LQDT - Earnings call transcript Q3 2019 | Liquidity Services, Inc.

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Operator

Good morning, my name is Annie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Liquidity Services Third Quarter Fiscal Year 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session [Operator Instructions] Thank you.

I would now like to turn the call over to Ms. of Director Senior Davis, Investor Relations. Julie

begin may your conference, ma'am. You

Julie Davis

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

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

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

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

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

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

supplemental operating certain merchandise and use useful which for substitute should GAAP management measure be to is results. as The also data of gross operating also We performance, of certain we investors. and a considered for data believe a includes supplemental components operating not volume or superior

turn to our to over I'd CEO, presentation time, the Angrick. this like At Bill

Bill Angrick

Earnings our an you, I'll Thank update initiatives. and strategic QX our Call. key QX morning, to welcome and on Julie. review performance provide Good

and fourth will on quarter outlook our for more quarter. details Celaya Jorge provide Next, the the

organic with quarter consecutive solid of our execution continued fifth RISE adjusted GMV results, of results. of EBITDA positive growth our including consecutive and reflect strategy growth second quarter results QX Our our

buyer continued Our quarter. to activity registered year-over-year our marketing transactions, investments have marketplaces and during completed both as the XX% the drive base grew in in robust

and leading for finally, four RISE sellers to recovery has of objective two, expense which a that for expansion; growth. our strategy the assets is benefit One, leverage. long-term investments: strategy key maximization; marketplace focus world's increasing; surplus of and growth buyers, our planet three, The foundation pillars, RISE is provide Our solid the the and deliver

Next, our and segment, in our by within in segments. strong existing year-over-year higher participation Supply Chain grew GMV highlights XX% marketplace. of business we'll at look higher take Retail U.S. in the and accounts driven Canada and a Group our retail volumes both new

We and services, continue data recovery drive by to cost scan-and-sell our reduce offerings domain and helping financial expand supply expertise. Returns which manufacturers maximum Management app, leverages and marketplace core our with chain business asset our retailers them with and

Of seeing year-over-year which of note, are XX% in solution, over our we QX. grew self-directed adoption increasing

period asset segment by in comparative Our affected ability affected year-over-year GMV Growth of the our some QX flooding widespread very fiscal included sales. grew GovDeals which despite negatively sellers XXXX, large business. in X% individual to the conduct was QX in strong a which government Midwest,

of utilities However, County municipal including we new California. agency County, Prince number state William GovDeals local the sellers, using Lake Illinois; Sacramento, and of to wins and Virginia; continue increase in in

GovDeals growth that Indeed, consistent of variety solution convenience our value, reflects wide assets. agency and service a government across our sellers the provides

markets. in and within by period, declined This the U.S. GMV our our the prior-year of strength segment across CAG the value in lower contract machinery Americas industrial softness because our Defense of of from biopharma Department offset and mix Our XX% was the assets verticals. with Scrap international

service multiple solution global we have to Fortune managed been recently. resonate sellers, awarded Our e-commerce with XXX by contracts manufacturers and continues

M&A We of and activity sectors new and are significant manufacturing seeing introduction automotive products. in activity electronics the by biopharma, the driven

analytics. use traction growing data buyer our leverage which investments, platform gaining also We are base our our solutions and of clients' our in self-directed

report to online Machinio our for Our classified and base. growth continues marketplace as machinery subscriber we expand solid equipment revenue used

and to on advertise sellers exposure third-party In The which around a their and inventory to to response sales. machinery for machinery equipment through new Machinio owners or host hosting significant online the storefront to marketplace, storefront centralize we sellers solution solution, offer fast, host, mobile-friendly named the equipment to of enables in generation both qualified provides world, lead the their customer enhance now and enables sale channels. which buyers equipment demand, manage classified assets all other

to responsive of increase classify in to help taken buyers entire support manage we speed, mobile design our and are and Account steps industry with and also features for and platform vertical, navigation to a our and global business, parameters, My technology across present assets recovery other strategy. improved sales of sale to our RISE a enhanced our a important support advance e-commerce. new multicurrency pleased activity asset tool announce taxonomy, to we've further and Next, e-commerce capability our core usability the consistent that new search a deployment location cross-border In volume, efforts new new multilingual a to and today, by manner transaction used

which which the transaction milestone, account important a of capable organization e-commerce our also Liquidity volume culminates under resides service With new marketing, This now majority the LiquidityOne platform, on supporting encompassed integrated functions our actions, supporting of Services sales, management Officer Chief brand customer all other platform online process technology go-to-market and finance, global HR, our and deployment this deployment core business our transformation centralization of of tools. role, transformation including message, our sales has alignment of a Commercial single process, single program, a and aligns a the and and activity.

