LIQUIDITY SERVICES INC (LQDT) SEC Filing 10-K Annual report for the fiscal year ending Sunday, September 30, 2018

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LIQUIDITY SERVICES ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2018 FINANCIAL RESULTS
Consolidated Fourth Quarter GMV of $155.3 million-- Revenue of $52.7 million -- GAAP Net Loss of $(1.0) million
Consolidated Fourth Quarter Non-GAAP Adjusted EBITDA of $(1.9) million
19% GMV growth in Q4-FY18, excluding the expired DoD Surplus contract, marks highest organic growth rate in six years and two consecutive fiscal years of organic growth
Business transformation drives 75% improvement in consolidated Adjusted EBITDA in Q4-FY18 and 66% improvement in FY18
 
Bethesda, MD - December 6, 2018 -
Liquidity Services (NASDAQ: LQDT; www.liquidityservices.com), a global solution provider in the reverse supply chain with the world’s largest marketplace for business surplus, today announced financial results for the fourth quarter and fiscal year ended September 30, 2018. The company's Q4-FY18 performance reflected a strong quarter which exceeded our guidance range for Adjusted EBITDA, GAAP Net Loss and GAAP EPS and was at the high end of our guidance range for GMV and Adjusted EPS.

"In Q4-FY18 we achieved stronger growth and we began to reap the benefits of our business transformation, restructuring efforts, new service offerings and increased efficiencies in our operations. On a consolidated basis, our core business, excluding the DoD Surplus Contract, grew GMV by 19%, marking our highest organic quarterly GMV growth rate in six years. Driving this growth, our GovDeals segment grew GMV 14% as we sold higher volumes of higher-value assets, and our RSCG segment grew GMV 10% as we continued to drive more participation from sellers and buyers aided by new marketplace features and seller solutions. Reversing its prior year trend, our CAG segment (excluding the expired DoD Surplus Contract) grew GMV 39%. At the same time, we are proud of the achievements we have made in driving operating efficiencies while simultaneously investing in new sales, marketing and technology initiatives to accelerate our top line growth. In Q4-FY18, we improved our consolidated Adjusted EBITDA by 75% over the comparative period. This notable improvement reflects the successful execution of our realignment and growth strategies which we expect should continue to drive improved results over time," said Bill Angrick, Chairman and CEO of Liquidity Services.

"Overall, we are encouraged by the strides made in FY18 to reset our business following the wind down of the DoD Surplus Contract and to resume organic growth. Our FY18 GMV was up 5%, excluding our DoD Surplus Contract, driven by consistent growth in our GovDeals and RSCG segments throughout the year. FY18 consolidated adjusted EBITDA was up 66% over FY17," continued Mr. Angrick.

"Our strategy in FY19 and beyond remains focused on the long-term growth of our commercial and municipal government marketplaces on a global scale. Our strategic plan focuses on four pillars, which we refer to by the acronym “RISE”, which include: 1 - Recovery Maximization; 2 - Increase Volume; 3 - Service Expansion; and 4 - Expense Leverage. The objective of our RISE strategy is to deliver a more diversified, asset-light business with recurring revenue that focuses on profitability while growing a solid foundation for long-term growth. We continue to innovate our marketplace platform and grow our technology enabled services, such as cloud-based SaaS solutions and self-service offerings, to deliver enhanced value for our buyers, sellers and shareholders,” continued Mr. Angrick.

Update on LiquidityOne
Our LiquidityOne transformation initiative is designed to deliver an improved online marketplace platform and related tools to enhance our customer experience, operations and ability to scale to a much larger business. We believe a single, unified marketplace will drive increased traffic from our buyer base through more efficient marketing strategies and provide our buyers with a more efficient method of sourcing our global supply of available assets from the most recognizable sellers across the globe. Our plan is to launch a new consolidated marketplace in calendar year 2019 to provide a single online destination to search, find, and buy any asset from across our network of marketplaces. As part of the marketplace transition strategy, our Go-Dove marketplace is expected to launch on the new platform in early 2019, and the retail liquidation marketplace will be integrated into the new platform later in the year. The completion of these deployments will further align our business processes, marketing initiatives, and optimize our platform technology.

