LQDT - Earnings call transcript Q2 2020 | Liquidity Services, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q2 Fiscal Year 2020 Liquidity Services Earnings Conference Call. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Ms. Julie Davis, Senior Director of Investor Relations. Thank you. ma'am. ahead, go Please

Julie Davis

Hello, Financial to Results Jimmy. Fiscal Second Year XXXX Conference and you, our welcome Quarter Thank Call.

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

after for We remarks. prepared questions be our will available

of include The discussion forward-looking results differ materially. as statements. to X, XXXX, reflect management's your Actual following May questions and responses views or today, we will may

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

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

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

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

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

William Angrick

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

more Jorge details the Celaya on Next, will quarter. provide

customers to to employees issues health shareholders. March, in in our periods reduced the and safety markets, employees, quickly impact to in mitigate protect Liquidity costs our global of Services for volumes customers During In our responded one to rapidly and of and order address most business. our has our control we moved all difficult the and

to our continue effort our value buyers together to adapt by environment are new to of humbled proud sellers. very to to the We team's work and deliver quickly and and

equipment assets liquidity and to during a access generate providing and and safe economic primary focus online shipped sellers crisis pandemic while paid the is and and global are in commerce they commercial buyers marketplace Our to government their and the able to by, for solutions, our manner, resulting monetize safely business needs. help our defined assets, to inventory customers By reliable efficiently. require and meet conduct leveraging

for largely aligned which results with expectations quarter Our by were weeks X March our on an economic pandemic, results. effect surrounding the second were The mid-March. adverse through of our the overall fallout the last impacted had

period prioritize exclusively almost resources over grew Our by X% attention activity quarter as for despite the RSCG goods. essential segment prior their seller online the at to meet GMV and retailers end year declines the in of demand

goods and their continue purchases in retail some in RSCG also buyers demand large demand depending saw to our strong circumstances. some we with the segment with higher increasing sellers marketplace. average for retailers, varying to existing We decreasing, mid-sized and programs we strong both launched Prior volume our Liquidation.com and see new from slowdown, and on we buyer this mixed experienced

March and early sellers our a for as supply interrupted inspecting This goods and In spread. prevented EMEA CAG in from facilities in pandemic American significant already segment, then North we and regions quarter China the slowdown trend saw restrictions travel from our second affected our buyers as the sale. in

reopen will to and provided seller globe starting to COVID-XX. anticipate reduce increase facilities continue the to see across restrictions related steadily, We governments are activity

This governments buyer complete ability and record GMV, their on to was also X transactions. to closed enacted orders of pickups track sellers prevented weeks but volume last report segment facilities. Our second significantly during GovDeals as related slowed from quarter the March shelter-in-place and

during the buyers, downturn. March prior segment small economic the Machinio grew many the whom our businesses, of waited in of over on better traffic XX% as depth for despite equipment visibility slowdown Finally, revenue year are a

our new need to live, including of which further AllSurplus.com, assets features we eliminates QX, consolidated the sell During contact. marketplace, for that enhanced online, in-person a enable the addition new low-touch solution self-service

early adoption of model seen have primarily relied they that as services traditional sellers historically managed our have shift We this from to business processes. cloud-based approach on

Moreover, the early and marketplaces increase We XX% targeted new our and an time our self-service marketing solution believe completed we March, over growth including legacy AllSurplus, opportunity heavy more from increase supply pandemic. transact guidelines will In seen are to manufacturing AllSurplus to distancing be equipment, array as business opportunities began in buyers due from the and to buyers attractive social wide products, providing traffic quickly a focus and sellers on transition energy across in to to transactions we have equipment. through aggregating adapt of by an a buyers marketplace. sellers and

the very near-term impacts in for it We on Public is us to of of understand or supply the all negative. including functions activity the U.S. limitations difficult quite over chain been pandemic functions. significant and the policy Looking meaningful restrictions of operations business travel impact forward, on have have our of business. in prioritization abroad activity, restrictions, the reverse closures, economic forecast included business actions the business pandemic essential

has the actions, into As a assets consequence reduced. of marketplaces of been flow these our

lower state sharply take place. government volume GovDeals from until expect reopening segment our We phases

sellers the time. and our economy resume improves, will the activity reopens business government believe selling climate their we over As

starting prepare coming facilities We weeks. as governments to increase to in activity are in the an reopen see

surplus the to to However, agencies impact assets at their state overall this remains government financial the this and local from pandemic time, future. decisions and unknown, in influence the sell could

