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 CEO,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 profit to evaluate the performance of each segment. GrossSegment gross profit is calculated as total revenue less cost of goods sold (excludes depreciation and seller distributions.amortization).
The following table sets forth certain financial information for the Company's reportable segments:
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements. These statements are only predictions. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include but are not limited to the factors set forth in our Annual Report on Form 10-K for the fiscal year ended September 30, 20172021, and subsequent filings with the Securities and Exchange Commission.Commission (SEC). You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. There may be other factors of which we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements.
All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this document and are expressly qualified in their entirety by the cautionary statements included in this document. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances occurring after the date of this document or to reflect the occurrence of unanticipated events.
The following discussion should be read in conjunction with our unaudited condensedconsolidated financial statements and related notes and the information contained elsewhere in this document.
Overview
About us. us. Liquidity Services is a leading global commerce company providing trusted marketplace platforms that power the circular economy. We manage,create a better future for organizations, individuals, and the planet by capturing and unleashing the intrinsic value of surplus. We connect millions of buyers and sell inventorythousands of sellers through our leading auction marketplaces, search engines, asset management software, and equipment forrelated services. Our comprehensive solutions enable the transparent, efficient, sustainable recovery of value from excess items owned by business and government clients by operatingsellers.
Our business delivers value to shareholders through its ability to unleash the intrinsic value of surplus from our marketplace platforms. These platforms ignite and enable a networkself-reinforcing cycle of leading ecommerce marketplaces that enablevalue creation where buyers and sellers to transactattract one another in an efficient, automated environment offering over 500 product categories. Our marketplaces provide professionalever-increasing numbers. The result is a continuous flow of goods that becomes increasingly valuable as more participants join the platform, thereby creating positive network effects that benefit sellers, buyers, access to a global,and shareholders.
Results from our operations are organized supply 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, as well as self-service tools. 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 threefour reportable segments,segments: Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), GovDeals, and GovDeals.Machinio. See Note 1314 - Segment Information to the condensed consolidated financial statements for more information regarding our reportable segments.
On November 1, 2021, the Company purchased all of the issued and outstanding shares of stock of Bid4Assets, Inc. (Bid4Assets), a Maryland corporation based in Silver Spring, MD. Bid4Assets auctions distressed real estate for the federal government, sheriffs, county tax-collectors, financial institutions and real estate funds. See Note 3 - Bid4Assets Acquisition for more information regarding this transaction.
Impacts of the COVID-19 Pandemic
The Company has been closely monitoring the COVID-19 pandemic. In April 2020, the Company experienced the largest impacts on its operations thus far stemming from the initial actions taken by governments and the private sector to limit the spread of COVID-19. The restrictions on economic activity were caused, in part, by business closures, limitations on the operations of business activity and significant prioritization of essential business functions. Since May 2020, we have seen subsequent increases in GMV and revenues as businesses and governments re-opened from government ordered closures which, combined with cost control measures, generated positive net income since the third quarter of fiscal 2020. However, COVID-19 and its variants continue to impact the global economy, supply chains, and the ability to conduct commerce due to ongoing travel restrictions in various countries, and lockdowns reintroduced within regions of China. Additionally, the COVID-19 pandemic in combination with various macroeconomic factors, has impacted the supply chain of new vehicles, and construction and heavy equipment production, which in turn negatively affected the supply of used vehicles and construction and heavy equipment being sold in North America. At this time, the likelihood, magnitude and timing of business developments across our reportable segments are difficult to predict given the current economic uncertainty, unknown duration and overall impact of the global pandemic. As a result, prior trends in the NotesCompany's results of operations may not be applicable throughout the duration of the COVID-19 pandemic.
Throughout the COVID-19 pandemic, the Company has actively monitored its liquidity position and working capital needs. During fiscal 2021 and during the three and nine months ended June 30, 2022, the Company determined that its liquidity position and working capital were more than sufficient to meet its projected needs. As discussed in Note 10 - Stockholders' Equity, on December 6, 2021, the Consolidated Financial StatementsCompany's Board of Directors authorized the repurchase of up to $20 million of the Company's outstanding shares of common stock through December 31, 2023. The Company repurchased 1,159,066 shares for Segment Information.$20.0 million during the six months ended March 31, 2022.
On May 13, 2022, the Company's Board of Directors authorized a new stock repurchase plan of up to $12 million of our outstanding shares of common stock through June 30, 2024. The Company repurchased 408,211 shares for $5.4 million during the three months ended June 30, 2022. As of June 30, 2022, the Company may repurchase an additional $6.6 million of shares under this program.
Effects of Inflation
Rising inflation in both the U.S. and internationally has weighed on the global economy, increasing prices for energy, shipping, and labor, among other areas of the macroeconomic environment. These events have caused a rise in borrowing costs as well, partly driven by actions taken by central banks to curb rising inflation. Currently, the Company is unable to predict the likelihood, magnitude and timing of inflationary risk to our business, if any. However, the Company does not believe inflation has had a material effect on our operating expenses. As a marketplace operator, the GMV, revenues and costs of revenues that result from our primarily auction-based sales may be influenced by macroeconomic factors, including but not limited to inflation, whose impacts may vary across each of our individual asset classes.
Our Marketplace Transactions
We believe our ability to create liquid marketplaces for surplus and salvage assets generates a continuous flow of goods from our corporate and government sellers. This flow of goods in turn attracts an increasing number of professional buyers to our marketplaces.marketplaces. During the twelve months ended June 30, 2022, the approximate number of registered buyers increased from 3,970,000 to 4,844,000, or 22%. Of the increase, approximately 16% is attributable to the Bid4Assets registered buyer base acquired during the three months ended December 31, 2017, the number of registered buyers grew from 3,018,000 to 3,209,000, or approximately 6.0%.2021.
Our revenue. 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 Condensed 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 vendorssellers 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 thisprincipal in purchase transaction model sales, we recognize as revenue the sale price paid by the buyer upon completion of a transaction. Also included in theThe proceeds paid by buyers arealso include transaction fees, charged to the buyers, referred to as buyer premiums. Revenue fromFor the three and nine months ended June 30, 2022, our purchase transaction model accounted for approximately 65.9%10.8% and 12.8% of our Gross Merchandise Volume (GMV), respectively, and 50.8% and 53.3% of our total revenue forrevenues, respectively. For the three and nine months ended December 31, 2017. Included in these amounts is revenue earned from the sale of property obtained under the Scrap Contract, where the price we pay the Defense Logistics Agency Disposition Services (DLA) of the Department of Defense (DoD) for the property purchased is based on a revenue share model, and which accounted for approximately 8.4% of our total revenue for the three months ended December 31, 2017. The merchandise sold underJune 30, 2021, our purchase transaction model accounted for approximately 24.7%14.8% and 16.3% of our grossGross Merchandise Volume (GMV), respectively, and 54.3% and 56.0% of our total revenues, respectively. These amounts included sales of commercial merchandise volume, which is the total sales valuesourced from vendor contracts with Amazon.com, Inc. by our RSCG reportable segment. See further discussion regarding our Amazon.com, Inc. contracts at Note 2 - Summary of all merchandise sold through our marketplaces during a given period, for the three months ended December 31, 2017. The revenue from our purchase transaction model is recognized within the Revenue line item on the Consolidated Statements of Operations.
Significant Accounting Policies.
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. ThisThe 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 Condensed 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 theirthe 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 fromFor the three and nine months ended June 30, 2022, our consignment model accounted for approximately 29.1%89.2% and 87.2% of our GMV, respectively, and 40.9% and 39.0% of our total revenue forrevenues, respectively. For the three and nine months ended December 31, 2017. The merchandise sold underJune 30, 2021, our consignment model accounted for approximately 75.3%85.2% and 83.7% of our GMV, for the three months ended December 31, 2017. Therespectively, and 37.4% and 36.2% of our total revenues, respectively.
Other — fee revenue from our consignment transaction model is recognized within the Fee Revenue line item on the Consolidated Statements of Operations.
. We also earn non-consignment fee revenue which is largely made upfrom Machinio's Advertising and System subscription services, as well as other services including returns management, refurbishment of service revenue related to our Surplus Contract. Thisassets, and asset valuation services. Non-consignment fee revenue is recognizedrecorded within the Fee revenueConsignment and other fee revenues line item on ourthe Condensed Consolidated Statements of Operations,Operations. Other revenues accounted for 8.3% and is discussed in further detail in Note 3 - Significant Contracts7.7% of our total revenues for the Notes tothree and nine months ended June 30, 2022, respectively, and 8.2% and 7.8% of our Consolidated Financial Statements.total revenues for the three and nine months ended June 30, 2021, respectively
We collect a buyer premium on substantially all transactions under the transaction models we offer to sellers. Buyer premiums are calculated as a percentage of the sale price of the merchandise sold 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 long-term growth 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 necessitatingwith verifiable recycling and remarketing of surplus assets; (4)
•the increase in outsourcing surplus disposition and end-of-life assets by corporatecorporations and government organizations of disposition activities for surplus and end-of-life assetsentities as they focus on reducing costs, improving transparency, compliance and working capital, flows, and increasingly prefer service providers with a proven track record,records, 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) chain;
•an increase in buyer demand for surplus merchandise as consumers trade down by purchasing less expensive goods and seek greater value from their purchases, which results in lower per unit prices and margins incould impact our retail goods vertical, and (6) long term growth;
•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.assets;
•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.
