LQDT - Earnings call transcript Q3 2018 | Liquidity Services, Inc.

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Operator

Good day, and welcome to the Third Quarter 2018 Liquidity Services Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will how at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Julie Davis, Senior Director of Investor Relations.

begin. may You

Julie Davis

and XXXX Hello, our quarter third Thank results welcome conference year financial call. fiscal you. to

Joining us Officer. today Executive are Bill Angrick, our Jorge our Officer; Chairman Celaya, Chief Financial and and Chief

our We available differ Actual or to and today, questions will your results will materially. of The management's as X, for after may responses views be reflect August following prepared questions include discussion remarks, XXXX, statements. forward-looking

in today's our impact potentially with Additional information press financial is our release included that and Report XX-K. including about SEC, our in Annual on filings results the could recent factors most Form

As encourage as press which our you on as today's listen of our includes to commentary call, well you to you, quarter. front in we metrics have results financial and release the

we our these discuss including measures. posted with GAAP will these our filings on financial non-GAAP find measures press regarding with non-GAAP will SEC, you and additional call, each which In the certain disclosures our measures, During of is of measures. release this reconciliations comparable website,

also measure includes operating CEO, should like of data Angrick. presentation this also to investors. certain as our Bill merchandise management The considered data and be I'd use for substitute gross to as superior GAAP a supplemental believe results. and volume to of which we operating performance, operating not components certain or time, over We useful is for supplemental At the turn

Bill Angrick

for review call, provide the key outlook you QX welcome strategic Thank earnings will QX Jorge our and I'll next Celaya on quarter. more and our and provide Julie, good update initiatives, morning performance QX QX details an our on to

business to our with our market QX share. core strengthened we and continue pleased expand We performance as are our

completion legacy during contracts. grew QX the In notwithstanding GMV surplus fact of overall our the via we

growth Moving forward more and government to we markets. a sustainable in attractive diversified much retail, tied the opportunities industrial business have

recovery customer services experience, expense leverage. driving that expansion Liquidity to through by and higher continue We our of transform innovation Services improves our

our in self ongoing generated light digit in generated people total asset positive as We we from cash and strategy growth and We XX% GMV service drive ongoing For on future the example than organic June of our growth. investments QX. important we solution QX made our flow via businesses. during executed GMVs more our platform in represented to growth operating double successfully

During we XX,XXX our accounts XXX of reflecting registered transformation value the business over verticals. and QX in needs our solving better added sellers new our and seller the of buyers new across segments and buyers

higher related lower expenses corporate lower LiquidityOne continued expected expected transactions strength during retail softness achieved was in group the to line volume margin also offset vertical in results. service These quarter. favorable and initiative fees bottom than consulting our self partially due by energy This better including GovDeals increased mix segments. spending. We than were and Lower our our of more chain supply to

Next let us segments. at take our look a highlights business of

which Our segment related grew management XX% Supply and Service manufacturers existing Group clients from programs year expanded. expanded service goods. return and to We've pipeline business period. our management than for year doubled from new to retailers with Chain driven year more our returns store helps platform by Retail and the performance over manage returns fees offerings returns strong our online both prior development as GMV by sell track, clients

management from solution. are returns We marketplace our the encouraged feedback by regarding the

new driven QX Arizona segment Ontario. and the XX% state hundreds grew addition in as the by U.S. and GovDeals by Our focusing clients Canada of the GMV of of on such year-over-year in

driven excluding consignment and Americas, exceeded auctions regions. equipment our including vehicles, by XX,XXX municipal Pacific Europe our the contracts our Assets activity property over strong During heavy completed and QX for forecasts in Capital school in $X segment Asia million. over GovDeals GMV Group across daily

liquidity buyer bright a be marketplace and for our outstanding delivered Asia in to industrial continues particular as results spot clients. multinational global our

vertical continue among rebound assets. sellers, hold our energy and oil during their QX, gas who experienced sector slower-than-expected Our to a to due softness

I'll you Next, state provide the on initiative. our LiquidityOne

and delivering LiquidityOne initiative ability to related scale tools operations Our improved platform focused experience, larger to and enhance marketplace transformation our customer is to on business. a an much

