Q2 2024 Liquidity Services Inc Earnings Call
Okay.
Operator: Welcome to the Liquidity Services, Inc. Second Quarter of Fiscal Year 2024 Financial Results Conference Call. My name is Liz, and I will be your operator for today's call. Please note that this conference call is being recorded. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. I will now turn the call over to Michael Patrick, Liquidity Services Vice President and Controller. Take it away. Good morning.
Welcome to the liquidity services, Inc. Second quarter of fiscal year 'twenty 'twenty four financial results Conference call. My name is Liz and I will be your operator for today's call. Please note that this conference call is being recorded at this time all participants are in listen only.
Operator: Mode. Later, we will conduct a question and answer session I will now I'll turn the call over to Michael Patrick liquidity services, Vice President and controller take it away.
Michael Patrick: On the call today are Bill Angrick, our Chairman and Chief Executive Officer, and Jorge Celaya, our Executive Vice President and Chief Financial Officer. They will be available for questions after their prepared remarks. The following discussion and responses to your questions reflect management's views as of today, May 9th, 2024, and will include forward-looking statements. Actual results may differ materially.
Operator: Yeah.
Michael Patrick: On the call today are bill and grit, our chairman and Chief Executive Officer.
Michael Patrick: So Ryan our executive Vice President and Chief.
Michael Patrick: <unk> financial officer they.
Michael Patrick: They will be available for questions after their prepared remarks.
Michael Patrick: The following discussion and responses to your questions reflects management's views as of today may nine 2024.
Michael Patrick: And will include forward looking statements.
Michael Patrick: Actual results may differ materially.
Michael Patrick: Additional information about factors that could potentially impact our financial results is included in today's press release and in filings with the SEC, including our most recent annual report on Form 10-K. As you listen to today's call, please have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter. During this call, management will discuss certain non-GAAP financial measures in its press release and filings with the SEC, each of which is posted on our website.
Michael Patrick: Additional information about factors that could potentially impact our financial results is included in today's press release and in filings with the SEC.
Michael Patrick: Putting our most recent annual report on Form 10-K.
Michael Patrick: As you listen to today's call we have our press release in front of you.
Michael Patrick: Which includes our financial results as well as metrics and commentary on the quarter.
Michael Patrick: During this call management will discuss certain non-GAAP financial measures.
Michael Patrick: In its press release and filings with the SEC.
Michael Patrick: Each of which is posted on our website.
Michael Patrick: You will find additional disclosures regarding these non-GAAP measures, including a reconciliation of these measures with the most comparable GAAP measures is available.
Michael Patrick: Management also uses certain supplemental operating data as a measure of certain components of operating performance, which we believe is useful for management and investors.
Michael Patrick: This supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results.
Michael Patrick: You will find additional disclosures regarding these non-GAAP measures, including the reconciliation of these measures with the most comparable GAAP measures, as available. Management also uses certain supplemental operating data as a measure of certain components of operating performance, which we believe is useful for management and investors. This supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results. At this time, I will turn the presentation over to our chairman and CEO, Bill Angrick.
Speaker Change: At this time I will turn the presentation over to our chairman and CEO.
Michael Patrick: Okay.
William P. Angrick: Good morning.
William P. Angrick: And welcome to our Q2 earnings call. I'll review our Q2 performance and the progress of our business segments. And then, Jorge Celaya will provide more details on the quarter.
William P. Angrick: And welcome to our Q2 earnings call I'll review, our Q2 performance and the progress of our business segments and next Jorge Celaya will provide more details on the quarter.
William P. Angrick: Our marketplace platform and services continue to delight customers, fueling double-digit organic revenue and GMV growth year over year. Our business continues to prove its resilience, even against the backdrop of higher interest rates and slowing growth in many sectors of the economy. We are pleased that our balanced investments in sales operations and platform automation are being rewarded across our diversified segments with market share expansion and Record Buyer Participation on our platform. In fact, this quarter, we shattered records for the number of completed transactions up 44% year-over-year and the number of auction participants up 43% year-over-year, which reflects the growing breadth of supply and buyer liquidity we've developed on our marketplace platform.
William P. Angrick: Our marketplace platform and services continued to delight customers fueling double digit organic revenue and GMB growth year over year, our business continues to prove its resilience.
William P. Angrick: <unk>.
William P. Angrick: Even against the backdrop of higher interest rates.
William P. Angrick: And slowing growth in many sectors of the economy.
William P. Angrick: We are pleased that our balanced investments in sales operations and platform automation are being rewarded across our diversified segments.
William P. Angrick: With market share expansion and.
