Q1 2025 Liquidity Services Inc Earnings Call
Okay.
Tanya: Welcome to the real quickly liquidity services, Inc. First quarter of fiscal year 2025 financial results Conference call. My name is Tanya and I'll be your operator for today's call. Please note that this conference call is being recorded.
Speaker Change: At this time all participants are in a 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. Please go ahead.
Michael Patrick: Good morning.
On the call today are bill angered, our chairman and Chief Executive Officer and.
Jorge Celaya: Jorge Celaya.
Jorge Celaya: 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 February six 2025 and will include forward looking statements.
Speaker Change: Actual results 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: As you listen to today's call we'd 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: In 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 data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results.
Belenguer: At this time I will turn the presentation over to our chairman and CEO Belenguer.
Good morning.
Speaker Change: 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 on the quarter.
Jorge Celaya: Our strong start to fiscal year 2025 was fueled by the continuing adoption of our services by customers and continued momentum across our businesses, resulting in record quarterly G M B and double digit GMB growth.
Speaker Change: In each of our segments.
Jorge Celaya: The strength of our performance across.
Jorge Celaya: All of our segments is powered by our relentless drive to exceed the expectations of our sellers and buyers.
Jorge Celaya: By continually enhancing our services and leveraging advanced technologies, we are attracting more sellers and buyers to our platform and enhancing our overall marketplace experiences.
Jorge Celaya: We continue to see growing network effects in our marketplace platform as we have now eclipsed $1 5 billion dollar annual GMP run rate.
Jorge Celaya: And grew our auction participants by 13% year over year during the quarter, reflecting consistent strong demand for the value price goods offered in our marketplace against a backdrop of persistent inflation.
Jorge Celaya: Strong buyer participation drove record quarterly G M B revenue and direct profit in our retail supply chain group segment for the second quarter in a row.
Jorge Celaya: Our rapid growth reflects our position as the most reliable and trusted solution provider in the retail supply chain.
Jorge Celaya: We expect to continue our momentum.
Jorge Celaya: By continuing to grow our buyer base and value added services.
Jorge Celaya: Notably we continued to expand our presence with consumer buyers for high value goods, using our online auction marketplace capabilities and our distribution center network to facilitate low cost customer pick up a single items.
Jorge Celaya: Our golf deal segment grew its G M b and revenues by 11% at 29% year over year, respectively, driven by growth in both high value capital goods and non vehicle asset categories over a growing seller base.
Jorge Celaya: Notable new sellers forgot deals during Q1 included.
Jorge Celaya: New York City, Tulsa, Oklahoma, Humboldt County, California.
Jorge Celaya: In Naval Air Station Jacksonville, Florida.
Jorge Celaya: We also set a new record for Gov deal sellers with over $1 billion of G M be transacted in a quarter.
Jorge Celaya: Reflecting our ability to continue to penetrate our existing sellers through a continuous improvement in our service and results.
Jorge Celaya: Our CAG segment grew its G M b, 31% organically year over year, driven by strength in its energy and heavy equipment verticals as we continue to scale our recurring seller base.
Jorge Celaya: Our CAG auction participants more than doubled year over year, reflecting the increased vibrancy of our CAC marketplace for sellers of industrial and heavy equipment.
Jorge Celaya: We have a strong pipeline heading into Q2 and are well positioned to continue this momentum.
Jorge Celaya: Finally, our machining segment recorded double digit organic growth in revenue and direct profit during Q1 and now has over 4000 subscribers from over 100 countries on the platform.
Jorge Celaya: Machining L has continued to expand its coverage entity as the Asia Pacific region, which represents a significant growth opportunity for our classifieds marketplace for used machinery.
Jorge Celaya: We expect continued steady growth in fiscal 'twenty five for machine here driven by continuous improvement to our marketplace traffic enhanced features and then increased value to our subscriber base.
Jorge Celaya: As we look to the future we continue to invest in growing our seller base.
Jorge Celaya: Buyer channels and value added services, both organically and via acquisitions.
Jorge Celaya: Investors should expect acquisitions that are accretive and.
Jorge Celaya: I want to expand our market share and capabilities.
Jorge Celaya: In that context, we're excited to announce the acquisition of auction software and simple auction site.
Jorge Celaya: A private label auction marketplace and SaaS solutions provider.
Jorge Celaya: This acquisition will enhance our software development capabilities.
Jorge Celaya: And extend our market reach.
Jorge Celaya: Our leadership team continues to make progress towards our mid term goal of achieving $2 billion of annual GMB.
Jorge Celaya: To achieve this.
Jorge Celaya: Objective, we will focus on increasing the sales volume transacted on our marketplace.
Jorge Celaya: Expanding our buyer base and sales channels to enhance recovery on the assets we sell.