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The following information was filed by LIQUIDITY SERVICES INC on Thursday, December 6, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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  • 18487878_385
    Financial - Earnings
    The $32.3 million increase in cash provided by operations between periods was primarily attributable to improved profitability as well as changes in working capital from collections of receivables and sales of inventory.
  • 18487878_247
    Revenue - Product
    Additionally, revenue under the Scrap Contract decreased by approximately $7.0 million as it experienced a lower volume of goods sold, as well as a change in mix of commodities to lower value commodities.
  • 18487878_320
    Revenue - Product
    Revenue from the CAG segment decreased 24.3%, or $46.6 million, mostly due to lower volume related to our Surplus contract, a shift to lower value commodities sold within our Scrap contract, as well as a decrease in revenue within our industrial and energy verticals resulting from lower than expected volume and sales activity within those verticals.
  • 18487878_297
    Financial - Expense
    Depreciation and amortization expenses decreased $1.2 million, or 20.7%, to $4.6 million for the year ended September 30, 2018, from $5.8 million for the year ended September 30, 2017, due to an intangible asset having been fully amortized in 2017.
  • 18487878_253
    Revenue - Product
    Furthermore, a lower volume of goods sold under our Scrap Contract, as well as a change in mix of commodities to lower value commodities sold under that contract, partially offset by improved commodity prices, led to a further $7.0 million reduction in GMV.
  • 18487878_45
    Revenue - Product
    We also earn non-consignment fee revenue, which prior to the wind-down of our operations under the Surplus Contract, was largely made up of service revenue related to our Surplus contract.
  • 18487878_355
    Financial - Expense
    Depreciation and amortization expenses decreased $0.7 million, or 10.8%, to $5.8 million for the year ended September 30, 2017, from $6.5 million for the year ended September 30, 2016.
  • 18487878_352
    Financial - Expense
    General and administrative expenses decreased $3.9 million, or 9.8%, to $35.8 million for the year ended September 30, 2017, from $39.7 million for the year ended September 30, 2016, due to a decrease of insurance costs, as well as lower non-income tax regulatory costs.
  • 18487878_403
    Financial - Debt
    Additional debt would result in increased interest expense and could result in covenants that would restrict our operations.
  • 18487878_321
    Revenue - Product
    GMV from our CAG segment decreased 18.2%, or $53.9 million, due to lower volume related to our Surplus contract, a shift to lower value commodities sold within our Scrap contract, as well as a decrease in GMV within our industrial and energy verticals.
  • 18487878_433
    Financial - Earnings
    The guidance may be adopted either retrospectively or on a modified retrospective basis whereby the new standard would be applied to new and existing arrangements with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to retained earnings at the effective date for existing arrangements with remaining performance obligations.
  • 18487878_147
    Financial - Cash Flow
    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.
  • 18487878_333
    Financial - Earnings
    Gross profit within Corporate & Other decreased $4.1 million over the prior year, mostly attributable to the exit of certain Truckcenter operations and a $3.1 million inventory valuation reserve within IronDirect during 2017.
  • 18487878_349
    Revenue - Product
    Sales and marketing expenses decreased $2.4 million, or 6.4%, to $35.2 million for the year ended September 30, 2017, from $37.6 million for the year ended September 30, 2016, due to a decrease in staff related costs.
  • 18487878_469
    Financial - Debt
    The update provides new guidance regarding the classification of debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investments, beneficial interests in securitized transactions, and separately identifiable cash flows and application of the predominance principle.
  • 18487878_332
    Revenue - Product
    The decrease in revenue of $4.7 million, is largely from declines in Truckcenter related to our decision earlier in the year to exit certain TruckCenter operations.
  • 18487878_263
    Financial - Earnings
    Gross profit within the RSCG segment increased 9.8%, or $3.0 million, to $33.0 million for the year ended September 30, 2018, from $30.1 million for the year ended September 30, 2017, due to the overall increase in revenue described above.
  • 18487878_410
    Financial - Expense
    Inflation generally affects us by increasing our cost of labor and equipment.