us platform solutions serve through of e-commerce prospective manner more a will and to a new current team organizational and to sales sellers from efficient single common enable self-directed our fully and in buyers ranging structure a with managed Our our through unified services, platform. technology combined set new

development sellers recovery recommendation product the analytics of and are on by the consolidated enhancing of our enhance through our of the experience a focused to launch tools, technology data-driven our for we predictive forward, buyers. our stack new Moving increasing share to market marketplace and marketing increase

unique volume, to plan of we our Thereafter, set services. a integrate retail has which transaction

we opportunities support growth we are team platform this enhance our over Steve's buyers. to of the strategy, Weiskircher, impressive an addition and and Chief of and serve e-commerce announce our will in sellers our as businesses. strong possess Maryland a based both leadership leadership our mobile stack, time, of Steven support along our the to e-commerce execution In appointment marketing headquarters. new growth while new acumen, terrific effort, pleased adapting and Bethesda, billion experience Steve scale technology Technology dollar of Officer, apps and also the is business outstanding understanding our continue with support continued expertise to RISE how we as of to to technology

in Services people, to significant processes innovation investments we the to strategy. business. on is for bold bring shareholders make long-term driving to continue we our execute value and to and sellers our value and committed enhance and grow summary, Liquidity our platform customers we our buyers In RISE creation to as

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

Jorge Celaya

you, good Thank Bill and morning.

within And adjusted range and non-GAAP net First, for quarter fiscal range I third year gross will XXXX non-GAAP GAAP GAAP above guidance the quarter EBITDA adjusted comment merchandise or finished on EPS consolidated for third GMV. We volume and selected company's EPS. of the the loss, guidance results.

of results RISE our third quarter Our successful growth the strategy. a reflect execution start of

adjusted comparing reflect quarter As EBITDA were compared improved third XXXX, trends, GMV positive continue the XXXX, revenue third and up GMV to X% and improved to to and XX%. the quarter

million a loss from up and our North ago, America includes net sequential Asia-Pacific Midwest the positive which quarter XX%. increases reflecting improved largely which segment, XX% results was was Scrap a strong were GAAP quarter, activity from third in partly by we to X%. increased contract XX% in and our compared loss, results a pricing impact improved year. the year-over-year third offset despite the year of year-over-year Net for up in RSCG decrease certain consignment million RSCG one-time unfavorable in was and and segments. adjusted reported in the quarter, year in These adjusted of and our while $XXX.X EBITDA $XXX.X GovDeals items in prior tax the GMV GovDeals impacted weather second GMV ago, GMV In the the by

favorably of in XX% by and and in only prior compared our slightly GovDeals year the year of of segment This revenue of segment. segment offset quarter RSCG a $XX.X in Our growth our million X% XXXX of million third fiscal strong was reflects $XX.X decrease to XX%. CAG

$X.X in the GAAP million to and was to period, Our ago, loss of net improved reflecting the earn-out Machinio. year acquisition a performance realignment the million business related current compared expense $X.X

improvement loss $X.X was a prior net the from million, Adjusted year loss in $X.X quarter. an million

the as the quarter. growth a prior segments our was positive $XXX,XXX, a These leverage and we third were improvement our due from improvements operations to quarter loss expenses, EBITDA and our $XXX,XXX RSCG compared gained third lower year in GovDeals Finally, adjusted of to streamlined organization. $XXX,XXX

debt-free sheet. have balance to We continue a

had June from rate. we of At year current million, fourth were to XXXX remain we the expect $X.X for XX, and capital of line the cash quarter in $XX slightly million, expenditures quarter capital XXXX, fiscal expenditures a balance the or down during run

strategy. sellers reflect this Looking and of fourth our RISE we top-line are results we both to reflect expand and continue GovDeals to QX volumes XXXX, drive RSCG our segments, anticipate recovery increase of in year look that services ahead will continue results expected to fiscal we to comparative buyers. GMV of and XXXX offer as growth execution to maximization, quarter fiscal the year

and comparative American year, of fourth contract expect quarter upcoming last We face a our in reduced business our strong in year. wind the North segment given prior the versus activity Scrap the tax to down the top-line

to RISE year-over-year and executing we partly volume. We and GovDeals, recovery increased offset sales marketing reflect strategy improve our expect maximization spending RSCG bottom-line on by growth focus results as increase to in Machinio, and growth on

fourth RSCG, increased profitable next in CAG continue anticipated sales follows. fiscal quarter the we XXXX seasonally to on quarter a marketing focus spending across Management's quarter guidance the the reflects segments for our low GovDeals as as growth. fourth and and is Sequentially, in