As version sellers our buyers customers self during successfully we our we deals operations the and quarter service and GovDeals planned, auction released marketplaces provide enhanced our an the support improves that teams. internal both of back-office and

needs manufacturers. we to software our LiquidityOne to of addition, support made enhancements and substantial management the In platform returns retailers

and integrates midsized returns clients needs all industry-leading architected been marketplace. sizes has from platform large solution types management of to and our to seamlessly with the Our serve retailers small this enterprise and of

We of for soon the platform expect further our launch preparing year all by retail to calendar while processes marketplaces existing end thereafter. deploy our to to marketplace will our align initiative our XXXX, This technology. enhanced the liquidation business ecommerce optimize of capability

buy globe. and as and bring a investments new more our our a will search, Finally, unified we our our and transformation. to buyer which method people, our base closing our single increased We sourcing traffic value from marketplace marketplace from calendar processes, will through single a buyers platform more asset we efficient anticipate to or find early market with our consolidated on of the XXXX, platforms year available place launch supply drive any efficient across sellers continued the market across network provide from clients drive marketing LiquidityOne of in enhance recognizable this serve places. will our most In strategies the in believe the e-commerce technology assets global

Liquidity for our grow strategy. tremendous to and we’re investments our potential we we our execute years significant about growth customers long-term and value business. As harvest begin driving over the few committed making creation innovation next as the shareholders to we’re Services is to excited the

turn me on let details Now more for over to it Jorge QX results.

Jorge Celaya

everyone. good and Bill you Thank morning

EPS. range quarter and quarter the to were GMV DoD loss, last of fiscal First GAAP of GMV of above guidance non Results the adjusted finished despite We the XXXX results. EPS, EBITDA was third I completion and the will guidance GAAP year third range up third GAAP, the compared surplus comment select year the on contract. company’s within quarter net diluted for

last compared impact of million the as year, DoD our third content. the quarter was down surplus to reflects $XX While completing our it revenue

loss, our Our initiatives $X loss all GAAP net progress transformation approximately significant segments. for adjusted improved on by our year-over-year, million EBITDA adjusted net and demonstrating

quarter was year 'XX, these GovDeals and the from offset the and in reflecting segment quarter the to reported of impact a by up product to of in third CAG quarter from year additional segment. contract. the GMV RSCG revenue again our the of up from to the to RSCG of GMV completing line due results from fiscal increased and by the XX.X% client reflect, to the business down As volume GMV fiscal completion first Partly sold driven while in up decrease our bottom-line CAG as accounts despite this we change existing commercial our year the executing business quarter than year-over-year successfully of effected GovDeals as by our of development GovDeals reflecting XXXX. quarter year third fiscal segments RSCG and a of are contracts. largely XX.X%, XX.X% new surplus flows segments decreases contract third segment compared ago. was DoD contract our year by XXX.X growing our contracts, offsetting in from fiscal the DoD XXXX surplus with reported segment year and volume we CAG in our our growth million year-over-year DoD our was revenue of new our a $XX.X DoD sales XX.X% revenue XXXX CAG of surplus DoD In third segment GMV completion compared increases contract. the was We surplus and under an tag million, the compared on third due sellers. partly from the quarter ago DoD that increased XX.X% year-over-year the GMV offset offsetting of and In existing GovDeals' the although efforts. was This XX% both increase RSCG goods was both XX.X% more reflected lower

Our CAG a quarter the million, and in million to segment million from million year finally, for our of the quarter. And functions and our business million technology quarter. a was significant was compared $X.X were prior year the in loss improvements losing restructure related $X due net segments, GovDeals million $XXX,XXX, negative ago. to $X point prior our our RSCG $X.X program. expenses corporate improvement Adjusted compared EBITDA a $X.X as $X.X as adjusted transformation lower and third third LiquidityOne GAAP of loss our a year improvement improvement These loss million growth in [Indiscernible] $X.X million realignment net loss well $X.X to was a strong

quarter expenditures the quarter XX, rate. June At $XX.X sheet. balance a were free we current debt balance Capital capital we remain the a with fourth expect fiscal have the cash to $XXX,XXX million. for expenditures of run to continue in XXXX and line year We XXXX had of during