Our Vendor Agreements
Our DoDcommercial agreements. We have twomultiple 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 non-rolling stock surplus property. The initial two-year base period of the current Surplus contract ended in December 2016 and was extended through December 14, 2017. Transactions under this contract follow the purchase transaction model described above. This contract is included within our CAG segment.
On October 11, 2017, the DLA published a Request for Technical Proposal (“RFTP”) and draft Invitation for Bid (“IFB”) for the sale of surplus, useable non-rolling stock property. The RFTP and IFB related to the DLA’s award of two term contracts. On December 5, 2017, the DLA determined that we were not the high bidder for either of the two contracts. We made our final inventory purchase under the Surplus Contract during December 2017, and we are currently in the process of winding down the Surplus Contract. The Surplus Contract accounted for $74.6 million, or 27.6% of revenue in fiscal year 2017, $21.1 million or 29.9% of revenue in the first quarter of fiscal 2017, and $16.2 million or 26.5% of revenue in the first quarter of fiscal 2018. We expect revenue to continue to decline further in the second and third quarters of fiscal 2018, and no further revenue from this contract in future periods. The property sold under the Surplus Contract accounted for approximately 8.9% and 9.9% of our GMV for the three months ended December 31, 2017 and 2016.
In regards to the impact on our profitability resulting from the Surplus contract revenue change noted above, we anticipate the lost profits will be offset by benefits from the reorganization and realignment efforts in fiscal 2017 and Q1-FY18 (see Note 11 Business realignment expenses). The reorganization efforts in our CAG commercial business and Corporate functions are expected to generate a benefit during FY18 and beyond, which combined with the 2017 realignments of our Truckcenter and Iron Direct businesses, are expected to offset the impact of the DoD Surplus contract.
We recorded approximately $0.5 million of severance and occupancy cost during the first quarter of fiscal 2018, as a result of the restructuring and realignment efforts undertaken due to the loss of the Surplus Contract. The wind-down is expected to be completed within fiscal 2018.
•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 Contract 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 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 8.4% and 10.0% of our revenue, and 3.3%, and 4.5% of our GMV for the three months ended December 31, 2017 and 2016, respectively. This contract is included within our CAG segment.
Our commercial agreements. We have a vendor contract with Amazon.com, Inc. under which we acquirethe Company acquires and sellsells commercial merchandise. While purchase model transactions account for less than 20% of our total GMV, the cost of inventory for purchase model transactions is the most significant component of our consolidated Costs of goods sold. The property we purchased under this contractthese contracts with Amazon.com, Inc. represented approximately 19.4%,61.1% and 17.8%63.5% of costconsolidated Cost of goods sold for the three months ended December 31, 2017June 30, 2022 and 2016,2021, respectively, and 57.7% and 61.7% of consolidated Cost of goods sold for the nine months ended June 30, 2022 and 2021, respectively. This contract isThese contracts are included within our RSCG reportable segment. Our agreements with our other sellers are generally terminable at will by either party.
Key Business Metrics
Our management periodically reviews certain key business metrics for operational planning purposes and to evaluate the effectiveness of our operational strategies, allocation of resources, and our capacity to fund capital expenditures and expand our business. These key business metrics include:
Gross merchandise volume.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 GMV of goods sold in our marketplaces during the three months ended December 31, 2017 and 2016 totaled $155.4 million and $159.7 million, respectively.
Total registered buyers.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 December 31, 2017June 30, 2022, and September 30, 2017,2021, we had 3,209,000approximately 4,844,000 and 3,171,0003,970,000 registered buyers, respectively. Of the increase, approximately 16% is attributable to the Bid4Assets registered buyer base acquired during the three months ended December 31, 2021.
Total auction participants. For each auction we manage, the number of auction participants represents the total number of registered buyers who have bid one or more times in that auction. As a result, a registered buyer who bids, or participates, in more than one auction is counted as an auction participant in each auction in which he or she participates. Thus, total auction participants for a given period is the sum of the auction participants in each auction conducted during that period. We use this metric to allow us to compare our online auction marketplaces to our competitors, including other online auction sites and traditional on-site auctioneers. In addition, we measure total auction participants on a periodic basis to evaluate the activity level of our base of registered buyers and to measure the performance of our marketing and promotional efforts. During the three months ended December 31, 2017June 30, 2022, and 2016, 519,0002021, approximately 884,000 and 544,000617,000, respectively, total auction participants participated in auctions on our marketplaces, respectively.marketplaces. During the nine months ended June 30, 2022, and 2021, approximately 2,355,000 and 1,695,000, respectively, total auction participants participated in auctions on our marketplaces.
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 three months ended December 31, 2017June 30, 2022, and 2016,2021, we completed 122,280approximately 253,000 and 129,000185,000 transactions, respectively. During the nine months ended June 30, 2022, and 2021, we completed approximately 709,000 and 511,000 transactions, respectively.
Non-GAAP Financial Measures
Non-GAAP EBITDA and adjustedNon-GAAP Adjusted EBITDA. Non-GAAP EBITDA is a supplemental non-GAAP financial measure and is equal to net income (loss) plus interest and other (income) expense, net;income, net excluding the non-service components of net periodic pension (benefit); provision for income taxes; and depreciation and amortization. Interest and other (income) expense,income, net, can include nonoperatingnon-operating gains and losses, such as from foreign currency fluctuations and disposals of
fixed assets.fluctuations. Our definition of adjustedNon-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, disposition expenses,deferred revenue purchase accounting adjustments, and goodwill and long-lived asset impairment.
We believe Non-GAAP EBITDA and adjustedNon-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 overin the past five years.past. 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.
•The authoritative guidance related to business combinations requires the initial recognition of contingent consideration so that it is recognized at fair value with subsequent changes in fair value recorded through the timeCondensed Consolidated Statements of acquisition rather than when it is probableOperations and disallows the capitalization of transaction costs. We believe adjusting net income 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.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 Non-GAAP EBITDA and adjustedNon-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 adjustedNon-GAAP Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry.
Our management uses Non-GAAP EBITDA and adjustedNon-GAAP Adjusted EBITDA:
•as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis as they remove the impact of items not directly resulting from our core operations;
•for planning purposes, including the preparation of our internal annual operating budget;
•to allocate resources to enhance the financial performance of our business;
•to evaluate the effectiveness of our operational strategies; and
•to evaluate our capacity to fund capital expenditures and expand our business.
Non-GAAP EBITDA and adjustedNon-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 adjustedNon-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 adjustedNon-GAAP Adjusted EBITDA by adjusting Non-GAAP 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, adjustedNon-GAAP Adjusted EBITDA is subject to all of the limitations applicable to Non-GAAP EBITDA. Our presentation of adjustedNon-GAAP Adjusted EBITDA should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.
The table below reconciles Net income from continuing operations to Non-GAAP EBITDA and adjustedNon-GAAP Adjusted EBITDA from continuing operations for the periods presented.
. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 |
| (in thousands) | | (Unaudited) |
| Net income | | $ | 16,408 | | | $ | 8,419 | | | $ | 31,979 | | | $ | 18,193 | |
Interest and other expenses (income), net1 | | 196 | | | (157) | | | 214 | | | (191) | |
| Provision for income taxes | | 2,183 | | | 429 | | | 4,254 | | | 1,133 | |
| Depreciation and amortization | | 2,641 | | | 1,705 | | | 7,546 | | | 5,246 | |
| Non-GAAP EBITDA | | $ | 21,428 | | | $ | 10,396 | | | $ | 43,993 | | | $ | 24,381 | |
| Stock compensation expense | | 1,884 | | | 1,803 | | | 6,156 | | | 5,793 | |
Acquisition costs and impairment of long-lived and other assets2 | | 43 | | | 1,136 | | | 295 | | | 1,338 | |
Business realignment expenses2, 3 | | — | | | — | | | — | | | 5 | |
| Fair value adjustments to acquisition earn-outs | | (11,500) | | | — | | | (20,000) | | | — | |
| | | | | | | | |
| Non-GAAP Adjusted EBITDA | | $ | 11,855 | | | $ | 13,335 | | | $ | 30,444 | | | $ | 31,517 | |
1 Represents Interest and other expenses (income), net, per the Statement of Operations, excluding the non-service components of net periodic pension (benefit).