Liquidation.com support RSCG volume through short the to retailers even in including online needs, marketplace, if term. at to expects our continue lower-than-average a retailer Our segment

the our essential can supply in we our As maintain long we the operations will center ensure needs of and our as safety support buyers. of sellers chain of employees, fulfillment

or third-party we during accumulated chain ourselves and the vendors the to any returns more subside, of address turning to excess pandemic. the As a as safer-at-home supply inventory retailers such way, shelter-in-place expect pandemic restrictions address in reverse to phases the of accumulation needs comprehensive

and facilities the our of buyer asset also Yet, expect for buyers liquidity from inspection restrict see of for need and assets CAG sale. cataloging for value-priced create from closed many reduced CAG equipment many future volumes positive within We segment the will employee segment. our demand segment assets, sellers of our and the in as to cases, CAG are in pickup seller our believe and we demand conditions supply

same equipment sell solution place we'll in We self-service aligns globally AllSurplus.com, our support for of solution long-term the numerous long-standing industries, traditional new, the and expanded on selling we will our market-maker to strategy. our continue have low-touch high-value offer a with At our timely across seller time, and base. which to needs reputation with

our strategy enables through remains technologies asset-light, buyers for focusing low-touch people, chain long-term our ourselves, processes and an marketplace sellers by the our efficiencies creating deliver Our and on growth solution. that supply optimal and liquidity the focused on reverse in

witnessed customers circumstances. In our that for are well the we the pandemic, team's we are delivering of closing, pandemic We of and to the evolving that reliable ingenuity of sellers during enable results our COVID-XX, global consistently the no platform the shining in our the partner adapt team weather show us and believe buyers have examples challenges of to we our industries across most will strength and the reverse our matter solve the we chain, serve. ability to positioned of and online supply the

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

Jorge Celaya

low Good except the only finished for $XXX was XXXX of for morning. metrics, end million below We quarter the $XXX.X which range and year within merchandise all guidance. fiscal slightly second guidance volume our gross million of

sales segment wind the marketplace. were at COVID-XX segment the offset in year compared on in marketing fiscal our down volume of March, February; than to and second existing EBITDA e-commerce segment in in of volumes expenses our and which RSCG of offset from impact to the DoD four, our our Scrap in CAG promote segment; which expected down our January impact, one, March three, and across related our increased North year to EMEA planned of five, slower related to adjusted COVID-XX to through and technology previously APAC, lower end lower the last impacts two, sellers related America; mid-March; in As the contract higher GMV volumes develop expenses our and in consolidated activity and volumes in our further GovDeals increases COVID-XX growth platform CAG impacts quarter XXXX, new

the We have operations, mid-March, on been COVID-XX closely spread. pandemic. from resulting by limit we governments By the taken an experience sector monitoring to began entities impact actions and private the to

for into or As the reduced was turn, year of facilities assets the of X%, a also assets hindered their to process Scrap pick closed, which, the the buyers seller second impact shipping for contract. employees as declined Compared arrange the flow to X%, DoD to revenue our marketplaces of result, quarter in XXXX, wind fiscal ability up and GMV of and including of of the down assets. down was

the GovDeals In flat facilities government as a GMV due second compared COVID-XX. as quarter reduced fiscal XXXX second volumes with of year many of the in quarter, closed result to mid-March, beginning was to

volumes up GMV began COVID-XX in to experience Retail the the where to of mid-March resulting of existing goods Our volume response their was X%, RSCG effect pandemic. driven reduced Supply resources the retailers meet Group growing within seller to demand Chain despite by from prioritizing essential accounts

as from the sellers an the and excluding in by and in down declined our of DoD These offset March XX%. North travel impacted inspecting improvements contract year-over-year Including goods. partially first segment our COVID-XX the and American of and wind our the interrupted XX% affected China trend buyers from pandemic impact in closures the spread. were DoD facility regions supply contract, EMEA decrease Scrap as by -- pandemic restrictions prevented a CAG CAG the impact from segment, This

year better $XX.X increased COVID-XX-related GovDeals X.X%. fiscal mix, of revenue X.X% revenue of product Despite quarter the headwind, increased on second reported We and XXXX million. RSCG

contract, quarter the compared to of revenue down quarter wind second XX% excluding Yet year CAG DoD contract. last the Our the Scrap year. CAG the DoD to down revenue was segment including decreased XX% the of same XXXX, compared segment fiscal

prior than offset loss year, operating expenses which year by mainly fiscal last stock $X.X the loss loss million was XXXX of top year from in million, compensation net impacts lower a last second $XXX,XXX an quarter from increase Adjusted net Our XXXX in fiscal improvement loss GAAP X% line $X.X $X.X as were of was quarter year. higher second a the a year. of reflected million,