anticipate we sequentially the our low albeit Looking seasonally what saw of in affected trends and that quarter GovDeals in fiscal segments. we year the RFCG reflect the quarter similar to XXXX fourth will ahead fourth XXXX of third by quarter

key platform, expect XXXX and this to year increase excluding and range go restructuring from before comparisons million business the the costs Overall, late trading growth guidance and organic activities realignment DoD reflect LiquidityOne sequentially fourth be new related the for XXXX. we for year fiscal fiscal in $X.X our the initiative our year-over-year and to and and spending took quarter we $X.X million in an the XXXX our overall live. to early UAT Additionally, contracts, reflects continued the quarter, benefits next in our actions other on final

of of in for despite adjusted XXXX, improvements guidance Our the fourth EBITDA year-over-year reflect DoD quarter to surplus the continues the completion the contract.

quarter accounting time GAAP to due deferred we acquisition flow temporary U.S. impact dilutive revenue value fair the adjustment the of U.S. to its GAAP of to cash to but of neutral purchase be Lastly, U.S. acquisition on a have XXXX Machinio fourth at recent rules. our GAAP reflect expect to results

a a affect negative we EBITDA. non-GAAP quarter is XXXX the from $X.XX tax of shares $XXX for be assumes loss negative for not to approximately negative to will diluted share XXXX next to have in share. for fiscal a QX fourth for is outstanding of negative million in the will single-digits. quarter range of rate to of expect per an from for average $X.XX range corresponding GAAP $X.X GMV ranging we XXXX $X.XX share. $XXX; to expected negative GAAP the XX.X to XXXX million; This per follows; a loss estimated Management's QX adjusted to for effective that guidance our of guidance a million a $X.XX QX fourth negative range of the per of net a adjustment million $X.X $X and million a is the this weighted the quarter range negative However, as non-GAAP the quarter adjusted per from for We share estimate negative loss $X million, EBITDA XXXX in to adjusted

We will your now take questions.

Operator

Instructions] W. question of [Operator line Colin first And from comes the Baird. Sebastian from Robert our

now Your open. line is

Colin Sebastian

I more where transformation talked you closer the about of point place, guess the taking cost that the you available to LiquidityOne point. some Bill, after get has efficiencies

of if So you normalized have visibility terms I have long-term and heading over see where you margins I EBITDA better of couple wonder, any a medium follow-ups. on and the now the then in

Bill Angrick

now to that relates technologies Returns there organic embraced reflect the few resumption from invalidates of an to the created returned there track becoming is store logistics to the serve from services, were safe reconciling credit handle First, of more the are leverage is the e-commerce industry be would last the is and about software so line that driving to and in omnichannel capability. that and wide having And data huge retailers product financial management by for platform, the existing investments management service Also return of are brick-and-mortar results and or have return of then new product example streamlined that starting we handle platform retailers something as value that business, retailers both to center. the can from drive to return, these overlay both to and to the the that the management An consumers and LiquidityOne top in software value the of a even capabilities fulfillment flow somebody products is efficiency. excited back are clients. between itself a in traditional suppliers related quarters. and and being all that new recovery growth steadily that who operating growth back large and of and center goods the the growth need assets that a and to

profitability XX Colin trends business we we current our mix would long-term guidance at think Our to we about a to through on have point business restoring comment move I that and margin. further that would give fiscal as be imply profit

I as margins you that the that's expense self-service the inventory on was think extremely company. it's to and where high, of limited our note going cover self-service a around no QX our of GMV business and is forward. the revenue very is during XX% associated There's over that business a know business GAAP interesting majority the sort operational of from trending

know platform. And returns the on transacted consignment about so you things think fees GMV on management is service we the fees, the business driving like

percentage as of management and as launched self-service, an when recurring visible business dealers -- stream Machinio business annual on moving margins service be have revenue our as recent part prepared subscription the paying fees new acquisition. which about GAAP talk recurring any we'll much we this because on the acquisition EBITDA of so I With we've will through a owners equipment on be we're X,XXX just focused more and subscriptions, is a recurring we're to of now subscription revenue much that needle over in margins returns

Colin Sebastian

That's helpful.