Speaker Change: And record.
William P. Angrick: Buyer participation on our platform.
William P. Angrick: In fact this quarter, we shattered records for the number of completed transactions up 44% year over year.
William P. Angrick: And the number of auction participants up 43% year over year.
William P. Angrick: Which reflects the growing breadth of supply and buyer liquidity, we've developed on our marketplace platform.
William P. Angrick: Our Retail Supply Chain Group segment set a new quarterly GMV record with approximately $80 million in GMV, powered in part by the rapidly expanding growth of our all-surplus deals direct-to-consumer sales channels, which grew GMV sequentially over 60%. [inaudible] continues to grow its recurring heavy equipment seller base at a record pace, and grew its heavy equipment fleet GMV by over 30% year-over-year during the quarter CAG's all-surplus online marketplace is the global market maker of choice for industrial sellers in all regions of the world and in all industry verticals.
William P. Angrick: Our retail supply chain group segment set a new quarterly GNP record with approximately $80 million of G. M. B powered in part by the rapidly expanding growth over all surplus deals direct to consumer sales channel, which grew GMB sequentially.
William P. Angrick: Over 60%.
William P. Angrick: Our CAG segment.
William P. Angrick: Continues to grow its recurring heavy equipment seller base at a record pace.
William P. Angrick: Through its heavy equipment fleet GMB by over 30% year over year during the quarter.
William P. Angrick: Tags, all surplus on the marketplace is the global market maker of choice for industrial sellers in all regions of the world and in all industry verticals.
William P. Angrick: For example, during the quarter, our CAG segment completed several high-value transactions in our automotive and energy categories, reflecting how corporate clients are using our marketplace to monetize assets amidst changing and dynamic growth in many sectors of the economy. Our Machinio segment achieved record revenue and paying customer counts driven by improvements to its online classifieds marketplace, which efficiently matches buyers and sellers of used equipment around the globe. Machinio's recent expansion into China is well underway, and this initiative more than doubles the addressable market for our Machinio business.
William P. Angrick: For example, during the quarter, our CAG segment completed several high value transactions in our automotive and energy categories, reflecting how corporate clients are using our marketplace to monetize assets amidst changing a dynamic growth in many sectors of the economy.
William P. Angrick: Our machine years segment achieved record revenue and.
William P. Angrick: Paying customer accounts, driven by improvements to its online classifieds marketplace, which efficiently matches buyer buyers and sellers of used equipment around the globe.
William P. Angrick: <unk> recent expansion into China.
William P. Angrick: Is well underway and this initiative more than doubles, the addressable market for our machine business.
William P. Angrick: We're also very excited to welcome Sierra Auction to Liquidity Services and are now leveraging its market-leading position in the Southwest United States to cross-sell its offerings to our government and commercial clients. We remain enthusiastic about our strategy and the strength of our business. During Q2, we generated $34.8 million in operating cash flow, which funded our organic growth initiatives, the Sierra acquisition, and continued share repurchases while generating a net $10 million of free cash flow to our balance sheet.
William P. Angrick: We're also very excited to welcome Sierra auction to liquidity services and are now leveraging its market leading position in the southwest United States to cross sell its offerings to our government and commercial clients.
William P. Angrick: We remain enthusiastic about our strategy and the strength of our business model.
William P. Angrick: During Q2, we generated $34 million in operating cash flow, which funded our organic growth initiatives.
William P. Angrick: The Sierra acquisition and continued share repurchases, while generating a net $10 million of free cash flow to our balance sheet.
William P. Angrick: In summary, we are very well positioned, strategically and financially, in the current environment. We have solutions that help our clients weather the cyclicality of an uncertain macro environment. We have a robust business development pipeline and continue to pursue strategic opportunities in each segment of the circular economy to drive shareholder value and provide outstanding service to our customers across the global supply chain. I'll now turn it over to Jorge for more details on the quarter.
William P. Angrick: In summary, we are very well positioned.
Jorge: Strategically and financially in the current environment, we have solutions that help our clients whether the cyclicality of an uncertain macro environment, we have a robust business development pipeline.
Jorge: Continue to pursue strategic opportunities in each segment of the circular economy to drive shareholder value and provide outstanding service to our customers across the global supply chain.
William P. Angrick: I'll now turn it over to Jorge for more details on the quarter.
Jorge A. Celaya: Thank you, Bill, and good morning. Our second quarter of fiscal year 2024 resulted in a 38% year-over-year increase in GAAP earnings per share, a 35% year-over-year increase in non-GAAP adjusted earnings per share, at a year-over-year increase in non-GAAP-adjusted EBITDA of 22%, while growing year-over-year GMV by 13% and revenue by GMV of $319.4 million, up 13% from $282.7 million in the same quarter last year.
