Liquidity Services, Inc.

Welcome to the Liquidity Services, Inc. First Quarter Fiscal Year 2021 Financial Results Conference Call. My name is James, and I'll be your operator for today's call. Please note that this conference call is being recorded. All participants are in innocent-only mode. Later, we will conduct a question and answer session. On the call today are Bill Engrick, Liquidity Services Chairman and Chief Executive Officer, and Jorge Celaya, Executive Vice President and Chief Financial Officer. They will be available for questions after their prepared remarks. The following discussion and responses to your questions reflect Liquidity Services Management's views as of today, February 4th, 2021, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact the financial results is included in today's press release and in filings with the SEC, including the most recent annual report on Form 10-K. As you listen to today's call, please have the press release in front of you, which includes liquidity services, financial results, as well as metrics and commentary on the quarter. During this call, liquidity services management will discuss certain non-GAAP financial measures. and its press release and filings with the SEC, each of which is posted on its website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Liquidity Services Management also used certain supplemental operating data as a measure of certain components of operating performance, which they also believe is useful for management and investors. This supplemental operating data includes gross, merchandise volume and should not be considered a substitute for or superior to GAAP results. At this time, I'll turn the presentation over to Liquidity Services CEO, Bill Angrich.

Good morning and welcome to our Q1 earnings call. I'll review our Q1 performance and provide an update on key strategic initiatives. Next, Jorge Celaya will provide more details on the quarter. We are pleased with our continued strong momentum. as reflected in our Q1 financial results, and we're very proud of our team's efforts to safely deliver outstanding results for our customers, both in our fulfillment centers and remotely during the quarter. Our e-commerce marketplace solutions are resonating with both large enterprises and small businesses, which is contributing to strong organic growth and market share expansion. Our team has carefully listened to the needs of our customers, and we continue to deliver the right tools, services, and strong buyer liquidity to ensure sellers and buyers in every major sector of the economy successfully monetize assets. And this is translating into results. Consolidated GMV was up 28% year over year The number of auction participants was up 14% year-over-year. Our completed transactions rose 12% year-over-year. And we grew our adjusted EBITDA by $10.9 million over the prior year period. Our solutions continue to drive strong recovery for sellers and have enabled us to scale our services quickly as more customers seek efficient self-service solutions with optional value-added services we provide to manage surplus and return goods in the global supply chain. We are finding the demand for our services and marketplace is growing along every dimension by size of customer, by geographic region, and by product category. This past quarter we helped sellers monetize assets in a diverse range of categories including vehicles, construction equipment, biopharma assets, industrial machinery, real estate, and consumer goods such as apparel, consumer electronics, jewelry, and housewares. Our newest marketplace, AllSurplus.com, features all of these categories and more. For our over 3.8 million registered buyers to view, bid, and buy using our mobile-first platform, and personalized recommendation engine. In fact, the more our buyers shop our all surplus marketplace, the better our matching engine becomes, which helps us improve the buyer user experience and increase recovery rates for our sellers. Indeed, through our domain expertise, innovative technology platform, and integrated services, We are driving the continued digital transformation of the reverse supply chain across the retail, industrial, and public sector markets, which together comprise a $100 billion market opportunity for liquidity services. Overall, our strategy and platform investments have yielded strong results to date, and we are well aligned to the needs of where the customer is going in the future in a changing landscape with higher e-commerce demand. GMV in our GovDeals segment grew a record 36 percent over the prior year's comparable quarter as more government agencies utilized our digital platform to transact higher volumes across a larger breadth of key categories. and our growing buyer base and automated asset promotion tools drove higher realized values through our marketplace. GMB and our retail supply chain group segment grew 30% over the prior year's comparable quarter as more large and SMB retail sellers utilized our platform, resulting in higher transaction volumes on our marketplace. GMB and our capital assets group segment increased 5% year-over-year, driven by strong results in our heavy equipment, biopharma, and energy verticals. Finally, our machinio segment grew revenue by 14% during the quarter, as equipment owners are benefiting from the machinio.com classified marketplace, as well as our machinery host inventory management system that together connect with buyers at lower costs when compared to traditional marketing channels. Looking forward, we're well positioned to help our customers continue to adapt to the changing landscape of the global economy, including the continued growth of e-commerce, the need of organizations of all sizes to leverage technology to drive supply chain efficiencies and monetize assets, and the increasing focus by business and government customers on sustainability. These needs are not unique to the current climate of a pandemic. Overtime liquidity services has proven to be a constant cyclical business, which helps sellers create value both in periods of economic expansion and contraction. We currently have strong activity in our sales pipeline. and are optimistic about our growth prospects. Against this backdrop, we remain focused on our goal of eclipsing $1 billion of annualized GMV by continuing to execute our RISE strategic plan. In closing, we thank our team members across liquidity services for their dedication to our mission, and we are excited to continue our role as a global market leader. to create value for our customers and shareholders. I'll now turn it over to Jorge for more details on the quarter.

Thank you, Bill. Good morning. We completed the first quarter of fiscal year 2021 with GMV of $190.4 million, a 28% increase of $148.6 million in the prior year's comparable period. Revenue for the first quarter was $55.8 million, a 13% increase compared to the same quarter last year. While net income for the first quarter was $4.5 million, resulting in diluted earnings per share of 13 cents. Our results compared to the same quarter last year have shown significant improvement. Non-GAAP adjusted EBITDA was $8.8 million, a $10.9 million improvement. The first quarter fiscal year 2021 comparative year-over-year consolidated financial results reflect increased volumes across all of our segments, with the largest increases in our GovDeals and retail or RSCG segments, as businesses and government agencies continued to benefit from our safe and effective e-commerce solutions. Our mixed shift to more consignment which includes self-directed solutions, is reflected in improved gross profit margins to 60% this quarter from 51% last year. We have also experienced improved margins from the mix of products sold in both retail and GovDeals and asset recovery rates achieved. Our bottom line results reflect these benefits to gross profit margin the overall increase in top-line volumes across our segments, and leverage in our operating expenses. A key goal of our multi-year business transformation and investments in our technology has been to enable us to provide more diverse service offerings and leverage our platform for scale and more profitable results. We are pleased in our ability to have sustained solid performance this past quarter. Specifically, comparing these first quarter results for the same quarter last year, our GovDeal segment was up 36% on GMV and 35% on revenue. Our retail RSCG segment was up 30% on GMV and up 10% on revenue. And our CAG segment GMV was up 5% and flat on revenue. Machinio's revenue was up 14%. We have a debt-free balance sheet completed $4.1 million in stock repurchases during the quarter and ended the quarter with $77.8 million in cash, up $1.8 million from last quarter. Looking ahead, we continue to see a solid pipeline, strong customer relationships, and indicators of positive performance going forward. Despite the general economic uncertainties globally and any possible shifts in related business dynamics and government spending. In spite of long-term macro drivers, the timing of business activity across our segments and historic seasonality trends are difficult to predict, especially for any given quarter, given the uncertainties still being faced. We will therefore not provide quarterly guidance and reassess future guidance on a quarterly basis. Financial results for Q2 of fiscal year 21 are expected to improve year over year. We remain optimistic about our prospects given our strong position in our key markets and marketplaces, our enhanced platform services, and the trends pointing towards a long-lasting shift to online transacting by businesses and governments alike. We continue to be highly focused on creating efficiencies and benefits to enable our growth to an asset-light low-touch marketplace solution. As e-commerce penetration continues to grow substantially, our online platform and cloud-based solutions should become an integral part of the evolving economy. Thank you, and we will now take your questions. James?