a among year I launch. And with a more launch to buyer and can you to respect incremental bit the expect unified buyers there's consolidated that next higher assume the fair follow-up with the activity base? selling in bring of and then do obviously creating to existing how marketplaces. plan or you aggressively other you As cross marketplace of engagement whether or support that is bidding levels sellers this about wondering new

Bill Angrick

latent there's of untapped our a sellers buyers. by all think boost efficient a the available from We potential be recovery allows more showcased to our marketplace having assets existing to that with

through buyers the to the think the in to going for marketplace. will nearly growth and our lift want of reward that would to to marketplace assets [paralellity] the order buyers plus there'll categories new they'll from the on talk of about we've what industry in used Machinio there their $XX and other legacy penetrating set a are sale we existing consolidated I created the sitting unsold into data available say that we are world. that also and they're and tap the the and share billion find equipment experience of the I individual us have acquisition existing tremendous So justify because with further ways our investment in for catalogue marketplaces, some which of is think somewhere user

drive avenues desktop, in leverage business. earnings are to destination that So personalize penetration type brand some our important ultimately even this have buyers that sale of is we on and a to a and make to can massive our existing a which buyer assets assets the great not then we going other message available buyers building base for single easy the campaign and existing through what really them of improvement provide pollinating streamlining recovery, simply that simplifying mobile give tablet, be will further doing how across in cross

Colin Sebastian

were And wind Obviously factors in That's then housekeeping, of the the segments other point. looks solid down there the participants this than helpful. maybe client at core the any contract? one outside DoD auction pretty DoD of the of other health

Bill Angrick

No.

the loss transactions period new you fewer that during the fewer launched -- DoD auction options volume of accurately participants. means think I stated attracts which

fact was So down principally contract that wind to volume also and contract that due year-over-year, a surplus down, the mix. scrap

Operator

Barrington And Prestopino question the from comes of Instructions] [Operator from Research. line next our Gary

open. now Your line is

Gary Prestopino

of here. Couple questions

no booked Machinio correct, for year? Is gets that QX. there's next revenue in into fiscal hit over bleed Just the that the deferred with Jorge, all

Jorge Celaya

down before acquire is value adjusted you effectively for company. effectively the fair that happens No. The deferred revenue

services the is of revenue, record part this what you is piece valuation begins or as newly when the only to maybe generating of So revenue company liquidity will the small on how completed depending it report exercise quarter. deferred some

Gary Prestopino

the at subscriptions XX So as months? acquisition over time subsequent essentially the deferred a revenue the of of restores itself reset that renew there’s those

Jorge Celaya

contracts. XX of service great enter tends month Machinio, majority again the part the deferred the for So Machinio into most of -- for to

months see smaller So through of that smaller smaller the growth just gets cycle Machinio. as we and you'll so number and XX

the we see basically XX as going that revenue growth up away. months we will go We GAAP get and in through impact of goes once Machinio

Gary Prestopino

just the what's here? I going of taken the guess is majority expense or to I so phrase just way question related hit issue that, I whole totally as should misunderstanding maybe the in QX, on that am

Jorge Celaya

you GAAP as as the their expense expense an question same recognizing side. just expenses not not will It's to you’re its stay that revenue much -- the

fourth very to XX of smaller the quarter and would gets and going months. is So quarter it impact not revenue our coming is GAAP largest there in the over be next every which them smaller impact gets what number first happens thereafter biggest having just being in that is quarter so the the quarter be the recorded that then progressively

Gary Prestopino

Okay. rest going And I to Bill, this That’s out been calendar now was I again to roll is in and have end platforms you going maybe that of that rolled lay impression, that back impression, more are you LiquidityOne that was platform. to the two you out narrative, remaining outs one us? year said in to of and then to or be just could the be there's by 'XX get the fiscal be your this just done for want wrong, my I I everything under for the think of year the could this going fine.

Bill Angrick

calendar at roadmap for XXXX, that marketplace. early I of that be. is to by few we reasons. liquidation.com made that be One We that retail we've prioritized to a LiquidityOne with of the marketplaces we would and the made our self all looked product launch marketplaces and decision XXXX, and on calendar which the the service during business in is business it as marketplaces be one GovDeals rolled gains should that's growth the in exception, significant demand on the 'XX our of market is self-service clarify statement made the to and our based will Yeah, existing platform and launch end that and our AuctionDeals

system is manage demand and that of initiative huge anyone platform. season customer platform a returns that which with follows been from ahead their clients great for to in knows that's has place the have holiday software prioritized management high. that second for The provide experience buyers very that They who track is The LiquidityOne returns retail and our effort.

