Liquidity Services(LQDT) - 2025 Q3 - Quarterly Results

Executive Summary Liquidity Services achieved record GMV and double-digit earnings growth in Q3 FY25, driven by strategic investments and marketplace expansion Company Overview and Q3 FY25 Performance Highlights Liquidity Services reported strong Q3 FY25 results with record GMV and double-digit earnings growth, reflecting successful strategic investments - Liquidity Services attributes strong Q3 FY25 financial results to leading technology-enabled marketplaces, growing buyer network, and disciplined execution[1] - Strategic investments in software, platform innovation, marketing, and sales are enabling greater market share capture and enhanced value for sellers and buyers[1] Q3 FY25 Consolidated Financial Highlights (YoY Growth) | Metric | Q3 FY25 Value (in millions) | Q3 FY24 Value (in millions) | YoY Change | | :----------------------------- | :-------------------------- | :-------------------------- | :--------- | | Gross Merchandise Volume (GMV) | $413.0 | $380.4 | +9% | | Revenue | $119.9 | $93.6 | +28% | | GAAP Net Income | $7.4 | $6.0 | +24% | | GAAP Diluted EPS | $0.23 (dollars) | $0.19 (dollars) | +21% | | Non-GAAP Adjusted EBITDA | $17.0 | $14.7 | +16% | | Non-GAAP Adjusted EPS | $0.34 (dollars) | $0.30 (dollars) | +13% | | Cash balances | $167.0 | N/A | N/A | Third Quarter Fiscal Year 2025 Financial Results This section details Liquidity Services' consolidated and segment-specific financial performance for Q3 FY25, including key operational metrics Consolidated Financial Highlights Q3 FY25 saw significant year-over-year growth in key financial metrics, including record GMV and revenue, with double-digit increases in GAAP and Non-GAAP earnings Q3 FY25 Consolidated Financial Performance (YoY) | Metric | Q3 FY25 (in millions) | Q3 FY24 (in millions) | Change | | :----------------------------- | :-------------------- | :-------------------- | :----- | | GMV | $413.0 | $380.4 | +9% | | Revenue | $119.9 | $93.6 | +28% | | GAAP Net Income | $7.4 | $6.0 | +24% | | GAAP Diluted EPS | $0.23 (dollars) | $0.19 (dollars) | +21% | | Non-GAAP Adjusted EBITDA | $17.0 | $14.7 | +16% | | Non-GAAP Adjusted Net Income | $11.1 | $9.5 | +17% | | Non-GAAP Adjusted EPS | $0.34 (dollars) | $0.30 (dollars) | +13% | | Cash balances | $167.0 | N/A | N/A | - Consignment sales represented 83% of consolidated GMV for Q3 FY25[7] Segment Financial Results All reportable segments contributed to Q3 FY25 growth, with RSCG and Machinio & Software Solutions showing particularly strong revenue increases - Segment direct profit is calculated as total revenue less cost of goods sold (excluding depreciation and amortization)[8] GovDeals GovDeals achieved record quarterly GMV and revenue in Q3 FY25, driven by new seller acquisition and service expansion, with revenue growth outpacing GMV GovDeals Q3 FY25 Performance (YoY) | Metric | Q3 FY25 (in thousands) | Q3 FY24 (in thousands) | YoY Change | | :------------------ | :--------------------- | :--------------------- | :--------- | | GMV | $252,291 | $249,652 | +1% | | Total revenue | $23,966 | $22,109 | +8% | | Segment direct profit | $22,160 | $20,716 | +7% | | % of Total revenue | 92% | 94% | -2 ppts | - Growth from new seller acquisition, service expansion, and record seller listing activity were partially offset by lower market prices for vehicles and lower take-rate real estate foreclosure auction activity[7] RSCG RSCG saw substantial Q3 FY25 GMV and revenue growth from retail client expansion and increased purchase model volumes, achieving record direct profit RSCG Q3 FY25 Performance (YoY) | Metric | Q3 FY25 (in thousands) | Q3 FY24 (in thousands) | YoY Change | | :------------------ | :--------------------- | :--------------------- | :--------- | | GMV | $102,556 | $78,950 | +30% | | Total revenue | $81,544 | $58,764 | +39% | | Segment direct profit | $19,371 | $17,365 | +12% | | % of Total revenue | 24% | 30% | -6 ppts | CAG CAG's GMV increased by 12% in Q3 FY25, driven by heavy equipment consignment sales, with revenue up 6% despite economic uncertainties CAG Q3 FY25 Performance (YoY) | Metric | Q3 FY25 (in thousands) | Q3 FY24 (in thousands) | YoY Change | | :------------------ | :--------------------- | :--------------------- | :--------- | | GMV | $58,160 | $51,838 | +12% | | Total revenue | $9,161 | $8,650 | +6% | | Segment direct profit | $8,460 | $7,430 | +14% | | % of Total revenue | 92% | 86% | +6 ppts | - Certain industrial categories and regions experienced tempered activity due to economic and tariff-related supply chain uncertainty[7] Machinio & Software Solutions