Jorge: Thank you Bill and good morning.
Jorge A. Celaya: Our second quarter of fiscal year 2024 resulted in a 38% year over year increase in GAAP earnings per share.
Jorge A. Celaya: A 35% year over year increase in non-GAAP adjusted earnings per share.
Jorge A. Celaya: On a year over year increase in non-GAAP, adjusted EBITDA of 22% while.
Jorge A. Celaya: While growing year over year G M V by 13% and revenue by 12%.
Speaker Change: Specifically, our second quarter of fiscal year 2024 financial results included.
Jorge A. Celaya: <unk> of $319 $4 million up 13% from $282 7 million in the same quarter last year Rev.
Jorge A. Celaya: Revenue of $91.5 million, up 12% from $81.5 million in the same quarter last year. GAAP earnings per share of $0.18, of $0.05, or 38% year over year, non-GAAP earnings per share of $0.27, of $0.07, or 35% year over year, and non-GAAP adjusted EBITDA of $12.1 million, of 22% from $9.9 million in the same quarter last year. We set new quarterly records with 1.1 million auction participants and 300,000 completed transactions in the fiscal second quarter. We ended the fiscal second quarter with $117 million in cash, cash equivalents, and short-term investments.
Jorge A. Celaya: Revenue of $91 $5 million up 12% from $81 5 million in the same quarter last year.
Jorge A. Celaya: GAAP earnings per share of 18, five or 38%.
Jorge A. Celaya: Year over year.
Jorge A. Celaya: non-GAAP earnings per share of 27 of seven or 35% year over year.
Jorge A. Celaya: And non-GAAP adjusted EBITDA of $12 $1 million of 22% from $9 $9 million in the same quarter last year.
Jorge A. Celaya: We set new quarterly records with $1 1 million auction participants in 300000 completed transactions in the fiscal second quarter.
Jorge A. Celaya: We ended the fiscal second quarter with 117.
Jorge A. Celaya: Millions of dollars in cash cash equivalents and short term investments.
Jorge A. Celaya: We generated $34.8 million of cash from operations during the fiscal second quarter and, after using $13.3 million for the acquisition of Sierra Auction and $7.9 million, repurchasing 474,000 shares of our common stock during the quarter. Our cash on hand still increased $10 million while we continue to have zero debt and $25 million of available borrowing capacity under our credit facility, specifically comparing segment results from this fiscal second quarter to the same quarter last year.
Jorge A. Celaya: We generated $34 $8 million of cash from operations during the fiscal second quarter.
Jorge A. Celaya: After using $13 $3 million for the acquisition of Sierra auction and $7 $9 million.
Jorge A. Celaya: Purchasing 474000 shares of our common stock during the quarter.
Jorge A. Celaya: Our cash on hand still increased $10 million, while we continue to have zero debt and $25 million of available borrowing capacity under our credit facility.
Jorge A. Celaya: Specifically comparing segment results from this fiscal second quarter to the same quarter last year.
Jorge A. Celaya: Our CAG segment was up 29% on GMV, 30% on revenue, and 31% on segment direct profit, driven by consignment sales in our industrial and heavy equipment category, including completion of some of the sales delayed from the prior quarter and some international purchase transactions. The GovDeal segment was up 11% on GMB. 22% on revenue, and 20% on Segment Direct Profit, reflecting the increased availability of vehicles, paired with a higher blended revenue take rate due to the expansion of service offerings into new markets, while experiencing slower than anticipated real estate auction volume despite continued inroads in various jurisdictions. Machinio revenue was up 21%, and its segment direct profit was up 22%, reflecting continuing increases in subscribers and prices for its Machino Advertising and Machino Systems dealer
Jorge A. Celaya: Our CAG segment was up 29% on <unk>, 30% of revenue and 31% and segment direct profit.
Jorge A. Celaya: Driven by consignment sales in our industrial and heavy equipment categories.
Jorge A. Celaya: Including completion of some of the sales delayed from the prior quarter and some international purchase transactions.
Jorge A. Celaya: Gov deals segment was up 11% on GMB.
Jorge A. Celaya: 22% on revenue.
Jorge A. Celaya: And 20% on segment direct profit.
Jorge A. Celaya: Reflecting the increase availability of vehicles.
Jorge A. Celaya: With a higher blended revenue take rate.
Jorge A. Celaya: Due to expansion of service offerings into new markets.
Jorge A. Celaya: While experiencing slower than anticipated real estate auction volume.