  • 18487878_264
    Revenue - Product
    As a percentage of revenue, gross profit slightly increased to 32.4%, from 31.6%.
  • 18487878_243
    Revenue - Product
    As a percentage of revenue, gross profit slightly decreased to 92.6%, from 93.7%.
  • 18487878_318
    Revenue - Product
    As a percentage of revenue, gross profit slightly decreased to 93.7%, from 93.9%.
  • 18487878_329
    Revenue - Product
    As a percentage of revenue, gross profit slightly decreased to 31.6%, from 31.7%.
  • 18487878_237
    Financial - Income
    During 2018, 2017 and 2016, we had an effective income tax rate for continuing operations of approximately 44.6%, 1.1% and (82.1)%, respectively, which included federal, state and foreign income taxes.
  • 18487878_153
    Financial - Cash Flow
    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.
  • 18487878_381
    Financial - Shares / Equity
    As of September 30, 2018, we are authorized to repurchase up to an additional $10.1 million in shares under this program.
  • 18487878_439
    Financial - Earnings
    The expected impact on our reported results of adopting the new standard is a $0.8 million increase to retained earnings, with the offset as an increase to our assets at the transition date of October 1, 2018.
  • 18487878_317
    Financial - Earnings
    Gross profit within this segment increased 17.5%, or $3.8 million, to $25.2 million for the year ended September 30, 2017, from $21.4 million for the year ended September 30, 2016, due to higher sales volume.
  • 18487878_285
    Financial - Expense
    Approximately $13.4 million of this decrease is due to a reduction in operations related costs.
  • 18487878_294
    Financial - Expense
    Included within this decrease are reductions in overall staff cost of approximately $4.8 million primarily resulting from business realignment and restructuring initiatives.
  • 18487878_324
    Revenue - Product
    As a percentage of revenue, gross profit decreased to 49.6%, from 57.0%.
  • 18487878_169
    Other - Other
    Such events may include strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our base of buyers and sellers or material negative changes in our relationships with material buyers and sellers.
  • 18487878_339
    Financial - Expense
    A decrease of approximately $17.3 million is attributed to a decrease in transactions within our CAG segment, a $2.2 million decrease in cost of goods sold related to exiting certain TruckCenter operations, partially offset by a $0.7 million increase from our RSCG segment, and a $0.3 million increase from our GovDeals segment.
  • 18487878_305
    Financial - Expense
    Other operating expense of $3.7 million during 2017 represents $4.2 million related to business restructuring costs, partially offset by an approximate $0.6 million increase in the fair value of a right the Company held from its participation in certain principal transactions in the Company's CAG business, for the year ended September 30, 2017.
  • 18487878_361
    Financial - Expense
    Other operating expense of $3.7 million represents $4.2 million related to business restructuring costs, partially offset by an approximate $0.6 million increase in the fair value of a right the Company holds from its participation in certain principal transactions in the Company's CAG business, for the year ended September 30, 2017.
  • 18487878_259
    Revenue - Product
    The increase is driven by growth in both purchase and consignment model transaction revenue.
  • 18487878_343
    Revenue - Product
    As a percentage of revenue, distributions increased to 7.1% from 7.1%, which is due to the increases described above.
  • 18487878_155
    Other - Other
    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.
  • 18487878_91
    Revenue - Product
    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.
  • 18487878_226
    MA - Other
    Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets.
  • 18487878_298
    MA - Other
    Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets.
  • 18487878_356
    MA - Other
    Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets.
  • 18487878_227
    MA - Other
    Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets consist of expenses incurred to complete a business combination, adjustments to the value of an earn-out, and impairment of goodwill and long-lived assets.
  • 18487878_394
    Other - Other
    Our capital expenditures consist primarily of capitalized software, computers and purchased software, office equipment, furniture and fixtures, and leasehold improvements.
  • 18487878_310
    Financial - Income
    The Company?s effective income tax rate was 44.6% for the twelve months ended September 30, 2018.
  • 18487878_367
    Financial - Income
    The Company?s effective income tax rate was 1.1% for the twelve months ended September 30, 2017.
  • 18487878_192
    Revenue - Product
    We generate a large portion of our revenue from the proceeds of sales of merchandise held in inventory.