Machinio & Software Solutions achieved a 27% revenue increase in Q3 FY25, driven by subscription growth, pricing adjustments, and the Auction Software acquisition Machinio & Software Solutions Q3 FY25 Performance (YoY) | Metric | Q3 FY25 (in thousands) | Q3 FY24 (in thousands) | YoY Change | | :------------------ | :--------------------- | :--------------------- | :--------- | | Total revenue | $5,221 | $4,106 | +27% | | Segment direct profit | $4,790 | $3,906 | +23% | | % of Total revenue | 92% | 95% | -3 ppts | Operational Metrics Q3 FY25 operational metrics showed healthy growth in buyer engagement and transaction volume, with significant year-over-year increases across key indicators Q3 FY25 Operational Metrics (YoY) | Metric | Q3 FY25 (in millions) | Q3 FY24 (in millions) | YoY Change | | :---------------------- | :-------------------- | :-------------------- | :--------- | | Registered Buyers | 5.9 | 5.4 | +9% | | Auction Participants | 1,098,000 (in thousands) | 1,016,000 (in thousands) | +8% | | Completed Transactions | 286,000 (in thousands) | 263,000 (in thousands) | +9% | Fourth Quarter Fiscal Year 2025 Business Outlook This section provides Liquidity Services' Q4 FY25 guidance, segment-specific outlooks, and key trends and assumptions influencing future financial performance Q4 FY25 Guidance Liquidity Services anticipates solid double-digit annual growth for FY25, with Q4 guidance reflecting seasonality and continued year-over-year growth in most segments Q4 FY25 Guidance | Metric | Q4 FY25 Guidance Range | | :-------------------------- | :--------------------- | | GMV | $355 to $390 million | | GAAP Net Income | $5.0 to $8.0 million | | Non-GAAP Adjusted EBITDA | $13.0 to $16.0 million | | GAAP Diluted EPS | $0.15 to $0.25 (dollars) | | Non-GAAP Adjusted Diluted EPS | $0.24 to $0.34 (dollars) | - Consolidated consignment GMV is expected to remain in the low eighties as a percentage of total GMV[17] - Consolidated revenue as a percentage of GMV is expected to be slightly below thirty percent[17] - Total segment direct profits as a percentage of consolidated revenue are expected to be in the mid-forty percent range[17] Segment-Specific Outlook Q4 FY25 projects solid year-over-year growth for CAG and GovDeals, flat GMV and revenue for RSCG, and continued growth for Machinio and Software Solutions - CAG segment is expected to grow its top-line year-over-year, led by the heavy equipment category, despite economic uncertainties[14] - GovDeals, Machinio, and newly established Software Solutions businesses are expected to continue year-over-year growth[14] - RSCG's GMV and revenue are expected to be flat year-over-year for Q4 FY25, with segment direct profit slightly down due to product mix and pricing changes[15] - Start-up costs for the expansion of RSCG's direct-to-consumer online auction and local pick-up initiative in Columbus, Ohio, are included in guidance[16] Key Trends and Assumptions Q4 FY25 outlook considers transaction and product mix fluctuations, digital economy adoption, economic conditions, and ongoing R&D and business development investments Potential Impacts to GMV, Revenue, Segment Direct Profits GMV, revenue, and segment direct profits are influenced by transaction mix, RSCG inventory, GovDeals real estate timing, digital economy adoption, and economic conditions - Fluctuations in the mix of purchase and consignment transactions can impact revenue as a percent of GMV and segment direct profit as a percentage of revenue[17] - Variability in RSCG's inventory product mix can cause changes in revenues and/or segment direct profit as a percentage of revenue[17] - Real estate transactions in GovDeals are subject to significant variability due to postponements, cancellations, or changes in property values[17] - Continued growth is expected from the acceleration of broader market adoption of the digital economy, particularly in GovDeals and RSCG[17] - Changes in economic, political, or international trading conditions could impact operating results by affecting sellers' or buyers' financial stability[18] Potential Impacts to Operating Expenses Operating expenses may be impacted by R&D spending, business development investments, and RSCG warehouse operating requirements due to product volumes - Continued R&D spending to support software solutions and enhance marketing, analytics, and payment optimization[21] - Spending in business development activities to capture market opportunities with efficient payback periods[21] - Variability in volumes and sourcing locations of products handled by RSCG can cause fluctuations in warehouse capacity and related