2 Acquisition costs, impairment of long-lived assets and other assets, and business realignment expenses are components of Other operating expenses, net on the Statements of Operations. |
| | | | | | | | |
| | | Three Months Ended December 31, |
| | | 2017 | | 2016 |
| | | (In thousands)
(Unaudited) |
| Net loss | | $ | (1,212 | ) | | $ | (8,397 | ) |
| Interest and other (income) expense, net | | (425 | ) | | 34 |
|
| (Benefit) provision for income taxes | | (4,815 | ) | | 103 |
|
| Depreciation and amortization | | 1,211 |
| | 1,429 |
|
| EBITDA | | (5,241 | ) | | (6,831 | ) |
| Stock compensation expense | | 930 |
| | 2,500 |
|
| Business realignment expenses* | | 1,349 |
| | — |
|
| Adjusted EBITDA | | $ | (2,962 | ) | | $ | (4,331 | ) |
*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.
Critical Accounting Policies and Estimates
The Company's critical accounting policies and estimates are described in our Annual Report on Form 10-K for the year ended September 30, 2021, and in Note 2 — Summary of Significant Accounting Policies to the condensed consolidated financial statements. The following discussion is a supplement to the disclosures referenced in connection with accounting estimates made in preparing the preliminary purchase accounting for the acquisition Bid4Assets as of November 1, 2021.
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., 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 of operations in the period it is modified.
Intangible assets. Intangible assets consist of contract intangibles, brand and technology, and patent and trademarks. Intangible assets are amortized using the straight-line method over their estimated useful lives. The preliminary fair value of acquired intangible assets, excluding goodwill, arising from the Bid4Assets acquisition was $16.5 million. This balance consisted of the following identified intangible assets, each with their own significant assumptions used, as follows:
•Contract Intangibles - We valued the contract intangibles using the multi-period excess earnings method, an income approach valuation model. The significant assumptions used in the income approach includes estimates about future expected cash flows from supplier contracts, the attrition rate, and the discount rate.
•Developed Software - We valued the developed software by applying the relief-from-royalty method, an income approach valuation model. The significant assumptions used in the relief-from-royalty method include estimates about future expected cash flows from the developed software, the royalty rate, the obsolescence factor and the discount rate.
•Trade Name - We valued the trade name acquired using a relief-from-royalty method. The significant assumptions used in the relief-from-royalty method include future expected cash flows from the trade name, the royalty rate, and the discount rate.
Earn-out liability. Shareholders of Bid4Assets are eligible to receive up to $37.5 million in cash, payable based on Bid4Assets' achievement of trailing twelve-month EBITDA targets measured at the end of each calendar quarter until the quarter ended December 31, 2022. The earn-out consideration was preliminarily fair valued at approximately $28.0 million as of the acquisition date, with fair value subsequently measured to be $4.5 million as of June 30, 2022. The significant unobservable inputs used in the fair value measurement categorized within Level 3 of the fair value hierarchy included estimated results of operations over the earn-out period, a high level of volatility of gross profit and operating expenses whichgiven the nature of the business model and its economic environment create a wider range of potential outcomes over the earn-out period, and the discount rate.
Goodwill. Goodwill represents the costs in excess of the fair value of net assets acquired through acquisitions by the Company. Pursuant to our preliminary purchase price allocation, goodwill arising from the acquisition was determined to be $30.0 million. See Note 3 - Bid4Assets Acquisition for further information. As discussed in Note 11 – Fair Value Measurement, the fair value of the Bid4Assets earn-out liability declined by $20.0 million during the nine months ended June 30, 2022, due to timing changes impacting the level of auction events and transactions that are excluded from Adjusted EBITDA,expected to occur during the earn-out period ending December 31, 2022. These timing changes have not reflected substantive changes to the long-term outlook for real estate sales within the GovDeals segment and were not considered a triggering event for testing goodwill or long-lived assets for impairment as of June 30, 2022. The Company will continue to monitor for changes that could impact the recoverability of its goodwill.
Components of Revenue and Expenses
Revenue. Refer to the discussion in the Our revenue section above, and to Note 2 — Summary of Significant Accounting Policies in our Annual Report on Form 10-K for discussion of the Company's related accounting policies.
Cost of goods sold. Refer to the discussion in Note 2 — Summary of Significant Accounting Policies in our Annual Report on Form 10-K for discussion of the Company's Costs of goods sold and related accounting policies.
Technology and operations. Technology expenses primarily consist of the cost of technical staff (including stock compensation), third party services, licenses, and infrastructure, all as required to develop, configure , deploy, maintain, and secure our marketplace platforms, business operational systems, and facilities. Technology expenses are net of the required capitalization of costs associated with enhancing our marketplace platforms and other software development activities.
Depreciation and amortization of capitalized software development costs, purchased software, acquired developed software intangible assets, and computer hardware are included within Depreciation and amortization in the accompanying Consolidated Statements of Operations. Technology expenses are presented separately from Costs of goods sold (excluding depreciation and amortization) in the Consolidated Statements of Operations, as these expenses provide for the general availability of our marketplace platforms and other business operational systems and are not attributable to specific revenue generating transaction activity occurring on our marketplaces.
Because our marketplaces and support systems require frequent upgrades and enhancements to maintain viability, we have determined that the useful life for certain internally developed software is less than one year. As a result, we expense those costs as incurred. However, where we determine that the useful life of the internally developed software will be greater than one year, we capitalize development costs in accordance with ASC 350-40, Internal-use software. As such, we are capitalizing certain development costs associated with our e-commerce platforms, as well as other software development activities.
Operations expenses consist primarily of operating costs, including buyer relations, shipping logistics and distribution center operating costs.
Sales and marketing. Sales and marketing expenses include the cost of our sales and marketing personnel as well as the cost of marketing and promotional activities. These activities include all sales and marketing-related activity, including but not limited to trade shows and online marketing campaigns such as paid search advertising.
General and administrative. General and administrative expenses include all corporate and administrative functions that support our operations and provide an infrastructure to facilitate our future growth. These expenses are generally more fixed in nature than our other operating expenses and do not significantly vary in response to the volume of merchandise sold through our marketplaces.
Depreciation and amortization. Depreciation and amortization expenses consist of depreciation of property and equipment, amortization of internally developed software, and amortization of intangible assets.
Other operating expenses (income). Other operating expenses (income) includes impairment of long-lived and other assets, the change in fair value of contingent consideration, impacts of lease terminations, as well as business realignment expenses, including those associated with restructuring initiatives and the exit of certain business operations.
Interest and other income, net. Interest and other income, net consists of interest income on interest bearing checking accounts, money market funds, and the Statementprior promissory note issued to JTC, interest and unused commitment fees in connection with the Company's Credit Agreement, the components of Operations. See Note 11 to Notes to Consolidated Financial Statements for further detail.
Critical Accounting Estimatesnet periodic pension (benefit) other than the service component, and impacts of foreign currency fluctuations.
Income taxes. For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income (loss). Our discussion and analysiseffective income tax rate after discrete items was 11.7% for the nine months ended June 30, 2022. The effective tax rate differed from the statutory federal rate of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect 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, often21% primarily as a result of the needimpact of foreign, state, and local income taxes and permanent tax adjustments, the most significant of which was the exclusion of the $20.0 million non-cash gain from the fair market value adjustment of the Bid4Assets acquisition earn-out liability.. .