So I we investments as have share retail liquidation summer then to the be we peak to think -- And business season. made we'll early does which and way peak volume new able the holiday in supplying know move those periods wins very from of of over along marketplace the end you the year. will and about has and is in XXXX move volumes the also season software it at we're judicious liquidation.com the holiday

solution natural platforms. new launch a move onto the then through and it's to liquidation.com the season So peak

The on other the timeframe. busy January are in seasonally marketplaces it December

talk and as buyers' our the your It new time. I envelop the add marketplace. on legacy and LiquidityOne question, likely a of architecture versus the with branded brands, over brand, new a feedback we marketplace And Let to have data we property I also this from will of that get that we on that generated testing experience about same brand think simplify lot rates a across every brand second legacy recovery in will platform. different the AB have just and all brand to are me we test the a will when consolidated is reside will marketplace, e-commerce

launched and we're to Layfair individual other hopefully example, historically new gives decision of for and you industry of many, time architecture. that its type a so company and context if talking some unified think a brand brand Layfair, simplify about. are over the brands of examples that activity what There So of many made had many like

Gary Prestopino

fine. that's No

see question, over that these that QX given down anticipate sequentially you'd just general it you come a would guess now sequentially marketplaces still down like last continues technology move on looks throughout a then that quarters, three the on I of So got and and lot the spending 'XX? has to we

Bill Angrick

again Chief Yeah to I I and new management associated have functionality business software credit product team in off team glide a high number efficient and Officer, taper of who to way. taken a some which managers new reconfigured Bradley, very to with why down. developers in very maintained starts of Roger the reason has path the And mainly the volume a think they give one-time maintenance the expenses We project include it’s amount members area of unit. of our to work come and one introduce the appropriate that's steps costs building of this and business have within think Information to output the things

our the been overhead So and 'XX reorganization fiscal continue more well-developed, into in area technology has beyond. being front-end path cloud. glide maintaining on Roger's systems and think the the I as and the of I fewer a of in will running corporate led very and those is that and reducing move efficient well-received result think Simply back-end business overall we as systems

when costs. And so for we of we don't, the have scalability need and it that overhead we to don't fixed we when pay

business us for a, that's positive in the So trend think Gary. a I that's

Gary Prestopino

now you your what you're it? for had good. about had recall do use talked prior want changed management versus then retailers it doing but the your to that far who making you so that LiquidityOne initiative to the lastly, putting is returns as ago Okay you in years one as attractive what and place of has And product, what I functionality

Bill Angrick

has donated offerings and service a you product that centers just or distribution to party think people is and and manifested service well which sales product, the return our you their is I but of sold. I their think offering manufactures for ultimately think inspected software even know us and solution do-it-for-you And then to a own a our data in use leveraging either to leveraging service facilities the call channels move to we solutions. matrix, adoption we retail Right, third which have clients the shift allowing an and we two-by-two things which if interest full have or been self of self do the own a have

returns and to a self these that's Software-as-a-Service as And know something essentially lot so of interest. getting platform customers you that's our attention management serve we've enterprise suite a configured software service and and

Gary Prestopino

Do you the charge a self fee service? for

Bill Angrick

Yes.

Gary Prestopino

it's all in. So bundled

and out giving away you're charge GMV? You then not it attract to

Bill Angrick

giving not no. we're Correct, away, it

Gary Prestopino

Okay, thank you.

Operator

call Davis will And I'm questions. showing further closing Julie no for now back to turn I the remarks.

Julie Davis

Thank you all for participating in today's call.

If please you reach again to me Thanks up follow-up. have have good out questions a and can additional a set and we afternoon.

Operator

thank participation your program gentlemen, today's day. concludes Everyone a and in Ladies This for disconnect. you may great you have all conference. and today's

Liquidity Services (LQDT) 2 Aug 182018 Q3 Earnings call transcript