 30, 2015. As a percentage of revenue, profit-sharing distributions decreased to 3.5% from 7.1%. This is due to lower commodity prices and decreases in property flow from the DoD in our scrap business.

~~Technology and operations expenses.~~ Technology and operations expenses decreased $6.3 million, or 6.4%, to $93.4 million for the year ended September 30, 2016 from $99.7 million for the year ended September 30, 2015, due to the sale of the Jacobs Trading Company, the wind down of the NESA business, and reduction in staff. As a percentage of revenue, technology and operations expenses increased to 29.5% from 25.1% primarily as a result of the decrease in revenue described above.

~~Sales and marketing expenses.~~ Sales and marketing expenses decreased $3.9 million, or 9.4%, to $37.6 million for the year ended September 30, 2016 from $41.5 million for the year ended September 30, 2015, primarily due to bad debt expense related to the Jacobs Trading Company in fiscal 2015, as well as staff reductions. As a percentage of revenue, sales and marketing expenses increased to 11.9% from 10.4% primarily as a result of the decrease in revenue described above.

~~General and administrative expenses.~~ General and administrative expenses decreased $1.7 million, or 4.1%, to $39.7 million for the year ended September 30, 2016 from $41.4 million for the year ended September 30, 2015 due to the wind down of the NESA refurbishment business in Canada and the sale of the Jacobs Trading Company in fiscal 2015. As a percentage of revenue, general and administrative expenses increased to 12.6% from 10.4% primarily as a result of the decrease in revenue described above.

~~Depreciation and amortization expenses.~~ Depreciation and amortization expenses decreased $2.7 million, or 29.6%, to $6.5 million for the year ended September 30, 2016 from $9.2 million for the year ended September 30, 2015. The decrease also relates to certain capitalized software becoming full amortized, and the sale of the Jacobs Trading Company in September 2015 and its related depreciable assets.

~~Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets.~~ Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets decreased $128.4 million, or 87.1% to $19.0 million for the year ended September 30, 2016 from $147.4 million for the year ended September 30, 2015. During fiscal

2016 the Company recorded an impairment charge of $19.0 million of goodwill related to one of its reporting units. During fiscal 2015 the Company recorded $147.4 million of goodwill and long-lived assets impairment charges.

~~Other operating expense.~~ ~~The~~ Company did not ~~incur other operating expense during~~make any draws under the ~~year ended September 30, 2016. The Company incurred approximately $0.3 million in other operating expense related to business realignment initiatives during the year ended September 30, 2015.~~

~~Business disposition loss.~~ ~~Business disposition loss was $8.0 million for the year ended September 30, 2015, due to the disposal of the Jacobs Trading Company.~~

~~Interest and other income (expense), net.~~ Interest and other income (expense), net increased $1.4 million, to $1.2 million of income for the year ended September 30, 2016 from an expense of ($0.2) million for the year ended September 30, 2015. Interest and other income (expense), net included the impacts of foreign currency fluctuations and interest income.

~~Provision (benefit) for income taxes.~~ Provision for income taxes increased $66.6 million, or 168.2%, to $27.0 million for year ended September 30, 2016 from ($39.6) million of benefit for the year ended September 30, 2015, primarily due to the valuation allowance against deferred taxes.

~~Net loss.~~ Net loss decreased $44.9 million, or 42.8%, to $59.9 million for the year ended September 30, 2016 from $104.8 million for the year ended September 30, 2015, primarily as a result of the larger impairment of goodwill in the twelve months ended September 30, 2015.

~~Liquidity and Capital Resources~~

~~Historically, our primary cash needs have been working capital (including capital used for inventory purchases), which we have funded primarily through cash generated from operations.~~Credit Agreement. As of September 30, ~~2017, we~~2023, the Company had ~~approximately $94.0 million~~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 ~~cash~~substantially all assets owned by us, and ~~cash equivalents. Effective March 25, 2016, we terminated~~each of our ~~$75 million senior credit facility. Termination~~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, 2023, the Company was in full compliance with the terms and conditions of the senior credit facility has not had, and we do not expect it to have a material effect on our liquidity or financial position. Throughout the fiscal year, we continued to advance the design and developmentCredit Agreement.

Working Capital Management

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

We expect to maximize bottom-line return, and transform their supply chain into a high-performing business function. During the fourth quarter of fiscal year 2017, we launched our Network International energy marketplace on the new LiquidityOne platform. We will continue to ~~incur additional costs throughout~~invest in enhancements to our e-commerce technology platform, marketplace capabilities, and tools for data-driven product recommendations, omni-channel behavioral marketing, expanded analytics, and buyer/seller payment optimization.

We intend to indefinitely reinvest the ~~duration~~earnings of ~~this initiative to implement~~our foreign subsidiaries outside the ~~new platform and educate our employees and our buyers and seller about the initiative.~~United States. As ~~part of this process,~~a result, we ~~have invested in new business ventures, such as our IronDirect marketplace in the construction vertical.~~

We did not record a provision for deferred U.S. tax expense on the ~~undistributed earnings~~$10.6 million of ~~foreign subsidiaries because we intend to indefinitely reinvest the earnings of these foreign subsidiaries outside the U.S. The amount of such~~ undistributed foreign earnings ~~was approximately $8.0 million~~ as of September 30, ~~2017.~~2023. As of September 30, ~~2017,~~2023, and September 30, ~~2016, approximately $14.9~~2022, $19.1 million and ~~$21.5~~$20.3 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, our GovDeals segment purchased all of the issued and ~~not available~~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 acquisition date fair value of the consideration transferred to ~~fund domestic operations without incurring taxes~~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 fair value of $28.0 million. As part of the acquisition of Bid4Assets, former shareholders of Bid4Assets were eligible to receive earn-out consideration of up to $37.5 million in cash.

Through December 31, 2022, $3.5 million in earn-out payments were made. The remaining earn-out fair value was $0 based upon ~~repatriation.~~

~~We are~~actual performance through the final earn-out measurement period ended December 31, 2022. Through and as of the final measurement period ended December 31, 2022, $3.5 million in earn-out payments were made. See Note 3 - Bid4Assets Acquisition for further information.

Share Repurchases. From time to time, we may be 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 December 6, 2021, and May 13, 2022, the Company's Board of Directors authorized new stock repurchase plans of up to $20 million and $12 million, respectively. The Company repurchased 408,211 shares for $5.4 million during the year ended September 30, 2022.

On December 6, 2022, March 13, 2023 and September 8, 2023, the Company's Board of Directors authorized new stock repurchase plans of up to $8.4 million, $8.0 million and $15.2 million, respectively. The Company repurchased 1,607,141 shares for $21.2 million during the year ended September 30, 2023.

As of September 30, 2023, the Company had $17.0 million of remaining share repurchase authorization through December 31, 2025.

Off-Balance Sheet Arrangements. We ~~did~~do not ~~repurchase shares under this program during~~have any transactions, agreements or other contractual arrangements that could be considered material off-balance sheet arrangements.

Changes in Cash Flows: 2023 Compared to 2022

Net cash provided by operating activities was $47.0 million and $44.8 million for the years ended September 30, ~~2017 or 2016.~~2023, and 2022, respectively. The $2.2 million increase in cash provided by operating activities between periods was attributable to $8.4 million of higher Net income as adjusted for non-cash items; a $9.0 million increase in cash inflows from Accounts receivable driven by the collection of proceeds from large spot purchase transactions with international clients conducted in the prior year; and a $2.9 million decrease in cash outflows from Accrued expenses and other current liabilities driven by changes in other variable compensation targets. These increases were offset by a combined $18.0 million decrease in cash inflows associated with our Accounts payable and Payables to sellers primarily due to lower volumes of foreclosed real estate property sales and timing differences in the payment of GovDeals seller settlements relative to the period end date.

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. 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 $11.4 million and $21.1 million for the years ended September 30, ~~2017, we are authorized to repurchase up to an additional $10.1~~2023, and 2022, respectively. The $9.7 million decrease in cash used in investing activities was driven by the prior year $11.2 million in ~~shares under this program. A summary~~cash paid at closing to acquire Bid4Assets on November 1, 2021, net of ~~our share repurchase activity~~cash acquired (see Note 3 - Bid4Assets Acquisition for further information), $2.7 million in lower capital expenditures, and $1.9 million from ~~fiscal~~the maturity of short-term investments. These decreases were offset by a $6.2 million increase in the purchase of short-term investments.

Net cash used in financing activities was $22.1 million and $31.9 million for the years ended September 30, 2023, and 2022, respectively. The $9.8 million decrease in cash used by financing activities was primarily driven by $4.2 million of lower common stock repurchases in the current year, ~~2014 to~~a $1.5 million decrease in taxes paid associated with net settlement of stock compensation awards, and the non-recurring earn-out payment of $3.5 million made during the year ended September 30, ~~2017, is as follows:~~

Fiscal Year Period Total Number
of Shares
Purchased Average Price
Paid per
Share Total Cash
Paid for
Shares
Purchased Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs(1)
2014 2,962,978
16
44,873,000
5,127,000
2015 —
—
—
5,127,000
2016 —
—
—
10,127,000
2017 —
—
—
$ 10,127,000


~~(1)~~	On February 5, 2014, our Board of Directors approved the expenditure of up to an additional $19.0 million under the share repurchase program. On May 5, 2016, our Board of Directors approved the expenditure of up to an additional $5.0 million in shares under the program, raising the current amount that may yet be expended up to $10.1 million.

~~Senior credit facility.~~ ~~Effective March 25, 2016,~~2022, in connection with the Company terminated its $75 million senior credit facility. Borrowings under the Agreement bore interest at an annual rate equal to the 30 day LIBOR rate plus 1.25%, due monthly. There were no outstanding borrowings under the Facility at the time of its termination.

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 not subject to significant collection risk, as goods are generally not shipped before payment is received.

Bid4Assets acquisition.

Changes in Cash Flows: ~~2017~~2022 Compared to ~~2016~~

2021

Net cash provided by operating activities was $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, 2022, as well as Accounts payable and Payables to sellers which together had a net decrease of $11.5 million due to reduced rates of change in 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, 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 ~~operating~~investing activities was ~~$31.7~~$21.1 million for the year ended September 30, ~~2017,~~2022, and ~~net cash provided by operating activities was $45.8~~$1.0 million for the year ended September 30, ~~2016.~~2021. The ~~$77.5~~$20.1 million ~~decrease~~increase in cash provided by operations between periods was primarily attributable to an overall increase of approximately $21.4 million in net loss after adjusting for non-cash adjustments, as well as a decrease in cash flows from changes in working capital of approximately $56.1 million. This decrease primarily resulted from the recovery in fiscal year 2016 of prior year income taxes amounting to approximately $34.0 million, as well as a reduction in accrued liabilities to the DLA.

~~Net~~ cash used in investing activities was ~~$7.9~~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 network of warehouses, 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, ~~2017,~~2022, and ~~$6.2~~$34.7 million for the year ended September 30, ~~2016. Net cash used~~2021. The $2.7 million decrease in ~~investing activities for both periods consisted primarily of expenditures for capitalized software, purchases of equipment and leasehold improvements.~~

Net cash used in financing activities was $1.1 million for the year ended September 30, 2017, and net cash used in financing activities was $0.2 million for the year ended September 30, 2016. Net cash provided by financing activities for fiscal year 2017 consisted primarily of proceeds from the exercise of stock options.

~~Changes in Cash Flows: 2016 Compared to 2015~~

Net cash provided by operating activities was $45.8 million for the year ended September 30, 2016, up from $43.5 million for the year ended September 30, 2015. The $2.3 million increase in cash provided by operations between periods resulted from an overall decrease of approximately $59.3 million in profitability after adjusting for non-cash items, offset by an increase in cash flows from changes in working capital of approximately $61.7 million. For the year ended September 30, 2016, working capital changes increased cash from operating activities, and primarily consisted of $34.0 million related to the recovery of prior year income taxes. This cash benefit resulted from the tax loss on the fiscal 2015 sale of the Jacobs Trading Company. For fiscal 2015, working capital changes decreased cash from operating activities by $23.0 million.

Net cash used in investing activities was $6.2 million for the year ended September 30, 2016 and $9.8 million for the year ended September 30, 2015. Net cash used in investing activities for the year ended September 30, 2016 consisted primarily of expenditures of $6.1 million for capitalized software, purchases of equipment and leasehold improvements. Net cash used in investing activities for the year ended September 30, 2015 consisted primarily of capital expenditures of $7.3 million for purchases of equipment and leasehold improvements, and $2.4 million related to net cash paid for a business disposition.

~~Net~~ cash used by financing activities was ~~$0.2~~primarily driven by $5.7 million for the year ended September 30, 2016 and net cash provided by financing activities was $0.1 million for the year ended September 30, 2015. Net cash provided by financing activities for the year ended September 30, 2015 consisted primarily of ~~proceeds from the exercise of~~lower common stock ~~options.~~

~~Capital Expenditures.~~ Our capital expenditures consist primarily of capitalized software, computers and purchased software, office equipment, furniture and fixtures, and leasehold improvements. The timing and volume of such capital expendituresrepurchases in the ~~future will be affected~~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 ~~addition~~Bid4Assets acquisition.

New Accounting Pronouncements

Information regarding our adoption of new ~~sellers or buyers or expansion~~accounting and reporting standards is discussed in Note 2 - Summary of ~~existing seller or buyer relationships. We intend~~Significant Accounting Policies, to ~~fund those expenditures primarily from operating cash flows. Our capital expenditures for~~ the ~~twelve months ended September 30, 2017 were $7.8 million. As of September 30, 2017, we had no 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 12 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, 2017. Operating leases represent commitments to rent office and warehouse space in the United States. Other contractual cash obligations represent information technology commitments related to licensing fee, 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 $ 27,143
$ 9,432
$ 13,599
$ 3,807
$ 305
Other contractual cash obligations 2,017
1,555
452
10
—
Total contractual cash obligations $ 29,160
$ 10,987
$ 14,051
$ 3,817
$ 305

~~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 fiscal years ended September 30, 2015, 2016 and 2017.

~~New Accounting Pronouncements~~

~~In August 2014, the FASB issued Accounting Standards Update ("ASU") 2014-15,~~ ~~Presentation of Financial Statements—Going Concern~~, which requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity's ability to continue as a going concern and to provide disclosures in certain circumstances. The new guidance was issued to reduce diversity in the timing and content of footnote disclosures. This guidance is effective for fiscal years, and interim reporting periods ending after December 15, 2016. ~~Our adoption of this new standard for the year ended September 30, 2017, had no impact on our~~ consolidated financial statements ~~and related disclosures.~~

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718). The new standard will change certain aspects of accounting for share-based payments to employees. Under the new standard, we will no longer record excess tax benefits and certain tax deficienciesincluded in additional paid-in capital (“APIC”). Instead, we will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement when the awards vest or are settled. The APIC pools will be eliminated. For interim reporting purposes, we will account for excess tax benefits and tax deficiencies as discrete items in the period in which they occur. The new standard will also allow us to repurchase more of an employee’s shares than we can currently for income tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The new guidance will require us to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. This guidance will become effective for us beginning on October 1, 2017. AdoptionPart IV, Item 15(a)(1) of this ~~standard will not have a material effect upon our consolidated financial statements.~~

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805). ASU 2017-01 clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This guidance will become effective for us beginningAnnual Report on October 1, 2018 and will be applied prospectively on or after the effective date. No disclosures are required at transition. We do not expect the adoption of this standard to have a material effect upon our consolidated financial statements.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~, which supersedes most existing revenue recognition guidance under GAAP. The new standard will change the way we recognize revenue and significantly expand the disclosure requirements for revenue arrangements. The guidance may be adopted either retrospectively or on a modified retrospective basis whereby the new standard would be applied to new and existing arrangements with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to retained

earnings at the effective date for existing arrangements with remaining performance obligations. During our fiscal year ended September 30, 2017, we initiated a formal project to assess the new standard, which is being completed in phases: the assessment phase followed by the implementation phase. We have substantially completed the assessment phase of its project. The assessment phase consisted of reviewing a representative sample of contracts, discussions with key stakeholders, and cataloging potential impacts on our accounting policies, financial statements, and systems and processes. The implementation team has apprised both management and the audit committee of project status on a recurring basis. We are continuing to evaluate the accounting impacts, and have identified some areas of the accounting guidance which will require more detailed analysis by us, including the principal-agent guidance, the transfer of control guidance, and the guidance on when certain services that we provide would be considered separate performance obligations. Because this assessment is preliminary and the accounting for revenue recognition is subject to significant judgment, this could change as we finalize the implementation of the new standard. We do not yet know and cannot reasonably estimate the quantitative impact on our consolidated financial statements. This guidance will become effective for us beginning October 1, 2018, which is when we intend to adopt. We intend to adopt the new standard on a modified retrospective basis. This determination is subject to change based on finalization of our implementation work.

~~In April 2015, the FASB issued ASU 2015-5, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement~~. ASU 2015-5 provides guidance regarding whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the software license element of the arrangement must be accounted for in a manner consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement must be accounted for as a service contract. ASU 2015-5 does not change the accounting for service contracts. ASU 2015-5 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2015. We adopted this standard beginning in fiscal year 2017, and it had no impact on our financial statements.

~~In February 2016, the FASB issued ASU 2016-2,~~ ~~Leases~~. ASU 2016-2 will change the way we recognize leased assets. ASU 2016-2 will require organizations that lease assets—referred to as "lessees"—to recognize on the balance sheet the assets and liabilities representing the rights and obligations created by those leases. ASU 2016-2 will also require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The standard will be effective for the Company beginning on October 1, 2019. We are currently evaluating the methods of adoption allowed by the new standard and the effect that adoption of the standard is expected to have on our consolidated financial statements and related disclosures.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350)~~. Under ASU 2017-04 an entity is required to perform its annual or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity must recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds the reporting unit's fair value; however, the loss recognized may not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This guidance will become effective for us beginning on October 1, 2020. We are currently evaluating the methods of adoption allowed by the new standard and the effect that adoption of the standard is expected to have on our consolidated financial statements and related disclosures.

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~. ASU 2017-07 changes how employers that sponsor defined benefit pension and/or other postretirement benefit plans present the cost of the benefits in the income statement. Under this standard, employers will present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Employers will present the other components of the net periodic benefit cost separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. This guidance will become effective for us beginning on October 1, 2018. We are currently evaluating the methods of adoption allowed by the new standard and the effect that adoption of the standard is expected to have on our consolidated financial statements and related disclosures.

Form 10-K.

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

Interest rate sensitivity. ~~We did not have any debt as of September 30, 2017, and thus do not have any related interest rate exposure.~~ 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, 2023, 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, 2023, 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. ~~We consider our exposure to foreign~~ Because of the number of countries and currencies we operate in, movements in currency exchange ~~rate fluctuations to be minimal, as approximately 11.1% percent~~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 generate revenues and incur expenses in both U.S. dollars and local 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 our ~~revenue was generated outside~~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 armed conflicts around the world, may result in significant changes in exchange rates, which could affect our results of ~~the~~operations expressed in U.S. ~~We have not engaged~~dollars. A hypothetical 10% decrease in ~~any hedging or other derivative transactions to date.~~

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 ~~Supplemental~~Supplementary Data.

~~Annual Financial Statements and Selected Financial Data:~~

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

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 ~~Chief Financial Officer~~ and Chief ~~Accounting~~Financial Officer, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as ~~amended.~~amended (the 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 ~~management's assessment of internal control over financial reporting, and~~ 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~~disclosure controls and ~~procedures"~~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 ~~management, including~~ our Chief Executive Officer ~~Chief Financial Officer,~~ and Chief ~~Accounting~~Financial Officer. Disclosure controls and procedures are controls and procedures designed to ~~reasonably assure~~ensure that information required to be disclosed in our reports filed under the ~~Securities~~ Exchange Act, ~~of 1934,~~ 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 ~~provide reasonable~~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 ~~Chief Financial Officer,~~ and Chief ~~Accounting~~Financial 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 ~~U.S. generally accepted accounting principles.~~GAAP. Internal control over financial reporting includes those policies and procedures that ~~(i)~~(a) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the ~~company; (ii)~~Company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with ~~U.S. generally accepted accounting principles;~~GAAP; and ~~(iii)~~(c) 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, ~~2017,~~2023, the end of our fiscal year. Management based its assessment on criteria established in Internal ~~Control—Integrated~~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.

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 ~~U.S. generally accepted accounting principles.~~

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

~~On a quarterly basis we evaluate any changes to our internal control over financial reporting to determine if material changes occurred. There were~~

During the three months ended September 30, 2023, no ~~changes~~change occurred in our internal controls over financial reporting ~~during the quarterly period ended September 30, 2017,~~ that ~~have~~ materially affected, or ~~are~~is reasonably likely to materially affect, our internal ~~control~~controls over financial reporting.

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~ON INTERNAL CONTROL OVER FINANCIAL REPORTING~~

~~The~~

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors ~~and Stockholders~~ 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, ~~2017,~~2023, 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). ~~Liquidity Services, Inc.~~In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and ~~subsidiaries'~~for the fiscal year ended September 30, 2023, of the Company and our report dated December 7, 2023, expressed an unqualified opinion on those financial statements.

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~~Over Financial Reporting. Our responsibility is to express an opinion on the ~~company's~~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 ~~Public Company Accounting Oversight Board (United States).~~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~~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~~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~~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.

~~In our opinion, Liquidity Services, Inc.~~

/s/ Deloitte and ~~subsidiaries maintained, in all material respects, effective internal control over financial reporting as of September 30, 2017, based on the COSO criteria.~~

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Liquidity Services, Inc. and subsidiaries as of September 30, 2017 and 2016, and the related consolidated statements of operations, comprehensive (loss) income, changes in stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2017 of Liquidity Services, Inc. and subsidiaries and our report dated Touche LLP

McLean, Virginia

December ~~6, 2017 expressed an unqualified opinion thereon.~~

~~/s/ ERNST & YOUNG LLP~~

~~Tysons, Virginia~~

~~December 6, 2017~~

7, 2023

Item 9B. Other Information.

~~None.~~

Not applicable.

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

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Incorporated by reference from the Company's Proxy Statement relating to its ~~2018~~2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after September 30, ~~2017.~~

2023.

Code of Ethics, Governance Guidelines and Committee Charters

We have adopted a Code of ~~Business~~ Conduct ~~and Ethics~~ that applies to all ~~Liquidity Services employees.~~of our directors, officers and employees, including our principal executive, principal financial and principal accounting officers, or persons performing similar functions. The Code of ~~Business~~ Conduct ~~and Ethics~~ is available on our ~~website.~~

website at http://investors.liquidityservices.com. We intend to disclose future amendments to certain provisions of the Code of Conduct, and waivers of the Code of Conduct granted to executive officers and directors, on the website within four business days following the date of the amendment or waiver.

Item 11. Executive Compensation.

Incorporated by reference from the Company's Proxy Statement relating to its ~~2018~~2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after September 30, ~~2017.~~

2023.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.

Incorporated by reference from the Company's Proxy Statement relating to its ~~2018~~2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after September 30, ~~2017.~~

2023.

Item 13. Certain ~~Relationship~~Relationships and Related Transactions, and Director Independence.

Incorporated by reference from the Company's Proxy Statement relating to its ~~2018~~2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after September 30, ~~2017.~~

2023.

Item 14. Principal ~~Accounting~~Accountant Fees and Services.

Incorporated by reference from the Company's Proxy Statement relating to its ~~2018~~2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after September 30, ~~2017.~~

2023.