$XXX to expect of million We from $XXX for XXXX to million. GMV QX range

a $X.XX negative of share net XXXX We in to assumes per million a and guidance XXXX corresponding non-GAAP have digits. share. million ranging fourth $X.XX range rate EBITDA of or per single $X.X of negative negative be A for the million an quarter estimated non-GAAP diluted quarter a $X.XX to outstanding loss quarter share. negative approximately a is the expected shares adjusted negative per loss the is in of $X.X QX for estimate million to range for A $XXX,XXX. positive a that to loss $XX.X for adjusted tax average of negative we a the the fourth to effective GAAP QX per range This GAAP XXXX in for weighted the a to $X.XX share from negative $X.X from

questions. questions Annie, your take we will now your We now will take please.

Operator

[Operator Gary Instructions] have from – question yes, Research]. the question of line a line we a Prestopino of We Gary the have from [Barrington

Your line open. is

Gary Prestopino

questions, the that? Or that terms of But there's to right? that that Bill, am as has do correct initiative putting out couple completed, on LiquidityOne strategic been still A said I platform, in I more well? unified you thought, is completed of

Bill Angrick

taxonomy There's our you marketing activities. to organization have CAG Gary. support in amount launch updated today of seller-facing is a for been of we've our created consolidated captured marketplaces decade. we single the e-commerce buyer-facing, of announced not follow what then of completion marketplace operations, than platform related and But technology. to all process all when at Thanks, from marketplaces, we've a these tremendous more natural look we an done, our some and first, launched requirements And on replacing a been is The that. processes;

our under sure onto making current our common really is first base and is logical in buyer it's first their look same the our look for transition. us of and that communication marketing then deployment. more so and feel on taxonomy and marketing use plan. action effort versus a a rollout feel our marketplace, the they've consolidated that of build that made brands, And to next technology That which migrate And

from new with and deployed is the sure technology, user buyers and to are the then user migrate adequately experience. the built to experiences legacy prepared we communicated that team marketing and Today, making

marketplace majority focus new these and look as feel consolidated the the say, our on And synergy we with So, our is that our on will buyers of capital a sellers capturing get marketplace. lies vast assets assets and us, greatest and buyers and follow with and that marketplace, GMV. synergies for comfortable experience. is the government together also bring as greater our industrial sellers which our I'd the consolidated

consolidated our for And marketplace. the so the will focus efforts end that's where our in standup we of front

Gary Prestopino

still it timed out consolidated is the the when? by So, end calendar put this marketplace year? Is of

Bill Angrick

be he also Steve to in the of we and is CTO, Weiskircher, starts week, Well, project as added all heard, recently going team you’ve to management. our new next have discussions and Steve the driving

to to confidence So, the have bringing had in us – the billion-dollar-plus I there. at we on e-commerce that, Steve, multiple for great But platforms, Steve a finalize and took let approach it's GameStop, both to prior leader we plan. to new methodical and appropriate chain. think experience let even rollout in Fanatics a him and supply at launched retail long

it's appropriate come get to let into back So, then and will with seat, Steve timing. his I

Gary Prestopino

ramp is down. now transformation and completed? number else looks sequentially sales percentage of a it technology of on, like basically to we the lastly, down somebody that as – spend jump to expect Okay. as LiquidityOne to I'll Then that was percentage your continue a sales Is should

Bill Angrick

Jorge going conceptual that be and housing grow our our inherently that line. will because we'll all practices over The never to not e-commerce, ongoing efficient single out done. and great as marketing areas. that with we technologies, in can focused the Well, business. I’ll margin pace investment That's And more efficient areas we're a give time data to in And sure extend a be what in not top doing incremental just And we're the more functionality building append. have which that marketing on view but won't only best say engineering of technology sales we analytics we that thing really talent in maintaining is on organization, incremental means also you about of the are world also making the is and contribution our the stack. very in we're have is technology like we appropriate

marketing terms but in be think business more of the arena. I investments we're efficient, long-term and model, still going So make in we'll to IT

Jorge Celaya

Hi Gary. thanks. Okay,

that, to just Bill So, add exactly right. is to

the As term, a leverage as percentage premise our get that as long revenue. we going grows, pipeline go is IT our medium to to so including everything forward, certainly, we're the of here across spend,