  • 18487878_271
    Financial - Earnings
    Gross profit within Corporate & Other increased $2.0 million over prior year, attributable to a $1.9 million inventory write-down recorded within IronDirect during the third quarter of 2017.
  • 18487878_427
    Other - Other
    This guidance become effective for us beginning on October 1, 2018.
  • 18487878_428
    Other - Other
    The amendments in this update should be applied prospectively on or after the effective date.
  • 18487878_446
    Other - Other
    The guidance will be effective for us beginning on October 1, 2019.
  • 18487878_453
    Other - Other
    This guidance will become effective for us beginning on October 1, 2020.
  • 18487878_459
    Other - Other
    This guidance will become effective for the us beginning on October 1, 2018.
  • 18487878_465
    Other - Other
    This guidance will become effective for us beginning on October 1, 2019.
  • 18487878_470
    Other - Other
    This guidance will become effective for the us beginning on October 1, 2018.
  • 18487878_390
    Other - Other
    Net cash used in investing activities for both periods consisted primarily of expenditures for capitalized software, purchases of equipment and leasehold improvements.
  • 18487878_335
    Revenue - Product
    Total consolidated revenue decreased $46.4 million, or 14.7%, to $270.0 million for the year ended September 30, 2017, from $316.5 million for the year ended September 30, 2016, due to a $46.6 million decrease in revenue from our CAG segment, and a $4.7 million decrease in revenue primarily related to exiting certain TruckCenter operations, partially offset by a $4.1 million increase in revenue from our GovDeals segment, and a $0.8 million increase in revenue from our RSCG segment.
  • 18487878_281
    Revenue - Product
    Seller distributions decreased $4.6 million, or 23.8%, to $14.7 million for the year ended September 30, 2018, from $19.3 million for the year ended September 30, 2017, due to lower sales under our Scrap Contract during the year ended September 30, 2018.
  • 18487878_432
    Revenue - Product
    The new standard will change the way we recognize revenue and significantly expand the disclosure requirements for revenue arrangements.
  • 18487878_299
    MA - Other
    Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets amounted to approximately $0.5 million, for the year ended September 30, 2018, compared to $1.0 million for the year ended September 30, 2017.
  • 18487878_357
    MA - Other
    Acquisition costs and related fair value adjustments and impairment of goodwill and long-lived assets amounted to approximately $1.0 million, for the year ended September 30, 2017, compared to $19.0 million for the year ended September 30, 2016.
  • 18487878_287
    Financial - Expense
    The remaining $8.9 million reduction in overall technology and operations expenses can be attributed to an approximate $6.2 million reduction in technology costs related to internal and contract IT labor, with the remainder of the balance related to other miscellaneous IT costs, including those to various service providers.
  • 18487878_136
    Financial - Income
    All other changes in valuation allowances are recognized as a reduction or increase to income tax expense or as a direct adjustment to additional paid-in capital as required.
  • 18487878_221
    Financial - Expense
    General and administrative expenses include all corporate and administrative functions that support our operations and provide an infrastructure to facilitate our future growth.
  • 18487878_364
    Financial - Income
    Interest (income) expense and other expense, net, decreased $0.9 million, to $0.4 million of income for the year ended September 30, 2017, from $1.2 million of income for the year ended September 30, 2016, primarily resulting from foreign exchange rate fluctuations.
  • 18487878_278
    Financial - Expense
    These decreases are slightly offset by an increase of $4.0 million in cost of goods sold within our RSCG business due to increased sales.
  • 18487878_290
    Revenue - Product
    Sales and marketing expenses decreased $1.5 million, or 4.3%, to $33.7 million for the year ended September 30, 2018, from $35.2 million for the year ended September 30, 2017, due to a decreased spend on marketing and promotion materials.
  • 18487878_377
    Financial - Shares / Equity
    Share repurchases may be made through open market purchases, privately negotiated transactions or otherwise, at times and in such amounts as management deems appropriate.
  • 18487878_240
    Revenue - Product
    Revenue from our GovDeals segment increased 12.5%, or $3.4 million, due to additional sales volume from existing sellers and an increase in the number of new sellers.