PART IV

Item 15. Exhibits and Financial Statement Schedules.



(a)		Page
~~(a)~~ (1)	The following documents related to the financial statements are filed as part of this report:
	~~Report~~ Reports of Independent Registered Public Accounting ~~Firm~~Firms (PCAOB ID No.'s34 and 42, respectively)	64	58
	~~Financial Statements covered by the Report of Independent Registered Public Accounting Firm:~~
	Consolidated Balance Sheets as of September 30, ~~2017~~2023, and ~~2016~~2022	65	61
	Consolidated Statements of Operations for the years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015~~2021	66	62
	Consolidated Statements of Comprehensive ~~(Loss)~~ Income for the years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015~~2021	67	63
	Consolidated Statements of ~~Changes in~~ Stockholders' Equity for the years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015~~2021	68	64
	Consolidated Statements of Cash Flows for the years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015~~2021	69	65
	Notes to the Consolidated Financial Statements	70	66
~~(a)(2)~~
(2)	The following financial statement schedule is filed as part of this report:
	Schedules for the three years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015:~~2021:
	II—Valuation and Qualifying Accounts	~~101~~ 96
	All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required or are inapplicable and therefore have been omitted.

(3)	The documents required to be filed as exhibits to this report under Item 601 of Regulation S-K are listed in the Exhibit Index included elsewhere in this report, which list is incorporated herein by reference.

~~All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required or are inapplicable and therefore have been omitted.~~

(a)(3) The documents required to be filed as exhibits to this report under Item 601 of Regulation S-K are listed in the Exhibit Index included elsewhere in this report, which list is incorporated herein by reference.

Report of Independent Registered Public Accounting Firm

~~The~~

To the Stockholders and the Board of Directors ~~and Stockholders~~ of

Liquidity Services, Inc. ~~and Subsidiaries~~

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Liquidity Services, Inc. and subsidiaries (the "Company") as of September 30, ~~2017~~2023 and ~~2016, and~~2022, the related consolidated statements of operations, comprehensive ~~(loss)~~ income, ~~changes in~~ stockholders' equity, and cash flows for each of the ~~three~~two years in the period ended September 30, ~~2017. Our audits also included~~2023, and the ~~financial statement~~related notes and schedule listed in the Index at Item 15(a)~~(2)~~ (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 7, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements ~~and schedule~~ are the responsibility of the Company's management. Our responsibility is to express an opinion on ~~these~~the Company's financial statements ~~and schedule~~ based on our audits.

We conducted our audits in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material ~~misstatement. An audit includes~~misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence ~~supporting~~regarding the amounts and disclosures in the financial statements. ~~An audit~~Our audits also ~~includes assessing~~included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial ~~statement presentation.~~statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue - Refer to Note 2 to the consolidated financial statements

Critical Audit Matter Description

The Company earns revenue on transactions where (1) they resell inventory that they purchase from sellers, (2) from the sale of inventory that is sold on a consignment basis, and (3) from other non-consignment fee transactions. When acting as a principal, the Company purchases an asset or assets from a seller and then seeks to sell the asset or assets to a buyer. The Company then recognizes as purchase revenue the gross proceeds from the sale, including buyer's premiums. When the Company is acting as an agent, its performance obligation is to arrange for the seller to sell an asset or assets to the buyer directly. The Company recognizes consignment and other fee revenues based on the sales commissions that are paid to the Company by the sellers for utilizing the Company's services. Consideration is variable based on units, final auction prices, or other factors, until the buyer’s purchase of the asset or assets is complete, or the service has been provided.

We identified a critical audit matter related to revenue transactions recorded, which required an increased extent of effort, including the need for us to involve professionals with expertise in information technology ("IT"), to identify, test, and evaluate the Company’s systems, applications and automated controls.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s revenue transactions included the following, among others:

•

With the assistance of our IT specialists, we:

Identified the significant systems used to process revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls.

Performed testing of system interface controls and automated controls relevant to revenue processes.

•

We tested internal controls within the relevant revenue processes, including those in place to reconcile the various systems to the Company’s general ledger.

•

We either developed an independent expectation of revenue and compared such expectation to the amounts recorded by the Company, or performed detailed transaction testing for a sample of revenue transactions, which included the following:

Agreed the selected revenue transaction amounts recognized to underlying source documents.

Tested the classification of each transaction as either purchase revenue, where the Company acts as a principal and records revenue based on the gross value of the asset sale, or commission and other fee revenue, where the Company acts as an agent and records only the fee earned net of the sale transaction value.

/s/ Deloitte and Touche LLP

McLean, Virginia

December 7, 2023

We have served as the Company’s auditor since 2021.

Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the consolidated statement of operations, comprehensive income, stockholders' equity and cash flows for the year ended September 30, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements ~~referred to above~~ present fairly, in all material respects, the ~~consolidated financial position of Liquidity Services, Inc. and subsidiaries at September 30, 2017 and 2016, and the consolidated~~ results of ~~their~~its operations and ~~their~~its cash flows for ~~each of~~ the ~~three years in the period~~year ended September 30, ~~2017,~~2021, in conformity with U.S. generally accepted accounting principles. ~~Also, in~~

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our ~~opinion,~~audit. We are a public accounting firm registered with the ~~related financial statement schedule, when considered in relation~~PCAOB and are required to be independent with respect to the ~~basic financial statements taken as a whole, presents fairly~~Company in ~~all material respects~~accordance with the ~~information set forth therein.~~

U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We ~~also have audited,~~conducted our audit in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States), Liquidity Services, Inc.~~PCAOB. Those standards require that we plan and ~~subsidiaries' internal control over~~perform the audit to obtain reasonable assurance about whether the financial ~~reporting as~~statements are free of ~~September 30, 2017, based on criteria established in Internal Control—Integrated Framework issued by~~material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the ~~Committee~~risks of ~~Sponsoring Organizations~~material misstatement of the ~~Treadway Commission (2013 framework)~~financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our ~~report dated December 6, 2017 expressed an unqualified opinion thereon.~~

~~/s/ Ernst & Young LLP~~

~~Tysons, Virginia~~

~~December 6, 2017~~

audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We served as the Company's auditor from 2001 to 2021.

Tysons, Virginia

December 9, 2021

Liquidity Services, Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in ~~Thousands)~~

September 30,
2017 2016
Assets

Current assets:

Cash and cash equivalents $ 94,348
$ 134,513
Accounts receivable, net of allowance for doubtful accounts of $668 and $718 in 2017 and 2016, respectively 11,598
10,355
Inventory 20,736
27,610
Tax refund receivable 357
1,205
Prepaid taxes 2,109
2,166
Prepaid expenses and other current assets 9,774
9,063
Total current assets 138,922
184,912
Property and equipment, net 16,793
14,376
Intangible assets, net 427
2,650
Goodwill 45,388
45,134
Net deferred long-term tax assets 962
1,021
Other assets 12,737
12,016

Total assets $ 215,229
$ 260,109
Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 13,099
$ 9,732
Accrued expenses and other current liabilities 30,193
45,133
Distributions payable 3,081
1,722
Payables to sellers 24,383
28,901
Total current liabilities 70,756
85,488
Deferred taxes and other long-term liabilities 11,837
12,010
Total liabilities 82,593
97,498
Commitments and contingencies (Notes 7 and 15) —
—
Stockholders' equity:

Common stock, $0.001 par value; 120,000,000 shares authorized; 31,503,349 shares issued and outstanding at September 30, 2017; 30,742,662 shares issued and outstanding at September 30, 2016 29
29
Additional paid-in capital 227,264
220,192
Accumulated other comprehensive loss (6,431 ) (8,571 )
Retained earnings (accumulated deficit) (88,226 ) (49,039 )
Total stockholders' equity 132,636
162,611
Total liabilities and stockholders' equity $ 215,229
$ 260,109

Thousands, Except Par Value)


	September 30,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	110,281		$	96,122
Short-term investments		7,891			1,819
Accounts receivable, net of allowance for doubtful accounts of $1,424 and $449		7,848			11,792
Inventory, net		11,116			11,679
Prepaid taxes and tax refund receivable		1,783			1,631
Prepaid expenses and other current assets		7,349			6,551
Total current assets		146,268			129,594
Property and equipment, net		17,156			19,094
Operating lease assets		9,888			13,207
Intangible assets, net		12,457			16,234
Goodwill		89,388			88,910
Deferred tax assets		7,050			13,628
Other assets		6,762			7,437
Total assets	$	288,970		$	288,104
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	39,115		$	41,982
Accrued expenses and other current liabilities		23,809			23,304
Current portion of operating lease liabilities		4,101			4,540
Deferred revenue		4,701			4,439
Payables to sellers		48,992			49,238
Total current liabilities		120,718			123,503
Operating lease liabilities		6,581			9,687
Other long-term liabilities		137			378
Total liabilities		127,436			133,568
Commitments and contingencies (Note 15)
Stockholders’ equity:
Common stock, $0.001 par value; 120,000,000 shares authorized; 36,142,346 shares issued and outstanding at September 30, 2023; 35,724,057 shares issued and outstanding at September 30, 2022		36			36
Additional paid-in capital		265,945			258,275
Treasury stock, at cost; 5,433,045 shares at September 30, 2023, and 3,813,199 shares at September 30, 2022		(84,031	)		(62,554	)
Accumulated other comprehensive loss		(10,457	)		(10,285	)
Accumulated deficit		(9,958	)		(30,936	)
Total stockholders’ equity		161,533			154,536
Total liabilities and stockholders’ equity	$	288,970		$	288,104

See accompanying notes to the consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in Thousands, Except ~~Share and~~ Per Share Data)

Year Ended September 30,
2017 2016 2015
Revenue $ 188,570
$ 233,828
$ 315,668
Fee revenue 81,445
82,626
81,457
Total revenue from operations 270,015
316,454
397,125
Costs and expenses from operations:

Cost of goods sold 126,227
143,127
166,009
Seller distributions 19,298
11,214
28,093
Technology and operations 82,988
93,405
99,550
Sales and marketing 35,211
37,570
41,465
General and administrative 35,835
39,717
41,338
Depreciation and amortization 5,796
6,502
9,235
Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets 1,009
19,037
147,414
Business disposition loss —
—
7,963
Other operating expenses 3,651
—
273
Total costs and expenses 310,015
350,572
541,340
Loss from operations (40,000 ) (34,118 ) (144,215 )
Interest (income) expense and other expense, net (362 ) �� (1,217 ) 171
Loss before provision for income taxes (39,638 ) (32,901 ) (144,386 )
(Benefit) provision for income taxes (451 ) 27,025
(39,571 )
Net loss $ (39,187 ) $ (59,926 ) $ (104,815 )
Basic and diluted loss per common share $ (1.25 ) $ (1.96 ) $ (3.50 )
Basic and diluted weighted average shares outstanding 31,402,921
30,638,163
29,987,985


	Year Ended September 30,
	2023			2022			2021
Purchase revenues	$	172,089		$	151,271		$	146,151
Consignment and other fee revenues		142,373			128,779		$	111,380
Total revenue		314,462			280,050			257,531
Costs and expenses from operations:
Cost of goods sold (excludes depreciation and amortization)		142,322			119,407			107,678
Technology and operations		57,078			55,522			47,673
Sales and marketing		49,443			43,224			37,635
General and administrative		28,074			28,282			28,938
Depreciation and amortization		11,255			10,322			6,969
Fair value adjustment of acquisition earn-outs		—			(24,500	)		—
Other operating expenses, net		186			388			1,470
Total costs and expenses		288,358			232,645			230,363
Income from operations		26,105			47,405			27,168
Interest and other income, net		(2,912	)		(248	)		(411	)
Income before provision for income taxes		29,016			47,653			27,579
Provision (benefit) for income taxes		8,039			7,329			(23,370	)
Net income	$	20,978		$	40,324		$	50,949
Basic income per common share	$	0.68		$	1.25		$	1.53
Diluted income per common share	$	0.65		$	1.20		$	1.45
Basic weighted average shares outstanding		31,075,648			32,292,978			33,333,557
Diluted weighted average shares outstanding		32,074,561			33,719,424			35,024,108

See accompanying notes to the consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Consolidated Statements of Comprehensive ~~(Loss)~~ Income

(Dollars In Thousands)

Year Ended September 30,
2017 2016 2015
Net loss $ (39,187 ) $ (59,926 ) $ (104,815 )
Other comprehensive income (loss):

Defined benefit pension plan—unrecognized amounts, net of taxes 1,589
(2,547 ) 1,101
Foreign currency translation 551
(398 ) (3,276 )
Other comprehensive income (loss), net of taxes 2,140
(2,945 ) (2,175 )
Comprehensive loss $ (37,047 ) $ (62,871 ) $ (106,990 )


	Year Ended September 30,
	2023			2022			2021
Net income	$	20,978		$	40,324		$	50,949
Other comprehensive (loss) income:
Defined benefit pension plan—unrecognized amounts		(1,411	)		1,836			170
Foreign currency translation		1,238			(3,110	)		601
Other comprehensive (loss) income		(173	)		(1,274	)		771
Comprehensive income	$	20,805		$	39,050		$	51,720

See accompanying notes to the consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Consolidated Statements of ~~Changes in~~ Stockholders' Equity

(Dollars In ~~Thousands Except Share Data)~~

Treasury Stock Common Stock
Shares Amount Shares Amount
Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Retained
Earnings
(Accumulated
Loss)
Total
Balance at September 30, 2014 —
—
29,668,150
$ 28
$ 204,704
$ (3,451 ) $ 115,702
$ 316,983
Common stock repurchase —
—
—
—
—
—
—
—
Common stock retired —
—
—
—
—

—
—
Exercise of common stock options and restricted stock             —
—
358,073
1
105
—
—
106
Compensation expense and incremental tax benefit from grant of common stock options and issuance of restricted stock —
—
—
—
5,903
—
—
5,903
Net income —
—
—
—
—
—
(104,815 ) (104,815 )
Defined benefit pension plan—unrecognized amounts, net of taxes

1,101

1,101
Foreign currency translation —
—
—
—
—
(3,276 ) —
(3,276 )
Balance at September 30, 2015 —
—
30,026,223
$ 29
$ 210,712
$ (5,626 ) $ 10,887
$ 216,002
Exercise of common stock options and restricted stock             —
—
716,439
—
9
—
—
9
Compensation expense and incremental tax benefit from grant of common stock options and issuance of restricted stock —
—
—
—
9,471
—
—
9,471
Net loss —
—
—
—
—
—
(59,926 ) (59,926 )
Defined benefit pension plan—unrecognized amounts, net of taxes

(2,547 )
(2,547 )
Foreign currency translation —
—
—
—
—
(398 ) —
(398 )
Balance at September 30, 2016 —
—
30,742,662
$ 29
$ 220,192
$ (8,571 ) $ (49,039 ) $ 162,611
Exercise of common stock options and restricted stock             —
—
760,687
—
93
—
—
93
Compensation expense and incremental tax benefit from grant of common stock options and issuance of restricted stock —
—
—
—
6,979
—
—
6,979
Net loss —
—
—
—
—
—
(39,187 ) (39,187 )
Defined benefit pension plan—unrecognized amounts, net of taxes

1,589

1,589
Foreign currency translation —
—
—
—
—
551
—
551
Balance at September 30, 2017 —
—
31,503,349
$ 29
$ 227,264
$ (6,431 ) $ (88,226 ) $ 132,636

Thousands)


	Common Stock								Treasury Stock
	Shares			Amount		Additional Paid-in Capital			Shares			Amount			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Accumulated Loss)			Total
Balance at September 30, 2020		34,082,406		$	34	$	247,892			(547,508	)	$	(3,983	)	$	(9,782	)	$	(122,346	)	$	111,815
Net income		—			—		—			—			—			—			50,949			50,949
Exercise of common stock options and vesting of restricted stock		1,605,618			1		444			—			—			—			—			445
Tax settlements associated with stock compensation expense		(217,196	)		—		(3,915	)		—			—			—			—			(3,915	)
Forfeiture of restricted stock awards		(13,733	)		—		—			—			—			—			—			—
Common stock repurchases		—			—		—			(1,591,963	)		(31,143	)		—			—			(31,143	)
Common stock surrendered in the exercise of stock options		—			—		1,502			(82,612	)		(1,502	)		—			—			—
Stock compensation expense					—		6,094			—			—			—			—			6,094
Defined benefit pension plan—unrecognized amounts, net of taxes		—			—		—			—			—			170						170
Foreign currency translation and other		—			—		—			—			—			601			(1	)		600
Balance at September 30, 2021		35,457,095		$	35	$	252,017			(2,222,083	)	$	(36,628	)	$	(9,011	)	$	(71,398	)	$	135,015
Net income		—			—		—			—			—			—			40,324			40,324
Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units		664,921			1		(1	)		—			—			—			—			—
Taxes paid associated with net settlement of stock compensation awards		(140,202	)		—		(2,805	)		—			—			—			—			(2,805	)
Common stock repurchases		—			—		—			(1,567,277	)		(25,447	)		—			—			(25,447	)
Common stock surrendered in the exercise of stock options		—			—		478			(23,839	)		(479	)		—			—			(1	)
Forfeiture of restricted stock awards		(257,757	)		—		—			—			—			—			—			—
Stock compensation expense		—			—		8,586			—			—			—			—			8,586
Defined benefit pension plan—unrecognized amounts, net of taxes		—			—		—			—			—			1,836			—			1,836
Foreign currency translation		—			—		—			—			—			(3,110	)		138			(2,972	)
Balance at September 30, 2022		35,724,057		$	36	$	258,275			(3,813,199	)	$	(62,554	)	$	(10,285	)	$	(30,936	)	$	154,536
Net income		—			—		—			—			—			—			20,978			20,978
Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units		500,540			—		495			—			—			—			—			495
Taxes paid associated with net settlement of stock compensation awards		(82,252	)		—		(1,261	)		—			—			—			—			(1,261	)
Common stock repurchases		—			—		—			(1,607,141	)		(21,277	)		—			—			(21,277	)
Common stock surrendered in the exercise of stock options		—			—		200			(12,705	)		(200	)		—			—			—
Forfeiture of restricted stock awards		—			—		—			—			—			—			—			—
Stock compensation expense		—			—		8,235			—			—			—			—			8,235
Defined benefit pension plan—unrecognized amounts, net of taxes		—			—		—			—			—			(1,411	)		—			(1,411	)
Foreign currency translation and other		—			—		—			—			—			1,238			1			1,239
Balance at September 30, 2023		36,142,345		$	36	$	265,945			(5,433,045	)	$	(84,031	)	$	(10,458	)	$	(9,958	)	$	161,533

See accompanying notes to the consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars In Thousands)

Year Ended September 30,
2017 2016 2015
Operating activities

Net loss $ (39,187 ) $ (59,926 ) $ (104,815 )
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 5,796
6,502
9,235
Business disposition loss —
—
7,963
Gain on reversal of earnout liability (954 ) —
—
Stock compensation expense 7,377
12,247
12,405
Provision (benefit) for inventory allowance 10,381
2,676
(575 )
Provision for doubtful accounts 357
247
1,109
Deferred tax (benefit) expense (620 ) 26,177
(6,282 )
Impairment of goodwill and long-lived assets 1,963
18,998
147,414
Change in fair value of financial instruments (573 ) —
—
Incremental tax loss from exercise of common stock options and restricted stock 1,198
229
38
Changes in operating assets and liabilities:

Accounts receivable (1,611 ) (4,408 ) 12,651
Inventory (3,507 ) (4,776 ) 43,101
Prepaid and deferred taxes 730
27,057
(38,545 )
Prepaid expenses and other assets (1,024 ) (160 ) (1,499 )
Accounts payable 3,192
232
(4,534 )
Accrued expenses and other current liabilities (14,882 ) 17,151
(18,895 )
Distributions payable 1,359
(790 ) (2,228 )
Payables to sellers (4,519 ) (901 ) (11,742 )
Other liabilities 2,871
5,283
(1,310 )
Net cash (used) provided by operating activities (31,653 ) 45,838
43,491
Investing activities

Cash paid in divestiture —
—
(2,372 )
Increase in intangibles (119 ) (62 ) (137 )
Purchases of property and equipment, including capitalized software (7,805 ) (6,090 ) (7,312 )
Net cash used in investing activities (7,924 ) (6,152 ) (9,821 )
Financing activities

Proceeds from exercise of common stock options (net of tax) 92
9
106
Incremental tax loss from exercise of common stock options and restricted stock (1,198 ) (229 ) (38 )
Net cash (used in) provided by financing activities (1,106 ) (220 ) 68
Effect of exchange rate differences on cash and cash equivalents 518
(418 ) (871 )
Net (decrease) increase in cash and cash equivalents (40,165 ) 39,048
32,867
Cash and cash equivalents at beginning of year 134,513
95,465
62,598
Cash and cash equivalents at end of year $ 94,348
$ 134,513
$ 95,465
Supplemental disclosure of cash flow information

Cash received (paid) for income taxes $ 793
$ 33,966
$ (5,678 )


	Year Ended September 30,
	2023			2022			2021
Operating activities
Net income	$	20,978		$	40,324		$	50,949
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,255			10,322			6,969
Change in fair value of earn-out liability		—			(24,500	)		—
Stock compensation expense		8,191			8,482			6,947
Inventory adjustment to net realizable value		1,048			194			174
Provision for doubtful accounts		1,390			136			297
Deferred tax expense (benefit)		6,578			6,287			(24,510	)
Impairment of long-lived and other non-current assets		—			31			1,338
(Gain) loss on disposal of property and equipment		(36	)		(14	)		80
Gain on disposal of lease assets		—			(240	)		(23	)
Changes in operating assets and liabilities:
Accounts receivable		2,725			(6,290	)		(843	)
Inventory		(479	)		441			(7,035	)
Prepaid taxes and tax refund receivable		(152	)		82			(61	)
Prepaid expenses and other assets		(1,166	)		(1,805	)		(2,022	)
Operating lease assets and liabilities		(228	)		396			(79	)
Accounts payable		(2,889	)		1,548			18,554
Accrued expenses and other current liabilities		277			(2,653	)		6,060
Deferred revenue		262			(185	)		1,369
Payables to sellers		(581	)		13,000			7,543
Other liabilities		(157	)		(723	)		(290	)
Net cash provided by operating activities		47,016			44,833			65,417
Investing activities
Purchases of property and equipment, including capitalized software		(5,386	)		(8,121	)		(5,419	)
Proceeds from note receivable		—			—			4,343
Purchase of short-term investments		(8,037	)		(1,820	)		—
Maturities of short-term investments		1,923			—			—
Cash paid for business acquisition, net of cash acquired		—			(11,164	)		—
Other investing activities, net		68			21			72
Net cash (used in) provided by investing activities		(11,432	)		(21,084	)		(1,004	)
Financing activities
Payments of the principal portion of finance lease liabilities		(101	)		(99	)		(42	)
Payments of debt issuance costs		—			(91	)		—
Proceeds from exercise of common stock options, net of tax		496			—			445
Taxes paid associated with net settlement of stock compensation awards		(1,262	)		(2,806	)		(3,915	)
Payment of earn-out liability related to business acquisition		—			(3,500	)		—
Common stock repurchases		(21,198	)		(25,447	)		(31,143	)
Net cash used in financing activities		(22,065	)		(31,943	)		(34,655	)
Effect of exchange rate differences on cash and cash equivalents		640			(2,019	)		541
Net increase (decrease) in cash and cash equivalents		14,159			(10,213	)		30,299
Cash and cash equivalents at beginning of year		96,122			106,335			76,036
Cash and cash equivalents at end of year	$	110,281		$	96,122		$	106,335
Supplemental disclosure of cash flow information
Cash paid for income taxes, net	$	1,590		$	885		$	1,442
Non-cash: Common stock surrendered in the exercise of stock options	$	200		$	479		$	1,502

See accompanying notes to the consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Organization

Liquidity Services, ~~(the “Company”) operates~~Inc. (Liquidity Services, the Company) is a ~~network~~leading global commerce company providing trusted online marketplace platforms that power the circular economy. We create a better future for organizations, individuals, and the planet by using technology to capture and unleash the intrinsic value of surplus. We connect millions of buyers and thousands of sellers through our leading ~~ecommerce~~e-commerce 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 online marketplace platforms. These platforms ignite and enable a self-reinforcing cycle of value creation where buyers and sellers ~~to transact~~attract one another in ~~an efficient, automated environment offering over 500 product categories.~~greater numbers. The ~~Company’s marketplaces provide professional~~result of this cycle is a continuous flow of goods that becomes increasingly valuable as more participants join the platforms, thereby creating positive network effects that benefit sellers, buyers, ~~access to~~and shareholders.