Jorge Celaya: Modernizing our platform with new technologies to increase our operational efficiencies.
Jorge Celaya: And improve the customer experience and finally executing complementary bolt on acquisitions.
Jorge Celaya: With our market leading solutions.
Jorge Celaya: Our strong financial foundation and strategic focus.
Jorge Celaya: We are well positioned to capitalize on numerous emerging opportunities in the $100 billion circular economy and drive long term growth and shareholder value.
Jorge Celaya: I'll now turn it over to Jorge for more details on the quarter.
Jorge Celaya: Yes.
Good morning.
Jorge Celaya: We are pleased to report a strong start to our 2025 fiscal year.
Jorge Celaya: Our fiscal first quarter results finished slightly above our first quarter guidance range.
Jorge Celaya: <unk> set a new quarterly consolidated GMB record as we have seen continued expanding market share with double digit GMB growth across each of our segments.
Speaker Change: Our growth diversification and.
Speaker Change: Our mix of business has led to four quarters of sequential operating leverage to adjusted EBITDA.
Speaker Change: From our scalable solution and resilient operational capabilities.
Speaker Change: Our consolidated results for the fiscal first quarter of 2025 included <unk> $386 $1 billion.
Speaker Change: Up 26%.
Speaker Change: From $305 $9 billion in the same quarter last year.
Speaker Change: Revenue was $122 $3 million up 72% from $71 $3 million last year.
Speaker Change: Consistent with our previous fourth quarter of fiscal year 2024 revenue has continued to grow faster than <unk>, mainly due to the expansion of lower touch purchase programs and our retail segment.
Speaker Change: Our GAAP earnings per share was <unk> 18 tons.
Speaker Change: While 28 tenths of a non-GAAP adjusted basis.
Speaker Change: Our GAAP net income was $5 $8 million up 205% and our non-GAAP adjusted EBITDA was $13 $1 million up 81% versus last year.
Speaker Change: We ended the fiscal first quarter.
Speaker Change: With $139 $1 billion in cash cash equivalents and short term investments.
Speaker Change: We continue to have zero debt and.
Speaker Change: And we have $17 $5 billion of available borrowing capacity under our credit facility.
Speaker Change: We also are not expecting any significant changes in the near term to our capital expenditures relative to our recent historical averages.
Speaker Change: Specifically comparing segment results from this fiscal first quarter of 2025 to the same quarter last year.
Speaker Change: Our retail segment was up 65% of GMB.
Speaker Change: Doubled its revenue growing 101% and was up 31% of segment direct profit.
Speaker Change: Getting new quarterly records for each of these metrics for the second consecutive quarter.
Speaker Change: Our capital assets Group segment was up 31% from <unk>, 26% on revenue.
Speaker Change: And up 27% and segment direct profit.
Speaker Change: Led by continued addition of recurring sellers of low touch heavy equipment sales.
Speaker Change: As a reminder.
Speaker Change: Last year, the fiscal first quarter of 2024 for the CAG segment experienced delays in selected international sales events.
Speaker Change: Many which subsequently took place during the fiscal second quarter last year.
Speaker Change: Our Gov deal segments, GMB was up 11% revenue up 29% and direct profit up 25%.
Speaker Change: <unk> by strong performance in vehicles continued growth in new sellers and the service initiatives from Sierra auctions expansion.
Speaker Change: The <unk> revenue and segment direct profit or each up 10%.
Speaker Change: Our outlook for the fiscal second quarter of 2045, anticipates, continuing our solid start to the fiscal year as a whole.
Speaker Change: Guidance anticipates, a strong first half of fiscal year 2045 for growth and operating leverage.
Speaker Change: Consistent with our fiscal first quarter results last year.
Speaker Change: The expanded purchase programs in our retail segment are expected to continue to grow revenue at a higher rate than <unk>, and therefore impacting the percent direct profit to revenue ratio.
Speaker Change: While our CAG heavy equipment and energy categories are expected to continue solid growth.
Speaker Change: Prior year comparable period for CAG reflected the completion of several international sales events that had previously been delayed from last year's fiscal first quarter.
Speaker Change: Our Gov deals and machinery segments are expected to continue expansion of new clients grow with existing clients and grow expanded service offerings.
Speaker Change: On a consolidated basis.
Speaker Change: Consignment GMB is expected to continue to be approximately 80% of total GMB.
Speaker Change: Consolidated revenue as a percent of GMB.
Speaker Change: It is expected to remain in the low 30 percentage range.
Speaker Change: The total of our segment direct profit as a percent of consolidated revenue is expected to be in the low forties percentage range.
Speaker Change: These ratios can vary based on our overall business mix of segments and within each segment, including asset categories in any given period.
Speaker Change: Management's guidance for the second quarter of fiscal year 2025 was as follows.
