Liquidity Services(LQDT) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2022, the company achieved a record Gross Merchandise Volume (GMV) of $325 million, representing a 33% year-over-year increase from $244.7 million [6][15] - Revenue for Q3 2022 was $69.9 million, consistent with the same quarter last year [15] - GAAP net income for Q3 was $16.4 million, resulting in diluted earnings per share of $0.50 [18] - Non-GAAP adjusted EBITDA was $11.9 million, down from the same quarter last year due to increased operating expenses [19] Business Line Data and Key Metrics Changes - The GovDeals segment saw a 52% increase in GMV and a 13% increase in revenue, driven by the inclusion of bid for assets [16] - The Retail RSCG segment experienced a 1% decline in GMV and a 4% decline in revenue, attributed to a shift in return goods volumes [16] - The CAG segment reported a 13% increase in GMV but an 8% decrease in revenue, reflecting increased sales with partner organizations [17] - The Machinio segment grew by 27% in revenue, continuing its strength in the subscription business [17] Market Data and Key Metrics Changes - There was a 22% year-over-year increase in the number of registered buyers and a 43% increase in auction participants [8] - The number of completed transactions on the platform increased by 37% year-over-year [8] - The company noted strong adoption of its consignment model, with 89% of GMV transacted under this model, up from 85% in the prior year [9] Company Strategy and Development Direction - The company aims to expand its market leadership in the $100 billion circular economy and is focused on scaling its business towards an objective of $1.5 billion in annualized GMV [6] - Investments in technology integration and enhanced user experience are being made to support self-directed sales and improve client outcomes [12][39] - The company is also focused on diversifying its product flows and sales channels, particularly in the retail sector [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the macroeconomic environment, noting that rising inflation and supply chain uncertainties present positive drivers for the business [25][26] - The company anticipates continued strength in the energy sector and expects to grow its low-touch services in this area [21] - Management provided guidance for Q4, expecting GMV to range from $300 million to $330 million and GAAP net income to be between $3.5 million and $6.5 million [23] Other Important Information - The company operates with strong cash flow, holding $88.3 million in cash and zero debt, with $25 million of available borrowing capacity [19] - The company has performed $5.4 million in share repurchases during the quarter [19] Q&A Session Summary Question: Market opportunities excluding government vehicle retirements - Management acknowledged that supply chain challenges have increased the demand for their services, and they are well-positioned to assist clients in managing and selling inventory [25] Question: Investment in bringing more sellers onto the platform - Management highlighted investments in human capital and technology to enhance their enterprise sales organization and marketing efforts [28] Question: Trends in government agencies moving auction business online - Management noted that there is significant potential for government agencies to adopt online sales, estimating a $3 billion to $4 billion GMV opportunity in the public sector [30] Question: G&A expense decrease and its causes - Management confirmed that the decrease in G&A expense was due to reversals of variable compensation accruals as the year-end approaches [34] Question: Growth potential without major spending cycles - Management indicated that the current infrastructure could support an increase in GMV up to $2 billion without significant new investments [37] Question: Decline in gross profit in certain segments - Management explained that the shift towards a consignment model is leading to lower revenue as a percentage of GMV, but they remain focused on delivering high-margin services [39]