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

On November 1, 2021, our GovDeals segment acquired Bid4Assets, Inc. (Bid4Assets), a ~~global, organized supply of new, surplus,~~Maryland corporation based in Silver Spring, MD. Bid4Assets is a leading online marketplace focused on conducting real property auctions for government entities, including tax foreclosure sales and scrap assets presented with digital images and other relevant product information. Additionally, the Company enables its 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. The Company's broad range of services include program management, valuation, asset management, reconciliation, Return to Vendor ("RTV") and Returns Management Authorization ("RMA"), refurbishment and recycling, fulfillment, marketing and sales, warehousing and transportation, buyer support, and compliance and risk mitigation. The Company organizes the products on its 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. The Company’s marketplaces are www.liquidation.com, www.govliquidation.com, www.govdeals.com, www.networkintl.com, www.secondipity.com, www.go-dove.com, www.unclesamsretailoutlet.com, www.irondirect.com, and www.auctiondeals.com. sheriff's sales. See Note 3 - Bid4Assets Acquisition for more information regarding this transaction.

Operating Segments

The Company has ~~over 10,000 sellers, including Fortune 1000 and Global 500 organizations as well as federal, state, and local government agencies. As of September 30, 2017, the Company has three~~four reportable segments under which we conduct business: GovDeals, Capital Assets Group (CAG), Retail Supply Chain Group (RSCG), ~~Capital Assets Group (CAG),~~ and ~~GovDeals. See~~Machinio. Further information and operating results of our reportable segments can be found in Note 16 - Segment Information.

•

GovDeals. The GovDeals reportable segment provides solutions that enable government entities including city, county, state and federal agencies located in the ~~Notes~~United States and Canada and related commercial businesses to sell surplus property and real estate assets through our GovDeals and Bid4Assets marketplaces (see Note 3 - Bid4Assets Acquisition).

•

RSCG. The RSCG reportable segment consists of marketplaces that enable corporations located in the ~~Consolidated Financial Statements~~United States and Canada to sell excess, returned, and overstocked consumer goods. RSCG also offers a suite of services that includes returns management, asset recovery, and e-commerce solutions. This segment uses multiple selling channels across our network of marketplaces and others to optimize the best combination of velocity, volume, and value.

•

Machinio. The Machinio reportable segment operates a global search engine platform for ~~Segment Information.~~listing used equipment for sale in the construction, machine tool, transportation, printing and agriculture sectors. Machinio also offers the Machinio System service that provides equipment sellers with a suite of online marketing tools that includes website hosting, email marketing, and inventory management, to support and enable equipment sellers’ online business.

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

~~The Company has evaluated subsequent events through the date that these financial statements were issued~~

Liquidity Services, Inc. and ~~filed with the Securities and Exchange Commission. See Note 18 in the~~ Subsidiaries

Notes to ~~the~~ Consolidated Financial Statements ~~for the Subsequent Event disclosure.~~

(Continued)

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect amounts in the consolidated financial statements and accompanying notes. Actual results could differ significantly from those estimates.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. ~~Certain prior period amounts have been reclassified to conform to the current year's presentation.~~ All intercompany balances and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared ~~pursuant to~~in accordance with accounting principles generally accepted in the ~~rules and regulations~~United States of ~~the Securities and Exchange Commission.~~America. In addition, in the opinion of management, all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation of the results for the periods presented have been included.

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

Business Combinations

The Company recognizes all of the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. Acquisition-related costs are recognized separately from the acquisition and expensed as incurred. Restructuring costs incurred in periods subsequent to the acquisition date are expensed when incurred. Subsequent changes to the purchase price (~~i.e.~~(i.e., working capital adjustments) or other fair value adjustments determined during the measurement period are recorded as an adjustment to goodwill, with the exception of contingent consideration, which is recognized in the ~~statement~~Consolidated Statements of ~~operations~~Operations in the period it is modified. All subsequent changes to a valuation allowance or uncertain tax position that relate to the acquired company and existed at the acquisition date that occur both within the measurement period and as a result of facts and circumstances that existed at the acquisition date, are recognized as an adjustment to goodwill. All other changes in valuation allowances are recognized as a reduction or increase to income tax expense or as a direct adjustment to additional paid-in capital as required.

Cash and Cash Equivalents

The Company considers all highly liquid securities purchased with an initial maturity of three months or less to be cash ~~equivalents.~~equivalents and are included as a current asset in the line-item Cash and cash equivalents within our Consolidated Balance Sheets. Interest income earned through our cash and cash equivalents are recorded to Interest and other income, net within the Consolidated Statements of Operations.

Short-term Investments

The Company's short-term investments are designated as held-to-maturity investment securities, recorded at amortized cost, and are included as a current asset in the line-item Short-term investments within our Consolidated Balance Sheets as their maturity is less than one year from the balance sheet date. Interest income earned through our short-term investments are recorded to Interest and other income, net within the Consolidated Statements of Operations.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and are ~~non-interest bearing.~~non-interest-bearing. The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. ~~Allowances~~Changes in allowances, which are included in Sales and marketing within the Consolidated Statements of Operations, are based on management’s judgment, which considers ~~historical experience and specific knowledge of accounts where collectability may not be probable. The Company makes provisions based on~~ historical bad debt experience, a specific review of all significant outstanding invoices, customer-specific information and relevant conditions, and an assessment of general economic conditions. As of September 30, 2023, the Company's bad debt allowance was $1.4 million.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Inventory

Inventory consists of property obtained for resale, generally through the online auction process, and is stated at the lower of cost or ~~market.~~net realizable value in the line-item Inventory, net on the Consolidated Balance Sheets. Cost is generally determined using the specific identification method. Costs associated with our warehouse operations are expensed as incurred and included within Technology and operations expenses in the Consolidated Statements of Operations. Charges for unsellable inventory, as well as for inventory written down to ~~expected market price,~~net realizable value, are included in Cost of goods sold in the period in which they have been determined to occur. During fiscal 2017, the Company recorded a $3.1 million inventory reserve within its IronDirect operating segment, as the carrying value of this inventory was written down to its expected market value. As of September 30, ~~2017, and 2016,~~2023, the Company's ~~inventory reserve was approximately $4.6 million and $3.4 million, respectively.~~Inventory, net on its Consolidated Balance Sheet reflects adjustments to net realizable value of $1.0 million. Adjustments to net realizable value reflected in the Inventory, net balances as of September 30, 2022, were immaterial.

Prepaid expenses and other current assets

Prepaid expenses and other current assets ~~includes prepaid income tax, financial assets,~~include the short-term portion of ~~a promissory note,~~contract assets (described in "Contract Assets and Liabilities"), capitalized sales commissions paid (described in "Contract Costs"), as well as other miscellaneous prepaid expenses. Financial assets are related to participation agreements for principal transactions in the Company's commercial business. Changes in the fair value of the Company's financial assets are recorded in Other operating expense. See Note 11 in the Notes to the Consolidated Financial Statements for further information.

Other Assets

- Promissory Note

On September 30, 2015, the Company sold certain assets related to its Jacobs Trading business to Tanager Acquisitions, LLC ~~(the ‘‘Buyer’’)~~(Tanager). In connection with the disposition, ~~the Buyer~~Tanager assumed certain liabilities related to the Jacobs Trading business. ~~The Buyer~~Tanager issued a ~~$12.3~~$12.3 million ~~5-year interest bearing~~five-year interest-bearing promissory note to the Company. Of

On October 10, 2019, the ~~$12.3~~Company entered into a Forbearance Agreement and Amendment to Note, Security Agreement and Guaranty Agreement (the Forbearance Agreement) with Tanager (now known as Jacobs Trading, LLC) and certain of its affiliates (collectively, JTC). In exchange for additional collateral, security, and a higher interest rate, the Company granted JTC a new repayment schedule that requires quarterly payments to be made from August 2020 to August 2023. Upon execution of the Forbearance Agreement, JTC repaid $2.5 million ~~$1.0~~in principal, plus $0.4 million ~~has been~~of accrued interest. As of March 31, 2021, JTC had repaid $7.7 million of the $12.3 million owed to the Company and had an outstanding principal balance of $4.6 million.

On May 12, 2021, the Company entered into the First Amendment to the Forbearance Agreement with JTC, providing JTC with full satisfaction and discharge from its indebtedness upon receipt of a $3.5 million payment made on May 17, 2021. As a result, the Company recorded a $1.1 million loss as component of Other operating expenses in its Consolidated Statements of Operations during the year ended September 30, 2021, representing the difference between the $4.6 million outstanding balance of principal and accrued interest and the $3.5 million payment received. There was no impact on the consolidated financial statements from the Forbearance Agreement as of and during the fiscal years ended September 30, ~~2017,~~2022 and another $1.5 million was repaid in October 2017. Of the $11.3 million outstanding at September 30, 2017, $8.3 million was recorded in Other assets, and $3.0 million in Prepaid expenses and other current assets as of September 30, 2017.2023.

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

Property and Equipment

Property and equipment isare recorded at cost, and depreciated or amortized on a straight-line basis over the following estimated useful lives:



Computers and purchased software		One to five years
~~Office equipment~~ Equipment		~~Three~~ Two to five years
Furniture and fixtures		Five to seven years
Internally developed software for internal-use		~~Five~~ Two to five years
Leasehold improvements		Shorter of lease term or useful life
Buildings		Thirty-nine years
~~Land~~ Vehicles		Five years
Land		Not depreciated

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Leases

The Company determines if an arrangement is a lease upon inception. A contract is or contains a lease if the contract provides the right to control the use of an identified asset for a period of time.

Lease assets and liabilities are recognized at the lease commencement date at an amount equal to the present value of the lease payments to be made over the lease term. The lease payments represent the combination of lease and nonlease components. The discount rate used to determine the present value is the Company’s incremental borrowing rate for a duration that is consistent with the lease term, as the rates implicit in the Company’s leases are generally not determinable. The Company’s incremental borrowing rate is estimated using publicly available information for companies with comparable financial profiles, adjusted for the impact of collateralization. The lease term includes the impacts of options to extend or terminate the lease only if it is reasonably certain that the option will be exercised.

Lease expense related to operating lease assets and liabilities is recognized on a straight-line basis over the lease term. Lease expense related to finance lease assets is recognized on a straight-line basis over the shorter of the useful life of the asset or the lease term, while lease expense related to finance lease liabilities is recognized using the interest method. Lease-related payments not included in the determination of the lease assets and liabilities, such as variable lease payments, are expensed as incurred.

Lease assets and liabilities are not recognized when the lease term is 12 months or less; however, short-term lease expense is still recognized on a straight-line basis over the lease term.

Balances related to the Company's operating leases are included within Operating lease assets, Current portion of operating lease liabilities, and Operating lease liabilities (non-current portion of operating lease liabilities) on the Consolidated Balance Sheets.

Balances related to the Company's finance leases are included within Other assets (finance lease assets), Accrued expenses and other current liabilities (current portion of finance lease liabilities), and Other long-term liabilities (non-current portion of finance lease liabilities) on the Consolidated Balance Sheets.

Lease assets are assessed for impairment in accordance with the Company’s accounting policy for the impairment of long-lived assets.

Intangible Assets

Intangible assets ~~primarily~~ consist of contract ~~acquisition costs, covenants not to compete, customer relationships~~intangibles, brand and ~~other intangible assets associated with acquisitions.~~technology, and patent and trademarks. Intangible assets are amortized using the straight-line method over their estimated useful ~~lives, ranging from three to ten years.~~lives.

Impairment of Long-Lived Assets

Long-lived assets, including ~~definite lived~~definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, the Company evaluates recoverability by comparing the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the estimated fair value of the assets. ~~During~~The Company did not record impairment charges on material long-lived assets during the ~~year~~years ended September 30, ~~2017,~~2023, 2022, and 2021.

Goodwill

Goodwill represents the costs in excess of the fair value of net assets acquired through acquisitions by the Company. The Company recorded a $1.2 million impairment of a contract intangible associated with its IronDirect business, and a $0.6 million impairment to leasehold improvements, also within its IronDirect business. No impairment was recorded during the fiscal year ended September 30, 2016.

~~Goodwill~~

~~Goodwill is reviewed~~reviews goodwill for impairment annually on July 1, or more frequently if events or circumstances indicate impairment may exist. Examples of such events or circumstances could include a significant change in business climate or the loss of a significant ~~buyer.~~ contract.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

In evaluating goodwill for impairment, the Company may first ~~assesses~~assess qualitative factors to determine whether it is more ~~than~~ likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further testing of goodwill assigned to the reporting unit is required. ~~However, if~~If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company applies a ~~two-step~~fair value-based test.

In applying a fair value-based test, ~~to assess goodwill for impairment. The first step compares~~the Company determines the fair value of aeach of its reporting ~~unit~~units and compares that amount to ~~its~~the carrying amount of the respective reporting units, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, no impairment loss is recognized. If, instead, the carrying value of the reporting unit exceeds its fair value, ~~the second step~~an impairment loss is ~~then performed. The second step compares~~recognized in the ~~carrying~~ amount of the ~~reporting unit's goodwill~~excess carrying value.

Deferred Revenue

Deferred revenue is primarily derived from Machinio Advertising and System subscriptions that range primarily from one to twenty-four months. Subscription fees are recognized ratably over the ~~implied fair value~~term of the ~~goodwill. If~~agreements.

Revenue Recognition

In the ~~implied fair value~~Consolidated Statements of Operations, revenue from the ~~goodwill~~resale of inventory that the Company purchases from sellers is ~~less than~~recognized within Purchase revenues. Revenue from the ~~carrying amount, an impairment loss would be recorded in~~sale of inventory that the ~~statement of operations.~~

~~The annual goodwill impairment assessment was performed as of July 1, 2017, for fiscal year 2017.~~

~~Revenue Recognition~~

Company sells on a consignment basis, and other non-consignment fee revenue, which includes Machinio's subscription services, is recognized within Consignment and other fee revenues.

The Company recognizes revenue when ~~all of~~or as performance obligations are satisfied and control is transferred to the ~~following criteria are met:~~

~~a buyer submits~~customer. Revenue is recognized in the ~~winning bid in an auction and, as a result, evidence of an arrangement exists, and~~amount that reflects the ~~sale price has been determined;~~

consideration to which the ~~buyer has assumed the risks and rewards of ownership; and~~

~~collection is reasonably assured.~~

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes~~Company expects to ~~Consolidated Financial Statements (Continued)~~

be entitled.

Revenue is also evaluated to determine whether the Company should report the gross proceeds as revenue, ~~(when~~when the Company acts as the principal in the ~~arrangement)~~arrangement, or the Company should report its revenue on a net ~~commissions and related fees as revenue (when~~basis, when the Company acts as an ~~agent). In arrangements~~agent. Specifically, when other parties are involved in ~~which~~providing goods or services to a customer, the Company must determine whether the nature of its promise is a performance obligation to provide the specified goods or services itself, or to arrange for another party to provide them. The Company evaluates the following factors to determine if it is acting as a principal: (a) whether the Company is ~~deemed~~primarily responsible for fulfilling the promise to beprovide the ~~primary obligor, bears physical and general~~asset or assets; (b) whether the Company has inventory risk of the asset or assets before they are transferred to the buyer; and ~~credit risk,~~(c) whether the Company has discretion in establishing the price for the asset or assets.

The Company enters into contracts with buyers and sellers. The Company has master agreements with some sellers pertaining to the sale of a flow of surplus assets over the term of the master agreement; however, a revenue contract for accounting purposes exists when the Company agrees to sell a specific asset or assets. When acting as a principal (a “purchase” arrangement), the Company purchases an asset or assets from a seller and then the Company seeks to sell the asset or assets to a buyer. The Company recognizes as ~~revenue~~Purchase revenues the gross proceeds from the sale, including buyer's premiums. ~~The Company has evaluated its~~In purchase arrangements, the contract with the seller is not a revenue contract in the scope of the revenue recognition ~~policy related to sales under its purchase transaction model and determined~~guidance; rather, it is ~~appropriate to account for these sales on~~ a ~~gross basis. In the Company's evaluation,~~purchase of inventory.

When the Company ~~relied most heavily upon its status as primary obligor in the sales relationship and the fact that the Company has general inventory risk.~~

~~In arrangements in which the Company acts~~is acting as an agent (a “consignment” arrangement), its performance obligation is to arrange for the seller to sell an asset or ~~broker on a consignment basis, without taking physical~~ assets to the buyer directly. The Company recognizes Consignment revenues, which are composed of buyer's premiums and/or ~~general inventory risk, revenue is recognized~~sales commissions, based on the ~~sales commissions~~amounts that are paid to the Company by the buyers and sellers for utilizing the Company's ~~services; in this situation, sales commissions~~services, which represent a percentage of the gross transaction proceeds.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

For the Company’s CAG segment, certain transactions may involve cooperation with third parties to satisfy the performance obligation of arranging for the sale of assets to a buyer, with proceeds shared among the parties. When the Company controls whether to use third parties to fulfill its performance obligation, it is considered the principal and revenue is recognized based on the gross purchase or consignment proceeds, with amounts due to third parties recognized as an expense. When the seller requests multiple parties to fulfill its performance obligation, the Company is considered the agent and revenue is recognized based on the net purchase or consignment proceeds to be retained by the Company.

In both purchase and consignment arrangements, the Company sometimes provides varying levels of services to the seller, such as returns management, refurbishment of assets, or valuation services. These services are considered integrated with the broader performance obligation to sell the seller’s assets to a buyer. Other services provided to sellers are not capable of being distinct, like providing access to the Company’s e-commerce marketplaces or promoting the asset or assets for sale, because they could not benefit the seller separately from the sale of their assets.

The consideration received from buyers and sellers includes (a) buyer’s premiums, (b) seller’s commissions, and (c) fees for services, including reimbursed expenses. Consideration is variable based on units, final auction prices, or other factors, until the buyer’s purchase of the asset or assets is complete, or the service has been provided. Recognition of variable consideration that is based on the ~~seller pays~~results of auctions or purchases by buyers is constrained until those transactions have been finalized. The Company estimates and recognizes amounts related to sales returns, discounts, or rebates promised to customers, and reimbursed expenses; however, those estimates are not significant relative to the ~~Company upon completion of~~Company's consolidated revenues. Revenue is recognized when or as the ~~transaction. Such revenue as well as other fee~~performance obligation is satisfied. Variable consideration is allocated to individual performance obligations when the variable consideration is related to satisfying that performance obligation. The Company's revenue is ~~presented as Fee Revenue in~~generally recorded subsequent to receipt of payment authorization, utilizing credit cards, wire transfers and other methods of payments. Goods are generally not shipped before payment is received. For certain transactions, payment is due upon invoice and the ~~Consolidated Statements of Operations.~~

payment terms vary depending on the segments.

The Company collects and remits sales taxes on merchandise that it purchases and sells and ~~reports~~has elected the practical expedient to exclude such sales tax amounts ~~under~~from the ~~net method~~transaction price. The Company also provides shipping and handling services in ~~its Consolidated Statements~~some arrangements and has elected the practical expedient to treat those activities as fulfillment costs and will recognize the costs of ~~Operations.~~

these services at the time revenue is recognized for the related assets sold. If the Company is acting as a principal for the combined obligation, amounts received from customers for shipping are recognized as Revenue, and amounts paid for shipping are recognized as Costs of goods sold. If the Company is acting as an agent for the combined obligation, shipping revenue and costs will be netted and recognized within Costs of goods sold.

The Company’s purchase and consignment performance obligations are satisfied at the point in time when control of the asset is transferred to the buyer or when the service is completed. The Company determines when control has transferred by evaluating the following five indicators: (a) whether the Company has a present right to payment for the asset or assets; (b) whether the buyer has legal title to the asset; (c) whether the buyer has physical possession of the asset or assets; (d) whether the buyer has the significant risks and rewards of ownership; and (e) whether the buyer has accepted the asset or assets.

For the Company's Machinio segment, the performance obligation has been identified as the stand ready obligation to provide access to the Machinio subscription services, which it satisfies over time and recognizes as other fee revenues. As of September 30, 2023, the Machinio segment had a remaining performance obligation of $4.7 million; the Company expects to recognize the substantial majority of that amount as Fee Revenue over the next 12 months.

Cost of Goods Sold

Cost of goods sold includes ~~the~~direct and incremental costs of purchasing ~~and~~inventory, transporting property for auction, ~~as well as~~shipping and handling costs, and credit card transaction fees. The Company purchases the majority of its inventory at a percentage of the vendor's original acquisition cost under the Surplus Contract and certain commercial contracts, at a percentage of the vendor's last retail price under certain commercial contracts, and at a fixed price per pound that varies depending on the type of the inventory purchased under the Scrap Contract. Title for the inventory passes toFor transactions where the Company atresells inventory that was purchased from sellers, the time of purchase and the Company bears the risks and rewards of ownership. The Company does not have title to assets sold on behalf of its commercial or government sellers when it receives only sales commission revenue and, as such, recognizes no inventory and related cost of goods sold includes the cost of that inventory, generally using specific identification. There are no inventory costs associated with ~~those~~consignment sales. ~~Cost~~

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Contract Assets and Liabilities

Contract assets reflect an estimate of ~~goods sold also includes shipping~~expenses that will be reimbursed upon settlement with a seller. The contract asset balance was $0.9 and ~~handling costs.~~$0.9 million as of September 30, 2023, and 2022, respectively, and is included in the line-item Prepaid expenses and other current assets on the Consolidated Balance Sheets.

Contract liabilities reflect obligations to provide services for which the Company has already received consideration, and generally arise from upfront payments received in connection with Machinio's subscription services. The contract liability balance was $4.7 million and $4.4 million as of September 30, 2023, and 2022, respectively, and is included in the line-item Deferred revenue on the Consolidated Balance Sheet. Of the September 30, 2022 contract liability balance, $4.4 million was earned as Fee Revenue during the year ended September 30, 2023.

Contract Costs

Contract costs relate to sales commissions paid on subscription contracts that are capitalized within our Machinio segment. Contract costs are amortized over the expected life of the customer contract. The contract cost balance was $2.2 million and $1.8 million as of September 30, 2023, and 2022, respectively, and is included in the line-item Prepaid expenses and other current assets and Other assets on the Consolidated Balance Sheets. Amortization expense was $1.3 million and $1.1 million during the year ended September 30, 2023, and 2022, respectively.