operating expense requirements[21] Potential Impacts to GAAP Net Income and EPS and Non-GAAP Adjusted Net Income and Adjusted EPS Net income and EPS impacts include stock compensation fluctuations, an FY25 ETR of 25% to 31%, and increased cash taxes due to full NOL utilization in Q2-25 - Changes in financial performance could cause fluctuations in stock compensation expense for performance-based awards[21] - FY25 annual effective tax rate (ETR) is expected to range from approximately 25% to 31%, with Q4-25 tax expense potentially appearing higher (low-to-mid 30% range) due to normalization from earlier discrete benefits[21] - Cash paid for income taxes is expected to increase in FY25 as the remaining US federal net operating loss carryforward position was fully utilized in Q2-25[21] - Diluted weighted average shares outstanding are expected to be approximately 32.5 to 33.0 million[21] Non-GAAP Financial Measures and Reconciliations This section provides reconciliations of GAAP Net Income to Non-GAAP EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS, along with explanations of these non-GAAP measures Non-GAAP EBITDA and Adjusted EBITDA Reconciliation This section reconciles GAAP Net Income to Non-GAAP EBITDA and Adjusted EBITDA, excluding items not indicative of core operating performance Reconciliation of Net Income to Non-GAAP EBITDA and Adjusted EBITDA (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :----------------------------- | :--- | :--- | | Net income | $7,410 | $6,000 | | Interest and other income, net | $(1,127) | $(891) | | Provision for income taxes | $3,885 | $2,702 | | Depreciation and amortization | $2,657 | $3,199 | | Non-GAAP EBITDA | $12,825 | $11,010 | | Stock compensation expense | $3,512 | $2,617 | | Acquisition-related costs | $50 | $1,080 | | Business realignment expenses | $618 | — | | Non-GAAP Adjusted EBITDA | $17,005 | $14,707 | Non-GAAP Adjusted Net Income and EPS Reconciliation This section reconciles Non-GAAP Adjusted Net Income and EPS, adjusting for stock compensation, intangible amortization, acquisition costs, and tax impacts Reconciliation of Net Income to Non-GAAP Adjusted Net Income and EPS (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Net income | $7,410 | $6,000 | | Stock compensation expense | $3,512 | $2,617 | | Intangible asset amortization | $828 | $1,084 | | Acquisition-related costs | $50 | $1,080 | | Business realignment expenses | $618 | — | | Income tax impact on the adjustment items | $(1,272) | $(1,291) | | Non-GAAP Adjusted net income | $11,146 | $9,490 | | Non-GAAP Adjusted basic earnings per share | $0.36 (dollars) | $0.31 (dollars) | | Non-GAAP Adjusted diluted earnings per share | $0.34 (dollars) | $0.30 (dollars) | | Basic weighted average shares outstanding | 31,157,183 | 30,388,675 | | Diluted weighted average shares outstanding | 32,497,238 | 31,464,461 | - Tax rates used to estimate the impact of income taxes on non-GAAP adjustments were 25% for Q3 FY25 and 27% for Q3 FY24[25] Explanation of Non-GAAP Measures Non-GAAP measures like EBITDA, Adjusted EBITDA, and Adjusted EPS are used to clarify core financial performance for investors and internal planning, not to replace GAAP results - Non-GAAP measures are provided to enhance investors' overall understanding of current financial performance and future prospects[29] - Non-GAAP Adjusted EBITDA eliminates the impact of items not considered indicative of core operating performance[30] - The company does not quantitatively reconcile guidance ranges for non-GAAP measures to comparable GAAP measures in the Business Outlook section due to the inherent variability and scenario-based process of preparing guidance[32] Supplemental Operating Data Explanation Supplemental operating data, including GMV, registered buyers, and transactions, measures performance and investment effectiveness, providing insight into marketplace activity - GMV is the total sales value of all transactions for which compensation was earned through marketplaces or other channels[33] - Supplemental operating data helps evaluate the effectiveness of investments in seller/buyer support, value-added services, product development, sales/marketing, and operations[33] - This data should be considered in addition to GAAP financial information, not as a substitute or superior to it[33] Forward-Looking Statements This document contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ, with past performance not guaranteeing future outcomes - Forward-looking statements are predictions subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[34] - Important factors that could cause