Speaker Change: We expect <unk> to range from $360 million to $390 billion.
Speaker Change: GAAP net income is expected in the range of $5 $5 billion to $8 billion with a corresponding GAAP diluted earnings per share ranging from 17 to 25 cents per share.
Speaker Change: non-GAAP adjusted diluted earnings per share is estimated in the range of 27 to.
Speaker Change: So <unk> 35 per share.
Speaker Change: We estimate non.
Speaker Change: non-GAAP adjusted EBITDA to range from 12 million to $14 5 billion.
Speaker Change: The GAAP and non-GAAP earnings per share guidance assumes that our effective tax rate applied to our fiscal second quarter results will follow our historical trend and be in the low to mid twenties.
Speaker Change: While our annual effective tax rate is still expected to be in the high twenty's or low <unk>.
Speaker Change: We also expect that we will have approximately 32 to $32 5 million fully diluted weighted average shares outstanding.
Speaker Change: The acquisition of auction software is not expected to materially impact our consolidated results for the quarter.
Speaker Change: Thank you we will now take your questions.
Speaker Change: Certainly.
Speaker Change: We will now begin our question and answer session. If you have a question. Please press star one line if you wish to be removed from the queue. Please press star one again.
Speaker Change: We are using a speakerphone you may need to pick up the handset first before pressing the numbers.
Speaker Change: For our first question.
Speaker Change: Our first question will be coming from George Sutton of Craig Hallum. Your line is open.
Speaker Change: Thank you our wonderful results congratulations.
Speaker Change: So I wondered.
Speaker Change: If we could address something you had in your prepared comments, you mentioned expanding market share, which is fairly obvious given the growth I'm just curious if you could.
Speaker Change: Talk about how much is expanding market share versus just a better market condition as you see it.
I think the market share comment relates to.
Speaker Change: Customers are providing access to more goods more categories more geographic regions.
Speaker Change: And that's across each of our segments.
Speaker Change: Conditions have been fairly choppy.
Speaker Change: Pending upon.
Speaker Change: You know where he had said.
Speaker Change: Different different categories have different cross currents.
Speaker Change: I did note the persistent inflation.
Speaker Change: Which tends to bring buyers to our platform offering value price goods.
George Sutton: George but I think this is about just.
George Sutton: Blocking and tackling, bringing the brand to more and more corporate and government organizations.
George Sutton: So you mentioned inflation in gist.
George Sutton: Just as a note on that we have a potential new tariff set of situations I am curious historically.
George Sutton: Have you seen when tariffs are put in place relative to your business.
George Sutton: Well.
George Sutton: The scarcity value of product.
George Sutton: In various categories already being in the U S and available tends to be a positive.
George Sutton: Used equipment can be quite useful if you can imported.
George Sutton: And I think thats something that on balance, it's probably neutral positive for us.
George Sutton: One last thing I wondered if you could just walk through the simple auction acquisition.
George Sutton: It looks like a relatively small but fast growing.
George Sutton: Business, it's fairly narrow as its set up today on the memorabilia side I'm wondering how broad could that offering ultimately become.
George Sutton: Sure I think this is a great example for us.
George Sutton: Bringing our ecosystem.
George Sutton: Two.
George Sutton: Include the transactional marketplaces, we serve and in the software we can provide resellers on a platform.
George Sutton: We are largely a <unk> platform. Our buyer base consists of many small entrepreneurial and midsized businesses, who often resell what they acquire.
George Sutton: They are all looking to be on a digital platform to support their own individual small businesses.
George Sutton: Both simple auction site and auction software.
George Sutton: Which is.
George Sutton: The other part of this this company required you'll provide the tools that you have the <unk>.
George Sutton: <unk> platform that resale platform of capabilities to further serve our buyers who then are looking to grow the resale business.
George Sutton: So this has this has a few aspects wanted to aqua hire a lot of great talent.
George Sutton: Developing modern scalable.
George Sutton: Software add to our business, it's operated in a software as a service.
George Sutton: Business model for many years successfully an area that we think has the.
George Sutton: <unk> to grow.
Speaker Change: I think three.
George Sutton: Puts us in a position to.
George Sutton: Add value and some new categories. You mentioned, a few I think theres a great opportunity just generally.
George Sutton: Good.
George Sutton: There's a very loyal group of.
George Sutton: Auctioneers, and resellers and nostalgia categories, including collectibles.
George Sutton: Even a state sales and antiques.
George Sutton: That that leverage this online auction community and I think we can monetize our our buyer base I think we can extend the reach to more categories and do so in a very asset light software enabled way. So it's a it's a great fit for us.
George Sutton: Super Lastly.
Speaker Change: <unk> does press release was frankly, one of the better thought out press releases I've seen in a long time congratulations on that.