Risk Associated with Certain Concentrations

~~The Company does not perform credit evaluations for~~

For the majority of ~~its buyers. However, substantially all sales~~buyers that receive goods before payment to the Company is made, credit evaluations are ~~recorded subsequent to~~performed; however, for the remaining buyers, goods are not shipped before payment ~~authorization being received. As~~is made, and as a result the Company is not subject to significant collection risk ~~as most goods are not shipped before payment is received.~~

from those buyers.

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

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

The Company deposits its cash in interest bearing checking accounts, acquires cash equivalent money market funds, and holds short-term investments designated as held-to-maturity investment securities, each with financial institutions that the Company considers to be of high credit quality.

~~The Company has two material~~ Management continually monitors the financial institutions with whom we conduct business and responds appropriately, when necessary, to manage potential risk exposure to our cash balances above the insurance limits.

We have multiple vendor contracts with the Department of Defense (DoD) under which it acquires, manages and sells government property. Revenue from the sale of property acquired, as well as provision of services, under the current Surplus Contract accounted for 27.6%, 31.0%, and 24.7%, of the Company's consolidated revenue for the fiscal years ended September 30, 2017, 2016, and 2015, respectively. Revenue from the sale of property acquired under the Scrap contract accounted for approximately 11.1%, 10.2% and 15.3% of the Company's total revenue for the fiscal years ended September 30, 2017, 2016 and 2015, respectively.

~~Additionally, we have a vendor contract~~ with Amazon.com, Inc. under which we acquire and sell commercial merchandise. ~~The property we~~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. $5.8 million and $8.1 million of inventory purchased under ~~this contract represented approximately 21.8%, 12.1%, and 6.9%~~such contracts with Amazon.com, Inc. is included in our Consolidated Inventory balances as of ~~cost of goods sold for the fiscal years ended~~ September 30, ~~2017, 2016~~2023, and ~~2015,~~2022, respectively. ~~This contract is included within~~Our vendor contracts with respect to sourcing or consigning merchandise for our RSCG ~~segment.~~segment generally reflect the concentration dynamics inherent to the retail industry.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Income Taxes

The Company accounts for income taxes using an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and income tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for the years in which the taxes are expected to be paid or recovered. ~~We recognize~~The Company recognizes deferred tax assets to the extent that ~~we believe~~it believes that these assets are more likely than not to be realized. In making such determination, ~~we consider~~the Company considers all available positive and negative evidence to estimate whether future taxable income will be generated to permit use of the existing deferred tax asset. The resulting net tax asset reflects management's estimate of the amount that will be realized.

The Company applies the authoritative guidance related to uncertainty in income taxes. Accounting Standards Codification (ASC) 740 states that a benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of technical merits. The Company records unrecognized tax benefits as a reduction to its deferred tax asset for its net operating loss carryforward. During fiscal year 2016, the Company reduced its net operating loss carryforward by $0.7 million for unrecognized tax benefits related to federal and state tax exposures. During fiscal year 2017, the Company reduced its net operating loss carryforward by $3.0 million for unrecognized tax benefits related to federal and state tax exposures. The Company’s policy is to recognize interest and penalties in the period in which they occur in the income tax provision. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and in foreign jurisdictions including, among others, Canada and the U.K.

Stock-Based Compensation

The Company ~~estimates~~has incentive plans under which stock options, restricted stock units, restricted stock awards, and stock appreciation rights are issued. The awards issued can contain service conditions, performance conditions based upon Company financial results, and/or market conditions based upon changes in the Company's stock price.

Service- and performance-based stock awards are measured at fair value ~~of share-based awards~~ on ~~the date of grant. The fair value of stock~~their grant date. Stock options and stock appreciation rights ~~is determined~~are measured at fair value using the Black-Scholes option-pricing ~~model. The~~model; however, because the stock appreciation rights are cash settled, they are also measured at fair value in each reporting period. The Black-Scholes option-pricing model includes assumptions for the expected term, volatility, and dividend yield, each of which are determined in reference to the Company's historical results. Where applicable, the expected term assumption is derived separately for homogenous groups within the overall award population. Restricted stock units and restricted stock ~~units is based on~~awards are measured at fair value using the closing price of the ~~Company’s common~~Company's stock on the ~~date of grant. The determination of the fair value of the Company’s~~grant date. For service-based stock options and stock appreciation rights is based on a variety of factors including, but not limited to, the Company’s common stock price, expected stock price volatility over the expected life of units, and actual and projected exercise behavior. Additionally, the Company has estimated forfeitures for share-based awards, ~~at the dates of grant based on historical experience, adjusted for future expectation. The forfeiture estimate is revised as necessary if actual forfeitures differ from these estimates.~~

The Company issues restricted stock units where restrictions lapse upon either the passage of time (service vesting conditions), achievement of performance targets (performance vesting conditions), or some combination thereof. For those restricted stock units with only service vesting conditions, the Company recognizes ~~compensation cost~~expense on a straight-line basis over the ~~explicit~~ service ~~period.~~period, which is generally a period of one to four years. For ~~restricted~~performance-based stock ~~units with both performance and service vesting conditions,~~awards, the Company ~~starts recognizing compensation cost~~recognizes expense on a straight-line basis over the ~~remaining~~derived service period ~~when~~expected to be required to achieve the performance condition. The Company records a cumulative adjustment to compensation expense for performance-based awards if there is a change in determination of whether it is probable that the performance condition will be ~~met.~~

achieved.

Market-based stock awards are measured at fair value on their grant date using a Monte Carlo simulation. The ~~Company excludes~~Monte Carlo simulation includes assumptions for the expected term, volatility, and dividend yield, each of which are determined in reference to the Company's historical results. For market-based stock ~~options~~option and restricted stock ~~units that contain performance vesting conditions from diluted earnings per share computations until~~awards, the ~~contingency is met as of~~Company recognizes expense on a straight-line basis over the ~~end of that reporting period.~~

derived service period determined by the Monte Carlo simulation, for each stock price target within the award. The Company ~~presents~~accelerates expense when a stock price target is achieved prior to the derived service period. The Company, however, does not reverse expense recognized if the stock price target(s) are not ultimately achieved, as required by equity accounting for market-based awards. For market-based stock appreciation rights, because they are cash settled, they are measured at fair value in each reporting period. The Company recognized expense on a straight-line basis over the derived service period determined by the Monte Carlo simulation in each reporting period, for each stock price target within the award. The Company accelerates expense when a stock price target is achieved prior to the derived service period, and reverses expense recognized if the stock price target(s) are not ultimately achieved, as required by liability accounting for market-based awards.

The Company recognizes the impact of forfeitures in the period they occur.

Compensation expense from the stock awards is included in the same lines on the Consolidated Statements of Operations as the cash compensation to the employees receiving the stock awards.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Excess tax benefits realized from stock awards are reported as cash flows from ~~the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) as a financing activity with a corresponding~~ operating ~~cash outflow in~~activities on the Consolidated Statements of Cash ~~Flows when it is considered probable that those tax benefits will be realized.~~Flows.

Advertising Costs

Advertising expenditures are expensed as incurred. Advertising costs charged to expense were ~~$5.2~~$4.5 million, ~~$6.0~~$4.6 million, and ~~$5.3~~$3.2 million for the years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015,~~2021, respectively.

~~Fair Value~~

Treasury Stock

Treasury stock is presented at cost, including any applicable excise taxes, commissions and fees, as a reduction of ~~Financial Instruments~~

~~Cash and cash equivalents, accounts receivable, accounts payable, profit-sharing distributions payable, and payables to sellers reported~~stockholders’ equity in the Consolidated Balance Sheets ~~approximate their fair values. The Company holds financial assets that are related to participation agreements for principal transactions~~and Consolidated Statement of Stockholders' Equity. Treasury stock held by us may be retired or reissued in the ~~Company's commercial business. Changes in the fair value of the Company's financial assets are recorded in Other operating expense.~~future.

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

Foreign Currency Translation

The functional currency of the Company's foreign subsidiaries is primarily the local currency. The translation of the subsidiary's financial statements into U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate during the period. The resulting translation adjustments are recognized in ~~accumulated~~Accumulated other comprehensive ~~(loss) income,~~loss, a separate component of stockholders' equity. Realized and unrealized foreign currency transaction gains and losses ~~for 2017, 2016 and 2015~~ are included in ~~interest~~Interest and other income, ~~(expense),~~ net in the Consolidated Statements of Operations.

Accumulated Other Comprehensive ~~Income (loss)~~

Loss

The following table shows the changes in accumulated other comprehensive ~~income (loss),~~loss, net of taxes (in thousands):


	Foreign Currency Translation Adjustments			Net Change Pension and Other Postretirement Benefit Plans			Accumulated Other Comprehensive Loss
Balance at September 30, 2020	$	(8,085	)	$	(1,697	)	$	(9,782	)
Current-period other comprehensive income		601			170			771
Balance at September 30, 2021		(7,484	)		(1,527	)		(9,011	)
Current-period other comprehensive (loss)		(3,110	)		1,836			(1,274	)
Balance at September 30, 2022		(10,594	)		309			(10,285	)
Current-period other comprehensive (loss)		1,238			(1,411	)		(173	)
Balance at September 30, 2023	$	(9,356	)	$	(1,102	)	$	(10,458	)

Foreign Currency
Translation
Adjustments

Net Change Pension
and Other
Postretirement
Benefit Plans

Accumulated Other
Comprehensive
Income (Loss)
Balance at September 30, 2014 (3,671 ) 220
(3,451 )
Current-period other comprehensive (loss) income (3,276 ) 1,101
(2,175 )
Balance at September 30, 2015 (6,947 ) 1,321
(5,626 )
Current-period other comprehensive loss (398 ) (2,547 ) (2,945 )
Balance at September 30, 2016 (7,345 ) (1,226 ) (8,571 )
Current-period other comprehensive income 551
1,589
2,140
Balance at September 30, 2017 (6,794 ) 363
(6,431 )

~~Earnings per Share~~

~~The Company calculates net income (loss) per share in accordance with~~

Recent Accounting Pronouncements

Accounting Standards Adopted

In December 2019, the Financial Accounting Standards Board (FASB) ~~Topic 260~~issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The Company adopted the new standard on a prospective basis effective October 1, 2021. This accounting standard has not had a material impact on the Company's consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), or ASC 326. ASC 326, including all amendments and related guidance, was designed to provide financial statement users with more useful information about the expected credit losses on financial instruments and other commitments to extend credit. ASC 326 will require estimation of expected credit losses using a methodology that takes into consideration a broad range of reasonable and supportable information. The guidance will be effective for the Company beginning on October 1, 2023, due to the fact that the Company was classified as a smaller reporting company defined by the SEC at the time the rule was effective for public business entities. The guidance will be applied on a modified-retrospective basis, with any cumulative-effect adjustment recorded to retained earnings on the adoption date. The Company is in the process of evaluating the impact ASC 326 will have on its consolidated financial statements and expects to estimate credit losses on its financial assets such as its Accounts receivable and money market funds. We do not expect the adoption of this ASU will have a material impact on our consolidated financial statements.

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

7. Goodwill

The ~~Company concluded that~~carrying value and changes in the carrying value exceeded fair value for one of the Company's reporting units that had goodwill. Accordingly, the Company performed the step two test to derive the fair value of the goodwill, and as a result the Company recorded a $19.0 million impairment charge to its RSCG reporting unit during the fourth quarter of fiscal year 2016. The goodwill impairment was due to updated assumptions used in the fair value calculation.

~~As part of the Company's fiscal year 2017 annual impairment assessment, the Company believed that certain events triggered moving to a step one evaluation~~ of goodwill attributable to ~~identify potential impairment. After performing the step one test, the Company concluded the remaining reporting units with goodwill had fair values~~each reportable segment were as ~~of July 1, 2017, that substantially exceeded their respective book values.~~follows:


Goodwill (in thousands)	GovDeals		CAG			Machinio		Total
Balance at September 30, 2020	$	23,731	$	21,550		$	14,558	$	59,839
Translation adjustments		—		33			—		33
Balance at September 30, 2021	$	23,731	$	21,583		$	14,558	$	59,872
Addition: Bid4Assets acquisition		30,083		—			—		30,083
Translation adjustments		—		(1,045	)		—		(1,045	)
Balance at September 30, 2022	$	53,814	$	20,538		$	14,558	$	88,910
Translation adjustments		—		478			—		478
Balance at September 30, 2023	$	53,814	$	21,016		$	14,558	$	89,388

~~The following summarizes the goodwill activity for the Company's reportable segments that have goodwill during the periods indicated:~~

Goodwill (in thousands) RSCG CAG GovDeals Total
Balance at September 30, 2014 $ 78,458
$ 131,198
$ —
$ 209,656
Impairment charge (52,716 ) (83,532 ) —
(136,248 )
Business disposition (6,733 ) —
(6,733 )
Translation adjustments (405 ) (2,197 ) —
(2,602 )
Balance at September 30, 2015 $ 18,604
$ 45,469
$ —
$ 64,073
Reallocation of goodwill —
(23,731 ) 23,731
—
Impairment charge (18,998 ) —
—
(18,998 )
Translation adjustments 394
(335 ) —
59
Balance at September 30, 2016 —
21,403
23,731
45,134
Impairment charge —
—
—
—
Translation adjustments —
254
—
254
Balance at September 30, 2017 $ —
$ 21,657
$ 23,731
$ 45,388

Accumulated goodwill impairment losses as of September 30, ~~2014~~2023, and 2022 were ~~$13.4~~$168.6 million.

Impairment Analysis

Goodwill is tested for impairment at the beginning of the fourth quarter and during interim periods whenever events or circumstances indicate that the carrying value may not be recoverable. As of July 1, 2023, the Company performed a quantitative fair-value-based test for each of our reporting units, determining that each of our reporting units with goodwill balances substantially exceeded their carrying values. The fair value test was performed utilizing the discounted cash flow method under the Income approach and the guideline company method under the Market approach, the results of which were weighted 75:25, respectively, in the ending determined fair value. The Company did not record impairment charges on its goodwill during the years ended September 30, 2023, 2022, and 2021.

The Company did not identify any indicators of impairment that required an interim goodwill impairment test during the three months ended September 30, 2023.

8. Intangible Assets

Intangible assets consist of the following:


				September 30, 2023							September 30, 2022
(in thousands)	Useful Life (in years)	Weighted average useful Life (in years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Contract intangibles	6 - 8		8.0	$	17,000	$	(6,043	)	$	10,957	$	17,000	$	(3,789	)	$	13,211
Technology	3 - 5		6.1		5,300		(4,361	)		939		5,300		(3,089	)		2,211
Patent and trademarks	7 - 10		9.1		2,375		(1,814	)		561		2,381		(1,569	)		812
Total intangible assets, net				$	24,675	$	(12,218	)	$	12,457	$	24,681	$	(8,447	)	$	16,234

Balance as of September 30, 2017 Balance as of September 30, 2016

Useful
Life
(in years)

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount
Contract intangibles 10
$ —
$ —
$ —
$ 1,500
$ (150 ) $ 1,350
Brand and technology 3 - 5
—
—
—
5,749
(5,018 ) 731
Covenants not to compete 3 - 5
—
—
—
700
(533 ) 167
Patent and trademarks 3 - 10
943
(516 ) 427
820
(418 ) 402
Total intangible assets, net
$ 943
$ (516 ) $ 427
$ 8,769
$ (6,119 ) $ 2,650

Future expected amortization of intangible assets at September 30, ~~2017,~~2023, is as follows:


Year Ending September 30,	Amortization
	(in thousands)
2024	$	3,254
2025		2,013
2026		1,768
2027		1,761
2028		1,752
Thereafter		1,909
Total	$	12,457

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Year Ending September 30, Amortization
(in thousands)
2018 $ 76
2019 69
2020 70
2021 58
2022 and after 154
Total $ 427

Amortization expense related to intangible assets for the years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015~~2021 was ~~$1.0~~$3.8 million, ~~$1.4~~$3.7 million, and ~~$3.1~~$1.3 million, respectively.

~~During fiscal year 2017, the Company recorded a $1.2 million impairment of a contract~~ The increase in intangible ~~associated with customer relationships in its IronDirect business, and reduced the remaining unamortized value of this intangible asset to zero~~amortization expense during the ~~fiscal~~ year ended September 30, ~~2017. The Company also concluded that the covenant not to compete intangible asset received in connection with the acquisition of the TruckCenter business,~~2022, was ~~impaired~~primarily due to the ~~exit of the TruckCenter land-based, live auction and retail business.~~ Bid4Assets acquisition.

The Company ~~recorded a $0.1 million charge, and reduced the remaining unamortized value of this intangible asset to zero during the fiscal year ended September 30, 2017. These~~did not record impairment charges ~~are recorded in the Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived~~on any intangible assets ~~line item in the Consolidated Statements of Operations and reported under the Corporate & other segment.~~

~~7. Commitments~~

~~Leases~~

The Company leases certain office space and equipment under non-cancelable operating lease agreements, which expire at various dates through 2022. Certain of the leases contain escalation clauses and provide for the pass-through of increases in operating expenses and real estate taxes. Rent related to leases that have escalation clauses is recognized on a straight-line basis. Resulting deferred rent charges are included in other long-term liabilities and were $0.6 million and $1.0 million, at September 30, 2017 and 2016, respectively. Future minimum payments under the leases as of September 30, 2017, are as follows:

Year Ending September 30, Operating
Lease
Payments
(in thousands)
2018 $ 9,432
2019 8,696
2020 4,903
2021 2,806
2022 1,001
2023 305
Total future minimum lease payments $ 27,143

On June 16, 2017 the Company entered into a sub-lease agreement for 18,412 square feet of office space at 6931 Arlington Road, Bethesda, Maryland. The sub-lease commenced September 29, 2017, and will expire April 30, 2023. On the sub-lease commencement date, the Company relocated its headquarters previously located at 1920 L Street NW, Washington DC, to the new Bethesda location. The Company ceased using the L Street location as of September 30, 2017, and recognized a $2.0 million cease-use charge in its consolidated statements of operations at September 30, 2017, within the Other operating expenses line item.

~~Rent expense for~~during the years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015, was $10.8 million, $11.5 million, and $12.5 million, respectively.~~2021. The ~~fiscal 2017 rent expense amount does~~Company did not ~~include~~identify any indicators of impairment requiring an interim impairment test on material long-lived assets during the ~~$2.0 million cease-use charge pertaining to the L Street location.~~year ended September 30, 2023.

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

9. 401(k) Benefit Plan

The Company has a retirement plan (the Plan), which is intended to be a qualified plan under Section 401(k) of the Internal Revenue ~~Code.~~Code of 1986, as amended. The Plan is a defined contribution plan available to all eligible employees and allows participants to contribute up to the legal maximum of their eligible compensation, not to exceed the maximum tax-deferred amount allowed by the Internal Revenue Service. The Plan also allows the Company to make discretionary matching contributions.

During the fiscal year ended September 30, 2023, the Company stopped accepting investments in the Company’s stock fund under the Plan and all shares of the Company and other Plan interests held in the stock fund under the Plan were reinvested into non-Company investment vehicles. On March 28, 2023, the Company filed a post-effective amendment on Form S-8 with the SEC to deregister all of the previously registered shares and other Plan interests that remained unissued and unsold under the Plan. As a result, interests in the Plan no longer require registration under the Securities Exchange Act of 1934, as amended. On October 2, 2023, the Company filed a Form 15 to suspend the duty of the Plan to file reports under Section 15(d) of the Securities Exchange Act of 1934, as amended.

For the years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015,~~2021, the Company ~~contributed and~~ recorded ~~expense~~expenses of ~~approximately $2.1~~$1.4 million, ~~$1.7~~$1.0 million, and ~~$2.4~~$1.1 million, respectively, related to its contributions to the Plan.

10. Income Taxes

The components of the provision for income taxes of continuing operations are as follows:


	Year Ended September 30,
	2023		2022		2021
	(in thousands)
Current tax provision (benefit):
U.S. Federal	$	—	$	—	$	—
State		1,179		487		293
Foreign		282		555		847
		1,461		1,042		1,140
Deferred tax provision (benefit):
U.S. Federal		5,251		4,962		(23,315	)
State		1,280		1,275		(1,252	)
Foreign		47		50		57
		6,578		6,287		(24,510	)
Total provision (benefit)	$	8,039	$	7,329	$	(23,370	)

Year Ended September 30,
2017 2016 2015
Current tax provision (benefit):

U.S. Federal $ (234 ) $ —
$ (32,116 )
State 613
672
(1,375 )
Foreign (210 ) 176
203
169
848
(33,288 )
Deferred tax (benefit) expense:

U.S. Federal (592 ) 25,338
326
State (86 ) 3,890
(4,422 )
Foreign 58
(3,051 ) (2,187 )
(620 ) 26,177
(6,283 )
Total (benefit) provision $ (451 ) $ 27,025
$ (39,571 )

Deferred taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)


	September 30,
	2023			2022
	(in thousands)
Deferred tax assets:
Net operating losses—Foreign	$	16,403		$	12,409
Net operating losses—U.S.		14,581			24,054
Accrued vacation and bonus		831			701
Inventory capitalization		486			683
Inventory reserves		243			24
Allowance for doubtful accounts		363			113
Stock compensation expense		3,288			2,198
Operating lease liabilities		3,552			3,565
Other		386			845
Total deferred tax assets before valuation allowance		40,133			44,592
Less: valuation allowance		(16,029	)		(12,259	)
Net deferred tax assets		24,104			32,333
Deferred tax liabilities:
Amortization of intangibles		2,666			3,453
Amortization of goodwill		7,964			7,595
Depreciation		1,004			938
Capitalized costs		1,440			2,786
Operating/right of use assets		3,365			3,325
Pension liability		615			608
Total deferred tax liabilities	$	17,054		$	18,705
Net deferred taxes	$	7,050		$	13,628

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

September 30,
2017 2016
Deferred tax assets:

Net operating losses—Foreign $ 9,171
$ 8,964
Net operating losses—U.S. 31,133
17,086
Accrued vacation and bonus 859
1,305
Inventory capitalization 1,315
1,906
Inventory reserves 1,903
1,311
Allowance for doubtful accounts 98
120
Stock compensation expense 6,689
8,105
Amortization of intangibles 2,753
2,286
Amortization of goodwill —
1,021
Pension liability —
133
Restructuring costs 913
—
Other 3,134
3,699
Total deferred tax assets before valuation allowance 57,968
45,936
Less: valuation allowance (54,379 ) (44,257 )
Net deferred tax assets 3,589
1,679
Deferred tax liabilities:

Amortization of goodwill 9,000
9,444
Depreciation 185
658
Capitalized costs 3,032
—
Pension liability 372
—
Total deferred tax liabilities $ 12,589
$ 10,102
Net deferred taxes $ (9,000 ) $ (8,423 )

The reconciliation of the U.S. federal statutory rate to the effective rate for continuing operations is as follows:


	Year Ended September 30,
	2023			2022			2021
U.S. statutory rate		21.0	%		21.0	%		21.0	%
Stock-based stock compensation expense		(1.3	)%		(2.0	)%		(14.1	)%
Nondeductible compensation expense		0.5	%		2.0	%		5.5	%
Fair value adjustments of acquisition earn-outs		—	%		(10.8	)%		—	%
Other permanent items		0.1	%		(0.4	)%		0.1	%
State taxes		7.8	%		3.3	%		3.0	%
Net foreign rate differential		—	%		0.1	%		0.5	%
Unrecognized tax benefits		(0.5	)%		0.0	%		0.1	%
Change in valuation allowance		1.4	%		(3.3	)%		(98.9	)%
Write-down of deferred tax assets on share-based stock compensation		0.2	%		0.5	%		0.7	%
Write-down of deferred tax assets on net operating loss		(0.8	)%		4.2	%		(2.8	)%
Other		(0.7	)%		0.8	%		0.2	%
Effective rate		27.7	%		15.4	%		(84.7	)%

Year Ended September 30,
2017 2016 2015
U.S. statutory rate 35.0 % 35.0 % 35.0 %
Permanent items (0.9 )% (4.2 )% (6.3 )%
State taxes 1.2 % 1.9 % 2.6 %
Net foreign rate differential (2.8 )% (3.8 )% (3.0 )%
Unrecognized tax benefits 3.5 % (2.2 )% — %
Change in valuation allowance (34.8 )% (108.8 )% (0.9 )%
Other (0.06 )% — % — %
Provision for income taxes 1.1 % (82.1 )% 27.4 %

As of September 30, ~~2017~~2023, and ~~2016,~~2022, the Company had federal and state deferred tax assets of ~~$45.4~~$6.6 million and ~~$35.8~~$13.4 million, respectively, related to available federal and state net operating loss (NOL) carryforwards, foreign tax credit carryforwards, and other U.S. deductible temporary differences. The federal and state NOL carryforwards expire beginning in ~~2035 through 2037.~~2038 and 2024, respectively. The Company's ability to use these various carryforwards to offset any taxable income generated in future taxable periods may be limited under Section 382 and other federal tax provisions. The foreign tax credit carryforwards expire beginning in 2024. At September 30, ~~2017~~2023 and ~~2016,~~2022, the Company had deferred tax assets related to available foreign NOL carryforwards of ~~approximately $9.2~~$16.4 million and ~~$9.0~~$12.4 million, respectively. All but ~~approximately $0.5~~$0.5 million of our foreign NOLs maintain an indefinite carry forward life. The NOLs with limited carryforward periods will expire beginning in ~~2018 through 2037.~~

2027.