actual results to differ are set forth in SEC filings, including risks related to asset sourcing, competitive environment, IT systems, employee retention, economic conditions, and regulatory compliance[35] - The company undertakes no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances occurring after the document's date, except as required by law[36] Company Information This section provides an overview of Liquidity Services' business and details for its Q3 FY25 financial results conference call About Liquidity Services Liquidity Services operates the world's largest B2B e-commerce marketplace for surplus assets, facilitating over $10 billion in transactions and supporting client sustainability - Liquidity Services operates the world's largest B2B e-commerce marketplace platform for surplus assets[37] - The platform has facilitated over $10 billion in completed transactions to more than five million qualified buyers and 15,000 corporate and government sellers worldwide[37] - The company supports clients' sustainability efforts by extending asset life, preventing waste and carbon emissions, and reducing landfill products[37] Conference Call Details A conference call to discuss Q3 FY25 financial results will be held on August 7, 2025, with webcast and archive options available - Conference call to discuss results will be held on August 7, 2025, at 10:30 a.m. Eastern Time[28] - A live listen-only webcast will be available on the company's investor relations website, with an archive available until August 7, 2026[28] Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated balance sheets, statements of operations, and statements of cash flows for Liquidity Services Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $372.4 million, driven by cash and investments, with total stockholders' equity rising to $208.7 million Condensed Consolidated Balance Sheet Highlights (Dollars in Thousands) | Metric | June 30, 2025 | September 30, 2024 | | :-------------------------- | :------------ | :----------------- | | Cash and cash equivalents | $155,605 | $153,226 | | Short-term investments | $11,353 | $2,310 | | Total current assets | $220,007 | $199,235 | | Total assets | $372,435 | $346,888 | | Total current liabilities | $153,895 | $155,153 | | Total liabilities | $163,785 | $164,328 | | Total stockholders' equity | $208,650 | $182,560 | Condensed Consolidated Statements of Operations Total revenue increased by 28% year-over-year for the three months ended June 30, 2025, driven by purchase revenues, leading to improved profitability Condensed Consolidated Statements of Operations Highlights (Three Months Ended June 30, Dollars in Thousands) | Metric | 2025 | 2024 | YoY Change | | :------------------------------------------ | :----- | :----- | :--------- | | Purchase revenues | $76,517 | $53,396 | +43.3% | | Consignment and other fee revenues | $43,358 | $40,217 | +7.8% | | Total revenue | $119,875 | $93,613 | +28.0% | | Cost of goods sold (excludes D&A) | $65,110 | $44,212 | +47.3% | | Total costs and expenses | $109,657 | $85,718 | +27.9% | | Income from operations | $10,218 | $7,895 | +29.4% | | Income before provision for income taxes | $11,295 | $8,702 | +29.8% | | Provision for income taxes | $3,885 | $2,702 | +43.8% | | Net income | $7,410 | $6,000 | +23.5% | | Basic income per common share | $0.24 (dollars) | $0.20 (dollars) | +20.0% | | Diluted income per common share | $0.23 (dollars) | $0.19 (dollars) | +21.1% | Condensed Consolidated Statements of Cash Flows For the nine months ended June 30, 2025, net cash from operations decreased, while investing activities increased, and financing activities decreased Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended June 30, Dollars in Thousands) | Metric | 2025 | 2024 | Change | | :------------------------------------------ | :----- | :----- | :----- | | Net income | $20,271 | $13,616 | +48.9% | | Net cash provided by operating activities | $28,768 | $48,215 | -40.3% | | Net cash used in investing activities | $(20,881) | $(17,646) | +18.3% | | Net cash used in financing activities | $(5,068) | $(10,825) | -53.1% | | Net decrease in cash and cash equivalents | $2,379 | $20,031 | -88.1% | | Cash and cash equivalents at end of period | $155,605 | $130,312 | +19.4% | | Cash paid for income taxes, net | $6,960 | $810 | +759.3% | - The decrease in net cash provided by operating activities was influenced by changes in accounts receivable, inventory, and payables to sellers[44] - Investing activities included $6.5 million for business acquisitions and $16.2 million for purchases of short-term investments in 2025[44]