Results of Operations
The following table sets forth, for the periods indicated, our operating results: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Nine Months Ended June 30, |
| (dollars in thousands) | 2022 | | 2021 | | $ Change | | % Change | | 2022 | | 2021 | | $ Change | | % Change |
| Purchase revenues | $ | 35,507 | | | $ | 37,862 | | | $ | (2,355) | | | (6.2) | % | | $ | 109,109 | | | $ | 104,902 | | | $ | 4,207 | | | 4.0 | % |
| Consignment and other fee revenues | 34,359 | | | 31,804 | | | 2,555 | | | 8.0 | | | 95,739 | | | 82,302 | | | 13,437 | | | 16.3 | |
| Total revenues | 69,866 | | | 69,666 | | | 200 | | | 0.3 | | | 204,848 | | | 187,204 | | | 17,644 | | | 9.4 | |
| Costs and expenses from operations: | | | | | | | | | | | | | | | |
| Cost of goods sold (excludes depreciation and amortization) | 28,932 | | | 28,543 | | | 389 | | | 1.4 | | | 85,662 | | | 77,501 | | | 8,161 | | | 10.5 | |
| | | | | | | | | | | | | | | |
| Technology and operations | 13,782 | | | 12,307 | | | 1,475 | | | 12.0 | | | 41,573 | | | 34,952 | | | 6,621 | | | 18.9 | |
| Sales and marketing | 10,900 | | | 9,661 | | | 1,239 | | | 12.8 | | | 32,217 | | | 27,679 | | | 4,538 | | | 16.4 | |
| General and administrative | 6,389 | | | 7,676 | | | (1,287) | | | (16.8) | | | 21,672 | | | 21,578 | | | 94 | | | 0.4 | |
| Depreciation and amortization | 2,641 | | | 1,705 | | | 936 | | | 54.9 | | | 7,546 | | | 5,246 | | | 2,300 | | | 43.8 | |
| Fair value adjustment of acquisition earn-outs | (11,500) | | | — | | | (11,500) | | | NM | | (20,000) | | | — | | | (20,000) | | | NM |
| Other operating expenses, net | 27 | | | 1,180 | | | (1,153) | | | (97.7) | | 18 | | | 1,390 | | | (1,372) | | | (98.7) | |
| Total costs and expenses | 51,171 | | | 61,072 | | | (9,901) | | | (16.2) | | | 168,688 | | | 168,346 | | | 342 | | | 0.2 | |
| Income from operations | 18,695 | | | 8,594 | | | 10,101 | | | 117.5 | | 36,160 | | | 18,858 | | | 17,302 | | | 91.7 |
| Interest and other expenses (income), net | 104 | | | (254) | | | 358 | | | 140.9 | | | (73) | | | (468) | | | 395 | | | 84.4 | |
| Income before provision for income taxes | 18,591 | | | 8,848 | | | 9,743 | | | 110.1 | | 36,233 | | | 19,326 | | | 16,907 | | | 87.5 |
| Provision for income taxes | 2,183 | | | 429 | | | 1,754 | | | 408.9 | | | 4,254 | | | 1,133 | | | 3,121 | | | 275.5 | |
| Net income | $ | 16,408 | | | $ | 8,419 | | | $ | 7,989 | | | 94.9% | | $ | 31,979 | | | $ | 18,193 | | | $ | 13,786 | | | 75.8% |
NM = not meaningful
The following table presents reportable segment GMV, revenue, segment gross profit (which is calculated as total revenue less cost of goods sold (exclusive of depreciation and amortization)), and segment gross profit as a percentage of total revenue for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Nine Months Ended June 30, | |
| (dollars in thousands) | | 2022 | | 2021 | | 2022 | | 2021 | |
| GovDeals: | | | | | | | | | |
| GMV | | $ | 222,238 | | | $ | 146,058 | | | $ | 559,429 | | | $ | 364,601 | | |
| Total revenue | | $ | 16,587 | | | $ | 14,658 | | | $ | 45,130 | | | $ | 36,448 | | |
| Segment gross profit | | $ | 15,765 | | | $ | 13,965 | | | $ | 42,913 | | | $ | 34,544 | | |
| Segment gross profit as a percentage of total revenue | | 95.0 | % | | 95.3 | % | | 95.1 | % | | 94.8 | % | |
| | | | | | | | | | |
| RSCG: | | | | | | | | | |
| GMV | | $ | 60,476 | | | $ | 61,231 | | | $ | 172,930 | | | $ | 171,557 | | |
| Total revenue | | $ | 42,374 | | | $ | 44,095 | | | $ | 122,883 | | | $ | 118,083 | | |
| Segment gross profit | | $ | 15,942 | | | $ | 17,755 | | | $ | 46,818 | | | $ | 48,315 | | |
| Segment gross profit as a percentage of total revenue | | 37.6 | % | | 40.3 | % | | 38.1 | % | | 40.9 | % | |
| | | | | | | | | | |
| CAG: | | | | | | | | | |
| GMV | | $ | 42,292 | | | $ | 37,379 | | | $ | 129,674 | | | $ | 106,222 | | |
| Total revenue | | $ | 7,796 | | | $ | 8,467 | | | $ | 27,996 | | | $ | 25,872 | | |
| Segment gross profit | | $ | 6,271 | | | $ | 7,099 | | | $ | 21,076 | | | $ | 20,445 | | |
| Segment gross profit as a percentage of total revenue | | 80.4 | % | | 83.8 | % | | 75.3 | % | | 79.0 | % | |
| | | | | | | | | | |
| Machinio: | | | | | | | | | |
| GMV | | $ | — | | | $ | — | | | $ | — | | | $ | — | | |
| Total revenue | | $ | 3,109 | | | $ | 2,446 | | | $ | 8,839 | | | $ | 6,801 | | |
| Segment gross profit | | $ | 2,956 | | | $ | 2,304 | | | $ | 8,379 | | | $ | 6,399 | | |
| Segment gross profit as a percentage of total revenue | | 95.1 | % | | 94.2 | % | | 94.8 | % | | 94.1 | % | |
| | | | | | | | | | |
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| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Consolidated: | | | | | | | | | |
| GMV | | $ | 325,006 | | | $ | 244,668 | | | $ | 862,033 | | | $ | 642,380 | | |
| Total revenue | | $ | 69,866 | | | $ | 69,666 | | | $ | 204,848 | | | $ | 187,204 | | |
Three Months Ended June 30, 2022, Compared to make estimates aboutthe Three Months Ended June 30, 2021
Segment Results
GovDeals. Total revenues from our GovDeals reportable segment increased 13.2%, or $1.9 million, due to a 52.2%, or $76.2 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 7.5% from 10.0% last year. As a result of the increase in revenues, segment gross profit increased 12.9%, or $1.8 million. Segment gross profit as a percentage of total revenue remained relatively consistent between the periods.
RSCG. Revenue from our RSCG reportable segment decreased 3.9%, or $1.7 million, due to a 1.2%, or $0.8 million, decrease in GMV as expanded diversification in client programs, sales channels, and its distribution network were offset by changes in retail consumer behavior, as some client returns management programs provided fewer higher value products than in the prior year. Segment gross profit decreased by 10.2%, or $1.8 million, due to that unfavorable change in the mix of inventory handled by the RSCG segment during the current quarter, causing segment gross profit as a percentage of total revenue to decrease by 2.7%.
CAG. Revenue from the CAG reportable segment decreased by 7.9%, or $0.7 million, primarily due to the impacts of the COVID-19 lockdowns in China, as GMV increases 13.1%, or $4.9 million were offset by an increase in sales conducted with partner organizations. As a result of the decrease in revenues, segment gross profit decreased 11.7%, or $0.8 million. Segment gross profit as a percentage of total revenues decreased 3.4% due to inherent variations in the mix of assets sourced and sold by the CAG segment in any given period. Further, challenged global supply chains are experiencing heightened disruptions from the Russian invasion of Ukraine and its impacts on international trade and energy markets, and the recent COVID-19 lockdowns in regions of China, which could limit the volume of assets made available for sale in any quarterly period.
Machinio. Revenue from our Machinio reportable segment increased 27.1%, or $0.7 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, gross profit increased 28.3%, or $0.7 million. Segment gross profit as a percentage of total revenue increased 0.9% due to the growth in subscribers and pricing.
Consolidated Results
Total revenues - Total consolidated revenue increased $0.2 million, or 0.3%. Refer to the discussion of Segment Results above for discussion of the increase in revenue.
Cost of goods sold (excludes depreciation and amortization). Cost of goods sold increased $0.4 million, or 1.4%, largely consistent with the change in total revenues.
Technology and operations expenses. Technology and operations expenses increased $1.5 million, or 12.0%, as we are investing in technology and operations to continue our growth and diversification efforts, including RSCG's expansion of its distribution network and launching AllSurplus Deals as a new marketplace offering consumers deals for curbside pickup.
Sales and marketing expenses. Sales and marketing expenses increased $1.2 million, or 12.8%, as we are investing in 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 $1.3 million, or 16.8%, 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 investments in our technology, operations, sales and marketing functions.
Depreciation and amortization. Depreciation and amortization expense increased $0.9 million, or 54.9%, 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 an $11.5 million non-cash gain due to a reduction in the fair value of the Bid4Assets earn-out liability during the three months ended June 30, 2022. See Note 11 - Fair Value Measurement for further information.
Other operating expenses, net. Other operating expenses, net decreased $1.2 million due to the $1.1 million loss during the three months ended June 30, 2021, following the full satisfaction and discharge of JTC's indebtedness to the Company. Refer to the discussion in Note 2 - Summary of Significant Accounting Policies.
Interest and other expenses (income), net. Interest and other expenses (income), net increased $0.4 million primarily due to the effect of matterschanges in foreign exchange rates.
Provision for income taxes. Provision for income taxes increased $1.8 million primarily due to the increase in our effective tax rate following the release of our valuation allowance on US deferred tax assets during the fiscal year ended September 30, 2021.
Nine Months Ended June 30, 2022, Compared to the Nine Months Ended June 30, 2021
GovDeals. Total revenues from our GovDeals reportable segment increased 23.8%, or $8.7 million, due to a 53.4%, or $194.8 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 are inherently uncertain. We continuously evaluatereason, revenue as a percentage of GMV decreased to 8.1% from 10.0% last year. As a result of the increase in revenues, segment gross profit increased 24.2%, or $8.4 million. Segment gross profit as a percentage of total revenue remained relatively consistent between the periods.