The Company evaluates the recoverability of its deferred tax assets on a jurisdictional basis by considering whether deferred tax assets will be realized on a more likely than not basis. To the extent a portion or all of the applicable deferred tax assets do not meet the more likely than not threshold, a valuation allowance is recorded. Consideration was given to the tax planning strategies and, when applicable, future taxable income as to how much of the relevant deferred tax asset could be realized on a more likely than not basis. The Company has recorded a valuation allowance of $16.0 million and $12.3 million against its gross deferred tax asset balance at September 30, 2023 and 2022, respectively. At each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of September 30, 2023, the Company determined that there was sufficient positive evidence to conclude that it is more likely than not that all of its U.S. deferred tax assets are realizable, except for $0.2 million of foreign tax credit carry forwards that expire beginning in 2024.

The Tax Act and Jobs Act of 2017 (the Tax Act) subjects a U.S. shareholder to a minimum tax on "global intangible low-taxed income" (GILTI) earned by certain foreign subsidiaries. The FASB Staff Q&A Topic 740 No. 5. Accounting for Global Intangible Low-Taxed Income states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI resulting from those items in the year the tax is incurred. The Company has elected to recognize the resulting tax on GILTI as an expense in the period the tax is incurred.

The Inflation Reduction Act (IRA) was enacted on August 16, 2022. The IRA includes provisions imposing a 1% excise tax on share repurchases that occur after December 31, 2022, and introduces a 15% corporate alternative minimum tax (CAMT) on adjusted financial statement income. The CAMT will be effective for us beginning in fiscal year 2024. We currently are not expecting the IRA to have a material adverse impact on our financial statements.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

~~The~~

On November 1, 2021, the Company ~~assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use~~acquired 100% of the ~~existing deferred tax assets. A significant piece~~stock of ~~objective negative evidence evaluated was~~Bid4Assets, Inc. for $42.7 million. Under the cumulative loss incurred over the three-year period ended September 30, 2017. Such objective evidence limits the ability to consider other evidence such as our projections for future growth. On the basisacquisition method of ~~this evaluation,~~accounting, the Company recorded a ~~valuation change~~net deferred tax liability of ~~$10.1~~$3.8 million composed primarily of acquired intangibles netted against NOLs and other deferred assets. The total amount of NOLs, which are subject to ~~bring the total valuation allowance to $54.4 million at September 30, 2017.~~

limitations under Section 382, were $1.2 million.

The Company has not recorded a provision for deferred U.S. tax expense on the undistributed earnings of foreign subsidiaries since the Company intends to indefinitely reinvest the earnings of these foreign subsidiaries outside the U.S. The amount of such undistributed foreign earnings was ~~approximately $8.0~~$10.6 million as of September 30, ~~2017.~~2023. As of September 30, ~~2017,~~2023, and ~~2016, approximately $14.9~~2022, $19.1 million and ~~$21.5~~$20.3 million, respectively, of cash and cash equivalents was held overseas and not available to fund domestic operations without incurring taxes upon repatriation.

The following is a tabular reconciliation of the total amounts of unrecognized tax ~~benefits:~~benefits (in thousands):


	Year Ended September 30,
	2023			2022		2021
Beginning balance at October 1	$	143		$	143	$	123
Additions based on positions related to the current year		—			—		—
Additions for tax positions of prior years		—			—		20
Reductions for tax positions of prior years		(143	)		—		—
Settlements		—			—		—
Balance at September 30		—		$	143	$	143

Year Ended September 30, (In thousands)
2017 2016 2015
Beginning balance at October 1 $ 725
—
—
Additions based on positions related to the current year —
—
—
Additions for tax positions of prior years 1,426
725
—
Reductions for tax positions of prior years (229 ) —
—
Settlements (1,922 ) —
—
Balance at September 30 $ —
725
—

The Company applies the authoritative guidance related to uncertainty in income taxes. ASC 740 states that a benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. During ~~fiscal year 2017, we reduced our deferred~~2023, the Company did not identify any new uncertain tax ~~asset~~positions and ~~valuation allowance for our net operating loss carryforward by $1.2~~released $0.1 million for unrecognized tax benefits related to federal and state exposures. We recorded a net tax benefit of $1.4 million comprised of a $1.2 million recovery of tax deductions related to equity compensation previously recorded to equity and a $0.2 million recovery of prior year ~~taxes.~~ uncertain tax positions related to foreign operations.

The Company ~~has agreed to settle all previously unrecognized tax benefits with the IRS and anticipates no additional adjustments for fiscal years 2013 through 2015.~~

~~The Company's policy is to recognize~~recognizes interest and penalties in the period in which they occur in the income tax provision. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions and in foreign jurisdictions, primarily Canada and the U.K. ~~Currently, the~~The Company ~~is subject to~~has no open income tax examinations ~~for fiscal years 2012 through 2015. The Company anticipates no material tax liability to arise from these examinations. The~~in the U.S. and the statute of limitations for years prior to ~~fiscal year 2013~~2020 is now ~~closed. However,~~closed; however, certain tax attribute carryforwards that were generated prior to fiscal year ~~2013~~2020 may be adjusted upon examination by tax authorities if they are utilized.

11. Debt

On February 10, 2022, the Company entered into a Credit Agreement with Wells Fargo Bank, National Association (the Credit Agreement). Terms of the Credit Agreement provide for revolving loans (the Line of Credit) up to a maximum aggregate principal amount of $25.0 million with a $10.0 million sublimit for standby letters of credit.

During the year ended September 30, 2023, the Credit Agreement was amended to extend the maturity date by 12 months to March 31, 2025 (the First Amendment). No other changes, including with respect to the borrowing terms of capacities, were made to the Credit Agreement as a result of the First Amendment.

The applicable interest rate on any draws under the Line of Credit 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. The Company pays an Unused Commitment Fee (as defined in the Credit Agreement), on a quarterly basis, equal to 0.05% per annum on the daily amount of the available, but unused, balance on the Line of Credit. The Company also pays a Line of Credit Fee (as defined in the Credit Agreement), on a quarterly basis, equal to 1.25% on the daily amount available to be drawn for standby letters of credit. Interest incurred on any draws under the Line of Credit, as well as the Unused Commitment Fee and Letter of Credit Fee, are included within Interest and other (income) expense, net in the Condensed Consolidated Statements of Operations.

The Company may draw upon the Line of Credit for general corporate purposes. Repayments of any borrowings under the Line of Credit shall become available for redraw at any time by the Company.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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, 2023, the Company was in full compliance with the terms and conditions of the Credit Agreement.

During the year ended September 30, 2023, the Company did not make any draws under the Credit Agreement. As of September 30, 2023, the Company had no outstanding borrowings under the Credit Agreement.

During the year ended September 30, 2023, interest expense incurred by the Company under the Credit Agreement was immaterial to the consolidated financial statements.

~~10.~~

12. Equity Transactions

~~2006 Omnibus Long-Term~~

Stock Compensation Incentive ~~Plan~~

~~In conjunction with~~Plans

The Company has several incentive plans under which stock options, restricted stock units (RSUs), restricted stock awards (RSAs), and cash-settled stock appreciation rights (SARs) have been issued, including the ~~Company's initial public offering, the board of directors~~Third Amended and ~~the Company's stockholders approved the~~Restated 2006 Omnibus Long-Term Incentive Plan, oras amended, and a plan and private placement issuances related to the ~~2006 Plan, on December 2, 2005. The 2005 Stock Option~~Company’s acquisition of Machinio and ~~Incentive Plan was terminated when~~Bid4Assets. As of September 30, 2023, the ~~2006 Plan became effective, immediately after the closing~~Company has reserved a total of ~~the initial public offering.~~

~~A portion~~20,300,000 shares of ~~the options and restricted shares granted to employees vest based on certain performance conditions being satisfied by the Company. Performance-based~~its common stock for exercises of stock options, ~~are tied to the Company's annual performance against pre-established internal targets~~vesting of RSUs, and ~~the actual payout~~grants of RSAs under these plans. Vesting of RSUs and grants of RSAs count as 1.5x shares against the plan reserves. As of September 30, 2023, 972,531 shares of common stock remained available for use.

Stock Compensation Expense

The table below presents the components of share-based compensation expense (in thousands):


	Year Ended September 30,
	2023			2022			2021
Equity-classified awards:
Stock options	$	2,002		$	2,673		$	3,117
RSUs & RSAs		6,233			5,912			2,977
Total Equity-classified award		8,235			8,585			6,094
Liability-classified awards:
SARs		(44	)		(104	)		853
Total stock compensation expense:	$	8,191		$	8,481		$	6,947

The Company’s total liabilities for liability-classified stock compensation awards ~~may vary from zero to 100%~~were $0 and $0.2 million as of ~~an employee's target payout, based upon~~September 30, 2023 and 2022, respectively.

The table below presents the ~~Company's actual performance during the previous twelve months.~~ components of share-based compensation expense by line item within our Consolidated Statements of Operations (in thousands):


	Year Ended September 30,
	2023		2022		2021
Stock Compensation Expense by Line Item
Technology and operations	$	1,226	$	1,307	$	1,016
Sales and marketing		2,363		2,148		1,541
General and administrative		4,602		5,026		4,390
Total stock compensation expense:	$	8,191	$	8,481	$	6,947

Share-Based Award Activity

Stock Options

The ~~performance-based~~table below presents stock ~~options are also subject to vesting requirements and generally vest when the performance condition has been satisfied. The fair~~option activity (aggregate intrinsic value ~~for stock options granted during the period was estimated at the grant date using the Black-Scholes option pricing model, as described~~ in Note 2, and the fair value of restricted shares granted is based on the closing price of the shares on the grant date. Compensation cost is recognized when the performance condition has been satisfied or when it becomes probable that the performance condition will be satisfied.

thousands):

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)


	Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding as of September 30, 2022		2,705,436		$	10.76		5.58	$	18,397
Granted		353,958		$	14.43			$	—
Exercised		(372,362	)	$	7.34			$	2,997
Forfeited		(34,019	)	$	15.23			$	143
Expired		(23,816	)	$	40.11			$	—
Outstanding as of September 30, 2023		2,629,197		$	11.41		5.12	$	18,549
Vested and expected to vest as of September 30, 2023		2,614,187		$	11.35		5.11	$	18,549
Exercisable as of September 30, 2023		1,851,754		$	9.59		4.05	$	15,924

~~Under~~

Of the ~~2006 Plan,~~777,443 stock options not yet exercisable as ~~amended, 10,000,000 shares~~ of ~~common stock were available for issuance. At~~ September 30, 2014, there were 772,227 shares remaining reserved for issuance in connection with awards under the 2006 Plan. In February 2015, at the Company's annual meeting of stockholders, the stockholders approved an amendment to the 2006 Plan which increased the shares available for issuance under the 2006 Plan2023, 449,438 can become exercisable by ~~3,000,000 shares~~satisfying service conditions only, and ~~established a fungible share pool so that awards other than~~328,005 can become exercisable by satisfying service and performance or market conditions.

Stock options or stock appreciation rights granted after January 9, 2015, would be counted as 1.5 shares from the shares reserved for issuance under the 2006 Plan. On February 23, 2017, at the Company's annual meeting of stockholders, the stockholders approved amendments to the 2006 Plan to increase the number of shares available for issuance under the 2006 Plan by 3,300,000, bringing the total number of shares issuable under the 2006 Plan since it was adopted to 16,300,000 shares. At September 30, 2017, there were 3,269,071 shares remaining reserved for issuance in connection with awards under the 2006 Plan.

During fiscal year 2016, the Company issued 1,062,668 cash-settled stock appreciation rights at a price of $4.57, and 153,338 cash-settled stock appreciation rights were forfeited. During fiscal year 2017, the Company issued 218,550 cash-settled stock appreciation rights at a price of $10.30, and 234,313 cash-settled stock appreciation rights were forfeited. Stock appreciation rights are recorded as liability awards. The maximum number of shares subject to options or stock appreciation rights that can be awarded under the 2006 Plan to any person is 1,000,000 per year. The maximum number of shares that can be awarded under the 2006 Plan to any person, other than pursuant to an option or stock appreciation right, is 700,000 per year. The Company issues stock appreciation rights where restrictions lapse upon either the passage of time (service vesting), achievement of performance targets, or some combination of these conditions. For those stock appreciation rights withcontaining only service conditions generally vest over periods of one to four years and expire five to ten years from the date of grant. Stock compensation cost is expensed ratably over the entire service period. As of September 30, 2023, there was $2.6 million of unrecognized compensation cost related to stock options containing only service conditions, which is expected to be recognized over a weighted-average period of 2.2 years.

The range of assumptions used to determine the fair value of stock options using the Black-Scholes option-pricing model during the years ended September 30, 2023, 2022, and 2021 were as follows:


	Year Ended September 30,
	2023		2022		2021
Dividend yield		—		—		—
Expected volatility	56.9% - 62.2%		57.0% - 62.2%		51.0% - 55.9%
Risk-free interest rate	3.4% - 3.9%		1.1% - 3.5%		0.4% - 0.8%
Expected term	4.5- 7.6 years		4.5- 7.4 years		4.6 - 7.6 years

The weighted-average grant date fair value of options granted during the year-ended September 30, 2023, 2022, and 2021 was $7.49, $10.70, and $4.81, respectively. The total intrinsic value of options exercised during 2023, 2022, and 2021 was $3.0 million, $3.8 million, and $15.0 million, respectively. Stock options containing performance conditions are discussed separately in the section below.

RSUs & RSAs

The table below presents RSU & RSA activity (aggregate fair value in thousands):


	RSU & RSA			Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (years)	Aggregate Fair Value
Outstanding as of September 30, 2022		1,102,039		$	18.66	2.94	$	17,919
Granted		767,233		$	15.16		$	11,628
Vested		(252,228	)	$	14.56		$	3,773
Forfeited		(59,703	)	$	17.22		$	909
Outstanding as of September 30, 2023		1,557,341		$	17.65	2.56	$	27,440
Expected to vest as of September 30, 2023		1,487,341		$	17.46	2.66	$	26,207

Of the outstanding RSUs & RSAs as of September 30, 2023, 835,526 can vest by satisfying service conditions only, and 721,815 can vest by satisfying service and performance or market conditions.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

RSUs containing only service conditions vest ratably each year over periods of one to four years. Stock compensation cost is expensed ratably over the entire service period. As of September 30, 2023, there was $10.3 million of unrecognized compensation cost related to RSUs containing only service conditions, which is expected to be recognized over a weighted-average period of 2.7 years. RSUs and RSAs containing performance conditions and market conditions are discussed separately in the section below.

SARs

The table below presents SAR award activity (aggregate intrinsic value in thousands):


	SARs			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding as of September 30, 2022		24,150		$	6.11	0.25	$	245
Exercised		(24,150	)	$	6.11		$	193
Forfeited		—		$	—		$	—
Outstanding as of September 30, 2023		—		$	—		$	—
Vested and expected to vest as of September 30, 2023		—		$	—		$	—
Exercisable as of September 30, 2023		—		$	—		$	—

The Company made cash payments of $0.2 million, $0.2 million and $0.4 million to settle SARs exercised during the years ended September 30, 2023, 2022, and 2021, respectively. As of September 30, 2023, there were no SARs outstanding. No new SARs were awarded during the year ended September 30, 2023.

The fair value of outstanding SARs containing only service conditions is estimated using the Black-Scholes option-pricing model. The range of assumptions used to determine the fair value of outstanding SARs as of September 30, 2023, 2022, and 2021 were as follows:


	Year Ended September 30,
	2023		2022			2021
Dividend yield		—		—			—
Expected volatility		—		71.7	%		78.3	%
Risk-free interest rate		—		4.0	%		0.1	%
Expected term		—	0.25			1.25

As of September 30, 2022, and 2021, the weighted-average fair value of SARs outstanding was $9.82 and $18.86 per award, respectively. SARs containing performance conditions and market conditions are discussed separately in the section below.

Stock Awards Containing Performance and Market Conditions

Stock awards containing performance conditions vest upon the achievement of specified financial targets of the Company ~~recognizes~~or its business units. Vesting is generally measured on the first day of each fiscal quarter over the four-year terms of the awards, starting with the first fiscal quarter after the first anniversary of the grant date, based upon the trailing twelve months performance of the Company or its business units. When it is probable that the performance targets will be achieved, stock compensation expense is recognized ratably over the derived service period. If the Company determines that achievement of the performance targets is no longer probable, the Company no longer records expense and reverses all previously recognized expense. As of September 30, 2023, there was $0.9 million of unrecognized compensation costs related to stock options and RSUs & RSAs, containing performance conditions that are considered probable of being met, which is expected to be recognized over a weighted-average period of approximately 1 year.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Stock awards containing market conditions vest upon the achievement of specified increases in the Company’s share price. Vesting is measured the first day of each fiscal quarter over the four-year terms of the award, starting with the first fiscal quarter after the first anniversary of the grant date, based upon the trailing 20-days average of the Company’s share price. Stock compensation cost is expensed on a straight-line basis over the ~~explicit~~derived service period for each stock price target within the award. The Company accelerates expense when a stock price target is achieved prior to the derived service period. For equity-classified awards, ~~with both performance and service conditions,~~ the Company ~~starts recognizing~~does not reverse expense recognized if the stock price target(s) are not ultimately achieved, but expense is reversed when such situations occur for liability classified awards. As of September 30, 2023, there was $1.4 million of unrecognized compensation ~~cost over the remaining service period, when it~~costs related to stock options, RSUs and SARs, containing market conditions, which is ~~probable the performance condition will~~expected to be ~~met. The stock appreciation rights that include only service conditions generally vest~~recognized over a weighted-average period of ~~one~~1.6 years.

The fair value of stock options, RSUs and SARs containing market conditions is estimated using Monte Carlo simulations. The range of assumptions used to ~~four years conditioned on continued employment for~~determine the ~~incentive period.~~

~~For~~fair value of these awards during the years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015,~~2021 were as follows:


	Year Ended September 30,
	2023		2022		2021
Dividend yield		—		—		—
Expected volatility		—	57.2% - 62.9%		51.6% - 54.6%
Risk-free interest rate		—	1.1% - 1.5%		0.3% - 0.9%
Expected holding period (% of remaining term)		—	29.4% - 100.0%		31.7% - 100.0%

There were no awards containing market conditions for which to determine their fair value during the Company recorded stock-based compensation of $7.4 million, $12.3 million and $12.4 million, respectively. The total costs related to unvested awards with service vesting conditions, not yet recognized, as ofyear ended September 30, 2017 was $8.8 million, which will be recognized over the weighted average vesting period of 56.00 months. The total costs related to unvested awards with performance vesting conditions, not yet recognized, as of September 30, 2017 was $4.8 million.

The 2006 Plan permits the granting of options to purchase shares of common stock intended to qualify as incentive stock options under the Internal Revenue Code and stock options that do not qualify as incentive stock options ("non-qualified stock options"). The exercise price of each stock option may not be less than 100% of the fair market value of the common stock on the date of grant. However, if a grant recipient, who holds at least 10% of the common stock of the Company, receives an incentive stock option, the exercise price of such incentive stock option may not be less than 110% of the fair market value of the common stock on the date of grant. The term of each stock option is fixed by the compensation committee and may not exceed 10 years from the date of grant.

~~The compensation committee may also award under the 2006 Plan:~~

~~restricted stock, which are shares of common stock subject to restrictions;~~

~~restricted stock units, which are common stock units subject to restrictions;~~

~~dividend equivalent rights, which are rights entitling the recipient to receive credits for dividends that would be paid if the recipient had held a specified number of shares of common stock;~~

stock appreciation rights, which are rights to receive a number of shares or, in the discretion of the compensation committee and subject to applicable law, an amount in cash or a combination of shares and cash, based on the increase in the fair market value of the shares underlying the right during a stated period specified by the compensation committee;

~~unrestricted stock, which are shares of common stock granted without restrictions as a bonus; and~~

performance and annual incentive awards, ultimately payable in common stock or cash, as determined by the compensation committee (the compensation committee may grant multi-year and annual incentive awards subject to achievement of specified goals tied to business criteria set forth in the 2006 Plan).

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

2023.

Share Repurchase Program

~~The Company is~~

From time to time, we may be authorized to repurchase issued and outstanding shares of ~~its~~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 ~~the Company's~~our available cash. ~~The~~

On December 6, 2021, and May 13, 2022, the Company's Board of Directors ~~reviews the share~~authorized new stock repurchase ~~program periodically, the last such review having occurred in May 2016.~~plans of up to $20 million and $12 million, respectively. The Company ~~did not repurchase~~repurchased 408,211 shares ~~under this program~~for $5.4 million during the twelve months ended September 30, 2017. As of September 30, 2017, the Company may repurchase an additional $10.1 million shares under this program. A summary of the Company's share repurchase activity from fiscal year 2014 to the year ended September 30, ~~2017 is as follows:~~

2022.


~~(1)~~	On February 5, 2014, the Company's Board of Directors approved an additional $19.0 million for the share repurchase program. On May 5, 2016, the Company's Board of Directors approved the repurchase of an additional $5.0 million in shares raising the current amount approved for repurchase, that may yet be expended up to $10.1 million.

~~Stock Option Activity~~

~~A summary of~~On December 6, 2022, March 13, 2023, and September 8, 2023, the Company's Board of Directors authorized new stock ~~option activity~~repurchase plans of up to $8.4 million, $8.0 million and $15.2 million, respectively. The Company repurchased 1,607,141 shares for $21.2 million during the ~~years~~year ended September 30, ~~2017, 2016,~~2023.

As of September 30, 2023, the Company had $17.0 million of remaining share repurchase authorization through December 31, 2025.