Jorge A. Celaya: Despite continued inroads in various jurisdictions.
Jorge A. Celaya: <unk> revenue was up 21%.
Jorge A. Celaya: And its segment direct profit was up 22%, reflecting continuing increase in subscribers and prices for its machinery advertising and machining system dealer management products.
Jorge A. Celaya: Our retail or RSCG segment was up 9% on GMV, setting a new quarterly record of $79.6 million. While up 6% on revenue and 2% on segment direct profit, reflecting an increase in Low-touch consignment solutions and high volumes from purchase programs, while continuing to experience a lower value product mix in certain full-service consignment and purchase programs. Our third quarter of fiscal year 2024 outlook reflects a continuation of double-digit consolidated GMV growth at the midpoint of our guidance range, led by CAG's energy and industrial categories and the continued growth of CAG's heavy equipment activity. Our Machinio subscription-based business is also anticipated to continue to report double-digit revenue growth.
Jorge A. Celaya: Our retail <unk> segment was up 9% on GMB setting a new quarterly record of $79 6 million.
Jorge A. Celaya: While up 6% on revenue and 2% on segment direct profit.
Jorge A. Celaya: Reflecting an increase in.
Jorge A. Celaya: Low touch consignment solution high volumes from purchase programs.
Jorge A. Celaya: While continuing to experience.
Jorge A. Celaya: A lower value product mix and certain full service consignment and purchase programs.
Jorge A. Celaya: Our third quarter of fiscal year 2024 outlook reflects a continuation of double digit consolidated <unk>.
Jorge A. Celaya: At the midpoint of our guidance range led by Cogs.
Jorge A. Celaya: Energy and industrial categories.
Jorge A. Celaya: And the continued growth of <unk> heavy equipment activity.
Jorge A. Celaya: Our machinery a subscription based business is also anticipated to continue to report double digit revenue growth.
Jorge A. Celaya: Our fiscal third quarter 2024 outlook also reflects the seasonally high activity at GovDeals with year-over-year GMV growth expected to continue with higher volumes, more than offset the potential for softer used vehicle market prices than last year. GovDeal's revenue is expected to grow at a faster year-over-year rate than GMB due to our expansion of more full-service consignment offerings since the acquisition of Sierra Auction in January of 2024. Our RSCG segment expects to sustain volume similar to this past fiscal second quarter's record retail GMB.
Jorge A. Celaya: Our fiscal third quarter 2024 outlook also reflects the season seasonally high activity at Gov deals with year over year GMB growth expected to continue with higher volumes.
Jorge A. Celaya: More than offsetting.
Jorge A. Celaya: The potential for softer used vehicle market prices than last year.
Jorge A. Celaya: Gov deals revenue is expected to grow at a faster year over year rate <unk> <unk> due to our expansion of more full service consignment offerings since the acquisition of Sierra auction in January of 2024.
Jorge A. Celaya: Our <unk> segment expects to sustain volume similar to this past fiscal second quarters record retail G M B.
Jorge A. Celaya: All surplus deals are retail direct to consumer curbside pickup market, which is expected to sustain a strong year-over-year growth rate this coming quarter. Our retail segment continues to improve, selling through the backlog of lower value products with improved operational efficiency and buyer demand generation, potentially resulting in some improvement in the direct profit margin sequentially, yet still down compared to last year. Operating expenses year-over-year will be up similar to this past fiscal second quarter that included the effect of the Sierra auction acquisition, continued operational investment in the expansion of all surplus deals, and the higher sales and technology personnel to accelerate platform technology enhancement and Marketshare Games.
Jorge A. Celaya: All surplus deals our retail direct to consumer curbside pickup marketplace.
Jorge A. Celaya: As expected to sustain a strong year over year growth rate this coming quarter.
Jorge A. Celaya: Our retail segment continues to improve selling through the backlog of lower value product with improved operational efficiency and buyer demand generation.
Jorge A. Celaya: Potentially resulting in some improvement in.
Jorge A. Celaya: In the direct profit margins sequentially still down compared to last year.
Jorge A. Celaya: Operating expenses year over year will be up similar to this past fiscal second quarter that included the effect of the Sierra auction acquisition.
Jorge A. Celaya: Continued operational investments in the expansion of all surplus deals.
Jorge A. Celaya: And the higher sales and technology personnel to accelerate platform technology enhancements and market share gains.
Jorge A. Celaya: We are anticipating our consolidated revenue as a percentage of GMV to reflect our growth and consignment and remain in the low to mid 20% range. We currently expect our segment direct profits as a percent of total revenue to be in the low to mid 50% range, reflecting current direct profit margins in our RSCG segment. Both ratios can vary based on our mix between and within our segments for asset categories in any given period.