RSCG. Revenue from our critical accounting estimates. We base our estimates on historical experienceRSCG reportable segment increased 4.1%, or $4.8 million, due to a 0.8%, or $1.4 million, increase in GMV as it continues to expanded diversification in client programs, sales channels, and on various other assumptions that are believed to be reasonableits distribution network, as well as an increase in the mix of transactions conducted under the circumstances,purchase model. Segment gross profit as a percentage of total revenue decreased by 3.1%, or $1.5 million, and was impacted by changes in retail consumer behavior, as some client returns management programs provided fewer higher value products than in the resultsprior year. As a result, segment gross profit as a percentage of which formtotal revenue decreased by 2.8%.
CAG. Revenue from the basis for making judgments aboutCAG reportable segment increased by 8.2%, or $2.1 million, due to a 22.1%, or $23.5 million, increase in GMV driven by increasing opportunities to obtain and sell inventory under our purchase model, and strong consignment sales in the carrying valuesenergy and heavy equipment categories. Revenues did not increase at the same rate as GMV due to increases in the mix of transactions conducted with partner organizations. As a result of the increase in revenues, segment gross profit increased 3.1%, or $0.6 million. Segment gross profit as a percentage of total revenue decreased 3.7% due to inherent variations in the mix of assets sourced and liabilities thatsold by the CAG segment in any given period. Further, challenged global supply chains are not readily apparentexperiencing heightened disruptions from other sources. Actual results may differthe Russian invasion of Ukraine and its impacts on international trade and energy markets, and the recent COVID-19 lockdowns in regions of China, which could limit the volume of assets made available for sale in any quarterly period.
Machinio. Revenue from these estimates under different assumptionsour Machinio reportable segment increased 30.0%, or conditions.$2.0 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 gross profit increased 30.9%, or $2.0 million. Segment gross profit as a percentage of total revenue increased 0.7% due to the growth in subscribers and pricing.
Consolidated Results
Total revenues - Total consolidated revenue increased $17.6 million, or 9.4%. Refer to the discussion of Segment Results above for discussion of the increase in revenue.
Cost of goods sold (excludes depreciation and amortization). Cost of goods sold increased $8.2 million, or 10.5%, which changed at a higher rate than Revenue recognition. Forprimarily due to an increase in principal transactions at our RSCG and CAG reportable segments.
Technology and operations expenses. Technology and operations expenses increased $6.6 million, or 18.9%, as we are investing in technology and operations to continue our growth, including RSCG's expansion of its distribution network, and launching AllSurplus Deals as a new marketplace offering consumers deals for curbside pickup.
Sales and marketing expenses. Sales and marketing expenses increased $4.5 million, or 16.4%, as we are investing in our ecommerce marketplaces,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 increased $0.1 million, or 0.4%, primarily due to increased corporate support costs to support the anticipated growth resulting from the investments in our technology, operations, sales and marketing functions, partially offset by changes in expected attainment of certain variable compensation targets.
Depreciation and amortization. Depreciation and amortization expense increased $2.3 million, or 43.8%, 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 $20.0 million non-cash gain due to a reduction in the fair value of the Bid4Assets earn-out liability during the nine months ended June 30, 2022. See Note 11 - Fair Value Measurement for further information.
Other operating expenses, net. Other operating expenses, net decreased $1.4 million primarily related to the $1.1 million loss during the nine months ended June 30, 2021, following the full satisfaction and discharge of JTC's indebtedness to the Company. Refer to the discussion in Note 2 - Summary of Significant Accounting Policies.
Interest and other expenses (income), net. Interest and other expenses (income), net decreased $0.4 million primarily related to no further interest income associated with the JTC promissory note following the full satisfaction and discharge of JTC's indebtedness to the Company during the nine months ended June 30, 2021. Refer to the discussion in Note 2 - Summary of Significant Accounting Policies.
Provision for income taxes. Provision for income taxes increased $3.1 million primarily due to the increase in our effective tax rate following the release of our valuation allowance on US deferred tax assets during the fiscal year ended September 30, 2021.
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 generatewe have funded through existing cash balances and cash generated from operations. From time to time, we may use our capital resources for other activities, such as contract start-up costs, joint ventures, share repurchases and acquisitions. As of June 30, 2022, we had $88.3 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.
The Company maintains a $25.0 million Credit Agreement due March 31, 2024 (Credit Agreement). The Company may draw upon the Credit Agreement for general corporate purposes. Repayments of any borrowings under the Credit Agreement shall become available for redraw at any time by the Company. The interest rate on borrowings under the Credit Agreement is a variable rate per annum equal to the Daily Simple Secured Overnight Financing Rate (SOFR) in effect plus a margin ranging from 1.25% to 1.75%. Interest is payable monthly. During the three and nine months ended June 30, 2022, the Company did not make any draws under the Credit Agreement. As of June 30, 2022, the Company had no outstanding indebtedness under the Credit Agreement and our borrowing availability was $25.0 million.
The obligations under the Credit Agreement are unconditionally guaranteed by us and each of our existing and subsequently acquired or organized domestic subsidiaries and secured on a first priority basis by a security interest (subject to permitted liens) in substantially all assets owned by us, and each of our revenue, we recognize revenue when allother 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 March 31, 2022, the Company was in full compliance with the terms and conditions of the following criteria are met:Credit Agreement.
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 COVID-19 pandemic has caused the consignment model,Company's GMV and is presented separately as it accounts for more than 10% of total revenue.
Transactions are also evaluatedrevenues to determine whether we should report gross proceeds as revenue, for example, when we act asfluctuate, and the principalCompany initially implemented cost control measures to protect against the uncertainties created by the severe economic restrictions in its initial phases. From a cash flow perspective, the Company employed working capital management practices, primarily in the arrangement, or if we should report revenue as our net commissions, for example, when we act as an agent. In arrangementsform of temporary extensions to vendor payment terms, and also experienced accumulation in its payables to sellers balance due to COVID-19 restrictions, which we are deemedcontinue to be a factor in certain countries, causing some buyer delays in their ability to pick up purchased assets. The Company is prepared to reimplement these measures should it face conditions consistent with the 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 percentageinitial phases of the gross proceeds fromCOVID-19 pandemic.
We expect to continue to 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 do not have any transactions, agreements or other contractual arrangements that could be considered material off-balance sheet arrangements.
On November 1, 2021, the sale that the seller pays to us upon completionCompany purchased all of the transaction.
We have evaluated our revenue recognition policy related toissued and outstanding shares of stock of Bid4Assets. Bid4Assets is a leading online marketplace focused on conducting real property auctions for the government, including tax foreclosure sales 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 uponsheriff's sales. Our investment through the acquisition of Bid4Assets will support continued growth in the GovDeals reportable segment, particularly in our determination:real estate vertical.
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 originalpreliminary 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).
The amount of our revenue that was generated outside of the U.S. for the three months ended December 31, 2017 and 2016 was 13.4% and 13.3%, respectively.
Inventory. Inventory consists of products available for sale and is valued at net realizable value. This valuation requires us to make judgments based on currently available information about expected recoverable value.
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 of being separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged. The fair value of identified intangible assets is based upon an estimate of 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.
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 calculate 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 implieddate fair value of the goodwill. Ifconsideration transferred to the former shareholders of Bid4Assets was approximately $42.7 million consisting of $14.7 million in cash (net of working capital adjustments totaling $0.3 million) and earn-out consideration with a preliminary fair value of 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 value 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 December 31, 2017, we have four reporting units. We will continue to sell trucks and related equipment through our other ecommerce marketplaces.
approximately $28.0 million. As part of our fiscal year 2017 annual impairment assessment performed asthe acquisition of July 1, 2017, we believed that certain events required performing a step one evaluationBid4Assets, former shareholders of goodwillBid4Assets are eligible to identify potential impairment. As a resultreceive earn-out consideration of the step one test, we determined that our reporting units with goodwill had fair values as of September 30, 2017, that substantially exceeded their respective book values.up to $37.5 million in cash. See Note 3 - Bid4Assets Acquisition for further information.
During the three months ended DecemberMarch 31, 2017, we did not identify any indicators of impairment.
We cannot predict2021, the occurrence of certain future events that might adversely affect the reportedfair value of goodwillthe earn-out liability was reduced by $8.5 million to $19.5 million, due to a decline in the auction events and other intangible assets, which totaled $45.9 million at December 31, 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 customers.
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 taxestransactions that 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 $10.1 million to our valuation allowancecompleted during the fiscal year ended September 30, 2017. earn-out period ending December 31, 2022, which included extended timelines to advance legislation that allows for online auctions of foreclosed real estate in certain target markets, and other client specific delays in bringing foreclosed real estate to auction.
During the three months ended December 31, 2017, we recorded a reduction to our valuation allowance of $10.3 million. The reduction is comprised of $10.3 million forJune 30, 2022, the re-measurement of deferred tax assets at the newly enacted tax rate and $1.7 million for the recognition of tax credits resulting from the repeal of the alternative minimum tax, netted against a charge of $1.7 million of net operating losses generated in the first quarter.