Other Share Repurchases

During the year ended September 30, 2023, and ~~2015 is as follows:~~September 30, 2022, participants surrendered 12,705 and 23,839 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.

Options
Weighted-
Average
Exercise Price
Options outstanding at September 30, 2014 1,465,907
$ 19.50
Options granted 310,177
9.92
Options exercised (14,869 ) 7.09
Options canceled (288,572 ) 20.26
Options outstanding at September 30, 2015 1,472,643
17.46
Options granted 583,228
6.68
Options exercised (1,251 ) 7.48
Options canceled (346,133 ) 16.99
Options outstanding at September 30, 2016 1,708,487
13.91
Options granted 232,845
9.18
Options exercised (12,421 ) 7.41
Options canceled (223,938 ) 13.00
Options outstanding at September 30, 2017 1,704,973
13.43
Options exercisable at September 30, 2017 1,270,781
14.99

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

~~The following table summarizes information about options outstanding at September 30, 2017:~~

Options Outstanding
Range of Exercise Price
Number
Outstanding

Weighted-
Average
Remaining
Contractual Life

Weighted-
Average
Exercise Price
$5.53 - $6.96 366,151
8.30 $ 6.42
$6.97 - $9.09 289,049
6.19 7.83
$9.10 - $10.82 359,597
6.92 9.78
$10.83 - $19.27 330,321
1.85 13.04
$19.28 - $46.72 359,855
5.55 29.06

~~The following table summarizes information about options exercisable at September 30, 2017:~~

Options Exercisable
Range of Exercise Price
Number
Exercisable

Weighted-
Average
Remaining
Contractual Life

Weighted-
Average
Exercise Price
$5.53 - $6.96 282,064
8.30 $ 6.36
$6.97 - $9.09 138,533
3.43 7.81
$9.10 - $10.82 182,613
6.30 9.99
$10.83 - $19.27 322,201
1.70 13.08
$19.28 - $46.72 345,370
5.52 29.35

~~The following table summarizes information about assumptions used in valuing options granted:~~

Year ended September 30
2017 2016 2015
Dividend yield —
—
—
Expected volatility 54.22% - 54.93%
51.5% - 58.6%
71.9% - 77.9%
Risk-free interest rate 1.65% - 2.17%
0.5% - 1.5%
0.26% - 1.4%
Expected forfeiture rate 21.4 % 23.5 % 22.2% - 22.8%

~~The intrinsic value of outstanding and exercisable options at September 30, 2017 was approximately $494 and $494, respectively, based on a stock price of $5.90 on September 30, 2017.~~

~~The weighted average grant date fair value of options granted during 2017, 2016, and 2015 was $3.58, $2.07, and $4.89, respectively.~~

The intrinsic value of options exercised at September 30, 2017, 2016, and 2015 was approximately $24,032, $3,128 and $4,000, respectively. Approximately 0.2 million unvested service-based stock options are expected to vest.

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~Restricted Share Activity~~

~~A summary of the Company's restricted share activity for the years ended September 30, 2017, 2016, and 2015 is as follows:~~

Restricted
Shares

Weighted-
Average
Fair Value
Unvested restricted shares at September 30, 2014 1,897,827
$ 24.96
Restricted shares granted 1,298,604
10.04
Restricted shares vested (343,204 ) 27.50
Restricted shares canceled (486,040 ) 26.54
Unvested restricted shares at September 30, 2015 2,367,187
16.08
Restricted shares granted 1,504,655
5.54
Restricted shares vested (715,188 ) 16.09
Restricted shares canceled (495,409 ) 20.25
Unvested restricted shares at September 30, 2016 2,661,245
9.34
Restricted shares granted 849,352
8.78
Restricted shares vested (748,266 ) 11.04
Restricted shares canceled (571,900 ) 9.81
Unvested restricted shares at September 30, 2017 2,190,431
8.42

The intrinsic value and weighted average remaining contractual life in years of unvested restricted shares at September 30, 2017, is approximately $12.9 million and 8.37, respectively, based on a stock price of $5.90 on September 30, 2017. Approximately 1.2 million unvested service-based restricted stock shares are expected to vest.

~~11.~~

13. Fair Value Measurement

The Company measures and records in the accompanying consolidated financial statements certain assets and liabilities at fair value on a recurring basis. Authoritative guidance issued by the FASB establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company's assumptions (unobservable inputs). The hierarchy consists of three levels:



Level 1		Quoted market prices in active markets for identical assets or liabilities;
Level 2		Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3		Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect those that a market participant would use.

Cash and cash equivalents. The Company had $51.4 million and $22.0 million of money market funds considered cash equivalents as of September 30, ~~2017,~~2023, and ~~2016, the Company had no Level 1 or Level 2~~2022, respectively. These assets ~~or liabilities measured at fair value. As of September 30, 2017, and September 30, 2016, the Company had financial assets that are~~were measured at fair value as of September 30, 2023, and ~~are~~2022, and were classified as Level 1 assets within the fair value hierarchy. There were no transfers between levels during the periods presented.

Contingent consideration. During the year ended September 30, 2022, and as a result of the acquisition of Bid4Assets, the Company recorded preliminary fair value of contingent consideration in the amount of $28.0 million on its Consolidated Balance Sheets as of the acquisition date. The contingent consideration is 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 liability for this consideration is included in Accrued expenses and other current liabilities within the Consolidated Balance Sheets.

The Company's initial estimate of the fair value of the earn-out consideration was informed by the Monte Carlo valuation method and considered potential outcomes based upon the terms and conditions of the merger agreement. The fair value measurements utilized were classified as Level 3 assets within the fair value ~~hierarchy.~~hierarchy under the provisions of ASC 820, Fair Value Measurements, and ASC 805, Business Combinations. The ~~Company records the financial assets using~~significant unobservable inputs used in the fair value ~~option under ASC 825,~~ ~~Financial Instruments~~measurement categorized within Level 3 of the fair value hierarchy included estimated results of operations over the earn-out period, volatility of operating results (expense components ranged from 20% to 55%), and the discount rate (13%). ~~These financial assets represent~~The earn-out consideration was valued at approximately $28.0 million as of the acquisition date. Fair value of ~~rights~~ the ~~Company holds from its participation in certain principal transactions in~~earn-out consideration was remeasured at the Company's commercial business, where a third-party partner owns the underlying assets to be sold, and the Company has contributed funds to the partner towards purchasing those underlying assets. These assets are included in prepaid expenses and other current assets in the Consolidated Balance Sheets. end of each calendar quarter until December 31, 2022.

The changes in ~~financial assets~~earn-out liability measured at fair value for which the Company has used Level 3 inputs to determine fair value ~~for~~during the year ended September 30, ~~2017, are~~2022, was as follows ~~($ in~~(in thousands):


	Contingent Consideration
Balance at September 30, 2021	$	—
Earn-out from business acquisition		26,900
Measurement period adjustment		1,100
Payment of achieved earn-out threshold		(3,500	)
Change in fair value		(24,500	)
Balance at September 30, 2022	$	—

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

Level 3 Assets

Balance at September 30, 2016 $ 2,200
Acquisition of financial assets 2,662
Settlements (4,944 )
Change in fair value of financial assets 573
Balance at September 30, 2017 $ 491

During the year ended September 30, ~~2017,~~2022, the Company ~~recognized~~recorded a measurement period adjustment of $1.1 million for the preliminary earn-out consideration fair value with a corresponding increase to goodwill, based on facts and circumstances in existence as of the effective date of the acquisition related to the discount rates associated with the expected earn-out payments. Based on results as of March 31, 2022, Bid4Assets achieved a trailing twelve-month EBITDA threshold resulting in a $3.5 million payment made by the Company to the former shareholders of Bid4Assets.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

During the twelve months ended September 30, 2022, the fair value of the earn-out liability was reduced by $24.5 million, such that no amount of fair value was determined present as of September 30, 2022. This reduction was due to a decline in the auction events and transactions that were expected to be completed during the earn-out period ended 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 known nor knowable at that time. These changes in fair value were recorded as a gain within Fair value adjustment of ~~approximately $0.6 million on its financial assets.~~

acquisition earn-outs in the Consolidated Statements of Operations.

Other Information. When valuing its Level 3 assets, the Company considers asset condition, economic and/or market events, and other pertinent information that would impact its estimate of the expected generated proceeds. The valuation procedures are primarily based onliability, management's ~~projection of the value of the assets securing the financial investment. Management’s~~ estimation of ~~the~~ fair value ~~of these assets~~ is based on the best information available in the circumstances and may incorporate management's own assumptions ~~regarding~~around market demand ~~for these assets. Such assumptions~~which could involve ~~management's~~a level of judgment, taking into consideration a combination of internal and external factors. ~~Changes in fair value of the Company's Level 3 assets are recorded in Other operating expense in the Consolidated Statements of Operations.~~

The Company’s financial assets and liabilities not measured at fair value are cash, short-term investments, accounts receivable, and ~~cash equivalents (which includes cash and commercial paper with original maturities of less than 90 days).~~accounts payable. The Company believes the carrying ~~value~~values of these instruments ~~approximates~~approximate fair value.

As of September 30, 2023, the Company had no non-financial instruments measured at fair value ~~due to their short-term maturities.~~on a non-recurring basis. As of September 30, 2023, and 2022, the Company did not have any material assets or liabilities measured at fair value on a non-recurring basis.

~~12.~~

14. Defined Benefit Pension Plan

Certain employees of Liquidity Services UK Limited ~~("GoIndustry")~~(GoIndustry), which the Company acquired in July 2012, are covered by the Henry Butcher Pension Fund and Life Assurance Scheme (the ~~"Scheme")~~Scheme), a qualified defined benefit pension plan.

The Company guarantees GoIndustry's performance on all present and future obligations to make payments to the Scheme for up to a maximum of £10 million British pounds. The Scheme was closed to new members on January 1, 2002.

The Company recognizes the funded status of its postretirement benefit plans, with a corresponding noncash adjustment to accumulated other comprehensive loss, net of tax, in stockholders' equity. The funded status is measured as the difference between the fair value of the ~~plan's~~Scheme's assets and the benefit obligation of the ~~plan.~~

Scheme.

The net periodic benefit cost is recognized within Interest and other income, net in the Consolidated Statements of Operations, and for the years ended September 30, ~~2017, 2016~~2023, 2022, and ~~2015,~~2021, included the following components:


	Year Ended September 30,
	2023			2022			2021
	(in thousands)
Interest cost	$	794		$	446		$	438
Expected return on plan assets		(876	)		(775	)		(793	)
Amortization of prior service cost		26			19			21
Settlement loss recognized		—			61			—
Total net periodic benefit	$	(56	)	$	(249	)	$	(334	)

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

~~Qualified Defined Benefit Pension Plan~~

Year Ended September 30,
2017 2016 2015
(in thousands)
Interest cost $ 582
$ 814
$ 964
Expected return on plan assets (826 ) (1,066 ) (1,186 )
Total net periodic benefit $ (244 ) $ (252 ) $ (222 )

The following table provides a reconciliation of benefit obligations, plan assets, and funded status related to the Company's qualified defined benefit pension plan for the years ended September 30, ~~2017~~2023, and ~~September 30, 2016:~~2022:


	Year Ended September 30,
	2023			2022
	(in thousands)
Change in benefit obligation
Beginning balance	$	13,329		$	26,955
Interest cost		794			446
Benefits paid		(761	)		(634	)
Actuarial gain		(786	)		(7,613	)
Foreign currency exchange rate changes		1,271			(5,825	)
Ending balance	$	13,847		$	13,329


	Year Ended September 30,
	2023			2022
	(in thousands)
Change in plan assets
Beginning balance at fair value	$	16,554		$	28,208
Actual return on plan assets		(1,344	)		(5,056	)
Benefits paid		(761	)		(634	)
Employer's contributions		293			134
Plan Settlements		—			(1,182	)
Foreign currency exchange rate changes		1,590			(4,916	)
Ending balance at fair value	$	16,332		$	16,554
Overfunded status of the Scheme	$	2,485		$	3,225

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~Qualified Defined Benefit Pension Plan~~

Year Ended September 30,
2017 2016
(in thousands)
Change in benefit obligation

Beginning balance $ 26,321
$ 24,069
Interest cost 582
814
Benefits paid (718 ) (1,246 )
Actuarial loss/(gain) (1,861 ) 5,999
Foreign currency exchange rate changes 761
(3,315 )
Ending balance $ 25,085
$ 26,321

~~Qualified Defined Benefit Pension Plan~~

Year Ended September 30,
2017 2016
(in thousands)
Change in plan assets

Beginning balance at fair value $ 25,767
$ 24,537
Actual return on plan assets 569
4,831
Benefits paid (718 ) (1,246 )
Employer's contributions 552
1,482
Foreign currency exchange rate changes 773
(3,837 )
Ending balance at fair value $ 26,943
$ 25,767
Overfunded (underfunded) status of the plan $ 1,859
$ (554 )

The ~~accrued~~ pension asset of ~~$1.9~~$2.5 million is recorded in Other long-term assets in the Consolidated Balance ~~Sheet.~~Sheets. Because the ~~plan~~Scheme is closed to new participants, the accumulated benefit obligation is equal to the projected benefit obligation, ~~and totals $25.1~~which was $13.8 million and ~~$26.3~~$13.3 million at September 30, ~~2017~~2023 and 2022, respectively.

During the year ended September 30, ~~2016, respectively.~~

2022, the Company extended early settlement offers to all members of the Scheme. There was no material impact to the consolidated financial statements as a result of the early settlement offers.

The ~~amount~~amounts recognized in ~~other~~Other comprehensive ~~loss~~income (loss) related to the Company's qualified defined benefit pension plan, net of ~~tax,~~taxes, and the related foreign currency translation adjustments, for the ~~year~~years ended September 30, ~~2017~~2023, and ~~September 30, 2016,~~2022, is shown in the following table:


	Year Ended September 30,
	2023			2022
	(in thousands)
Accumulated other comprehensive income (loss) at beginning of year	$	278		$	(1,885	)
Net actuarial loss		(334	)		(328	)
Foreign currency translation adjustments		(1,038	)		2,491
Accumulated other comprehensive (loss) income at end of year	$	(1,094	)	$	278

~~Qualified Defined Benefit Pension Plan~~

Year Ended September 30,
2017 2016
(in thousands)
Accumulated Other Comprehensive Loss (Income)

Accumulated Other Comprehensive Loss (Income) at beginning of year $ 1,226
$ (1,321 )
Net actuarial (gains)/losses (1,589 ) 2,547
Foreign currency exchange rate changes 240
—
Accumulated Other Comprehensive (Income) loss at end of year $ (123 ) $ 1,226

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

Estimated amounts to be amortized from accumulated other comprehensive (income) loss into net periodic benefit cost during 2017 based on September 30, 2017 plan measurements are $0. Amortization of a net gain or loss included in accumulated other comprehensive income shall be included as a component of net pension cost for a year if, as of the beginning of the year, that net gain or loss exceeds 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets.

The plan complies with the funding provisions of the UKU.K. Pensions Act 2004 and the Occupational Pension Schemes Regulations Act 2005. The Company does not plan to make contributions to the plan in the near future.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Actuarial Assumptions

The actuarial assumptions used to determine the benefit obligations at September 30, ~~2017~~2023 and ~~September 30, 2016,~~2022, and to determine the net periodic (benefit) cost for the year were as follows:


	September 30, 2023			September 30, 2022
Discount rate to determine net periodic (benefit) cost		5.50	%		2.00	%
Expected return on plan assets		6.45	%		4.82	%
Discount rate to determine benefit obligations		5.70	%		5.50	%
Rate of increases to deferred CPI linked benefits		3.20	%		3.40	%
Rate of increases to deferred RPI linked benefits		3.80	%		3.80	%

~~Qualified Defined Benefit Pension Plan~~

2017 2016
Discount rate 2.70 % 2.30 %
Expected return on plan assets 3.80 % 3.20 %
Increases to non-GMP pensions in payment accrued pre 4/6/97 — % — %
Increases to non-GMP pensions in payment accrued post 4/6/97 2.10 % 2.00 %
Rate of increases to deferred CPI linked benefits 2.10 % 2.00 %
Rate of increases to deferred RPI linked benefits 3.20 % 3.10 %

Mortality—~~100%~~101% for males and ~~105%~~98% for females of ~~S2PxA "light"~~S3PMA mortality tables, projected in line with the ~~2016~~2021 Continuous Mortality Investigation projection model and a ~~1.5%~~1.3% per annum long-term rate of improvement.

Estimated Future Benefit Payments

The Company's pension plan expects to make the following benefit payments to participants over the next 10 years:


	Pension Benefits
	(in thousands)
Year ending September 30,
2023	$	1,126
2024		931
2025		858
2026		888
2027		823
2028 through 2033		4,924
Total	$	9,550

Pension Benefits
(in thousands)
Year ending September 30,
2018 $ 751
2019 767
2020 791
2021 687
2022 749
2023 through 2027 4,362
Total $ 8,107

Fair Value Measurements

The investment policy and strategy of the plan assets, as established by the Trustees (the "Trustees") of the plan, strive to maximize the likelihood of achieving primary objectives of the investment policy established for the ~~plan.~~plan, which are:

•

Funding—to ensure that the Plan is fully funded using assumptions that contain a modest margin for prudence. Where an actuarial valuation reveals a deficit, a recovery plan will be put in place which will take into account the financial covenant of the employer;

•

Stability—to have due regard to the likely level and volatility of required contributions when setting the Plan's investment strategy; and

•

Security—to ensure that the solvency position of the Scheme is expected to improve. The ~~primary objectives are:~~


1.	Funding—to ensure that the Plan is fully funded using assumptions that contain a modest margin for prudence. Where an actuarial valuation reveals a deficit, a recovery plan will be put in place which will take into account the financial covenant of the employer;


2.	~~Stability—to have due regard to the likely level and volatility of required contributions when setting the Plan's investment strategy; and~~


3.	~~Security—to ensure that the solvency position of the Plan is expected to improve. The~~ Trustees will take into account the strength of employer's covenant when determining the expected improvement in the solvency position of the Plan.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The assets are allocated among ~~equity investments~~government bonds, corporate bonds, and ~~fixed income securities.~~diversified funds. The assets are not rebalanced, but the allocation ~~between equities and bonds~~ is reviewed on a periodic basis to ensure that the investments are appropriate to the Scheme's circumstances. The Trustees review the investment policy on an ongoing basis, to determine whether a change in the policy or asset allocation targets is necessary. The basis of the Trustees’ strategy is to divide the Scheme’s assets between a “growth” portfolio, comprising assets such as multi-asset / diversified growth funds, and a “stabilizing” portfolio, comprising assets such as government bonds (both fixed and inflation-linked) and corporate bonds. The Trustees recognize the benefits of diversification across asset classes, as well as within them, in reducing the risk that results from investing in any one particular market. The Company has elected to use a bid value of Scheme assets to calculate the expected return on assets in the net periodic benefit cost. The assets consisted of the following as of September 30, ~~2017:~~



	~~Actual~~ ~~2016~~
~~Equity securities~~	~~43.7~~	%
~~Fixed-income securities~~	~~54.9~~	%
~~Cash equivalents~~	~~1.4~~	%
~~Total~~	~~100.0~~	%

~~The class of equity securities consists of one pooled fund whose strategy is to invest in approximately 70% UK company shares (domestic)~~2023, and ~~30% international equity securities. The class of fixed-income securities consists of one pooled fund whose strategy is to invest in a limited number of government and corporate bonds.~~2022:


	September 30, 2023			September 30, 2022
Government bonds		59.7	%		0.0	%
Equity securities		0.0	%		21.6	%
Corporate bonds		29.8	%		51.1	%
Diversified fund		10.1	%		27.0	%
Cash		0.4	%		0.3	%
Total		100.0	%		100.0	%

The expected long-term rate of return for the plan's total assets is based on the expected returns of each of the above categories, weighted based on the current target allocation for each class. The Trustees evaluate whether adjustments are needed based on historical returns to more accurately reflect expectations of future returns.

The Company is required to present certain fair value disclosures related to its postretirement benefit plan assets, even though those assets are not included onin the Company's Consolidated Balance Sheets. The following table presents the fair value of the assets of the Company's qualified defined benefit pension plan by asset category and their level within the fair value hierarchy, which has three levels based on reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets, Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant unobservable inputs.hierarchy.


Balance as of September 30, 2023	Level 1		Level 2		Level 3		Total
	(in thousands)
Government bonds	$	—	$	9,757	$	—	$	9,757
Corporate bonds		—		4,860		—		4,860
Diversified fund		—		1,653		—		1,653
Cash		61		—		—		61
Total	$	61	$	16,270	$	—	$	16,331


Balance as of September 30, 2022	Level 1		Level 2		Level 3		Total
	(in thousands)
Equity securities	$	—	$	3,582	$	—	$	3,582
Corporate bonds		—		8,462		—		8,462
Diversified fund		—		4,467		—		4,467
Cash		43		—		—		43
Total	$	43	$	16,511	$	—	$	16,554

Balance as of September 30, 2016 Level 1 Level 2 Level 3 Total
(in thousands)
Equity securities $ —
$ 10,087
$ —
$ 10,087
Fixed-income securities —
15,149
—
15,149
Cash equivalents 531
—
—
531
Total $ 531
$ 25,236
$ —
$ 25,767

Balance as of September 30, 2017 Level 1 Level 2 Level 3 Total
(in thousands)
Equity securities $ —
$ 11,778
$ —
$ 11,778
Fixed-income securities —
14,795
—
14,795
Cash equivalents 371
—
—
371
Total $ 371
$ 26,573
$ —
$ 26,944

Valuation Techniques

The Company relies on pricing inputs from investment fund managers to value investments. The fund manager prices the underlying securities using independent external pricing sources.

15. Legal Proceedings

The Company reserves for contingent liabilities based on ASC 450, Contingencies, when it determines that a liability is probable and reasonably estimable. From time to time, the Company may become involved in litigation relating to claims arising in the ordinary course of the business; however, unless otherwise noted, there are no claims or actions pending or threatened against the Company that, if adversely determined, would in the Company's management's judgment have a material adverse effect on the Company.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

~~13. Guarantees~~

~~During~~

Former Employee Matters

In May 2021, the second quarter of 2015, the Company issued a guarantee to GoIndustry (the "Subsidiary") and the Trustees (the "Trustees") of the Henry Butcher Pension Fund and Life Assurance Scheme (the "Scheme"). Under the arrangement, the Company irrevocably and unconditionally (a) guarantees to the Trustees punctual performance by the Subsidiary of all its Guaranteed Obligations, defined as all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally in any capacity whatsoever) of the Company to make payments to the Scheme up to a maximum of 10 million British pounds, (b) undertakes with the Trustees that, whenever the Subsidiary does not pay any amount when due in respect of its Guaranteed Obligations, it must immediately on demand by the Trustees pay that amount as if it were the principal obligor; and (c) indemnifies the Trustees as an independent and primary obligation immediately on demand against any cost, charge, expense, loss or liability suffered or incurred by the Trustees if any payment obligation guaranteed by it is or becomes unenforceable, invalid or illegal; the amount of the cost, charge, expense, loss or liability under this indemnity will be equal to the amount the Trustees would otherwise have been entitled to recover on the basis of a guarantee. The guarantee is a continuing guarantee that will extend to the ultimate balance of all sums payable by the Company in respect of its Guaranteed Obligations.