Our the period $X.X positive last compensation stock decline reflecting second negative a also year. this was lower million, from expense year, $XXX,XXX a quarter adjusted EBITDA same in

of XXXX. December have XX, prior had an ended March quarter the balance We cash a debt-free increase from sheet. short-term investment million, million $XX.X XX, of a $X.X balance and At XXXX, we

we performance of quarter, achievement a based on the payment Machinio benchmarks. earn-out paid During $X million

in likelihood, decline the laid ahead, term, actions Looking The And possibly longer, may may will events magnitude business cause COVID-XX the number Bill and at flows. as mitigate although out, the and these segment and across these and of our to expect short our expect of marketplaces adjusted short lower we resources the conserve be short-term by to speed return difficult to pandemic our and EBITDA our term, to a predict. negatively declines. is we on operations impacted cash in might GMV, transactions taken which affect which activity cash timing

not are, quarterly providing therefore, guidance. We

Thank you.

We will your take now questions.

Operator

Instructions]. [Operator

first Colin with comes question Our Baird. from Sebastian

Colin Sebastian

of bigger for picture me. couple A questions

particularly auction time and in groups? over bit. aggregating Are seeing those secondly, And Bill, merchant the about of synergies -- lift for an divisions? that scenario, Retail And be the AllSurplus and and improvement a a a downturns we larger buyer just would CAG potential of on First, prolonged in the yet event should and any it base prior more that time sort how to in then consolidating have looking of your recessionary the think reasonable the expect participants? the experience, volumes, line we in terms you at liquidation given in

William Angrick

transportation strategy marketplaces, part drive been helps question, long-term has of a in been equipment. scale spend. demand Buyers to us branded allows to first your such scale It It such AllSurplus. benefits handling buyers. marketing as consolidated which know and regarding Well, marketplace, that cross-pollination matters. aggregating leverage Sure. our or adjacent may as who in our supply categories might also us in support needs in has have category equipment our buy We also material of of construction

and see in industrial we've and it's of and place managed go. there lot The And sellers, are for that early categories. We so many years both to for for a sold overlap natural the things returns commercial government us a positive.

have marketplace. the the is transactions customers and And that methodically. receptivity it reach the that X.X something taking good upload self-service seeing on had This long-term turn come buyers million the This capabilities manage dime, to to with the effort. a both but a and is good we're for that's we have. allow validation We're and marketplace not sellers in going we've directly on

interesting I periods Regarding in for is time, a recessions, well a Colin, recessionary doing had reasons. this think of of variety what's I think history we've

in term, As everybody, a so in far has restriction in as which there's pandemics, no in facility And different that's I an travel how entirely commerce orders, well restrictions, the Liquidity short result closures, severe we think for shelter-in-place environment. that question not Services. just do

to in mid that And Those they that marketplace. assets. term, in looking looking or and monetize to They're for speak be But our countercyclical retailers, long frugal. value. manufacturers the we our know buyers are government a are sellers, we are know We agencies, strengths. whether

once XXXX these expect you restrictions society policies, in once had progress. XXXX, that, the and downturn, restrictions we would extraordinary we very you from for play, kind And And are we've of so in if cyclical of government normalize will. normalize you periods some steady like

don't we've witnessed. sugarcoat to I But want what

I sell sellers think closed no ability who and April employees, list difficult simply those assets. was long-standing economy. this No to very no We access facilities, up. government had for to many

that in negative business closed. many parts market, was impact. to very a going that's And of So have short-term

How provide where recovery future? predict a tell recovery, difficult we you a are recovery, guidance. an we some V near-term second have W, why very becomes L if then to you Well, it's do can't a That's and and wave. talking folks the maybe about it a

Colin Sebastian

you there you some so there we've seen that, at of of some and the and when sell-in-place place, companies do talk which, environment lack will companies programs or note, that assets happen that physical like -- -- liquidate that, are are this. friction need locations flow different adapting to start can of that municipalities warehouses methods and are about on are to companies and again? But manage did to things maybe adapt And in inventory, you reference being and that and ways the put given bodies to in those, there to

William Angrick

fascinating differently our is Many local addressed ultimately counties. local these same the see in towns, are locations. what's Well, And decisions. set clients are you of different municipalities, problem villages,

all they differently. it so And slightly attack

in And -- certainly the believe, We care a health particularly a have concern. that the issue great the that's technology-enabled eliminates any a there's educated availability in-person in of approach on the we market for solution or interaction. need this environment, when

that the resonates but over time, think, town governor a ours. value So the decides. and local whatever of is message or to of subordinated That we strong, strength mayor proposition the is

You understand that.

