Q4 2024 Liquidity Services Inc Earnings Call
Welcome to the liquidity services, Inc fourth quarter.
Lisa: Fiscal year 2024 financial results Conference call. My name is Lisa and I will be your operator for todays call.
Lisa: Please note that this conference is being recorded.
Lisa: At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
Speaker Change: I will now turn the call over to Michael Patrick Liquidity Service, Vice President and controller. Please go ahead.
Good morning.
On the call today are bill angry, our chairman and Chief Executive Officer.
Perhaps a liar.
Speaker Change: Our executive Vice President and Chief Financial Officer.
Speaker Change: They will be available for questions after their prepared remarks.
Speaker Change: The following discussion and responses to your questions reflect management's views as of today December 12, 2024 and will include forward looking statements.
Speaker Change: Actual results May vary may.
Speaker Change: May differ materially.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: During this call management will discuss certain non-GAAP financial measures.
Speaker Change: Our press release and filings with the SEC each of which is posted on our website you will find additional disclosures regarding these non-GAAP measures.
Speaker Change: The reconciliations of these measures with their most comparable GAAP measures is available.
Speaker Change: Management also uses certain supplemental operating data as a measure of certain components of operating performance, which we also believe is useful for management and investors.
Speaker Change: This supplemental operating operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results.
Speaker Change: At this time I will turn the presentation over to our chairman and CEO Your language.
Speaker Change: Good morning.
Speaker Change: Welcome to our Q4 earnings call I'll review, our Q4 performance and the progress of our business segments and next Jorge Celaya will provide more details on the quarter.
Speaker Change: Our healthy fourth quarter results capped a successful year of market share expansion and consistent growth in fiscal year 2024 backed by our investments in innovation service and strong operational execution for our customers.
We achieved double digit consolidated <unk> growth in each quarter throughout the year in each of our segments achieved double digit annual GMB growth culminated in record annual <unk> of one 4 billion.
Overall, we are seeing enhanced network effects in our two sided marketplace platform as we grew our auction participants and completed transactions by 22% and 12% year over year, respectively. During the quarter.
Speaker Change: We converted this growth to over $22 million in operating cash flow in the fourth quarter, highlighting the strength of our asset light business model.
Speaker Change: In the fourth quarter, our RSC G segment set new quarterly records.
Speaker Change: And G O b.
Revenue and segment direct profit as we drove expanded relationships with our seller clients by leveraging our decades of industry, leading expertise and multichannel buyer liquidity.
Speaker Change: Our golf deal segment delivered robust double digit growth.
Speaker Change: Through ongoing seller acquisition and service expansion.
Speaker Change: Additionally.
Our machining segment achieved another quarterly revenue record.
Speaker Change: Further solidifying its position as a leading platform for connecting buyers and sellers of used equipment.
Speaker Change: Worldwide.
Speaker Change: We're also thrilled to celebrate a significant milestone.
Speaker Change: 25th anniversary.
Speaker Change: Over the past quarter century liquidity services has grown from a scrappy startup.
Speaker Change: I was there.
Speaker Change: Into a leading global E Commerce company.
Speaker Change: Powering the circular economy in delivering unmatched value worldwide.
Speaker Change: Our journey has been marked by remarkable growth innovation and a steadfast commitment.
Speaker Change: To promoting sustainability.
This milestone allows us to reflect on our achievements and express our deepest gratitude to our dedicated team.
Our loyal clients and supporter.
Speaker Change: Take holders who have been instrumental in our success.
Speaker Change: As we look to the future.
Speaker Change: We remain committed to driving excellence in innovation and all that we do.
Speaker Change: Overall, our scalable marketplace technology.
Speaker Change: What range of it services.
Speaker Change: <unk> client base.
Speaker Change: Organic growth initiatives.
Speaker Change: And pipeline of acquisition opportunities will propel us in continuing our track record of growth.
Speaker Change: Our leadership team has now set its sights on reaching the $2 billion annual GMB milestone.
Speaker Change: Which is a key step combined with service and margin expansion towards attaining.
Speaker Change: The $100 million of annual EBITDA milestone.
Speaker Change: To achieve these objectives, we will focus on the following areas.
Speaker Change: One increasing our market share and the sales volume transacted on our marketplace.
Speaker Change: Two expanding our buyer base and sales channels to enhance recovery on the assets we would sell.
