Liquidity Services, Inc. (NASDAQ:LQDT) Q1 2024 Earnings Call Transcript
Liquidity Services, Inc. (NASDAQ:LQDT) Q1 2024 Earnings Call Transcript February 8, 2024
Liquidity Services, Inc. misses on earnings expectations. Reported EPS is $0.14 EPS, expectations were $0.16. LQDT isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the Liquidity Services Inc. First Quarter Fiscal Year 2024 Financial Results Conference Call. My name is Norma, and I'll be your operator for today's call. Please note that this conference call is being recorded. [Operator Instructions] On the call today are Bill Angrick, Liquidity Services' Chairman and Chief Executive Officer; Jorge Celaya, Executive Vice President and Chief Financial Officer. They'll be available for questions after their prepared remarks. The following discussion and responses to your questions reflect Liquidity Services management's views as of today, February 8, 2024, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact the financial results is included in today's press release and in filings with the SEC, including the most recent annual report on Form 10-K.
As you listen to today's call, please have the press release in front of you, which includes Liquidity Services financial results as well as metrics and commentary on the quarter. During the call, Liquidity Services management will discuss certain non-GAAP financial measures, in its press release and filings with the SEC, one of which is posted on its website, and you will find additional disclosures regarding these non-GAAP measures, including the reconciliations of the measures with the comparable GAAP measures as available. Liquidity Services management also use certain supplemental operating data as a measure of certain components of operating performance, which they also believe is useful for management and investors. This supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results.
At this time, I'll turn the conference over to your -- the presentation over to Liquidity Services Chairman and Chief Executive Officer, Bill Angrick.
Bill Angrick: Good morning. and welcome to our Q1 earnings call. I'll review our Q1 performance and the progress of our business segments. And next, Jorge Celaya will provide more details in the quarter. We recorded 13% organic growth in consolidated GMV this quarter, led by our GovDeals segment, which benefited from strong bidder engagement on our modernized govdeals.com marketplace platform. Additionally, we recorded strong subscriber growth in our Machinio segment as customers continue to be delighted by our Machinio System, dealer management software solutions, which deliver outstanding ROI by automating and improving asset management, marketing and sales activities. Of note, Machinio was selected by XCMG E-Commerce, an Asia-based multinational corporation to facilitate the sale of more than 6,000 refurbished construction machinery assets as part of their reconditioned machine refurbishment program to remarket and extend the life of these assets.
This is just one recent example of our successful expansion into the Asia Pacific region, which more than doubles the addressable market for our Machinio segment. Growth and profitability in our RSCG and CAG segments were impacted during Q1 by an inferior mix of product and delays in selected international sales events at quarter end, respectively. However, we are seeing an improvement in our RSCG product mix as we enter the seasonally high fiscal second quarter, and most of the delayed projects in our CAG segment are expected to close during the fiscal second quarter, resulting in the resumption of year-over-year growth. We continue to provide strong liquidity for our sellers across all segments as the number of auction participants on our platform grew by 14% year-over-year during Q1, and the number of completed transactions grew 12% year-over-year.
We continue to invest in our multichannel buyer base to drive higher recovery including expanding our AllSurplus Deals marketplace, which provides consumers direct access to value price merchandise and expands addressable market in the retail supply chain. We are pleased to report that we have successfully rolled out our AllSurplus Deals marketplace offering in 5 markets, and we are setting new records for completed transactions, revenue and profitability week-over-week in this channel as we move through the current quarter. In support of our long-term strategy, we continue to expand our market share in our GovDeals and CAG segments through the acquisition of Sierra Auction, which strengthens and accelerates our position as the leading online platform for the sale of vehicles, equipment and surplus assets for government and commercial fleet sellers.
In summary, we remain the trusted provider of choice for commercial and government claims in the circular economy and continue to deliver outstanding value for our customers as companies of all sizes and industries seek to better manage their assets, inventories and supply chains to drive efficiencies, they are turning to the Liquidity Services platform. We intend to capitalize on our strong buyer base and business pipeline across our segments to deliver improved growth and profitability in our current fiscal second quarter. In parallel, we continue to make multiyear investments to expand our market share and enhance our platform's capabilities to drive long-term growth for Liquidity Services shareholders. Our results will benefit from these investments and our expanded operational capacity.
Our capital-efficient business with strong operating cash flow, approximately $107 million in cash with zero debt provides us ample financial flexibility to execute our plans. We thank all of our team members across Liquidity Services for their dedication to our mission to power the circular economy to benefit sellers, buyers and the planet. And I'll now turn it over to Jorge for more details on the quarter.