Jorge A. Celaya: We are anticipating our consolidated revenue as a percentage of <unk> to reflect our growth in consignment and remain in the low to mid 20% range.
Jorge A. Celaya: We currently expect our segment direct profit as a percent of total revenue to be in the low to mid 50% range.
Jorge A. Celaya: Reflecting current direct profit margins in our <unk> segment.
Jorge A. Celaya: Both ratios can vary based on our mix between and within our segments for asset categories in any given period.
Jorge A. Celaya: Management's guidance for the third quarter of fiscal year 2020-4 is as follows. We expect GMV to range from $350 million to $385 million. Gap net income is expected in the range of $3.5 million to $6.5 million, with a corresponding gap diluted earnings per share ranging from $0.11 to $0.21 per share. We estimate non-GAAP adjusted EBITDA to range from $10.5 million to $13.5 million. Non-GAAP adjusted diluted earnings per share is estimated in the range of 20 cents to 28 cents per share. The GAAP and non-GAAP earnings per share guidance assumes that we have approximately 31.5 to 32 million fully diluted weighted average shares outstanding for the third quarter of fiscal year 2020.
Jorge A. Celaya: Management's guidance for the third quarter of fiscal year 'twenty, two or four is as follows.
Jorge A. Celaya: We expect <unk> to range from $350 million to $385 million.
Jorge A. Celaya: GAAP net income is expected in the range of $3 5 million to $6 $5 million with a corresponding GAAP diluted earnings per share ranging from 11.
Jorge A. Celaya: 21 per share.
Jorge A. Celaya: We estimate non-GAAP adjusted EBITDA to range from $10 5 million.
Jorge A. Celaya: The $13 5 million.
Jorge A. Celaya: non-GAAP adjusted diluted earnings per share is estimated in the range of 20 to 28 per share.
Jorge A. Celaya: The GAAP and non-GAAP earnings per share guidance assumes that we have approximately 31, 5% to 32 million fully diluted weighted average shares outstanding for the third quarter of fiscal year 2024.
Operator: Thank you, and we will now take your questions. Thank you, Jorge. We will now begin
Speaker Change: Thank you and we will now take your questions.
Operator: Thank you, Jorge. We will now begin the question and answer session. If you have a question, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. If you wish to be removed from the queue, please press star 11 again. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers.
Speaker Change: Thank you Jorge we will now begin the question and answer session. If you have a question. Please press star one one on your telephone you will then hear an automated message advising your hand is raised.
Operator: We wish to be removed from the queue. Please press star one one again.
Operator: If youre using a speakerphone you may need to pick up the handset first before pressing the numbers. Please standby, while we compile the Q&A roster.
Operator: Okay.
Operator: Yes.
Operator: Please stand by while we compile the Q&A roster. Our first question comes from Gary Prestopino with Barrington Research. Your line is open.
Speaker Change: Our first question comes from Gary Presto Perino with Barrington Research Your line is open.
Gary Frank Prestopino: Hi, good morning all. Very good quarter. So happy about that. Bill, in terms of Sierra Auction, is that booked in the GovDeal segment? Is that correct?
Operator: Hi.
Gary Frank Prestopino: Morning, all.
Gary Frank Prestopino: Very good quarter, so happy about that.
Gary Frank Prestopino: Bill in terms of Sierra auction is that that's booked in the golf deal segment is that correct.
William P. Angrick: Yeah, that's correct. That's correct, Gary.
Bill: Yes, that's correct that's correct Gary.
Gary Frank Prestopino: Okay, so I don't know how much I don't expect you to break out the contribution, but with the gub deals business, because of the real estate still being sluggish, would that have been either down slightly or just up slightly in the quarter?
Gary Frank Prestopino: Okay. So I don't know how much.
Gary Frank Prestopino: Expect you to break out the contribution but with the Gov deals business.
Gary Frank Prestopino: Because of the real estate.
Gary Frank Prestopino: Still being sluggish would that have been.
Gary Frank Prestopino: Either down slightly or just up slightly in the quarter.
William P. Angrick: We still have organic growth in the core GovDeals business if that's the focus of the question.
Gary Frank Prestopino: We still have organic growth in the in the CT Gov deals businesses.
William P. Angrick: But that's the focus of the question.
Gary Frank Prestopino: Yeah, I'm just trying to get an idea if you had organic growth that's all. I'm just trying to see how that other legacy business is performing.