Colin Sebastian

are that facilities your correct? And still open. Is

William Angrick

have different aspects our to operations. we couple a of Well,

strict other and are supply operate, and supply part with line chain have retail Our been capacity care recommendations health centers an the function from because essential to of chain less-than-full maintaining in although fulfillment we're and guidelines continuing experts.

to that has Our adapted adapted of will environment while local America to and most work-from-home continue And primarily, we'll continue and state as open, be ordinances. so by virtual the a be governed to we offices, technically have case.

United in have or at outside same, or of this United less U.S. fulfillment the the retail outside other is operations, don't -- we that more parts supply XXX% and but do. of the our status stage. centers distribution much Canada, much the are or And open virtual marketplace the operation less more center We as well, a our online And same same. capacity. in the And less operating, chain States, than

Colin Sebastian

may position Jorge, I the company the and in about just different months? how near-term you of scenarios mean, coming the on general out then, over and comments And the that play are cash feeling liquidity dynamics.

Jorge Celaya

accordingly. drop Well, managing and managing the top line the from expenses the we're

March than position, we we reasonably saw, stronger the a on we last cash of with And thought. last ended good during that's despite, you Machinio this million as $X finished course, earn-out. quarter, spent quarter As having

was it reasonably quarter. cash-generating So a strong, good,

obviously, the picks up, As will business cash the improve.

do to with them they cash actions given avenues on -- our that, we're for For having feeling we're know over We month continue balance now, debt. April, And that actions. our we've hand and zero and sheet, those go capital. other term, in we comfortable But are, the why of have what reassess. for tight took took is explored million we forward, on March which all we for although as the with the we'll short the sitting $XX

Operator

And our next question comes from with Research. Gary Barrington Prestopino

Gary Prestopino

that Yes. I flow cash cash just number looks want trying of paid But of you on to of things you've ask is, obviously, million like some good pretty thing the then just taken? and a the reductions free or -- it that some was the is -- $XX-something of Machinio. that. $XX was flow to handle And a get really versus $X of for -- expense first there's I your It million function -- is get million, this because that to Machinio a quarter. want in I'm here.

details give your you how the And question what So there? would is much from explore I in other could to down here you want response cost then done you've flexed us pandemic? have to the some

Jorge Celaya

Yes.

So we're those second bit March The and we've for one gone. to Bill. But about little is pass no. April. of reduction first the talking always took the were we've the I'll April, had a we for in as that actions take cost when answer Yes,

so So the forth, March more significant and February, reductions, did the not January, including furloughs impact quarter.

William Angrick

a we that's technology people, well, is costs, that our knowledge we which largely, operating And followed business, asset cost. platform. -- primary by primarily regarding our our are fixed means realized And our a

cost this any variable has down. to on one try margin, can job of and certainly the visibility that modulate and transaction the majority one but on the modulation that it's it's costs, based spend measures lots then with environment However, been in to these the GMV there downside of not businesses where of is And match are the take of upside. on that our It's of that at material. to volume, the or managed activity

I what So And you're going very April difficult number be a think to was businesses, to we correlated fairly nation's probably a marketplace. will see would GDP. that see of including month our in that the in lot well

have, Supply essential balance, spectrum It's the been, pretty of businesses. part chain. supply Chain of said, has as Retail an resilient. I We a on

to that, the activity the resume they're then there's follow decide answer when for continuum, mean, shop, and really prescribed close On that when governments all of up end patient no other guidelines than ready. and to other I to be

costs, we've have out travel is, So that's what certain map to marketing costs, and helped. done. that's The controllable and costs Certainly managed. what we've transaction spend taken volume discretionary the things and to

Jorge Celaya

also... I'll maybe Well,

Gary Prestopino

Go ahead.

