Liquidity Services, Inc.

Welcome to the Liquidity Services, Inc. Third Quarter of Fiscal Year 2025 Financial Results Conference Call. My name is Kast, and I will be your operator 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. I will now turn the call over to Michael Patrick, Liquidity Services Vice President and Controller.

Good morning. On the call today are Bill Engrick, our Chairman and Chief Executive Officer, and Jorge Salaya, our 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 management's views as of today, August 7, 2025, and will include forward-looking statements. Actual results may vary or differ materially. Additional information about factors that can potentially impact our financial results is included in today's press release and in filings with the SEC, including our most recent annual report on Form 10K. As you listen to today's call, please have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter. During this call, management will discuss certain non-GAAP financial measures. In our press release and filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP measures, including the reconciliations of these measures with their most comparable GAAP measures as available. Management also uses certain supplemental operating data as a measure of certain components of our operating performance, which we 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 our chairman and CEO, Bill Engrich.

Good morning, and welcome to our Q3 earnings call. I'll review our Q3 performance and the progress of our business segments, and next, Jorge Salaya will provide more details on the quarter. Thanks to our team's focus during Q3, we delivered record GMV, strong adjusted EPS growth, our differentiated positioning as the leading circular economy e-commerce marketplace has helped us grow despite economic uncertainty related to tariff policies and higher interest rates. The strength of our asset-like business model was on display as we generated operating cash flow during Q3 that exceeded our EBITDA. These strong results reflect the power of our leading technology-enabled marketplaces, growing buyer network and disciplined execution to optimize recovery and operations in every segment of our business. Our strategic investments in software, platform innovation, marketing and sales are enabling us to capture greater market share while enhancing the value we deliver to sellers and buyers. Our resilient diversified business provides stability for our customers and investors alike amid ongoing economic uncertainty. With our proven service offerings and continued investment and innovation, we are uniquely equipped to empower our buyers and sellers and drive sustainable long-term growth in the large and fragmented circular economy market. In line with our strategic plan, we continue to grow our volumes, buyer base and recovery in key categories such as construction, trucks, vehicles and consumer return goods. During Q3, we set new records in the number of sellers, assets listed and bidders in these categories. And now have over 5.9 million registered buyers on our platform. Our strategy has allowed us to develop an attractive diversified business. We continue to drive adoption of our asset light services in all segments and are transacting more than 80% of our total GMB under the consignment pricing model. Despite significant investment in our business expansion and product roadmap, we delivered 31% adjusted EBITDA margins as a percentage of direct profit during Q3. We also generated over $19 million of operating cash flow during the quarter and have a debt-free balance sheet with $167 million in cash with zero financial debt to execute our organic and M&A growth strategies. Now let's take a closer look at each segment. Our GovDeals segment delivered a record GMB of $252 million, a record number of assets sold in a single quarter and a record number of live vehicle listings. We continue to expand with existing and new accounts in key areas including New York, Florida, Texas and California. Notable new account wins during the quarter include Fresno, California, Anaheim, California, Mesa, Arizona, King County, Washington, Fort Still, Oklahoma and York County, Virginia. We are also expanding our digital marketplace for real estate tax foreclosure sales in Florida, Louisiana, Wisconsin and Oklahoma. We're also introducing new payment technology on our GovDeals marketplace in the US and Canada to increase payment options and improve efficiencies for buyers and our internal operations. Our capital asset group or CAG segment posted solid results during Q3 with double digit organic growth and GMB and direct profit. The breadth of our CAG marketplace allowed it to grow despite the headwinds of tariff policies in the biopharma, semiconductor and machine tools verticals in our marketplace. In fact, we grew the number of assets sold in our CAG segment year over year by 35%. Leading the charge was our heavy equipment category which continued its rapid growth setting records for the number of unique sellers, repeat sellers and completed transactions during Q3. GMB in our heavy equipment category more than doubled year over year and we continue to see a billion dollar GMB opportunity in this category. Our RSCG segment expanded relationships with sellers across product categories and geographies to drive double digit year over year growth and direct profit during Q3. Our market share gains have focused on adding more lower touch, higher margin consignment relationships as we transition away from selected purchase model programs. We're currently in discussions with over 60 brands and manufacturers who are attracted to the high quality and reliability of our retail supply chain group software solutions and buyer network which ensures that our retail clients benefit financially and operationally from our services. For example, during Q3 we added several new clients including a leading national sporting goods retailer, a global branded food manufacturer, a national leading furniture retailer and a leading branded housewares manufacturer. In addition, we have expanded our RSCG sell and place software solution with leading international e-commerce retailers to manage and sell their returned goods on our liquidation.com online auction platform. To further optimize our market leading recovery and expand our market share, we are establishing our online B2C auctions in Columbus, Ohio. This dedicated consumer focused e-commerce experience will utilize the auction software of our software solutions business segment and will lay the foundation for a national direct to consumer auction platform. Finally, our machinio and software solutions business segment continues to grow its share and now has over 5,000 paying customers in over 100 countries which rely on its dealer management and marketing solutions for used equipment sales. Our machinio segment has ample opportunity to more than double its business by further penetrating its existing used equipment verticals and expanding with adjacent service providers who can also leverage machinio suite of marketing, lead generation and website hosting tools to more efficiently manage their business. Our technology and product teams across liquidity services continue to integrate machine learning, data analytics and AI assisted tools into our marketplace platform. Over time, we will unlock more value for buyers and sellers on our platform through these investments. With our strong financial foundation and strategic focus, we are well positioned to seize emerging opportunities to drive profitable long-term growth even in uncertain times. I'll now turn it over to