Gary Frank Prestopino: Yes, I'm just trying to get an idea if you had organic growth.
Gary Frank Prestopino: Im just trying to see how that other.
Gary Frank Prestopino: The legacy business is performing.
William P. Angrick: Yeah, the legacy business is still very strong, and, you know, we've continued to bring on board new customers. Now we've expanded the business development capacity of core gov deals, and in my opening remarks, you know we are pleased that these balanced investments are pulling through new opportunities. So we signed the state of New York fleet business and the City of New York fleet business as a direct consequence of staffing up some territory business development resources in the GovDeals core business.
William P. Angrick: The legacy business is still still very strong and we continue to.
William P. Angrick: Onboard new customers now.
William P. Angrick: We've expanded the business development capacity of CT Gov deals.
William P. Angrick: And in my opening remarks, we are pleased that these balanced investments are pulling through new opportunities. So we signed the state of New York Fleet business. The city of New York Fleet business as a direct consequence of staffing up some territory business development resources in the Gov deals core business.
Speaker Change: Okay Thats good to here.
Gary Frank Prestopino: Okay, that's good to hear. And then, in terms of the sell-in-place consignment solutions, what are the plans to expand that? I believe you have either three or four centers that do that now in the RSG, CG segment.
William P. Angrick: And then in terms of the.
Gary Frank Prestopino: Sell in place consignment solutions.
Gary Frank Prestopino: What are the plans to expand that I believe you have either three or four centers that youre doing that now.
Gary Frank Prestopino: <unk>.
Gary Frank Prestopino: CG segment.
William P. Angrick: Yes, well, we've got tell in place. As a solution across all segments, RSCG has seen adoption from retail clients to sell from fulfillment centers, individual store locations, or individual warehouses. So we've given that option. We've got the API feed.
Speaker Change: Yes, well, we've got sell in place.
William P. Angrick: As a solution across all segments RSC G has seen adoption.
William P. Angrick: Retail clients to sell from fulfillment centers individuals' store locations or individual.
William P. Angrick: Warehouses, so we've given that option we've got the API feed it's a very elegant solution to those that have the resources in the retail vertical to list and sell on the liquidation of account platform now since the what I would call exuberant expense expansion of retailers in the pandemic a lot of those retail clients.
William P. Angrick: It's a very elegant solution for those that have the resources in the retail vertical to list and sell on the liquidation.com platform. Now, since the what I would call exuberant expansion of retailers during the pandemic, a lot of those retail clients have cut costs, reduced staff, and reduced warehouse space. And so many of them have leaned on our own distribution center facilities. And so we've got the full continuum of self-managed sell-in-place to fully managed full-service footage.
William P. Angrick: <unk> cut costs reduce staff reduce warehouse space.
William P. Angrick: And so many of them have leaned on our own distribution center facilities.
William P. Angrick: And so we've got the full continuum of self.
William P. Angrick: Self manage sell in place to fully managed.
William P. Angrick: Full service for these clients.
Gary Frank Prestopino: And then just lastly, on the guidance for Q3, you're giving a 10 12 to 13 12 EBITDA number. Last year, I believe you were at 13.3 if my numbers are correct, so what is actually going on there that is causing the potential flatness to step down and adjust to be that you? Have you seen some acceleration in investments in the platform? Yeah, there are a couple things there.
Speaker Change: Okay, and then just lastly on the guidance for Q3.
Gary Frank Prestopino: And given the 10, 5% to $13 five EBITDA number.
Gary Frank Prestopino: Last year I believe you were at 13, three if my numbers are correct.
Gary Frank Prestopino: So what is actually going on there.
Gary Frank Prestopino: Is causing the potential flatness to step down and adjusted EBITDA are you.
Gary Frank Prestopino: FX, having seeing some acceleration in investments.
Gary Frank Prestopino: And the platform.
Gary Frank Prestopino: Yes, there are a couple there are a couple of things there.
William P. Angrick: Certainly, what you just mentioned has been on our minds, and we've got a great CTO and product team, and we've identified and made some unbudgeted IT hires to pull forward some, you know, key projects that are going to help this business and meet current demand for many of our clients. For example, in the GovDeals Marketplace, we're rolling out four-level taxonomy and key categories such as transportation assets, and this simply means that buyers will be able to more precisely find and bid on, you know, key specific categories. The individual categories for trucks and passenger vehicles and commercial heavy equipment will be a focus of this project, and we've already started to roll out some of that functionality, but more is coming.
Gary Frank Prestopino: Certainly.
Gary Frank Prestopino: What you just mentioned has been on our mind I'd week, we've got a great CTO and product team and we've identified and made some on budget it hires.