I think between a course a bit of where we the see to increase launch, of months capitalized to this software six and in in have IT the the shorter of with shift going expense a we're year IT total. might a term, slight next over in

the and quarter-to-quarter. reduced closer. on just Steve, will the got of the be it'll we're short revenue, depend, into be model also mind out our past despite our of at a as months, decline conceptually, we've right, I cycle and pace three least that keep we But platform more wouldn't it, year again the and he in months much two, But be rollout significantly leverage closer had the this IT. think our getting comes in onboard, But we As IT over I XX of unnecessarily. starts here clarity expenses on to next And is percentage the of term, our this continued growth. budgeting with modeling going – as quarter in that going to our cycle

Bill Angrick

they language allows the and that as need This us to the currencies. in they is buyers both Let value-added globe with by me And basis, in higher the to merchandising you're on a we recovery interacting in front-end. well on expense platform recovery that result we're focused the new we're allowing and load maximization services, sellers add a made focused and as this how buy of on self-directed it's the as selling. going different how are we've just across themselves our of and where we're investments bid a side, buyers, platform. clearly, get additional if to serve our values And while assets

company for streams the the the company. for When when we that sell real less to assets payback improving overtime, drive base, capture money, recovery the the more is for realization So, and margin revenue expanding buyer bottom higher the we able labor to we're things line. with creates profitability more

And need factored so we'll efficiencies that over realize the things time. to combination all those be into of

Gary Prestopino

Okay. Thanks.

Operator

have question [Operator Baird. from Colin line of another from Instructions] the We Sebastian

open. is line Your

Colin Sebastian

the just on expense? what follow-ups. will couple over amount that get to Thanks. point, A of timeframe the a from platform you is And maybe last that spends that capitalized need on expense? And I of well, as me couple have total what

Jorge Celaya

on balance – – on what five million $XX life about about that is capitalized It's of we've approximately capitalizing we million the sheet that have – and it’s years, software. the that we're set $XX more

Colin Sebastian

the see to as new platform And does quickly catalyst clients of is Bill? the we Okay. a that customer Does And how so, happen? for with if expect should that organization, provide that – as existing accelerate completion that the does something well can engagement sales acquisition? that project,

Bill Angrick

think to answer and tech allows way is, under platform to we lead sales from yes. solution role, driving function is – much I contract generation, it's execution process consolidated the than output is Chief The from then But that into what go-to-market alignment And need the I that's think a believe an the Commercial account efficient us management. a want. the conversion, systematic important So more just we've platform. tech process and that in market it's clients go our lead the more Officer onboarding short and a design

by that more aligned in leader organization single productive single with globally in a housing a process, a a organization. And we'll so have

managed eBay for we The other them important large options self-directed fully Fortune there this and solutions. very we'll provide that's many companies their change want manage own some it's XXX cases, And asset Colin, dealers they individual believe be of for marketing And able to and every sales, is assets discussion, control assistance, description whether having company and not preference from to have assistance, that management a this menu assistance, more a with buyers. manifesting are point, how other clients that client and project to an unlike in that experience. load equipment many in

the flex to we've So, that and more to we're made allow of efficient, going underlying respond we ends the to platform. leverage like think to clearly needs to in is investment able clients' and our us e-commerce to continuum both this be the

Colin Sebastian

the And it you progress the to track then GMV what Is how completed – understand or we KPIs going measure… should transactions are there? to are

Bill Angrick

But flowing to to of we eye things. fairly on clients, going value-added metric that used of the dollar services think there is driving the stream through because also a marketplace. we’re universally a an in what's couple One, revenue to understand Well, understand activity GMV terms certain attached and should additional not we're to GMV. keep is need these that is revenue we to

gross And also talking growth, about GMV be so growth and profit. we'll revenue

As the very other services high to we some self-directed are GMV attached know or and aren't software-driven that of data-driven that margin.

gross over focus time. profit for another important to metric would so be us on And

Colin Sebastian

Okay. now? of then more there projects? as think terms CTO, lastly, that or is And associated less spend be and… up canvas are the like do completion? an Or in about role How he of, incremental And to we his with projects going does he there almost marketplace, is open have Steve his kind picking at

Bill Angrick

that bring I think product Steve settling took existing move – review into skills will had of in he'll extensive of continue both set to be broader Steve roadmap forward. to and And the and situation. the he'll flight, a an company what's an

he's of process a and So I the scale are doing performance think RISE think situation. here. growth settings he large what will amount execute and in done very significant bring, pattern continue the strategy very prior I a recognition will Because of in we to the to

Colin Sebastian

you. Thank Okay.