Speaker Change: Three.
Speaker Change: Confusing and modernizing our platform with new technologies, including AI tools too.
Speaker Change: To increase our operational efficiencies and improve the customer experience.
Speaker Change: And finally for executing complementary bolt on acquisitions.
Speaker Change: We expect to realize these goals in the next few years, which in turn will deliver tremendous value for our customers and our shareholders.
Speaker Change: Yeah.
Jorge Celaya: I'll turn it over to Jorge for.
Jorge Celaya: More details on the quarter.
Jorge Celaya: Good morning.
We completed the 2020 for fiscal year with a new annual record for G. M. B at $1 4 billion solid profitability and a strong cash position.
Jorge Celaya: These achievements coincided with the celebration of our 25th anniversary.
Jorge Celaya: A milestone that underscores our commitment to our customers investors and continued industry leadership.
Jorge Celaya: Fiscal year 2024 saw GMB grow 14% to the $1 $4 billion record level with each of our segments delivering double digit <unk> growth year over year.
Jorge Celaya: Our revenue grew 16% to $363 million.
Jorge Celaya: Led by our retail and <unk> segments.
Jorge Celaya: GAAP net income was $20 million were up 9% on a non-GAAP adjusted basis.
Jorge Celaya: Our non-GAAP adjusted EBITDA was $48 $5 million for the year up 6%.
For our consolidated fiscal fourth quarter <unk> was $361 million.
Jorge Celaya: Also up 14% from $316 million in the same quarter last year.
Jorge Celaya: Revenue was $106 $9 million up 34% and.
Jorge Celaya: And growing faster than <unk>, mainly due to growth in purchase programs at our retail segment, primarily from lower touch flows.
Jorge Celaya: Our GAAP earnings per share was 20, <unk>, our GAAP our non-GAAP adjusted EPS was <unk> 32, seven up 23% and our non-GAAP adjusted EBITDA was $14 5 million.
Jorge Celaya: 13%.
Jorge Celaya: We generated $22 million in cash flows from operations during the fourth quarter.
Jorge Celaya: And ended the fourth quarter with $155 $5 million in cash cash equivalents and short term investments.
Jorge Celaya: We continue to have zero debt.
Jorge Celaya: With $17 $5 million of available borrowing capacity under our credit facility.
Jorge Celaya: Specifically comparing segment results from this fiscal fourth quarter to the same quarter last year.
Jorge Celaya: Our retail segment was up 28% <unk> up 49% of revenue and up 5% with segment direct profit.
Jorge Celaya: Driven by the growth in our purchase programs.
Jorge Celaya: Our Gov deal segments, <unk> was up 14% revenue up 26% and direct profit up 23% driven by service expansion from this year, our auction acquisition and continued growth with new sellers.
Jorge Celaya: Our CAG segment was down 2% on <unk> down, 17% on revenue and down 4% on segment direct profit, reflecting low purchase transactions during this past fiscal fourth quarter.
Jorge Celaya: <unk> revenue and segment profit were both up 13% as we continued to experience strong client retention and increases in new customers for our subscription services.
As we look to our fiscal year 2025, we continue to see opportunities to expand our market share and our services to improve our seller and buyer experiences on our platform and to delivered year over year growth across our segments.
Jorge Celaya: Our fiscal first quarter 2025 guidance reflects our continued optimism as key metrics showed solid improvement as we closed 2024.
Jorge Celaya: Much of our focus throughout fiscal year 2024.
Jorge Celaya: We will drive results expected during 2025.
Jorge Celaya: Our retail segment expanded its purchase programs, including additional lower touch flows and its buyer outreach.
Jorge Celaya: <unk> continued to expand and have strong retention and demand for its services in our CAG segment pipeline of projects continued solid across several sectors, including heavy equipment industrial and energy.
Jorge Celaya: These drivers are expected to increase their respected GMB and revenues as we go forward into fiscal year 2025 with revenue growing at a higher rate than <unk>.
Jorge Celaya: Gov deals also expanded its footprint and provided a strong add on for continued growth from new services through the acquisition of Sierra auction.
Jorge Celaya: Our fiscal first quarter guidance when compared sequentially against this last fiscal fourth quarter reflects the downward seasonality effects in the fiscal first quarter.
Jorge Celaya: Cross various of our segments, despite some potentially higher topline results sequentially.