~~14. Business Realignment expenses~~

In January 2017, the Company decided to exit the TruckCenter land-based, live auction and retail business. Costs of $0.9 million associated with the restructuring, were recognized under other operating expenses in the consolidated statement of operations. Those costs included occupancy cost of $0.6 million, employee severance of $0.2 million, and long-lived asset impairments of $0.1 million.

During the fourth quarter of fiscal year 2017, the Company decided to execute a restructuring of its CAG business. The restructuring plan resulted in a reduction in force across a number of departments, including Sales, Marketing and Operations in both the US and in Europe. Severance costs associated with this restructuring amounted to $0.6 million. In addition, the restructuring plan calls for the closure of several offices and legal entities in Europe. Legal and administrative costs associated with the restructuring amounted to $0.1 million. These amounts are presented within the table below.

~~Also related to the restructuring of its CAG business, on September 25, 2017 the Company entered into a Severance Agreement and General Release (the "Severance Agreement") with the~~Company’s former Vice President, of the Capital Assets Group. Pursuant to the terms of the Severance Agreement, the Company provided a severance package in the amount of $0.3 million. This amount is presented under employee severance and benefit costs in the table below.

During fiscal year 2017, the Company reorganized its IronDirect business. As a result, the Company recorded approximately $0.9 million of net expense related to the impairment of long-lived assets associated with the IronDirect business, as well as a fair value adjustment. The impairment was comprised of $1.2 million of impairment related to contract intangibles, and $0.6 million of impairment related to fixed assets. This expense was netted with a $0.9 million reversal of an earn-out liability. In addition to these impairments, and the restructuring of its overall business model, the Company entered into a Severance Agreement and General Release with the previous President of IronDirect. As a result, the Company incurred severance costs of approximately $0.1 million.

On June 16, 2017 the Company entered into a sub-lease agreement for 18,412 square feet of office space at 6931 Arlington Road, Bethesda, Maryland. The sub-lease commenced September 29, 2017, and will expire April 30, 2023. On the sub-lease commencement date, the Company relocated its headquarters previously located at 1920 L street NW, Washington DC, to the new Bethesda location. The Company ceased using the previous location as of September 30, 2017 and recognized a $2.0 million cease-use charge in its consolidated statements of operations at September 30, 2017, under the Other operating expenses line item. The amount is presented under occupancy cost in the table below.

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

The table below sets forth the significant components and activity in the liability for business realignment initiatives during the fiscal year ended September 30, 2017, on a segment and consolidated basis:

(in thousands)
Liability
Balance at
September 30,
2016

Business
Realignment
Expenses

Cash
Payments

Liability
Balance at
September 30,
2017
Employee severance and benefit costs:

CAG —
1,037
(244 ) 793
Corporate & Other —
570
(171 ) 399
Total employee severance and benefit costs —
$ 1,607
$ (415 ) $ 1,192
Occupancy costs:
CAG —
—
—
—
Corporate & Other —
2,616
(628 ) 1,988
Total occupancy costs $ —
$ 2,616
$ (628 ) $ 1,988
Total business realignment $ —
$ 4,223
$ (1,043 ) $ 3,180

The $4.2 million in employee severance and occupancy cost per the table above is recorded in Other operating expenses in the Consolidated Statements of Operations. Of this $4.2 million in cost, approximately $3.7 million is associated with general and administrative, $0.3 million with sales and marketing, and $0.2 million with technology and operations activities.

The Company expects that the majority of the remaining liability balance at September 30, 2017, of approximately $3.2 million will be paid during fiscal year 2018, with the remainder in fiscal year 2019.

During fiscal year 2015, the Company incurred approximately $0.3 million of business realignment expenses. In order to conform to current year presentation, this amount was reclassified from Technology and operations, and General and Administrative expenses to the Other operating expenses line item in the Consolidated Statements of Operations. The reclassification had no effect on total operating expenses, net income, or cash flows.

~~15. Legal Proceedings~~

~~Howard v. Liquidity Services, Inc., et al.,Civ. No. 14-1183 (D. D. C. 2014)~~.

~~On July 14, 2014, Leonard Howard~~Human Resources filed a ~~putative class action~~ complaint against the Company in the United States District Court for the District of ~~Columbia~~Maryland (the ‘‘“District Court”), alleging wrongful termination on the basis of gender, race, and age. The Company’s employment practices liability insurance carrier, CNA, accepted tender of these claims. In December 2022, the District ~~Court’’) against the Company and its chief executive officer, chief financial officer, and chief accounting officer, on behalf of stockholders who purchased~~Court granted the Company’s ~~common stock between February 1, 2012,~~motion to dismiss with respect to the age discrimination claim but denied the motion with respect to the race and ~~May 7, 2014.~~gender claims. Trial on the race and gender claims began on October 30, 2023. The complaint alleged that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by, among other things, misrepresenting the Company’s growth initiative, growth potential, and financial and operating conditions, thereby artificially inflating its stock price, and sought unspecified compensatory damages and costs and expenses, including attorneys’ and experts’ fees. On October 14, 2014, the Court appointed Caisse de Dépôt et Placement du Québecjury was unable to reach a unanimous verdict on either claim and the ~~Newport News Employees’ Retirement Fund as co-lead plaintiffs. The plaintiffs filed an amended complaint~~judge declared a mistrial on ~~December 15, 2014, which alleges substantially similar claims, but which does~~November 6, 2023. To date, a retrial date has not name the chief accounting officer as a defendant. On March 2, 2015, the Company moved to dismiss the amended complaint for failure to state a claim or plead fraud with the requisite particularity. On March 31, 2016, the Court granted that motion in part and denied it in part. Only the claims related to the Company’s retail division were not dismissed. On May 16, 2016, the Company answered the amended complaint. Plaintiffs’ class certification motion was granted on September 6, 2017. The scheduling order in this action requires that fact discovery be completed by February 23, 2018, and that expert discovery be completed by July 27, 2018.

been set. The Company ~~believes the allegations in the amended complaint are without merit~~continues to assert substantial defenses and cannot estimate a range of potential liability, if any, at this time.

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~In re Liquidity Services, Inc. Derivative Litigation, Civ. No. 2017-0080-JTL (Del. Ch.).~~

On ~~February 2, 2017, plaintiff David Girardi~~December 28, 2022, the Company’s former Chief Marketing Officer (the “Former CMO”) filed a ~~putative derivative~~ complaint (the “Original Complaint”) in the District Court, alleging wrongful termination on the basis of ~~Chancery of~~race and age and that the ~~State of Delaware (the “Court of Chancery”), and on February 7, 2017, plaintiff Harold Slingerland~~Company retaliated against him. On April 26, 2023, the Former CMO filed ~~a putative derivative~~an amended complaint with the District Court, alleging the same claims made in the ~~Court of Chancery. On March 9, 2017, plaintiffs Girardi and Slingerland filed a consolidated putative derivative complaint in the Court of Chancery, purportedly on the Company’s behalf.~~Original Complaint. The consolidated complaint names as defendants the Company’s chief executive officer and chief financial officer, as well as certain other individuals who served on the Company’s Board of Directors between 2012 and 2014, and seeks recovery from those individuals, not the Company. The complaint asserts that, among other things, the defendants breached their fiduciary duties to the Company and its stockholders by causing or allowing the Company to make the same misstatements that are alleged in the amended complaint in the Howard action, and for alleged trading in the Company's securities while in possession of material non-public information. The defendants have filed a motion to dismiss certain of the ~~complaint in its entirety. On November 27, 2017,~~Former CMO’s claims on September 1, 2023. The District Court has not yet ruled on the ~~Court~~motion. The Company asserts substantial defenses and cannot estimate a range of ~~Chancery granted the defendants’ motion to dismiss.~~potential liability, if any, at this time. CNA has accepted tender of these claims as well.

16.Segment Information

~~Prior to the Company's quarterly report as of June 30, 2017, the Company provided operating results in one reportable segment. Effective as of June 30, 2017, the~~

The Company provides operating results in ~~three~~four reportable segments: GovDeals, Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), and ~~Retail Supply Chain Group (RSCG). These three segments constitute 99%~~Machinio. Descriptions of the Company's revenue as of September 30, 2017, and each offers separately branded marketplaces to enable sellers to achieve channel marketing objectives to reach buyers. Across its segments, the Company offers its sellers two primary transaction models as well as a suite of services, and its revenues vary depending upon the models employed and the level of service required. This change in segment presentation does not affect consolidated statements of operations and comprehensive loss, balance sheets or statements of cash flows. A description of theour reportable segments are as follows:

•

GovDeals. The GovDeals reportable segment provides ~~self-service~~ solutions ~~in which sellers list their own assets, and it consists of marketplaces~~ that enable ~~local and state~~ government entities including city, county, state and ~~state~~federal agencies ~~as well as commercial businesses~~ located in the United States and Canada ~~to sell surplus~~ and ~~salvage assets. GovDeals also offers a suite of services to sellers that includes asset sales and marketing. This segment includes the Company's GovDeals.com and AuctionDeals.com marketplaces.~~

~~The CAG reportable segment provides full-service solutions to sellers and it consists of marketplaces that enable federal government agencies as well as~~related commercial businesses to sell surplus ~~salvage,~~property and ~~scrap assets. The~~real estate assets ~~that the company receives as the exclusive contractor of the DLA of the DoD are sold in this segment. CAG also offers a suite of services that includes surplus management, asset valuation, asset sales~~through our GovDeals and marketing. Commercial sellers are located in the United States, Europe, Australia and Asia. This segment includes the Company's Network International, GoIndustry DoveBid, Government Liquidation, and Uncle Sam's Retail Outlet marketplaces.Bid4Assets marketplaces (see Note 3 - Bid4Assets Acquisition).

•

RSCG. The RSCG reportable segment consists of marketplaces that enable corporations located in the United States and Canada to sell ~~surplus~~excess, returned, and ~~salvage~~overstocked consumer ~~goods and retail capital assets.~~goods. RSCG also offers a suite of services that includes returns management, asset recovery, and ~~ecommerce services.~~e-commerce solutions. This segment uses multiple selling channels across our network of marketplaces and others to optimize the best combination of velocity, volume, and value.

•

CAG. The CAG reportable segment provides solutions to sellers and consists of marketplaces that enable commercial businesses to sell surplus assets. The core verticals in which CAG operates include industrial manufacturing, oil and gas, heavy equipment, biopharma, and electronics. CAG also offers a suite of services that includes surplus management, asset valuation, asset sales and marketing. CAG benefits from a global base of buyers and sellers enabling the ~~Company's Liquidation.com, Liquidation.com DIRECT,~~sale and ~~Secondipity~~redeployment of assets wherever they’re most likely to generate the best value and highest use across the world. This segment primarily uses the AllSurplus and GovDeals marketplaces.

•

Machinio. The Machinio reportable segment operates a global search engine platform for listing used equipment for sale in the construction, machine tool, transportation, printing and agriculture sectors. Machinio also offers the Machinio System service that provides equipment sellers with a set of online marketing tools that includes website hosting, email marketing, and inventory management, which support and enable equipment sellers’ online business.

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

We also report results of Corporate & Other, ~~primarily consists of the Company's TruckCenter and IronDirect operating segments that are not individually significant, as well as~~including elimination adjustments. The TruckCenter business consisted of land-based, live auctions for fleet and transportation equipment. On January 30, 2017, the Company exited its TruckCenter land-based, live auction business in order to focus its time and resources on its ecommerce marketplace strategy. IronDirect offers buyers access to construction equipment, parts and services through a single ecommerce marketplace.

Decisions concerning the allocation of the Company’s resources are made by the Company’s Chief Operating Decision Maker ~~("CODM")~~(CODM), which is the Company's ~~chief executive officer,~~Chief Executive Officer, with oversight by the Board of Directors. The Company reports reportable segment information based on the internal performance measures used by the CODM to assess the performance of each operating segment in a given period. In connection with that assessment, the CODM uses segment ~~gross~~direct profit to evaluate the performance of each segment. ~~Gross~~Segment direct profit, ispreviously referred to as segment gross profit, continues to be calculated as total revenue less cost of goods sold (excludes depreciation and ~~seller distributions.~~

amortization).

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

The following table sets forth certain financial information for the Company's reportable ~~segments.~~segments:


		Year Ended September 30,
(in thousands)		2023			2022			2021
GovDeals:
	Purchase revenue	$	—		$	—		$	—
	Consignment and other fee revenues		62,010			59,352			49,579
	Total revenue		62,010			59,352			49,579
	Segment direct profit	$	58,810		$	56,408		$	47,030

RSCG:
	Purchase revenue	$	161,780		$	134,092		$	130,790
	Consignment and other fee revenues		38,438			32,007			28,016
	Total revenue		200,218			166,100			158,806
	Segment direct profit	$	68,068		$	63,704		$	64,564

CAG:
	Purchase revenue	$	10,309		$	17,179		$	15,361
	Consignment and other fee revenues		28,167			25,396			24,284
	Total revenue		38,476			42,575			39,645
	Segment direct profit	$	32,215		$	29,120		$	29,324

Machinio:
	Purchase revenue	$	—		$	—		$	—
	Consignment and other fee revenues		13,821			12,083			9,559
	Total revenue		13,821			12,083			9,559
	Segment direct profit	$	13,110		$	11,471		$	8,992

Corporate & Other, including elimination adjustments:
	Purchase revenue	$	—		$	—		$	—
	Consignment and other fee revenues		(62	)		(60	)		(57	)
	Total revenue		(62	)		(60	)		(57	)
	Segment direct profit	$	(62	)	$	(60	)	$	(57	)

Consolidated:
	Purchase revenue	$	172,089		$	151,271		$	146,151
	Consignment and other fee revenues		142,373			128,779			111,380
	Total revenue		314,462			280,050			257,531
	Total Segment direct profit	$	172,140		$	160,643		$	149,853

Year Ended September 30,
2017 2016 2015
GovDeals:
Revenue $ —
$ —
$ —
Fee revenue 26,853
22,802
20,577
Total revenue 26,853
22,802
20,577
Gross profit 25,172
21,422
19,342
Depreciation and amortization 245
241
256
Other operating expenses —
—
—

CAG:
Revenue 100,160
140,210
177,770
Fee revenue 44,971
51,555
34,178
Total revenue 145,131
191,765
211,949
Gross profit 71,934
109,373
135,829
Depreciation and amortization 1,222
1,837
2,107
Other operating expenses 465
—
84

RSCG:
Revenue 85,766
88,986
138,037
Fee revenue 9,265
5,232
23,776
Total revenue 95,032
94,218
161,813
Gross profit 30,050
29,903
46,656
Depreciation and amortization 1,134
974
1,372
Other operating expenses —
—
145

Corporate & Other:
Revenue 2,644
4,632
(139 )
Fee revenue 356
3,037
2,925
Total revenue 2,999
7,669
2,786
Gross profit (2,666 ) 1,415
1,197
Depreciation and amortization 3,195
3,449
5,500
Other operating expenses 3,187
—
44

Consolidated:
Revenue 188,570
233,828
315,668
Fee revenue 81,445
82,626
81,457
Total revenue 270,015
316,454
397,125
Gross profit 124,490
162,113
203,023
Depreciation and amortization 5,796
6,502
9,235
Other operating expenses $ 3,651
$ —
$ 273

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The following table ~~presents a reconciliation between~~reconciles segment direct profit used in the reportable segments ~~and~~to the Company's consolidated results:

Year Ended September 30,
2017 2016 2015
Reconciliation:
Total revenue $ 270,015
$ 316,454
$ 397,125
Gross profit 124,490
162,113
203,023
Operating expenses 160,839
196,231
346,965
Other operating expenses 3,651
—
273

Interest (income) expense and other expense, net

(362 ) (1,217 ) 171

(Benefit) provision for income taxes

(451 ) 27,025
(39,571 )

Net loss

$ (39,187 ) $ (59,926 ) $ (104,815 )


	Year Ended September 30,
(in thousands)	2023			2022			2021
Reconciliation:
Total segment direct profit	$	172,140		$	160,643		$	149,853
Other costs and expenses from operations (1)		145,850			137,350			121,215
Fair value adjustment of acquisition earn-outs		—			(24,500	)		—
Interest and other (income) expense, net		(2,726	)		140			1,058
Income before provision for income taxes	$	29,016		$	47,653		$	27,579

(1) Other ~~operating~~costs and expenses ~~includes changes~~from operations is defined as Total costs and expenses from operations per the Consolidated Statements of Operations, less Cost of goods sold (which is included in the ~~fair value~~calculation of ~~the Company's financial~~Segment direct profit).

Total segment assets ~~and business realignment expenses, which can be seen in more detail in Note 14.~~

~~See Note 5 in the Notes~~reconciled to ~~the Consolidated Financial Statements for goodwill impairment information by segment.~~consolidated amounts are as follows:


	September 30,
(in thousands)	2023			2022
Segment Assets:
GovDeals	$	256,215		$	237,697
RSCG		110,592			99,430
CAG		96,828			96,393
Machinio		36,362			32,771
Corporate & Other		(211,026	)		(178,188	)
Total Segment Assets:	$	288,970		$	288,104

Revenue attributed to countries that represent a significant portion of consolidated revenues are as follows:


	Year Ended September 30,
(in thousands)	2023		2022		2021
Revenue by geographic area
United States	$	278,734	$	237,720	$	214,162
Rest of the world		35,729		42,330		43,369
Consolidated	$	314,462	$	280,050	$	257,531

Year Ended September 30,
2017 2016 2015
United States 240,102
281,328
366,149
Rest of the world 29,913
35,126
30,976
Consolidated $ 270,015
$ 316,454
$ 397,125

~~Total segment assets reconciled to consolidated amounts are as follows:~~

September 30, September 30,
2017 2016
Segment Assets:
GovDeals 43,262
38,828
CAG 115,514
121,352
RSCG 39,766
—
Corporate & Other 16,687
99,929
Total Segment Assets: 215,229
260,109

As of September 30, 2016, the RSCG segment balance sheet was included within Corporate & Other because it was not practical for the Company to separate the RSCG and Corporate & Other balance sheets at that time. As of September 30, 2017, the RSCG and corporate balance sheets have been separated.

Total long-lived assets by geographic areas are ~~presented~~ as follows:


	September 30,
(in thousands)	2023		2022
Assets by geographic area
United States	$	17,039	$	18,867
Rest of the world		117		227
Total Long-lived Assets	$	17,156	$	19,094

September 30, September 30,
2017 2016
United States 16,142
14,159
Rest of the world 650
217
Consolidated 16,793
14,376

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

~~Property and equipment, additions by segment are presented as follows:~~

September 30, September 30,
2017 2016
GovDeals 223
242
CAG 938
39
RSCG 733
—
Corporate & Other 5,911
5,809
Consolidated 7,805
6,090

~~17. Quarterly Results (Unaudited)~~

The following table sets forth for the eight most recent quarters the selected unaudited quarterly consolidated statement of operations data. The unaudited quarterly consolidated statement of operations data has been prepared on the same basis as the Company's audited consolidated financial statements and, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of this data.

Three months ended

Dec. 31,
2015

Mar. 31,
2016

June 30,
2016

Sept. 30,
2016

Dec. 31,
2016

Mar. 31,
2017

June 30,
2017

Sept. 30,
2017
(in thousands, except share and per share data)
Revenue from operations $ 65,875
$ 86,878
$ 85,188
$ 78,513
$ 70,796
$ 72,335
$ 65,520
$ 61,364
Loss before provision for income taxes from operations $ (7,351 ) $ (1,117 ) $ (141 ) $ (24,291 ) $ (8,294 ) $ (8,305 ) $ (8,573 ) $ (14,466 )
Net loss from operations $ (5,197 ) $ (850 ) $ (124 ) $ (53,755 ) $ (8,397 ) $ (8,252 ) $ (8,614 ) $ (13,924 )
Basic and diluted loss per common share $ (0.17 ) $ (0.03 ) $ 0.00
$ (1.75 ) $ (0.27 ) $ (0.26 ) $ (0.27 ) $ (0.44 )
Basic and diluted weighted average shares outstanding 30,490,670
30,594,940
30,726,554
30,740,977
31,261,603
31,361,122
31,485,599
31,503,349

~~18. Subsequent Event~~

On October 11, 2017, the Defense Logistics Agency Disposition Services DLA published a Request for Technical Proposals (“RFTP”) and draft Invitation for Bid (“IFB”) for the sale of surplus, useable non-rolling stock property. The DLA is awarding two term contracts, each with a base term of two years and four one-year options to extend. One term contract will include all property west of the Mississippi River, including Alaska, Hawaii, and Guam. The other term contract will include all property east of the Mississippi River, including Puerto Rico and the U.S. Virgin Islands.

On December 5, 2017, the DLA has determined that the Company is not the apparent high bidder for either of the two contracts. Final contract awards are subject to a protest period and a pre-award survey by the DLA regarding the bidder’s ability to satisfactorily perform the work in accordance with their technical proposal submitted in step-one of the solicitation.