Jorge Celaya : Good morning. We completed the first quarter of fiscal year 2024 with $305.9 million in GMV, up 13% from $270.8 million in the same quarter last year. We saw a very strong performance for our GovDeals and Machinio segments this fiscal first quarter. While finishing the overall quarter within guidance, albeit at the low end of guidance due to delays in various CAG segment high-margin projects, which were mostly already finalized this January and a slower-than-anticipated improvement in our retail segment from the more recent product mix trends related to lower value supply in the market. Our fiscal first quarter revenue was $71.3 million, down 1% from $72.3 million in the same quarter last year, reflecting consignment GMV at 89%, tying an all-time high.
The mix of our retail segment supply was a factor in the higher mix of consignment GMV. Our fiscal first quarter consolidated profitability included GAAP EPS of $0.06, non-GAAP adjusted EPS of $0.14 and non-GAAP adjusted EBITDA of $7.3 million. While our operating expenses were well controlled during the quarter, the percentage drop in revenue and direct profit compared to the same quarter last year reflected the CAG and retail segments delays and product mix, respectively, impacting these results. We ended the quarter with $107 million in cash, cash equivalents and short-term investments. We performed $1.2 million of share repurchases during the quarter. And at the beginning of January, we completed our acquisition of Sierra Auction for $13.5 million in cash paid at closing in this fiscal second quarter.
We continue to have zero debt and $25 million of available borrowing capacity under our credit facility. Specifically comparing segment results from this fiscal first quarter to the same quarter last year, our GovDeals segment was up 18% on GMV, 17% on revenue and up 17% on segment direct profit driven by increased availability of vehicles and strong bidder engagement on our newly modernized Govdeals.com marketplace platform. Machinio was up 18%, and its segment direct profit was up 19% with continuing increase in subscribers and pricing for Machinio Advertising and Machinio System dealer management products. Our RSCG segment was up 3% on GMV, down 5% on revenue due to mix and down 12% on segment direct profit as the GMV increase was driven by lower take rate, low-touch consignment solutions, while retailer purpose programs and some retailer consignment activity continued to reflect the impact of the lower value product mix compared to last year.
Despite the delays in projects during December, our CAG segment was up 9% on GMV, yet down 17% of revenue and 18% on direct segment profit as a more diversified GMV mix with increases in global energy and industrial consignment sales were not enough to offset the prior year fiscal first quarter's high-margin international purchase transaction. GAAP net income for the first quarter were $1.9 million, resulting in the diluted GAAP earnings per share of $0.06 compared to $0.12 per share last year. Non-GAAP adjusted EPS for the first quarter was $0.14, down from $0.19 in the same quarter last year. While non-GAAP adjusted EBITDA of $7.3 million this quarter was down from $9.8 million in the same quarter last year, reflecting the CAG and retail segment results.
Our fiscal year 2024 outlook continues to anticipate year-over-year growth for the second quarter with improvements in consolidated results expected for the second half of fiscal 2024 compared to the first half of fiscal 2024. The second quarter of fiscal year 2024 guidance includes continued strong performance for our GovDeals segment and further improvement in the GovDeals segment from our acquisition of Sierra Auction this quarter. Our CAG segment also looks to have a stronger sequential quarter for this fiscal second quarter as it captures transactions delayed from this past fiscal first quarter. We also expect the traditional sequential seasonal growth effect for our RSCG segment during this coming quarters post-holiday return season. Compared to last year, RSCG expects continued expansion on its lower-touch consignment programs, while the mix of product across some purchase and consignment program is expected to begin to improve sequentially.
Compared to last year, these will continue to receive a higher mix of the lower value flows from certain seller programs. Consolidated operating expenses are currently expected to increase from the Sierra Auction acquisition, mainly in operations expense and variable expenses related to top line growth overall. We currently anticipate our consolidated revenue as a percent of GMV to reflect our current level of consignment mix and remain in the low to mid-20% range, which can also vary based on our mix of asset categories transacted. We expect our segment direct profits as a percentage of total revenues to increase year-over-year, remaining at a similar percentage sequentially to our fiscal first quarter 2024 results. Management's guidance for the second quarter of fiscal year 2024 is as follows: We expect GMV to range from $320 million to $350 million, GAAP net income is expected in the range of $3 million to $6 million with a corresponding GAAP diluted earnings per share ranging from $0.09 to $0.19 per share.
We estimate non-GAAP adjusted EBITDA to range from $9 million to $12 million. Non-GAAP adjusted diluted earnings per share is estimated in the range of $0.17 to $0.27 per share. The GAAP and non-GAAP EPS guidance assumes that we have 32 million fully diluted weighted average shares outstanding for the second quarter of fiscal year 2024. Thank you, and we will now take your questions.
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