William P. Angrick: To pull forward some key projects that are going to help this business.
William P. Angrick: Meet current demand for many of our clients for example in the Gov deals marketplace.
William P. Angrick: Rolling out four level taxonomy in key categories, such as transportation assets and this simply means that buyers were able to more precisely find it.
William P. Angrick: In and bid on key.
William P. Angrick: Key specific categories.
William P. Angrick: The individual categories for trucks and passenger vehicles and commercial heavy equipment will be a focus of this project and we've already started to rollout some of that functionality with more is coming.
William P. Angrick: Effectively, this will improve the bidding and recovery for these assets. Another example is we're actively developing a high-speed receiving tool into our retail distribution center facilities using, you know, enhanced data and, you know, call it some machine, you know, automation around that data, so that's going to help us quickly and in a more efficient manner improve the listing quality of what we put on liquidation.com and our all-surplus deals platforms, which will improve recovery.
William P. Angrick: Effectively this will.
William P. Angrick: <unk> improved the bidding and recovery.
William P. Angrick: These assets. Another example is we are actively developing a high speed receiving tool into our retail distribution center facilities using enhanced data.
William P. Angrick: Call. It some machine automation around that data, so thats going to help us quickly.
William P. Angrick: And a more efficient manner improve the listing quality of what we put on liquidation dot com and our all surplus deals platforms, which will improve recovery. It will also gary materially reduce labor costs associated with our National distribution Center footprint. Now this is a $1 2 million square foot footprint.
William P. Angrick: It will also materially reduce labor costs associated with our national distribution center footprint. Now, this is a 1.2 million square foot footprint, so we like the opportunity and the ROI of some of those IT investments, so we've got a little bit more of that in the current period versus the prior period. And the other thing I would just add, and we've talked about in the past, There was a period of less attractive product mix in retail in 2024 versus the prior year period.
William P. Angrick: So we like the opportunity and the ROI of some of those investments. So we've got a little bit more of that in the current period versus the prior period and the other thing I would just add that we've talked about in the past.
William P. Angrick: There has been.
William P. Angrick: A period of.
William P. Angrick: Less attractive.
William P. Angrick: Product mix in retail in 2024 versus the prior year period, there are lots of reasons for that.
William P. Angrick: There are lots of reasons for that, but I would tell you that we're seeing signs of consolidation in the retail industry as it relates to, you know, in the liquidation category. A number of new entrants that came in to try to buy and resell retail goods during 2021-2022 encountered operational and financial difficulties, resulting in non-performance and even closures of these players, which has been a sort of recalibration for these top And I think this sets the stage for, you know, more normalization around this industry and, ultimately, better terms and conditions for folks like liquidity services. Okay, thank you.
William P. Angrick: But I would tell you that we're seeing.
William P. Angrick: Signs of consolidation in the retail industry.
William P. Angrick: As it relates to in the liquidation category a number of new entrants that came in to try to bind we sell.
William P. Angrick: Retail goods during 2021, and 2022 have encountered operational and financial difficulties, resulting in nonperformance and even closures of these players which has been a sort of recalibration for these these.
William P. Angrick: These top 50 retailers and who they want to interact with and I think this sets the stage for.
William P. Angrick: More normalization around this.
William P. Angrick: This industry and ultimately better.
William P. Angrick: The terms in an environment for folks like liquidity services.
Speaker Change: Okay. Thank you.
Operator: Please stand by for our next question. The next question comes from George Sutton with Craig Hellam. George, your line is open.
Speaker Change: Please standby for our next question.
Operator: The next question comes from George Sutton with Craig Hallum. Your line is open.
George Frederick Sutton: Thank you, Bill. Given what sounds like quite a cold that you have, I'll try to ask you a short question, and then I'll leave my next question for Jorge. So, relative to what you were saying about the business development pipeline and, you know, your work on pursuing strategic opportunities in each of the segments, I wonder if you can just give us a little bit better color on sort of how mature some of those opportunities are. You just mentioned, on the retail side, potential liquidation or challenges that some of the competitors are seeing. Is that an area that you're contemplating? I would love to get a little more clarity.
George Frederick Sutton: Thank you Bill given what sounds like quite a call that you have I'll try to ask you a short question and then ill leave my next question for Jorge So.
Jorge: Relative to what you were saying on the business development pipeline.
George Frederick Sutton: Your work on pursuing strategic opportunities in each of the segments. I'm wondering if you could just give us a little bit better color on on sort of how mature some of those opportunities are you just mentioned on the retail side potential liquidation.