Jorge Celaya: Comparing year over year, However, our fiscal first quarter guidance range reflects solid improvement.
Jorge Celaya: In our results.
Jorge Celaya: With the expected <unk> mix in our segments volumes we.
Jorge Celaya: We expect the mix going forward to result in an overall consolidated consignment <unk> to be at approximately 80% of total GMB.
Jorge Celaya: Our consolidated revenue as a percentage of <unk> to be up in the range of approximately 30%.
Jorge Celaya: And the total of our segment direct profit as a percent of total revenue.
Jorge Celaya: To be down to the low 40 percentage range.
Jorge Celaya: These ratios can vary based on our mix, including pricing models volume of asset categories in any given period.
This mix shift includes the expansion of lower touch purchase programs in the retail segment retail segment.
Jorge Celaya: Direct profit as a percent of revenue is expected to be tempered year over year and sequentially relative to the fourth quarter of fiscal years 2020 fours direct.
Jorge Celaya: Margin percent.
Jorge Celaya: Our profitability is expected to be up year over year, this coming fiscal first quarter and consistent with prior year trends, we expected increase in adjusted EBITDA is despite our operating expenses seasonally increasing during the fiscal first quarter with operating leverage typically expected to improve.
Jorge Celaya: During the stronger second half of our fiscal year.
Jorge Celaya: Management guidance for the first quarter of fiscal year 2045 is as follows.
Jorge Celaya: We expect <unk> to range from $350 million to $385 million GAAP net income is expected in the range of $2 5 million to $5 million with a corresponding GAAP diluted earnings per share ranging from eight to 16 <unk> per share.
Jorge Celaya: non-GAAP adjusted diluted earnings per share is estimated in the range of 18 to 26 per share.
Jorge Celaya: We estimate non-GAAP adjusted EBITDA to range from $9 5 million to $12 5 million.
Jorge Celaya: The GAAP and non-GAAP EPS guidance assumes that we have approximately 31, 5% to 32 million fully diluted weighted average shares outstanding for the first quarter of fiscal year 2025.
Speaker Change: Thank you we will now take your questions.
Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone you will then hear an automated message advising your hand. It's raised we also ask that you. Please wait for your name and company to be announced one I will take the first questions.
Speaker Change: Yes.
Speaker Change: And the first question for today will be coming from the line of Gary.
Speaker Change: Chris the P&L of Barrington Your line is open.
Speaker Change: Good morning, Bill and George.
Speaker Change: Couple of questions here.
Speaker Change: The growth in the participants this quarter has been pretty it was pretty strong.
Speaker Change: I guess as well as transactions wanted to get an idea of.
Speaker Change: What segments, you're seeing the highest growth in participants in or maybe asking it another way.
Speaker Change: Is the Sierra acquisition.
Speaker Change: Sierra auction acquisition really driving some of this growth from the participants.
Speaker Change: Hello.
Speaker Change: And it's not a catalyst for that I think we've seen.
Speaker Change: Rod base expansion of our buyer base led by.
Speaker Change: Our retail segment.
Speaker Change: Followed by our golf deal segment.
Speaker Change: We've broadened.
Speaker Change: The range of assets that we're selling in both of those areas and I think just in general there's been a nice.
Speaker Change: Depreciation for the value of our marketplace on behalf of both small business buyers had end consumers a shop liquidity services marketplaces, because they're able to access.
Speaker Change: Used in.
Speaker Change: In return goods that have a long useful life, but at prices that are far lower than buying new so I think those are the drivers.
Speaker Change: Okay. Thank you.
Speaker Change: Then.
Speaker Change: In terms of.
Speaker Change: Continuing the investments for growth.
Speaker Change: At least the last two years, we had situation where you've stepped up your investments for growth.
Speaker Change: Yeah.
Speaker Change: It seems like.
Speaker Change: That is not going to really be the case in this quarter.
Speaker Change: For fiscal 'twenty five it seems like.
Given.
Speaker Change: Your guidance at least for Q1 that you.
Speaker Change: Sure.
Speaker Change: Investments you've made are sufficient here to drive growth at least for this year and maybe going into next year can you comment on that.
Speaker Change: Yes, I would agree Beth.
Speaker Change: Our growth.
Speaker Change: It has leveraged investments made in prior years and that going forward were making.
Speaker Change: The incremental.
Speaker Change: Investment and continued <unk>.
