Liquidity Services, Inc.

Welcome to the Liquidity Services, Inc. fourth quarter of fiscal year 2022 financial results conference call. My name is Carmen and I'll be your host for today's call. Please note that this conference call is being recorded. At this time, all participants are in a listen-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 Zelaya, its 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, December 8th, 2022, 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, In 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 the reconciliations of these measures with the comparable GAAP measures as available. Liquidity services management also use certain supplementary 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 will turn the presentation over to Liquidity Services CEO, Bill Angrig.

Good morning, and welcome to our Q4 earnings call. I'll review our Q4 performance and the progress of our business. And next, Jorge will provide more details on the quarter. We delivered strong EPS and adjusted EBITDA results during the quarter, despite macro challenges which limited the supply of vehicles in our marketplace. This performance reflects our efficient business model and diversified client portfolio. During Q4, the strength of our buyer liquidity in a recessionary environment was on display as the number of auction participants and registered buyers on our platform grew 34% and 24% year over year respectively. For the full year fiscal 2022, we generated a record number of auction participants and completed transactions on our platform, which provided outstanding results for our sellers. We estimate that the lack of vehicles for our customers fleet replacement cycles reduced our GMV by $10 million during the quarter. This combined with abnormally low conversion rates on share of sales in our government real estate vertical resulted in lower than expected GMV during Q4. While these are currently headwinds, we expect these trends to normalize and boost our business as we move through 2023. For our full fiscal year 2022, we're proud of the focus and execution of our team. We continue to advance Our strategic and operational objectives, which translated into a record $1.1 billion of GMB, up 29% over the prior year. Cabinet income of $40.3 million and $42.7 million in non-GAAP adjusted EBITDA. We also grew our registered buyer base to a record $4.9 million, reflecting strong interest in our circular economy platform during this inflationary environment. As we commence fiscal year 2023, we remain focused on expanding our mindshare and position with commercial and government clients as the most trusted marketplace to manage value and sell surplus assets in the circular economy. Despite near-term headwinds in vehicle supply, we have a strong business pipeline and continue to see opportunities to reach $1.5 billion in annualized GMV and expand our technology-enabled asset-like services to drive long-term shareholder value. Our expertise in diverse sectors, strong buyer base across numerous asset categories, and global reach are continuing to provide advantages for our clients as they navigate this current volatile macro environment. Let's take a closer look at the progress of each of our segments and how we're driving market share expansion. Our field segment is making excellent progress in expanding the growth and activity of customers on its marketplace. We continue to grow the number of new accounts and number of assets sold in the mid to high single digit percentages each quarter, despite the current headwind of lower vehicle supply. In fact, we set new records for these metrics during Q4. Additionally, we continue to make progress penetrating our GovDeals customer relationships as their one-stop solution for all asset sales, including their highest value assets. For example, since fiscal 20, our GMV per seller and the number of assets sold per seller on GovDeals have grown 44% and 19% respectively. We're also committed to the relentless improvement of our platform, and we'll be launching the next generation of our GovDeals marketplace in 2023. The beta version of our new GovDeals marketplace was shared with select bidders in Q4 and was extremely well received, resulting in a two times increase in our customer net promoter score. This bodes well for the future, and we expect our modernized GovDeals platform An introduction of more data-driven features will increase our recovery rates and lift GovDeals GMV materially over time. As client vehicle replenishment cycles normalize, federal infrastructure spending takes hold, and we continue our pace of account acquisition, we see the opportunity to significantly grow the size of our GovDeals business over the next three to five years. In our retail segment, our flexible service offerings have been well received by the marketplace as customers utilize both self-directed and fully managed solutions. Leveraging our distribution center network to reduce supply chain costs and the sale of returned and shelf-pulled goods. While some clients have held on to returned inventory to offer customers compelling early holiday deals, we have a strong new business pipeline and have won several new programs in the big box, omnichannel, and pharmacy sectors, which has continued to diversify and grow our business portfolio in the retail segment. Our retail segment has a large market opportunity, driven by strong secular growth in the volume of return merchandise as customers continue to embrace online retail. For example, according to the National Retail Federation, Retailers expect about 18% or $158 billion of merchandise sold during the holiday shopping season to be returned. Our value added services in particular have been highly prized by our retail segment customers as they help our clients reduce their supply chain costs. Current results reflect that we are still early on in fully leveraging the investments we have made in three new distribution center facilities. We expect retail segment margins to improve as we further leverage this added operational capacity and drive productivity gains. Our CAG segment continues to play the role of a trusted global market maker for high-value equipment in the industrial supply chain. Our ability to support cross-border transactions and financial settlements among counterparties has been increasingly valued given the broad application and demand for the industrial assets we sell. For example, in a recent auction of biopharma assets in Europe for multiple Fortune 500 clients, we had over 100 bidders from 27 countries, including 17 bidders from China, where 60% of the assets were ultimately sold. Our global reach was critical to giving our sellers the best execution. Indeed, our CAG solutions are well positioned to help industrial companies who are in a cost savings mode manage through the current recessionary environment. We anticipate growth in the energy, biopharma, and automotive verticals in particular, and we have landed new mandates with major companies in these areas. As COVID restrictions loosen in China, we have attractive growth opportunities in the APAC region, which have been limited recently. Finally, our CAG heavy equipment fleet category has strong upside potential. we grew our consignment heavy equipment vertical 36% year-over-year in fiscal 2022 and finished the year ahead of plan for signed contracts, new sellers, transacted opportunities, and net new revenue. Finally, our machinio segment continues to scale nicely with expanded coverage and more equipment categories and related services such as financing. We believe our Maschineo digital advertising and storefront solution offers business customers cost savings and convenience that are well-suited to a recessionary environment. We've recently launched a self-directed option for smaller dealer customers to list their equipment directly on the Maschineo marketplace. And we're also offering transaction-based services to Maschineo customers to unlock valuable liquidity for sellers. Finally, we've opened a new Maschineo sales office in China and believe there is a significant growth opportunity for our Maschineo classifieds marketplace and storefront platform in the China market over time. In conclusion, we're focused on executing multiple drivers to create value for our shareholders over time. We've continued to enhance our brand awareness in the marketplace. and plan to double our core business over the next three to five years, which will be aided by the normalization of supply chains and our leverage of the fixed investments we've made in sales, branding and marketing, technology, and operational capacity. Moreover, our capital efficient business with a strong operating cash flow, $98 million in cash and zero debt, provides us with ample flexibility to execute our plans. We've increased our authorized share repurchase capacity to $15 million, and we will continue to deploy our capital on organic growth initiatives, share buybacks, and tuck-in acquisitions. In closing, we thank our team members across liquidity services for their dedication to our mission to power the circular economy to benefit sellers, buyers, and the planet.

I'll turn it over to Jorge for more details on the quarter.