Jorge: Or challenges at some of the competitors are seeing is that an area that you are contemplating just wanted to get a little more clarity.
William P. Angrick: Sure. Full disclosure, I'm a college lacrosse fan and they're now in the NCAA tournament, so that's really what's resulting in a coarse voice here.
George Frederick Sutton: Sure.
William P. Angrick: Full disclosure I'm, a college lacrosse fan and they're now in the <unk>.
William P. Angrick: It's really what's resulting of course voice here I feel great. Let me tell you that there is opportunity in the.
William P. Angrick: I feel great. Let me tell you that there is opportunity in, you know, the retail vertical. You know, there are lots of different segments, you know, and we have a filter that is about, you know, the buyer base, you know, the capabilities, you know, further penetrating and expanding our direct to consumer channels, which allows us to, you know, improve and elevate recovery. And that's a win-win for clients and liquidity in our marketplace. So, you know, we're actively exploring opportunities in the retail vertical.
William P. Angrick: The retail vertical.
William P. Angrick: Lots of different segments.
William P. Angrick: We have a <unk>.
William P. Angrick: <unk>, which is about.
William P. Angrick: Buyer base.
William P. Angrick: Capabilities further.
William P. Angrick: Further penetrating and expanding our direct to consumer channels.
William P. Angrick: Which allows us to improve and elevate recovery and that's a win win for clients and liquidity in our marketplace. So we.
William P. Angrick: We are actively exploring opportunities in retail vertical we're actively exploring opportunities in the capital assets and government sectors. There's always some overlap because the the fleet sellers can be both.
William P. Angrick: We're actively exploring opportunities in the capital assets and government sectors. There's always some overlap because the fleet sellers, you know, can be both commercial and government. So, Sierra is a great example of that. And, you know, what happens: you announce a transaction, and people have a good feeling about it. And Sierra is going quite well.
William P. Angrick: <unk> and government. So Sierra is a great example of that and what happens you announced the transaction and people have a good feeling about it and CRM is going quite well.
William P. Angrick: You know, other people start to approach you, and, you know, we've got a good pipeline of ideas there now. We're a thrifty buyer. We're not, you know, looking to just do a roll-up of some kind. We're looking very patiently at where we can get, you know, the one plus one equals three type of outcome. And, you know, with a very strong balance sheet and a very good team that can handle the onboarding and integration of employees. But I think there's more to do, Gary. I'm sorry. I think there's more to do, Jorge, on this notion of consolidation. But consolidation with smart integration and leveraging the tech platform is how we think about it.
William P. Angrick: Other people start to approach you.
William P. Angrick: We've got a good pipeline of ideas, there now where a thrifty buyer, we're not looking to just do a rollout, but some kind of we're looking very patiently at where we can get the one plus one equals three type of outcome.
William P. Angrick: And with US a very strong balance sheet and a very good team.
William P. Angrick: Can handle the Onboarding and integration of acquired businesses I think theres more to do Gary.
Speaker Change: I'm sorry.
William P. Angrick: I think theres more to do.
William P. Angrick: George on this notion of consolidation, but consolidation with smart integration and.
William P. Angrick: And leveraging the tech platform is how we think about it.
Jorge A. Celaya: So, Jorge, on the strength that we saw in auction participants and transactions, which was quite good, was there something that drove that uniquely this quarter, perhaps the CAG purchase transactions side?
William P. Angrick: Yeah.
William P. Angrick: So Jorge on the strike that we saw in auction participants in transactions, which was quite good.
Jorge A. Celaya: Was there something that drove that uniquely this quarter.
Jorge: Perhaps the CAG purchase transactions side.
Jorge A. Celaya: Well, I think we have strength across the board, but certainly, growth and all surplus deals help with auction participants, right? We have more people on smaller items. I think those are the key drivers, but overall, we had pretty good strength of participation and Buyer Demand across our segment.
Jorge: Well I said, we had strength across the board, but certainly.
Jorge A. Celaya: The growth in all sorts of deals.
Jorge A. Celaya: Helps with auction participants right, we have more people on smaller items.
Jorge A. Celaya: Sure.
Jorge A. Celaya: I think those are the key drivers, but overall we had.
Jorge A. Celaya: Pretty good strength of participation.
Jorge A. Celaya: And buyer demand across our segments.
George Frederick Sutton: Gotcha. Okay. Thanks, guys.
Speaker Change: Got you okay. Thanks, guys.
Operator: We have no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Speaker Change: We have no further questions at this time. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Operator: Okay.
Operator: [music].
Operator: Okay.
Operator: Okay.
Operator: [music].