Speaker Change: Modern inflation and areas that will help expand margins.
For example, we have harnessed the value of certain machine driven an AI driven <unk>.
Speaker Change: <unk> to drive better descriptions of our assets.
Better matching of assets with buyers and a much more automated way.
Speaker Change: Better merchandising.
Speaker Change: The.
Speaker Change: Assets that we sell through the marketplace.
Speaker Change: Better registration process.
Speaker Change: Two.
Onboard.
Speaker Change: Buyers and re target buyers.
Speaker Change: With less less effort unless less friction and costs.
Speaker Change: And I think these incremental investments going forward will also on continuing to improve the mobile.
Speaker Change: The experience on our platform, which will ultimately increase continue to increase buyer participation and continue to increase recovery, which is a key lever for any market.
Speaker Change: One we're very excited about for liquidity services.
Speaker Change: Okay. Thank you and then just two more in terms of the numbers you threw out with 2 billion <unk> $100 million.
Speaker Change: EBITDA what is the timeframe for that is that over.
Speaker Change: A five year target of 10 year target you can give us some idea of how.
Speaker Change: What are you looking to achieve that.
Speaker Change: Yeah, well, we've we've got.
Speaker Change: It right in front of Us I think the markets.
Speaker Change: The credit facility and the capabilities to.
Speaker Change: Arrived that $2 billion GMP destination, certainly inside of five years and we'd say next few years, whether that's two years or four years somewhere in between.
The market will reveal itself, what we have great confidence in that.
Speaker Change: Our solutions.
Speaker Change: Our solutions that our customers need and value.
Speaker Change: That we have a market leading position to execute on that growth.
Speaker Change: And just by continuing to.
Speaker Change: What we're doing.
Speaker Change: We're on our way to that type of trajectory and I think.
Speaker Change: First you have to create the value for the client and we do that through a self directed and fully managed solutions, we do that by having the largest buyer base and liquidity are both in the <unk> and direct to consumer channels for our clients and then we have incredible data to value and provide expertise to our clients on return get so if you have that theory, you had the opportunity.
Speaker Change: Turning to grow and hitting that $2 billion timeframe to billions.
Speaker Change: A milestone in a shorter timeframe certainly isn't our goal is our goal but.
Speaker Change: We're very comfortable with.
Speaker Change: Our competitive position or ability to do that and I'd say the margins that you derive from volume are also an exciting part of our marketplace business model.
Speaker Change: We're growing both our G M b on the platform, but also our non <unk> related services.
Speaker Change: We've talked about the growth of machines.
Speaker Change: We have a lot of software enabled self directed flows on our marketplace and our bid for assets business. We have fee for service to allow government entities, including counties and sheriffs to manage the entire foreclosure process online some of that activity is not.
Speaker Change: Recorded in GMP, so a combination of getting towards $2 billion <unk> threshold plus growth of non GM. The value added services puts us well on our way towards that 100 million dollar annual EBITDA milestone.
Speaker Change: It's not directly quoted correlated to that to the point estimate of $2 billion of GMP, but certainly attainable in the next few years and also I'd like to point out that we are really the consolidator of choice in the circular economy.
Speaker Change: If we if we see these small niche businesses express a desire to become part of a market leading platform.
Speaker Change: We're getting that call and a lot of these are founder led businesses. So Sierra is one example of that you think there's a lot of opportunities in that.
Speaker Change: <unk>.
Speaker Change: Inorganic growth category as we move forward.
Speaker Change: Thank you very much.
Speaker Change: Thank you one moment for the next questions.
Speaker Change: Okay.
Speaker Change: And our next question will be coming from the line of.
Logan Liard: Logan Liard.
Logan Liard: Craig helium your line is open.
Hey, Good morning, guys. This is Logan on for George Congrats on the nice quarter here.
Logan Liard: I think the big number that stands out is that retail <unk>.
Logan Liard: Bill I'm, just wondering if you could put a little finer point on that.
Logan Liard: You guys have outlined the case as to why you're kind of at the best player in the market, but I'm. Just wondering if you can speak a little bit to why now why do you think those retailers are expanding that relationship now is that something you guys are doing on your end.
Logan Liard: Operational improvements are just gaining their trust and just kind of what drives that right now.
Sure well, if you've if you've looked at the history of the company we have been.