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 three months ended December 31, 2017, we did not identify new uncertain tax benefits.
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 all 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 as well as a Monte Carlo simulation to estimate the fair values of certain share-based payments.
The above list is not intended to be a comprehensive list of all of our accounting estimates. 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.
Components of Revenue and Expenses
Revenue. We generate a large portion of our revenue from 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 detail in the section above entitled “Critical Accounting Estimates.”
Cost of goods sold. Cost 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 and pay the DLA a revenue-sharing payment equal to 64.5% 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 of the cost of technical staff who develop, deploy, and maintain our marketplaces and corporate infrastructure. These personnel also develop and upgrade the software systems that support our operations, such as sales processing. Technology expenses also includes certain costs associated with our LiquidityOne platform. 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. As such, we are capitalizing certain development costs associated with our LiquidityOne platform. At the end of the first quarter of fiscal 2017, we determined that a seller 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. During the first quarter of fiscal 2018, we completed development of our new Return to Vendor ("RTV") module of the LiquidityOne platform, and began amortizing the associated capitalized costs during the quarter.
Operations expenses consist primarily of operating costs, including buyer relations, shipping logistics and distribution center operating costs.
Sales and marketing. Sales and marketing expenses include the cost of our sales and marketing personnel as well as the cost of marketing and promotional activities. These activities include online marketing campaigns such as paid search advertising.
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 administrative expenses are generally more fixed in nature than our operating expenses and do not vary directly with the volume of merchandise sold through our marketplaces.
Depreciation and amortization. Depreciation and amortization expenses consist primarily of the depreciation and amortization of amounts recorded in connection with the purchase of furniture, fixtures and equipment and amortization of intangible assets from our acquisitions.
Other operating expenses (income). Other operating expenses (income) includes the change in fair value of financial assets and liabilities, as well as business realignment expenses, including those associated with restructuring initiatives and the exit of certain business operations.
Interest and other (income) expense, net. Interest and other (income) expense, net, consists of interest income on the note receivable related to the sale of the Jacobs Trading business, impacts of foreign currency fluctuations, and gains and losses on the sale of fixed assets.
Income taxes. For interim income tax reporting, the Company estimates its annual effective tax rate and applies this effective tax rate to its year to date pre-tax (loss) income. The Company’s effective income tax rate before discrete itemsearn out liability was -5.8% for the three months ended December 31, 2017. The 2018 effective tax rate differed from the statutory federal rate of 24.53% primarily as a result of the valuation allowance charge for fiscal 2017 and the impact of foreign, state, and local income taxes and permanent tax adjustments.
Results of Operations
The following table sets forth, for the periods indicated, selected statement of operations data expressed as a percentage of revenue:
|
| | | | | | |
| | | Three Months Ended December 31, |
| | | 2017 | | 2016 |
| Revenue | | 100.0 | % | | 100.0 | % |
| Costs and expenses from operations: | | |
| | |
|
| Cost of goods sold | | 45.2 |
| | 45.7 |
|
| Seller distributions | | 5.4 |
| | 6.4 |
|
| Technology and operations | | 29.6 |
| | 30.9 |
|
| Sales and marketing | | 13.6 |
| | 14.1 |
|
| General and administrative | | 12.4 |
| | 13.9 |
|
| Depreciation and amortization | | 2.0 |
| | 2.0 |
|
| Other operating expenses (income) | | 2.4 |
| | (1.3 | ) |
| Total costs and expenses | | 110.6 |
| | 111.7 |
|
| Loss from operations | | (10.6 | ) | | (11.7 | ) |
| Interest and other (income) expense, net | | (0.7 | ) | | — |
|
| (Loss) before provision for income taxes | | (9.9 | ) | | (11.7 | ) |
| (Benefit) provision for income taxes | | (7.9 | ) | | 0.2 |
|
| Net loss | | (2.0 | )% | | (11.9 | )% |
The following table presents segment revenue, gross profit, and gross profit margin for the periods indicated:
|
| | | | | | | | | |
| | | | Three Months Ended December 31, |
| | | | 2017 | | 2016 |
| GovDeals: | | | | |
| | Total revenue | | $ | 7,040 |
| | $ | 5,813 |
|
| | Gross profit | | 6,543 |
| | 5,438 |
|
| | Gross profit margin | | 92.9 | % | | 93.5 | % |
| | | | | | |
| CAG: | | | | |
| | Total revenue | | 32,063 |
| | 42,506 |
|
| | Gross profit | | 17,603 |
| | 21,202 |
|
| | Gross profit margin | | 54.9 | % | | 49.9 | % |
| | | | | | |
| RSCG: | | | | |
| | Total revenue | | 20,485 |
| | 21,411 |
|
| | Gross profit | | 6,728 |
| | 7,002 |
|
| | Gross profit margin | | 32.8 | % | | 32.7 | % |
| | | | | | |
| Corporate & Other: | | | | |
| | Total revenue | | 1,555 |
| | 1,065 |
|
| | Gross profit | | (675 | ) | | 335 |
|
| | Gross profit margin | | (43.4 | )% | | 31.5 | % |
| | | | | | |
| Consolidated: | | | | |
| | Total revenue | | 61,143 |
| | 70,796 |
|
| | Gross profit | | $ | 30,199 |
| | $ | 33,977 |
|
| | Gross profit margin | | 49.4 | % | | 48.0 | % |
Three Months Ended December 31, 2017 Compared to Three Months Ended December 31, 2016
Segment Results
GovDeals. Revenue from our GovDeals segment increased 21.1%, or $1.2reduced by $11.5 million, due to additional sales volumefurther client specific delays in bringing foreclosed real estate to auction.
These changes resulted from existing clients and an increase in the number of new sellers. GMV from this segment increased 26.8%, or $15.1 million, also due to additional sales volume from existing clients and an increase in the number of new sellers. Gross profit within this segment increased 20.3%, or $1.1 million, to $6.5 million for the three months ended December 31, 2017, from $5.4 million for the three months ended December 31, 2016, dueevents occurring subsequent to the new business. November 1, 2021, acquisition date and therefore, were not known nor knowable at that time.
As of March 31, 2022, Bid4Assets achieved a percentage of revenue, gross profit slightly decreased to 92.9%, from 93.5%trailing twelve-month EBITDA threshold resulting in the prior year. Gross profit is calculated as total revenue less cost of goods sold and client distributions.
CAG. Revenue from our CAG segment decreased 24.6%, or $10.4a $3.5 million due to a lower volume of goods sold under our Surplus Contract, and a change in mix of commodities to lower value commodities sold under our Scrap contract. Also contributing to the decrease in revenue is lower service revenue related to our Surplus contract, as well as a decrease in revenue within our CAG Commercial business. GMV from our CAG segment decreased 29.4%, or $22.4 million, due to a lower volume of goods sold under our Surplus Contract, a change in mix of commodities to lower value commodities sold under our Scrap contract, as well as a decrease in GMV related to our CAG Commercial business. Gross profit within the CAG segment decreased 17.0%, or $3.6 million, to $17.6 million for the three months ended December 31, 2017, from $21.2 million for the three months ended December 31, 2016. This decrease can primarily be attributed to the lower volume of goods sold under our Surplus Contract, a change in mix of commodities to lower value commodities sold under our Scrap Contract, and lower service revenue under the Surplus Contract. As a percentage of revenue, gross profit increased to 54.9%, from 49.9%.
RSCG. Revenue from our RSCG segment decreased 4.3%, or $0.9 million. The decrease in revenue is drivenpayment made by the change in mix from purchase model to consignment model transactions. GMV from our RSCG segment increased 16.9%, or
$4.2 million over fiscal 2016. The increase in GMV is attributable to increased sales under our consignment model during fiscal 2018. The overall decrease in revenue, but increase in GMV is due to a change in mix from purchase to consignment model transactions. Gross profit within the RSCG segment decreased 3.9%, or $0.3 million for the three months ended December 31, 2017, due to the decrease in revenue. As a percentage of revenue, gross profit slightly increased to 32.8%, from 32.7%.
Corporate & Other. Revenue from Corporate & Other primarily relates to IronDirect and certain TruckCenter operations. The decrease in revenue of $0.5 million is largely made up of the decreases in revenue related to our decision to exit certain TruckCenter operations in January 2017, partially offset by increases in revenue from IronDirect. Gross profit within Corporate & Other decreased $1.0 million over prior year, mostly attributable to a $0.6 million inventory reserve within IronDirect during the first quarter of fiscal 2018, and $0.3 million of gross profit related to our Truckcenter operationsCompany during the three months ended December 31, 2017, which we subsequently exited.June 30, 2022. As of June 30, 2022, Bid4Assets has not achieved any additional trailing twelve-month EBITDA thresholds.