Jorge Celaya

Sure.

on give and sense, by basis. March, home, from forth XX-day -- to always furloughs volumes we add clearly, cash you system off, March. and period made and a of we we way, and of look But was to starting more luckily, that, the changes had we, that forecasting, we've Just in had our structure on with kind very frankly, how on made that a very last last as actions coming focused late changes which starting our work improvement frequent better with plans Especially and a visibility, within our attentive of dime year, on all turned these in all so we been ahead. some -- were starting our cost our a quite

bimonthly monthly think week doing, normal weeks' forecasting, marketplaces. at tracking your business going a what we're line assessments a be at We're that not and commensurate even instituted translate our of daily. would we're to and seeing, the cash is in we not quarter of granular X We're GMV volumes routinely across daily weekly And in that we're basis. or formal process X looking which our forecasting and our be just to but with and weeks' we forwards translating of currently view what our time. that on which looking see We're expenses into look weekly definitely using also out, our even of or and We've top what a happening transaction weekly. pretty

focus now numbers. next and more focus on quarter might week, and quarters So next our from be X assessment more the month and we're of be on now, attentive X the being short-term less which performance we're about might putting a next and quarters is from resources this of the where what or headed business we then extremely the nitty-gritty the financial

well long pretty the in right? term, is So On term short the focused.

know So quickly way able pretty coming, one we're and what's other. or react we the to

Gary Prestopino

Yes.

in maybe get So question here's I too answer And you I'm guess the trying of $XX quarter wrong at of get I'm specific. maybe the get full you because -- be and I'm costs and what that million that I But considered what to question, transparency. that would want to percentage asked what here expenses trying had the to variable? at, to trying is

the in over were question Given cash if could and burn neutral in QX, of the cash in you level seeing possibly anticipating follow-on And as in to a are a that. April? GMV quarters be QX things flow what hold then you're or I'll have they next two

Jorge Celaya

in cash where with monthly line said line we with we've to put in, certainly in I'll in guidance spend. what that are of -- forward we guidance, with and us chime let today, indicated. we're giving giving in the on that as top not we're not help can kind manage our best will but comfortable place in as And we've we've And the going cash. well, but we'll that things is continue reductions line So Bill -- track weekly, and

William Angrick

States. the be part of think the United is, you or relaxation by what that question I county me state will by difficult most the of tell restrictions throughout

to answer to If the precisely. give don't us can answer I anyone you forecasting. better knows I think that, think that give can we the you

basis, it short-term indicated. Jorge So we're on a as managing

Gary Prestopino

weeks X could the for first the then And to idea of GMV just Okay. you maybe of of X looked the X general, impact -- throughout and an -- weeks at and March could last March versus versus happened April in you are speak It the April, GMV as starting are then, pretty last to companies you saw Bill, you of to through in second right. come your as week initially. give but All Most you what hit then any back still you And to work then see April, we starting bad first see, week really weeks was bad starting the it's weekly? increase in to of slowly. March? in or us some

question another would that's that So I answer you if have, that. could

William Angrick

think into I of actual observed sellers April. that very who our to owing from regarding was the start XX% to XX% metrics are slope number look March open for closures. when down April, at business to like of the that and the people facility you slope who pronounced, was posted assets are down on that down listing the to number marketplace, in And

starting we what think can we bottom, direction. other to move from Now that's and we've touched the in see,

I think slope is largely -- decision-makers. are governor but that's level being of a task by the And debated councils, regulatory of decisions, slope, is policy recovery. the force -- discussed decisions the that type at what dictated question city and

brutal. U.S. think the I looking you're in GDP April, down at -- that's XX% was it in when So

Gary Prestopino

have understand No. Right. goods? then that? in you Or at been haircut have the significant take trying to the of I been least of I'm just seeing No, for, on price on And throughout price on on. a willing short what's a buyer move realizations terms feel side, that. this to going sellers term, all to a just get

William Angrick

having, you're like force selling. I play at the Well, is think still let's of panic in don't say, I think price market terms setting.

think disposition for people an orderly process. looking I are

coverage the multiple of is have benefits that one we in industries. us things think I

And closed. been at haven't of to the all Well, had sector. top equal. chain And other fulfillment us, prioritization how chain been the have has in of because of goods sector. the some cases, Retail operations that's things so essential some you've There's being workers clearly in good, headwind activities. prioritize energy a been getting a retail has volume supply managed good on good or for care of about retail goods the all limits over a health supplies they've and supply stores queue. And retail read center processed had enough

of But day. marketplace, still bringing price discovery in terms through -- is there and every orderly that we're

to I think forced it's people there monetize demand selling, is value price but looking I any like at a pricing. are think or panic liquidation competitive a at for not or assets,

Operator

And no the call Instructions]. turn the this any remarks. closing like in queue I'd showing for [Operator I'm to at time. to back the questions speakers

Julie Davis

additional you afternoon. Hi. Thank Please for Thank you to or so out have have if reach have call questions today. much, good and follow-up. all you any me a joining our

Operator

Ladies gentlemen, and This your disconnect. you program, now for on participation thank and you your does today's conference. may conclude

Liquidity Services (LQDT) 9 May 202020 Q2 Earnings call transcript