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

LIQUIDITY SERVICES, INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(~~dollars~~Dollars in ~~thousands)~~Thousands)


	Balance at beginning of period		Charged (credited) to expense			Reductions			Balance at end of period
Deferred tax valuation allowance (deducted from net deferred tax assets)
Year ended September 30, 2021	$	41,788		(27,975	)		—		$	13,813
Year ended September 30, 2022		13,813		(1,554	)		—			12,259
Year ended September 30, 2023	$	12,259		3,770			—		$	16,029
Allowance for doubtful accounts (deducted from accounts receivable)
Year ended September 30, 2021	$	389		297			(196	)	$	490
Year ended September 30, 2022		490		136			(177	)		449
Year ended September 30, 2023	$	449		1,392			(417	)	$	1,424
Provision for inventory allowance (deducted from inventory)
Year ended September 30, 2021	$	300		174			(300	)	$	174
Year ended September 30, 2022		174		96			(174	)		96
Year ended September 30, 2023	$	96		1,048			(100	)	$	1,044

Balance at
beginning
of period Charged
(credited) to
expense Reductions Balance at
end of
period
Deferred tax valuation allowance (deducted from net deferred tax assets)

Year ended September 30, 2015 7,216
1,258
—
8,474
Year ended September 30, 2016 8,474
35,783
—
44,257
Year ended September 30, 2017 44,257
10,122
—
54,379
Allowance for doubtful accounts (deducted from accounts receivable)

Year ended September 30, 2015 1,042
1,243
(1,814 ) 471
Year ended September 30, 2016 471
247
—
718
Year ended September 30, 2017 718
357
(407 ) 668
Inventory allowance (deducted from inventory)

Year ended September 30, 2015 1,723
(575 ) (378 ) 770
Year ended September 30, 2016 770
2,709
(33 ) 3,446
Year ended September 30, 2017 3,446
10,381
(9,255 ) 4,572

EXHIBIT INDEX



Exhibit No.	Description
2.1	Stock Purchase Agreement, dated July 10, 2018, by and between the Company, Machinio Corp., the stockholders of Machinio Corp., and Shareholder Representative Services, LLC, incorporated herein by reference to Exhibit ~~No.~~	~~Description~~2.1 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 2, 2018.
~~3.1~~ 2.2	Purchase and Sale Agreement, dated September 22, 2015, by and between Jacobs Trading, LLC and Tanager Acquisitions, LLC, incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, filed with the SEC on October 6, 2015.
2.3	First Amendment to Purchase and Sale Agreement dated September 30, 2015 by and between Jacobs Trading, LLC and Tanager Acquisitions, LLC.
2.4	Agreement and Plan of Merger, dated November 1, 2021, by and among the Company, Liquidity Services RE Ventures, Inc., Bid4Assets, Inc. (“Bid4Assets”), USA B4A Sellers Rep LLC, and certain holders of the outstanding stock of Bid4Assets, incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, filed with the SEC on November 1, 2021.
3.1	Fourth Amended and Restated Certificate of Incorporation, incorporated herein by reference to Exhibit 3.1 to Amendment No. 2 to the ~~Company's~~Company’s Registration Statement on Form S-1 (Registration No. 333-129656), filed with the SEC on January 17, 2006.
~~3.2~~ 3.1.1	Certificate of Amendment to the Company’s Fourth Amended and Restated Certificate of Incorporation, incorporated herein by reference to Appendix A to the Company’s Schedule 14A filed with the SEC on January 24, 2023.
3.2	Amended and Restated Bylaws, incorporated herein by reference to Exhibit ~~3.2~~3.1 to the Company's ~~Quarterly~~Current Report on Form ~~10-Q,~~8-K, filed with the SEC on August ~~4, 2016.~~5, 2022.
4.1		Form of Certificate of Common Stock of the Company, incorporated herein by reference to Exhibit 4.1 to Amendment No. 5 to the ~~Company's~~Company’s Registration Statement on Form S-1 (Registration No. 333-129656), filed with the SEC on February 21, 2006.
~~10.1~~ 4.2	Description of Securities
10.1	~~Executive Employment~~Credit Agreement, dated January 27, 2005, between the Company and James M. Rallo, incorporated herein by reference to Exhibit 10.6.1 to Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-129656), filed with the SEC on February ~~1, 2006.#~~
~~10.1.2~~		Amendment to Executive Employment Agreement between the Company and James M. Rallo, dated January 25, 2006, incorporated herein by reference to Exhibit 10.6.2 to Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-129656), filed with the SEC on February 1, 2006.#
~~10.2~~		Form of Indemnification Agreement for directors and officers, incorporated herein by reference to Exhibit 10.11 to Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-129656), filed with the SEC on February 1, 2006.#
~~10.3~~		~~Executive Employment Agreement, dated as of January 2, 2013,~~10, 2022, by and between ~~the Company~~Liquidity Services, Inc., and ~~Leoncio Casusol,~~Wells Fargo Bank, National Association, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on February ~~4, 2013.#~~10, 2022.
~~10.3.1~~ 10.1.1		First Amendment to Credit Agreement, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on April 4, 2023.
10.2#	Form of Amended and Restated Executive Employment Agreement, ~~between~~incorporated herein by reference to Exhibit 10.1 to the ~~Company and Leoncio Casusol, dated as~~Company's Current Report on Form 8-K, filed with the SEC on January 20, 2023.
10.3#	Form of ~~June 13, 2016,~~Change in Control Agreement, incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the SEC on ~~June 17, 2016.#~~January 20, 2023.
~~10.4~~ 10.4#		~~Amended~~Form of Indemnification Agreement for directors and ~~Restated Executive Employment Agreement, dated October 1, 2014, by and between the Company and Thomas B. Burton,~~officers, incorporated herein by reference to Exhibit ~~10.32~~10.3 to the Company's ~~Annual~~Quarterly Report on Form 10-Q, filed with the SEC on ~~November 21, 2014.#~~February 2, 2023
~~10.5~~ 10.5#	Form of Employee Agreement Regarding Confidentiality, Intellectual Property, and Competitive Activities, incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q, filed with the SEC on February 2, 2023.


10.8#	Liquidity Services, Inc. Third Amended and Restated 2006 Omnibus Long-Term Incentive Plan, incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A, filed with the SEC on January ~~26, 2015.#~~28, 2020.
~~10.6~~ 10.8.1#		~~Form of Notice of Stock Option Grant under 2006 Omnibus Long Term Incentive Plan, incorporated herein by reference to Exhibit 99.1~~2022 Amendment to the ~~Company's Current Report on Form 8-K, filed with the SEC on April 4, 2006.#~~
~~10.6.1~~		Form of Notice of Restricted Stock Grant, under 2006 Omnibus Long Term Incentive Plan, incorporated herein by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K filed with the SEC on December 8, 2008.#
~~10.7~~		~~Surplus Usable Property Sales Contract (Sales Contract Number 08-0001-0001) between~~ Liquidity Services, Inc. and the Defense Reutilization and Marketing Service of the U.S. Department of Defense, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on August 6, 2008.




~~Exhibit No.~~		~~Description~~
~~10.7.1~~		~~Supplemental Agreement 1 (Sales Contract Number 08-0001-0001), incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on February 5, 2009.~~
~~10.7.2~~		Supplemental Agreement No. 6 relating to Surplus Usable Property Sales Contract (Sales Contract Number 08-0001-0001) between Liquidity Services, Inc. and the Defense Reutilization and Marketing Service of the U.S. Department of Defense, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on September 17, 2012.
~~10.7.3~~		Supplemental Agreement No. 8, dated January 17, 2014, relating to the modification of Surplus Usable Property Sales Contract (Sales Contract Number 08-0001-0001), as amended, between the Company and DLA Disposition Services, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on January 21, 2014.
~~10.7.4~~		Notice of Award, Statement, and Release Document, dated January 17, 2014, relating to Surplus Usable Property Sales Contract (Sales Contract Number 08-0001-0001), as amended, between the Company and DLA Disposition Services, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on January 21, 2014.
~~10.8~~		Shareholders' Agreement dated as of September 1, 2011 among Liquidity Services, Inc., Jacobs Trading, LLC, WGD, Inc., Irwin L. Jacobs and Howard Grodnick, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on September 1, 2011.
~~10.9~~		Executive Employment Agreement, dated September 10, 2014, by and between the Company and Gardner Dudley, incorporated herein by reference to Exhibit 10.33 to the Company's Annual Report filed with the SEC on November 21, 2014.#
~~10.9.1~~		Amendment to Executive Employment Agreement between the Company and Gardner H. Dudley, dated as of June 13, 2016, incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K, filed with the SEC on June 17, 2016.#
~~10.9.2~~		~~Severance Agreement and General Release between the Company and Gardner H. Dudley, dated September 25, 2017.~~
~~10.10~~		Notice of Award, Statement, and Release Document, dated February 13, 2015, relating to the Surplus Contract between the Company and the Defense Logistics Agency Disposition Services of the U.S. Department of Defense, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on February 17, 2015.
~~10.10.1~~		Supplemental Agreement No. 1 to Mutual Agreement for Contract (15-0001-0001) dated February 13, 2015, relating to the Surplus Contract between the Company and the Defense Logistics Agency Disposition Services of the U.S. Department of Defense, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on July 21, 2015.
~~10.11~~		Notice of Award, Statement and Release Document (Contract Number 15-5601-0001) dated June 8, 2015 issued by DLA Disposition Services, incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the SEC on June 9, 2015.
~~10.12~~		Executive Employment Agreement dated July 20, 2015 by and between the Company and Jorge Celaya, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on July 23, 2015.#




~~Exhibit No.~~		~~Description~~
~~10.13~~		Executive Employment Agreement between the Company and William P. Angrick, dated as of June 13, 2016, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on June 17, 2016.#
~~10.14~~		Executive Employment Agreement by and between the Company and Mark A. Shaffer, incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on July 13, 2016.#
~~10.15~~		Supplemental Agreement No. 1 to Surplus Usable Property Sales Contract (Sales Contract Number 14-0091-0002), dated December 6, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 8, 2016.
~~10.16~~		~~Liquidity Services, Inc. Second~~Third Amended and Restated 2006 Omnibus Long-Term Incentive Plan, incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A, filed with the SEC on January ~~23, 2017.#~~24, 2022.
~~10.17~~ 10.9#		~~Form of Option Agreement,~~Machinio Corp. 2014 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.1 to the Company’s ~~Current Report~~Registration Statement on Form ~~8-K,~~S-8, filed with the SEC on ~~February 24, 2017.#~~July 10, 2018.
~~10.18~~ 10.10#		Form of Notice of Time-Based Stock Option Grant.
10.11#	Form of Notice of Time-Based Restricted Stock ~~Unit Agreement,~~Units Grant.
10.12#	Form of Notice of Performance Based Stock Option Grant.
10.13#	Form of Notice of Performance-Based Restricted Stock Units Grant.
10.14#	Liquidity Services Inc. Annual Incentive Plan, adopted on December 2, 2020, incorporated herein by reference to Exhibit ~~10.2~~10.20 to the Company’s ~~Current~~Annual Report on Form ~~8-K,~~10-K, filed with the SEC on ~~February 24, 2017.#~~December 11, 2020.
~~21.1~~ 16.1	Letter of Ernst & Young LLP, dated December 27, 2021
21.1	List of Subsidiaries.
23.1	Consent of Deloitte & Touche LLP.
23.2	Consent of Ernst & Young LLP.
24.1		Power of Attorney (included on signature page).
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~31.3~~ 32.1		~~Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~32.1~~		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~32.3~~ 99.1		~~Certification of Chief Accounting Officer pursuant~~Revised Liquidity Services, Inc. Clawback Policy, incorporated herein by reference to ~~Section 906 of~~Exhibit 99.1 to the ~~Sarbanes-Oxley Act of 2002.~~Company's Quarterly Report on Form 10-Q, filed with the SEC on August 3, 2023.
101		The following materials from the Registrant's Annual Report on Form 10-K for the year ended September 30, ~~2017,~~2023, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of September 30, ~~2017~~2023 and ~~2016,~~2022, (ii) Consolidated Statements of Operations for each of the three years in the period ended September 30, ~~2017,~~2023, (iii) Consolidated Statements of Comprehensive Income (Loss) ~~Income~~ for each of the three years in the period ended September 30, ~~2017,~~2023, (iv) Consolidated Statements of ~~Changes in~~ Stockholders' Equity for each of the three years in the period ended September 30, ~~2017,~~2023, (v) Consolidated Statements of Cash Flows for each of the three years in the period ended September 30, ~~2017,~~2023, and (vi) Notes to Consolidated Financial Statements.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

# ~~Designates~~Indicates management contract or ~~compensation plans.~~

compensatory plan.

Item 16. Form 10-K Summary.

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on December ~~6, 2017.~~

7, 2023.




	LIQUIDITY SERVICES, INC.
By:	~~By:~~		/s/ WILLIAM P. ANGRICK, III
		William P. Angrick, III
		Chairman of the Board of Directors
		and Chief Executive Officer

We, the undersigned directors and officers of Liquidity Services, Inc., hereby severally constitute William P. Angrick, III, Jorge A. Celaya, and Mark A. Shaffer, and each of them singly, our true and lawful attorneys with full power to them and each of them to sign for us, in our names in the capacities indicated below, any and all amendments to this Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on December ~~6, 2017.~~

7, 2023.



Signature		Title
~~Signature~~		~~Title~~

/s/ WILLIAM P. ANGRICK, III William P. Angrick, III		Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)
/s/ JORGE A. CELAYA Jorge A. Celaya		Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
~~/s/ MICHAEL SWEENEY~~ ~~Michael Sweeney~~		~~Vice President and Chief Accounting Officer (Principal Accounting Officer)~~
/s/ PHILLIP A. CLOUGH Phillip A. Clough		Director
/s/ KATHARIN S. DYER Katharin S. Dyer		Director
/s/ GEORGE H. ELLIS George H. Ellis		Director
/s/ ~~PATRICK W. GROSS~~ ~~Patrick W. Gross~~ THIERNO A. FALL Thierno A. Fall		Director
/s/ BEATRIZ V. INFANTE Beatriz V. Infante		Director
/s/ EDWARD J. KOLODZIESKI Edward J. Kolodzieski		Director
/s/ JAIME MATEUS-TIQUE Jaime Mateus-Tique		Director


~~For the fiscal year ended September 30, 2017~~
OR
o ☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
~~For the transition period from to~~



Delaware (State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~ incorporation or ~~Organization)~~ organization)		52-2209244 (I.R.S. Employer Identification No.)
6931 Arlington Road, Suite ~~200,~~ 460, Bethesda ~~MD.~~ , MD. (Address of ~~Principal Executive Offices)~~ principal executive offices)		20814 (Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	LQDT	Nasdaq



Large accelerated filer	o ☐	Accelerated filer	ý ☒	Non-accelerated filer	o ☐	Smaller reporting company	o ☐
						Emerging growth company	☐


	September 30,
	2023			2022
	(in thousands)
Computers and purchased software	$	2,151		$	2,058
Developed software for internal-use		25,820			22,168
Equipment		9,337			8,536
Leasehold improvements		2,979			3,256
Building		2,158			2,158
Furniture and fixtures		413			527
Vehicles		1,383			1,406
Land		754			754
Construction in progress		2,249			1,812
Total property and equipment		47,244			42,675
Less: Accumulated depreciation and amortization		(30,088	)		(23,581	)
Total property and equipment, net	$	17,156		$	19,094



(Mark One)
ý ☒		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




Item	Description	Page
PART I
1	Business	4
1A.	Risk Factors	16
1B.	Unresolved Staff Comments	29
2	Properties	29
3	Legal Proceedings	29
4	Mine Safety Disclosures	30
PART II
5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
6	Selected Financial Data	32
7	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
7A.	Quantitative and Qualitative Disclosures about Market Risk	51
8	Financial Statements and Supplemental Data	52
9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	52
9A.	Controls and Procedures	52
9B.	Other Information	54
PART III
10	Directors, Executive Officers and Corporate Governance	55
11	Executive Compensation	55
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	55
13	Certain Relationships and Related Transactions, and Director Independence	55
14	Principal Accounting Fees and Services	55
PART IV
15	Exhibits and Financial Statement Schedules	56
Signatures		96


◦	~~Distribution centers—we provide sellers with the flexibility of either having us manage the sales process at their location or delivering merchandise to one of our distribution centers.~~


◦	~~Inventory management—sellers benefit from our management and inventory tracking system designed so that merchandise is received, processed and delivered in a timely manner.~~


◦	Cataloguing merchandise—we catalogue all merchandise, which enables us to provide useful product information to buyers and sellers. In certain circumstances, we inspect the merchandise and provide condition descriptions to improve quality and the financial recovery to the seller.


◦	Testing, data wiping, de-labeling and refurbishment—we test products, wipe electronic data, refurbish and remove labels and product markings from merchandise prior to sale in order to add value to the asset and protect sellers' brand equity and distribution relationships.


◦	Return to vendor or product disposition to non-sales channels—we manage the end-to-end processes for our sellers ensuring that returned merchandise is disposed of in compliance with a variety of disposition requirements. We provide end-to-end management of returning products to vendors, charities, or channels outside of our leading marketplace solutions.


◦	Outbound fulfillment—we can arrange for domestic or international shipping for all merchandise, whether it's a small item or container load for export located in one of our distribution centers or at a seller's facility.


◦	~~Settlement and seller support. Settlement and seller support services are designed for successful and reliable completion of transactions and include:~~


◦	~~Buyer qualification—we qualify buyers to ensure their compliance with applicable government or seller mandated terms of sale, as well as to confirm their ability to complete a transaction.~~


◦	~~Collection and settlement—we collect payments on behalf of sellers prior to delivery of any merchandise and disburse the proceeds to the seller after the satisfaction of all conditions of a sale.~~


◦	~~Seller support and dispute resolution—we provide full support throughout the transaction process and dispute resolution for our buyers and sellers if needed.~~


◦	Search and navigation tools—buyers can search our marketplaces for products based on a variety of criteria and personalized settings, including product category, keyword, lot size, product condition, product geographic location and auction ending date.


◦	Dynamic pricing tools, product information, and shipping quotes—we offer multiple dynamic pricing tools including outbid notification, automated bid agent and automatic auction extension. In addition, we provide buyers the information they need to make informed decisions, including product data, seller performance, and online shipping quotes to help understand their landed cost.


◦	Broad and flexible range of shipping/pick-up options—we can provide packaging and shipping services for each transaction, whether it is a small item or container loads for export, including buyer pick-up at our premises, for the majority of transactions, or support buyer arranged transportation. We support the most efficient solution for each transaction and each buyer.


◦	Secure settlement and buyer support—in addition to qualifying sellers, providing several electronic payment options and serving as a trusted market intermediary, we verify transaction completion, which in turn enhances buyer confidence. In addition, we provide full reliable buyer support throughout the transaction process.



Fiscal year ended September 30, 2016	Low		High
First Quarter	$	6.20	$	9.19
Second Quarter	$	4.42	$	6.58
Third Quarter	$	5.10	$	7.84
Fourth Quarter	$	7.06	$	11.25
Fiscal year ended September 30, 2017
First Quarter	$	8.05	$	11.49
Second Quarter	$	7.50	$	10.45
Third Quarter	$	6.05	$	8.05
Fourth Quarter	$	5.50	$	7.10



	Year ended September 30,
	2013		2014			2015			2016			2017
	(dollars in thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue	$	404,041	$	388,671		$	315,668		$	233,828		$	188,570
Fee revenue	101,815		106,990			81,457			82,626			81,445
Total revenue	505,856		495,661			397,125			316,454			270,015
Costs and expenses:
Cost of goods sold	199,494		211,659			166,009			143,127			126,227
Profit-sharing distributions/Client distributions	35,944		35,055			28,093			11,214			19,298
Technology and operations	90,052		108,160			99,550			93,405			82,988
Sales and marketing	40,170		41,451			41,465			37,570			35,211
General and administrative	48,950		48,928			41,338			39,717			35,835
Depreciation and amortization	17,374		16,595			9,235			6,502			5,796
Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets	5,921		(18,384		)	147,414			19,037			1,009
Business disposition loss	—		—			7,963			—			—
Other operating expenses (1)	—		1,780			273			—			3,651
Total costs and expenses	437,905		445,244			541,340			350,572			310,015
Income (loss) from continuing operations	67,951		50,417			(144,215		)	(34,118		)	(40,000		)
Interest income (expense) and other income (expense), net	704		(370		)	171			(1,217		)	(362		)
Income (loss) from continuing operations before income taxes	68,655		50,047			(144,386		)	(32,901		)	(39,638		)
Provision (benefit) for income taxes	27,551		19,657			(39,571		)	27,025			(451		)
Net income (loss)	$	41,104	$	30,390		$	(104,815	)	$	(59,926	)	$	(39,187	)



Basic earnings (loss) per common share:
Basic earnings per common share	$	1.30	$	0.97	$	(3.50	)	$	(1.96	)	$	(1.25	)
Diluted earnings (loss) per common share:
Diluted earnings per common share	$	1.26	$	0.97	$	(3.50	)	$	(1.96	)	$	(1.25	)
Basic weighted average shares outstanding	31,616,926		31,243,932		29,987,985			30,638,163			31,402,921
Diluted weighted average shares outstanding	32,657,236		31,395,301		29,987,985			30,638,163			31,402,921
Non-GAAP Financial Measures:
EBITDA from continuing operations(2)	$	85,325	$	67,012	$	(134,980	)	$	(27,616	)	$	(34,204	)
Adjusted EBITDA from continuing operations(2)	104,625		63,013		33,075			3,668			(21,595		)
Supplemental Operating Data:
Gross merchandise volume from continuing operations(3)	$	973,325	$	931,556	$	798,977		$	642,078		$	629,330
Completed transactions(4)	530,000		547,000		567,000			574,000			530,000
Total registered buyers(5)	2,424,000		2,615,000		2,845,000			2,986,000			3,171,000
Total auction participants(6)	2,458,000		2,538,000		2,483,000			2,417,000			2,290,000



	As of September 30,
	2013		2014		2015		2016		2017
	(in thousands)
Consolidated Balance Sheet Data
Cash, cash equivalents and short-term investments	$	95,109	$	62,598	$	95,465	$	134,513	$	94,348
Working capital(7)	79,289		77,935		119,225		99,424		68,166
Total assets	421,344		431,718		288,488		260,109		215,229
Total liabilities	106,465		114,735		72,486		97,498		82,593
Total stockholders' equity	314,879		316,983		216,002		162,611		132,636



Fiscal Year Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Cash Paid for Shares Purchased	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1)
2014	2,962,978	16	44,873,000	5,127,000
2015	—	—	—	5,127,000
2016	—	—	—	10,127,000
2017	—	—	—	$	10,127,000



	Total		Less than 1 year		1 to 3 years		3 to 5 Years		5+ years
	(in thousands)
Operating leases	$	27,143	$	9,432	$	13,599	$	3,807	$	305
Other contractual cash obligations	2,017		1,555		452		10		—
Total contractual cash obligations	$	29,160	$	10,987	$	14,051	$	3,817	$	305



	Foreign Currency Translation Adjustments		Net Change Pension and Other Postretirement Benefit Plans		Accumulated Other Comprehensive Income (Loss)
Balance at September 30, 2014	(3,671	)	220		(3,451	)
Current-period other comprehensive (loss) income	(3,276	)	1,101		(2,175	)
Balance at September 30, 2015	(6,947	)	1,321		(5,626	)
Current-period other comprehensive loss	(398	)	(2,547	)	(2,945	)
Balance at September 30, 2016	(7,345	)	(1,226	)	(8,571	)
Current-period other comprehensive income	551		1,589		2,140
Balance at September 30, 2017	(6,794	)	363		(6,431	)


(in thousands)	Fair Value
Cash and cash equivalents	$	3,576
Intangible assets		16,500
Other assets		346
Total assets acquired		20,422
Payables to sellers		3,715
Operating lease liabilities		204
Deferred tax liabilities		3,847
Total liabilities assumed		7,766
Net identifiable assets acquired	$	12,656
Goodwill		30,083
Total consideration transferred	$	42,739


(in thousands)	Useful Life (in years)	Fair Value
Contract intangibles	8	$	13,900
Developed software	3		2,200
Trade name	3		400
Total identifiable intangible assets		$	16,500


	September 30, 2023
	Operating Leases			Finance Leases
2024	$	4,629		$	97
2025		3,854			68
2026		2,418			65
2027		560			12
2028		144			—
Thereafter		49			—
Total lease payments (1)		11,654			242
Less: imputed interest (2)	$	(928	)	$	(18	)
Total lease liabilities	$	10,726		$	224


	Years Ended September 30,
	2023		2022
Cash paid for amounts included in operating lease liabilities	$	4,754	$	4,368
Cash paid for amounts included in finance lease liabilities	$	101	$	99
Non-cash: lease liabilities arising from new operating lease assets obtained	$	725	$	4,664
Non-cash: lease liabilities arising from new finance lease assets obtained	$	—	$	175
Non-cash: adjustments to lease assets and liabilities(1)	$	418	$	(196	)



		Balance as of September 30, 2017							Balance as of September 30, 2016
	Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Contract intangibles	10	$	—	$	—		$	—	$	1,500	$	(150	)	$	1,350
Brand and technology	3 - 5	—		—			—		5,749		(5,018		)	731
Covenants not to compete	3 - 5	—		—			—		700		(533		)	167
Patent and trademarks	3 - 10	943		(516		)	427		820		(418		)	402
Total intangible assets, net		$	943	$	(516	)	$	427	$	8,769	$	(6,119	)	$	2,650



Year Ending September 30,	Operating Lease Payments
	(in thousands)
2018	$	9,432
2019	8,696
2020	4,903
2021	2,806
2022	1,001
2023	305
Total future minimum lease payments	$	27,143



	Year Ended September 30, (In thousands)
	2017			2016	2015
Beginning balance at October 1	$	725		—	—
Additions based on positions related to the current year	—			—	—
Additions for tax positions of prior years	1,426			725	—
Reductions for tax positions of prior years	(229		)	—	—
Settlements	(1,922		)	—	—
Balance at September 30	$	—		725	—