  • 18487878_241
    Revenue - Product
    GMV from our GovDeals segment increased 14.9%, or $39.6 million, also due to additional sales volume from existing sellers and an increase in the number of new sellers.
  • 18487878_315
    Revenue - Product
    Revenue from our GovDeals segment increased 17.8%, or $4.1 million, due to additional sales volume from existing sellers and an increase in the number of new sellers.
  • 18487878_316
    Revenue - Product
    GMV from our GovDeals segment increased 17.5%, or $39.5 million, also due to additional sales volume from existing sellers and an increase in the number of new sellers.
  • 18487878_258
    Revenue - Product
    Revenue from our RSCG segment increased 7.3%, or $6.9 million for the year ended September 30, 2018.
  • 18487878_326
    Revenue - Product
    Revenue from our RSCG segment increased 0.9%, or $0.8 million for the year ended September 30, 2017.
  • 18487878_18
    Other - Other
    We believe the continuous flow of goods in our marketplaces attracts a growing buyer base, in turn, attracts more sellers and transactions.
  • 18487878_284
    Financial - Expense
    Technology and operations expenses decreased $22.2 million, or 26.7%, to $60.8 million for the year ended September 30, 2018, from $83.0 million for the year ended September 30, 2017.
  • 18487878_293
    Financial - Expense
    General and administrative expenses decreased $5.7 million, or 15.9%, to $30.2 million for the year ended September 30, 2018, from $35.8 million for the year ended September 30, 2017.
  • 18487878_345
    Financial - Expense
    Technology and operations expenses decreased $10.4 million, or 11.1%, to $83.0 million for the year ended September 30, 2017, from $93.4 million for the year ended September 30, 2016.
  • 18487878_254
    Financial - Earnings
    Gross profit within the CAG segment decreased 32.1%, or $23.1 million, to $48.9 million for the year ended September 30, 2018, from $71.9 million for the year ended September 30, 2017.
  • 18487878_322
    Financial - Earnings
    Gross profit within the CAG segment decreased 34.2%, or $37.4 million, to $71.9 million for the year ended September 30, 2017, from $109.4 million for the year ended September 30, 2016.
  • 18487878_230
    Financial - Expense
    As a result, we recorded approximately $0.9 million of net expense, comprised of a $1.2 million impairment of contract intangibles, and a $0.6 million impairment of fixed assets, partially offset by a $0.9 million reversal of an earn-out liability, during 2017.
  • 18487878_134
    Other - Other
    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, except for contingent consideration, which is recognized in the statement of operations in the period it is modified.
  • 18487878_57
    Other - Other
    The second Scrap Contract has a 36-month base term, commencing in the first quarter of 2017, with two 12-month extension options exercisable by the DLA.
  • 18487878_248
    Revenue - Product
    The lower volume and unfavorable mix were partially offset by improved commodity prices.
  • 18487878_179
    Other - Other
    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.
  • 18487878_23
    Revenue - Product
    Substantially all of our revenue is earned through the following transaction models.
  • 18487878_79
    Other - Other
    The wind-down impact of the Surplus Contract is offset by the reorganization efforts within our CAG Commercial business and Corporate functions, and our realignment of our TruckCenter and IronDirect businesses.
  • 18487878_228
    MA - Other
    During 2018 we recorded approximately $0.5 million of acquisition costs related to our acquisition of Machinio.
  • 18487878_249
    Revenue - Product
    Also contributing to the decrease is lower sales volume within our CAG Commercial business for both purchase and consignment transaction models.
  • 18487878_282
    Revenue - Product
    As a percentage of revenue, distributions slightly decreased to 6.6% from 7.1%.
  • 18487878_242
    Financial - Earnings
    Gross profit within this segment increased 11.2%, or $2.8 million, to $28.0 million for the year ended September 30, 2018, from $25.2 million for the year ended September 30, 2017, due to the new business.

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  • Form Type: Annual
  • Number of times amended: 0
  • Accession Number: 0001235468-18-000007
  • Submitted to the SEC: Thursday, December 6, 2018 4:45:51 PM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Fiscal Year ending: September 2018
  • Industry: Unclassified Business