Logan Liard: Working in the retail supply chain for over 20 years and have been.
Logan Liard: In many ways.
Logan Liard: So there.
Logan Liard: Our best practices in this in this marketplace and I think what has helped continue to grow our share is our ability to provide the full range of solutions that our retail supply chain client whether it's a.
Logan Liard: Brick and mortar Omnichannel player.
Logan Liard: Whether it's a born in the cloud E Commerce online retailer.
Or any hybrid any one of those players has a set of solutions that they can lever in our portfolio from self directed solutions, where our clients are listing directly on the platform with their own teams in their own facilities, whether theyre using our distribution center platforms.
Logan Liard: Our locations to sell on our platform and more of a fully managed way.
Logan Liard: We're able to do business with our clients and meet them where their needs are and we also provide different pricing models from consignment to purchase model.
Logan Liard: Alternatives, so clients feel like.
Logan Liard: They can tell us what their needs are and we can solve for those needs versus not dictating to them to only use a specific solution or a specific pricing model. So I think that's one of the keys to growth and then scale.
Logan Liard: Matters, a lot I mean, we have the largest buyer base.
Logan Liard: <unk> to buy new use outlets returns any type of.
Logan Liard: A product that is in the retail supply chain, so that large lot liquidity that liquidity by individual SKU.
Logan Liard: <unk> to do both <unk> and direct to consumer transactions.
Logan Liard: And also supplement that with expertise to protect these clients brands.
Logan Liard: To be able to move that product into different geographic locations, including outside the United States. All of those collectively are why retailers have increasingly turned to liquidity services.
I think the secular growth, which you are well aware of.
Logan Liard: Retail is continuing to capture more volume.
Logan Liard: <unk> more product categories.
Logan Liard: That inexorable March means that theres more returns to manage and sell which is what we do so those are the things that I think are driving the growth of the <unk> as we said on the call New quarterly records in GMB revenue and segment profit.
Speaker Change: Great and then one thing I don't think we've talked about today is the real estate opportunity and bid for assets I know you've talked in the past.
Speaker Change: About making some progress.
Speaker Change: Just just trying to get some of those municipalities to adopt going through the online.
Speaker Change: And channel.
Speaker Change: An update on how you think thats going in our immediate you think that that opportunity is I think you've talked about it being a $100 million GMB opportunity.
Speaker Change: Sure.
Public sector real estate is definitely part of the needs.
Of our customer base to find efficiencies and <unk>.
Speaker Change: And more transparency and how.
Speaker Change: Either government.
Speaker Change: Or distressed real estate has brought to market.
Speaker Change: We highlighted in the quarter, we had a record real estate sale this quarter or an 8 million dollar asset.
Speaker Change: It sold in an online auction marketplace.
Speaker Change: Our online auction marketplace Gov deals. So that was an all time record, which is very exciting and just as an illustrative example of how big the relative opportunity can be over time, our current result, frankly hasnt.
Speaker Change: But then Oh.
Speaker Change: A large result.
Speaker Change: The real estate category real estate is something that we think will.
Speaker Change: Expand and grow in the next few years, it's a natural add on to the work we've done on the personal property side and we're committed to growing the real estate category.
Speaker Change: We look at the public sector is the right place to focus on and we have over 15000 government entities, including States counties cities public universities, and if you look at some of the trends.
Speaker Change: There's going to be.
Speaker Change: Our need for some of these.
Speaker Change: Public entities to be more efficient and probably less asset heavy with some of the real estate asset. So we're well positioned to help them sell online to realize the value of more competitive auction result in value and we provide a lot of the software and services pre and post sale to handle the buyer.
Speaker Change: Experienced the payments the collections the invoicing the settlement. So that's an opportunity to grow now real estate doesn't have the same level of take rate. This is a single digit take rate. So we're really focused on growing the direct profit associated with online real estate sales.
Speaker Change: And we have great capabilities there so we expect.
Speaker Change: Real estate to play a role in our growth to the $2 billion milestone over the next few years and I don't think we fully.
Speaker Change: Have capitalized on it yet and it's something that certainly in our growth.
Speaker Change: Priorities.
Speaker Change: And we are well positioned to execute.
Speaker Change: Got it thanks for the detail.
Speaker Change: Thank you and that does conclude our Q&A session for today as well as the conference call. Thank you all for joining you may all disconnect.
Speaker Change: Okay.
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