Consolidated Results
Total Revenue. Total consolidated revenue decreased $9.7 million, or 13.7%, to $61.1 millionWe did not record a provision for the three months ended December 31, 2017, from $70.8 million for the three months ended December 31, 2016, primarily due to a $10.4 million decrease in revenue from our CAG segment, a $0.9 million decrease in revenue from our RSCG segment, partially offset by a $1.2 million increase in revenue from our GovDeals segment. Total consolidated GMV decreased $4.3 million, or 2.8%, to $155.4 million for the three months ended December 31, 2017, from $159.7 million for the three months ended December 31, 2016, primarily due to a $22.4 million decrease in GMV from our CAG segment, a $1.2 million decrease within Corporate & Other, partially offset by a $15.1 million increase in GMV from our GovDeals segment, and a $4.2 million increase in GMV from our RSCG segment.
Cost of goods sold. Cost of goods sold decreased $4.7 million, or 14.6%, to $27.6 million for the three months ended December 31, 2017, from $32.3 million for the three months ended December 31, 2016. Approximately $4.3 million of this decrease is attributable to a lower volume of sales under our Surplus Contract during the three months ended December 31, 2017. In line with these changes, cost of goods sold slightly decreased to 45.2% of revenue, from 45.7%.
Seller distributions. Seller distributions decreased $1.2 million, or 26.7%, to $3.3 million for the three months ended December 31, 2017, from $4.5 million for the three months ended December 31, 2016, due to lower sales under our Scrap Contract during the three months ended December 31, 2017. As a percentage of revenue, seller distributions decreased to 5.4%, from 6.4%.
Technology and operations expenses. Technology and operations expenses decreased $3.8 million, or 17.4%, to $18.1 million for the three months ended December 31, 2017, from $21.9 million for the three months ended December 31, 2016, due to a decrease in staff costs of approximately $3.4 million, partially the result of business realignment activities. As a percentage of revenue, technology and operations expenses decreased to 29.6%, from 30.9%.
Sales and marketing expenses. Sales and marketing expenses decreased $1.7 million, or 17.0%, to $8.3 million for the three months ended December 31, 2017, from $10.0 million for the three months ended December 31, 2016, due to decreases in staff cost of approximately $1.2 million, as well as lower marketing and promotional expenses. As a percentage of revenue, sales and marketing expenses decreased to 13.6%, from 14.1% in the prior year.
General and administrative expenses. General and administrative expenses decreased $2.3 million, or 23.2%, to $7.6 million for the three months ended December 31, 2017, from $9.9 million for the three months ended December 31, 2016. Included within this decrease are reductions in overall staff cost of approximately $1.2 million, partially the result of business realignment activities, as well as lower non-incomedeferred U.S. tax regulatory costs, and a decrease in certain lease costs. As a percentage of revenue, general and administrative expenses decreased to 12.4%, from 13.9% in the prior year.
Depreciation and amortization expenses. Depreciation and amortization expenses decreased $0.2 million, or 14.3%, to $1.2 million for the three months ended December 31, 2017, from $1.4 million for the three months ended December 31, 2016.
Other operating expenses (income). Other operating expenses (income) reflected an expense of approximately $1.5 million in the three months ended December 31, 2017, which consisted of approximately $1.3 million of restructuring cost (for further information, see Note 11 to the Consolidated Financial Statements included in this Report), and a $0.1 million loss on the value of a right the Company holds from its participation in certain principal transactions in the Company's CAG business. In the three months ended December 31, 2016, Other operating expenses (income) reflected income of $0.9 million, which
represented a gain on the value of a right the Company holds from its participation in certain principal transactions in the Company's CAG business.
Interest and other (income) expense, net. Interest and other (income) expense, net, increased $0.4 million over prior year, consisting of a gain on sale of equipment of approximately $0.3 million, and $0.1 million of interest income on our note receivable.
(Benefit) provision for income taxes. (Benefit) provision for income taxes increased $4.9 million, to a benefit of $4.8 million for the three months ended December 31, 2017, from a provision of $0.1 million for the three months ended December 31, 2016, due to a decrease in the deferred tax balance resulting from the newly enacted lower corporate tax rate, a reduction to the valuation allowance, and the impactundistributed earnings of foreign state, and local taxes and permanent tax adjustments.
Net loss. Net loss for the three months ended December 31, 2017 was $1.2 million, compared to $8.4 million for the three months ended December 31, 2016.
Liquidity and Capital Resources
Historically, our primary cash needs have been working capital (including capital used for inventory purchases), whichsubsidiaries because we have funded primarily through cash generated from operations. As of December 31, 2017, we had approximately $96.8 million in cash. Throughout the quarter, we have continued to advance the design and development of our LiquidityOne platform, services and analytical tools to empower our clients 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, and during fiscal 2018, we plan to launch further marketplaces onto the platform. We will continue to incur additional costs throughout the duration of this initiative to implement the new platform and educate our employees and clients about the initiative.
The effects of the international provisions of the Tax Cuts and Job Act (“the Act”), which establish a territorial tax system and subject certain foreign earnings on which US tax is currently deferred to a one-time transition tax is uncertain. Based on a preliminary analysis, the Company has not recorded any provisional amounts in the financial statements for the three months ending December 31, 2017 and will re-evaluate its existing accounting positionintend to indefinitely reinvest unremittedthe earnings of these foreign earnings.subsidiaries outside the United States. The amount of such unremittedundistributed foreign earnings was approximately $8.4$8.1 million as of December 31, 2017.June 30, 2022. As of December 31, 2017,June 30, 2022 and September 30, 2017, approximately $17.42021, $21.1 million and $14.9$22.4 million, respectively, of cashCash and cash equivalents was held overseasoutside of the U.S.
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. We did not
The Company had no remaining share repurchase authorization as of September 30, 2021. On December 6, 2021, the Company's Board of Directors authorized a new stock repurchase plan of up to $20.0 million of the Company's outstanding shares under this programof common stock through December 31, 2023. The Company repurchased 1,159,066 shares for $20.0 million during the six months ended March 31, 2022.
On May 13, 2022, the Company's Board of Directors authorized a new stock repurchase plan of up to $12 million of our outstanding shares of common stock through June 30, 2024. The Company repurchased 408,211 shares for $5.4 million during the three months ended December 31, 2017 or 2016.June 30, 2022. As of December 31, 2017, weJune 30, 2022, the Company may repurchase an additional $10.1$6.6 million inof shares under this program.
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.
Changes in Cash Flows: ThreeNine Months Ended December 31, 2017June 30, 2022 Compared to Threethe Nine Months Ended December 31, 2016June 30, 2021
Net cash provided by operating activities was $3.5$31.1 million and $54.3 million for the threenine months ended December 31, 2017, as compared to net cash used by operating activities of $5.0June 30, 2022, and 2021, respectively. The $23.1 million for the three months ended December 31, 2016. The $8.5 million increasedecrease in cash provided by operationsoperating activities between periods was attributable to improved profitability as well ascash flows associated with accounts payable and payables to sellers which had a net decrease of $16.2 million due to reduced rates of change in the underlying transaction volumes during the current period. Our working capital improvements primarilyaccounts 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 collectionsaccounts payable and payables to sellers are expected to become more variable. The amount of receivablescash received and salessettled will be substantially higher than our take rate on such transactions, and the timing of inventory.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) provided by investing activities was $(17.4) million and $0.9 million for the nine months ended June 30, 2022, and June 30, 2021, respectively. The $18.3 million increase in cash used in investing activities was $1.0driven by an increase of $2.8 million in new property and equipment purchases from expansion of our distribution network, and $11.2 million in cash paid at closing to acquire Bid4Assets on November 1, 2021, net of cash acquired. See Note 3 - Bid4Assets Acquisitionfor the three months ended December 31, 2017, and $2.3 million for the three months ended December 31, 2016. further information.
Net cash used in investingfinancing activities was $31.0 million and $19.4 million for the threenine months ended December 31, 2017 consisted primarily of expenditures for capitalized software, purchases of equipment,June 30, 2022, and leasehold improvements.
NetJune 30, 2021, respectively. The $11.6 million increase in cash provided byused in financing activities was zero forprimarily driven by a $9.3 million increase in share repurchases and an earn-out payment of $3.5 million made in connection with the three months ended December 31, 2017, andBid4Assets acquisition, offset by $1.6 million in lower taxes paid in connection with the net cash provided by financing activities was $0.03 million for the three months ended December 31, 2016. Net cash provided bysettlement of stock compensation awards.
financing activities for the three months ended December 31, 2016 consisted primarily of proceeds from the exercise of common stock options.
Capital Expenditures.expenditures. Our capital expenditures consist primarily of capitalized software, computers and purchased software, office equipment, furniture and fixtures, and leasehold improvements. Capitalized software includes costs associated with our LiquidityOne platform. The timing and volume of such capital expenditures in the future will be affected by the addition of new customerssellers or buyers or expansion of existing customerseller or buyer relationships. We intend to fund those expenditures primarily from our existing cash balances and operating cash flows. Our capital expenditures for the threenine months ended December 31, 2017June 30, 2022, and June 30, 2021, were $1.0 million.$6.3 million and $3.5 million, respectively. This increase was primarily driven by enhancements to our platforms and marketplaces, as well as the expansion of our RSCG distribution network. As of December 31, 2017,June 30, 2022, we had no significant outstanding commitments for capital expenditures.