Operator

Research. Prestopino from of the another have We Gary question Barrington from line

open. line Your is

Gary Prestopino

strategy the or right? what buyer you this us Could of – that of of four are to beyond your recoveries, maximize three is to simply, recoveries maximize for tell – and to the expanding are – trying could base, key things Yes. new your try you're on and clients? you your guys platform So you're some focusing going benefits maybe one the we RISE very

Bill Angrick

where on our been of than is online mobile have with the now experience, XX% gap with of we being closing the One traffic more mobile devices.

where we'd extent, – some be. are been like have still We not to to

a best gap that and harnessing click that and user of range So more new we're prior a of stream not histories data fresh tailored leveraging a closing gap gap. closing drive that's and and We're simply wide in to the assets. on recommendations closing bidding practices and about larger terms the of idea viewing scale doing other also curated, with

our fascinating in so deals verticals, and we're that of industrial And so vertical quality sandbox recommendation huge improving in about what's is worldwide great this analytics terms engine equipment so a is great every have data buyers recovery. using from there and that discover this business is opportunity to on

that the certainly where and manage on use of see activity, opportunity using the they and in. and or about data them the allow business to to ability There gets log what dashboards our an technology platform a our needs control their we machine they business intelligence, on And to set more which take that self-serve we've from gets is into with is when do how sellers' they needs more into what aspect the technology this to they marketplace. up drive learned is another self-directed basis have buyers' investment their us learning,

appropriate will the might upgrade. growth buyers the buyers, that we recovery. be are service to for understand international because everywhere, to a I the experience want as going cross-border in think for to also more outside the that platform with sell with an of the international that's whole allow ability And So I customers, ways us U.S. our us talk engage giving And be then that we to platform tailored a that's about will frontier more improve think them also

a mobile recommendation getting recovery time. experience a drive in there's whole more will the effective that using better experience range So continue curation to of buyer behavioral and to marketing data base, a the of over way,

Gary Prestopino

bundled lot into these, fee or a auctioning... standard charging like additional an for analytics any that just like, are that, – you fees there of your things data Is for is that? for Or

Bill Angrick

we what do. Largely bundled into

Gary Prestopino

that seems is KPIs, most should the GMV? GMV in segments? would So, we the of if maximizing to a on be that as like that, your a be maximizing percentage that one percentage revenues, going up really your then, I for mean, would KPIs of you're in of your your recovery, Because mentioned going be revenue that number various as each it should of me be focusing important KPI forward Colin

Bill Angrick

need the what businesses our in you solutions offer to a reflects self-directed of GMV use. understand revenue they of percentage which opt as to way of client has a is which solution, we to adoption revenue. service, Well, and multiple they want on a to fee, And managed get either lower lower-touch a has the or fee a as fully more higher a percentage

So on to solutions, given we more business, I dollars percentage profit profitable are revenue focused the profit go as the inherently And because and solutions. our would to GMV, in gross What migrating in the lower-touch using of Gary, expect a up the growth. over we wouldn't time. higher-margin be to growth is I the growth be judge that revenue continue revenue GMV to is as would a of i.e., gross mix, of likely percentage dollars technology-enabled

Gary Prestopino

that contract that going in quarter? right, the end okay. to then lastly, is And All September? correct, September Is Scrap

Bill Angrick

Correct.

Gary Prestopino

away category that income the with does distribution, sellers your for that Scrap the of cessation So statement in contract? go

Bill Angrick

it Overtime, will. Yes.

Gary Prestopino

you're saying… then Well, Okay.

Bill Angrick

very that's were now more And and you as born almost our we zero go our contracts. when of it's zero DoD to – So QX. what's a efficiently you have business, about yet, Today company this XX% much with diversified about or when legacy think to over we then as revenue integrated. public business organically growing interesting you think attached

these new fixed the and our do ability And our leverage day so in it's a for of growth how opportunity, us think cost terms about verticals. in to so really multiple we

Gary Prestopino

seller all tied to were contract? But distributions those Scrap the Right.

Bill Angrick

Significant majority Scrap the contract. tied would've to been

Gary Prestopino

That’s fine. what Thank that’s about. Okay, I you. asking was

Operator

back time, There Ms. at I like are Julie now this to no turn further to Davis. the call would presenters. questions

Julie Davis

your have in if free out This nice to you, a call. Please any you and afternoon. me to Thank feel Thank concludes our now have for additional reach follow-up participation you questions. call. today’s

Liquidity Services (LQDT) 4 Aug 192019 Q3 Earnings call transcript