We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 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.
Off-Balance Sheet Arrangements
We do not have any transactions, obligations or relationships that could be considered material off-balance sheet arrangements.
Item 3.Quantitative and Qualitative Disclosures aboutAbout Market Risk.Risk
Interest rate sensitivity. We had no debt as As of December 31, 2017, and thusJune 30, 2022, we do not have any relateddebt, and we are not holding any short-term investments. Our cash and cash equivalents balance of $88.3 million is maintained within various interest rate exposure.bearing and earnings allowance checking accounts, as well as cash equivalent money market funds. Changes in interest rates on these checking accounts are not expected to have a significant impact to our consolidated results of operations. Our investment policy requires us to invest funds in excess of current operating requirements. The principal objectives of our investment activities are to preserve principal, provide liquidity and maximize income consistent with minimizing risk of material loss.
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 13.4% percentrates may affect our results. We report our operating results and financial condition in U.S. dollars. Our U.S. operations earn revenues and incur expenses primarily in U.S. dollars. Outside the United States, we predominantly generate revenues and expenses in the local currency. When we translate the results and net assets of these operations into U.S. dollars for reporting purposes, movements in exchange rates will affect reported results and net assets. Volatile market conditions arising from the COVID-19 pandemic and/or ongoing hostilities in Ukraine may result in significant changes in exchange rates, which could affect our sales are denominatedresults of operations expressed in foreign currencies. We have not engaged in any hedging or other derivative transactions to date.U.S. dollars.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer and Chief Accounting Officer,(Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
During the quarter ended December 31, 2017, as part of our LiquidityOne platform project, we continued to roll out a new enterprise resource planning system to additional areas of the company. The roll-out resulted in changes to certain internal controls over financial reporting. There has not occurred any further change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
As of December 31, 2017,June 30, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer our Chief Financial Officer, and our Chief AccountingFinancial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer Chief Financial Officer, and Chief AccountingFinancial Officer concluded that our disclosure controls and procedures were effective and were operating to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer principal financial officer, and principal accountingfinancial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the three months ended June 30, 2022, no change occurred in our internal controls over financial reporting that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.Proceedings
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 complaintInformation regarding the Company's legal proceedings may be found in the United States District Court for the District of Columbia (the ‘‘District Court’’) against our company 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 13 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 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 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 relatedaccompanying Notes to the alleged misrepresentation regarding the Company’s retail division were not dismissed. On May 16, 2016, we answered the amended complaint. Plaintiffs’ class certification was granted on September 6, 2017. The scheduling order in this action requires that fact discovery be completed by April 9, 2018, and that expert discovery be completed by October 1, 2018.condensed consolidated financial statements.
We believe the allegations in the amended complaint are without merit and cannot estimate a range of potential liability, if any, at this time.
In re Liquidity Services, Inc. Derivative Litigation, Civ. No. 2017-0080-JTL (Del. Ch.).
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. On November 27, 2017, the Court of Chancery granted the defendants’ motion to dismiss.
Following the dismissal of the putative derivative action discussed above, former plaintiffs Girardi and Slingerland sent us a letter dated January 5, 2018 (the “Shareholder Demand”) demanding that the Board of Directors take action to remedy purported breaches of fiduciary duties allegedly related to the claims asserted in the above-discussed securities class action and derivative actions. We acknowledged the Shareholder Demand on January 22, 2018. Our Board of Directors has delegated evaluation of the Shareholder Demand to the Audit Committee of the Board of Directors.
Item 1A. Risk Factors.Factors
Risks Related to Russian Invasion of Ukraine.
On February 24, 2022, Russian forces invaded Ukraine, and sustained conflict and disruption in the region is likely. Impact to Ukraine as well as actions taken by other countries, including new and stricter sanctions imposed by Canada, the United Kingdom, the European Union, the United States and other nations against officials, individuals, regions, and industries in Russia, Ukraine, and Belarus, could adversely affect the global economy and financial markets and thus adversely affect our business, financial condition and results of operations as well as the price of our common stock. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.
Total revenues directly associated with Russia and Ukraine are not material to our consolidated financial results. However, our business is exposed to the broader economic volatility associated with the invasion. For example, increased volatility in energy, steel and other metal scrap prices caused several clients to delay scheduled projects or suspend them indefinitely. In addition, some clients in Europe have suspended asset sales out of concern for increased scarcity of parts and other resources. To the extent the broader economic volatility associated with the invasion continues affecting project timelines and asset values, particularly in Europe and in the energy market globally, our results of operations could be adversely affected.
Our Machinio segment uses a small number of independent contractors based in Ukraine and Russia. If these independent contractors are unable to perform their duties due to local instability or political, economic or military conditions, then our Machinio segment’s ability to provide certain services and the development of new services or enhancement of existing services could be delayed, and our results of operations could be adversely affected.
The conflict and related sanctions could also increase the risk of cyber-attacks launched against businesses based in the countries which have imposed sanctions, including the United States. We are based in the United States and have business interests around the world. An increase in the prevalence of cyber-attacks increases the risk that our e-commerce marketplaces, information technology systems, networks, and services could be affected, magnifying the cyber-related risks described in our Annual Report on Form 10-K for fiscal year ended September 30, 2021.
Turbulent economic conditions may negatively affect our business and results of operations.
Our business may be adversely affected by turbulence in economic conditions such as employment levels, wage and salary levels, global supply chain constraints, trends in consumer confidence and spending, reductions in consumer net worth, interest rates, inflation, foreign exchange rate fluctuations, the availability of consumer credit and taxation policies. Consumer purchases in general may decline during recessions, periods of prolonged declines in the equity markets or housing markets and periods when disposable income and perceptions of consumer wealth are lower.
In addition to the other information set forth in this report, you should carefully consider the factors set forth in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017,2021, which could materially affect our business, financial condition or future results. The risks described in our Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Use of Proceeds
Not applicable.
Issuer Purchases of Equity Securities
The following table presents information about our repurchases of common stock during the three months ended June 30, 2022 (in thousands, except share and per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased1 | | 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 Programs |
| April 1, 2022 to April 30, 2022 | | — | | 0 | $ | — | | 0 | — | | | $ | — | |
| May 1, 2022 to May 31, 2022 | | 305,690 | | | $ | 13.30 | | | 305,690 | | | $ | 7,935 | |
| June 1, 2022 to June 30, 2022 | | 102,521 | | | $ | 13.48 | | | 102,521 | | | $ | 6,553 | |
| Total | | 408,211 | | | | | 408,211 | | | |
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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 June 30, 2022, participants surrendered 0 shares of common stock in the exercise of stock options, respectively. Any shares surrendered to the Company in this manner are not available for future grant.
From time to time, we have been authorized to repurchase issued and outstanding shares of our common stock under a share repurchase program approved by our Board of Directors. Share repurchases may be made through open market purchases, privately negotiated transactions or otherwise, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The repurchase program may be discontinued or suspended at any time and will be funded using our available cash.
As of June 30, 2022, the Company had $6.6 million authorization to repurchase shares under the May 13, 2022 Stock Repurchase Plan.
Item 5. Other Information
None
Item 6. Exhibits.Exhibits
|
| | | | | | | |
| Exhibit No. | | Description |
3.12.1 |
| | Stock Purchase Agreement, dated July 10, 2018, by and among the Company, Machinio, Corp., the stockholders of Machinio, Corp., and Shareholder Representative Services., LLC., incorporated herein by reference to Exhibit 2.1 to the Company's Quarterly Report on 10-Q, filed with SEC on August 2, 2018. |
| 2.2 | | | |
| 3.1 | | | |
| 3.2 |
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10.131.1 |
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31.1 |
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| 31.2 |
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31.332.1 |
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32.1 |
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| 32.2 |
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32.3101 |
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101 |
| | The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2017,June 30, 2022, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statement of Stockholders' Equity, (v) Condensed Consolidated Statements of Cash Flows, and (iv)(vi) Notes to the Unaudited Consolidated Financial Statements. |
| 104 | | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
# Designates management or compensation plans.
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 February 1, 2018.authorized.
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| LIQUIDITY SERVICES, INC. |
| | (Registrant) |
| | |
| | |
By:August 4, 2022 | By: | /s/ William P. Angrick, III |
| | William P. Angrick, III |
| | Chairman of the Board of Directors |
| | and Chief Executive Officer |
| | |
| | |
By:August 4, 2022 | By: | /s/ Jorge A. Celaya |
| | Jorge A. Celaya |
| Executive Vice President and | Chief Financial Officer |
| | |
| | |
By: | /s/ Michael Sweeney | |
| Michael Sweeney | |
| Vice President and Chief Accounting Officer | |