Speaker Change: Well, thank you and we found that our business originally in Washington D. C. We have a lot of experience working within the federal government a lot of these principles we've been talking about.
Speaker Change: For 25 years.
Speaker Change: When you have some.
Speaker Change: Open mindedness to rethink how government functions I think it's a great entry point for companies like liquidity services right now could.
Speaker Change: Unlock efficiency for federal agencies, and we look forward to having future interaction and conversation with decision makers as they may arise.
Speaker Change: Arrived that new policy.
Speaker Change: Super Thank you.
Speaker Change: One moment for our next question.
Our next question will be coming from Gary <unk> of Barrington. Your line is open.
Speaker Change: Hey, good morning, all.
Speaker Change: Bill a question on Gov deals.
Speaker Change: Are you starting to see more of an increased flow of vehicles.
Speaker Change: Coming through the auction.
Speaker Change: That was kind of constricted over the last couple of years due to what happened with the pandemic. So how is that looking now.
Speaker Change: Whats your take on what's happening in the future there.
Speaker Change: Vehicle flow has been healthy.
Speaker Change: I wouldn't say it has been a.
Speaker Change: A massive catalyst.
Speaker Change: To support our results.
Speaker Change: But it is not anemic.
Speaker Change: Each was an issue as you pointed out Gary Webb.
Speaker Change: Inputs were.
Speaker Change: Chipsets weren't available so I think the supply chain has more normalized flows steady.
Speaker Change: Bob.
Speaker Change: That isn't the.
Speaker Change: The primary catalyst for Gov deals result, I think as I've mentioned, we've had good results in non vehicle categories and another high value capital, Canada capital item categories, which could include things like.
Speaker Change: Yep.
Speaker Change: High value fire trucks helicopters.
Speaker Change: Construction equipment or equipment to maintain roads and bridges those are all performing well for us. We as you know also have a real estate.
Speaker Change: The category that.
Speaker Change: As we've seen through some of our results.
Speaker Change: And even some some of our press releases.
Speaker Change: We're now getting a lot of government real estate on the platform, which tends to bring larger chunks of GMB and just as a wonderful category for us to expand and it makes no sense for those sales to occur in an offline manner. So broad based growth vehicles are healthy contributor among many.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Don't know if this question was asked of you did mention it but.
Speaker Change: In terms of the GMT increase you also mentioned that you've got new high volume sellers I mean, how much of that <unk> increase.
Speaker Change: Came from new accounts recently signed over the last six to 12 months.
Speaker Change: Yeah.
Speaker Change: If you go through each of the categories.
Speaker Change: I think Gov deals in CAG benefited from continued growth in the and the seller community. So we've invested in expanding our sales business development capacity.
Speaker Change: We're beginning to reap the benefits of that.
Speaker Change: Retail is.
Speaker Change: A combination of us penetrating existing relationships and adding new sellers added.
Speaker Change: Adding new territories.
Speaker Change: New categories.
Speaker Change: So we know that.
Speaker Change: There is a lot of room to.
Speaker Change: Gross or circular economy commerce.
Speaker Change: And the retail category, we're committed to that so it's a good mix.
Speaker Change: Gary or both.
Speaker Change: New names and existing relationships driving that GMB growth okay.
Speaker Change: Okay. That's helpful and then with the auction software business Youre, saying, it's a SaaS model.
Speaker Change: Is.
Speaker Change: The revenue streams, there generated just from selling the SaaS SaaS software on a rental basis.
Speaker Change: Or does the.
Speaker Change: Platform allow you.
Speaker Change: To take any percentage of the transaction as a b as well, it's a combination of both.
Speaker Change: And we see an opportunity to.
Speaker Change: Standardize and provide a.
Speaker Change: A very.
Speaker Change: Reasonably priced.
SAS.
Speaker Change: E Commerce platform.
Speaker Change: And then unlock additional recovery for these.
Speaker Change: Call it subscribers by providing access to <unk>.
Speaker Change: Aggregated buyer marketplace.
Speaker Change: Yes.
Speaker Change: In terms of delivering value from those improved.
Speaker Change: <unk> results and access to a larger buyer base, we would receive a percentage of that GMP, but again that would be.
Speaker Change: Well within.
Speaker Change: Yes.
Speaker Change: The affordability of of small and midsized businesses. So it's a very asset light.
Speaker Change: The marketplace business model that does unlock additional value for these subscribers and what would reap some GMP.
Speaker Change: Related pricing.
Speaker Change: For liquidity services.
Speaker Change: So as I looked at this website.
Speaker Change: Obviously, it's kind of a niche at those collectibles I sold wine auctions and things of that nature.
Speaker Change: But does this give you the ability now.
Speaker Change: You have a potential client that wants to run their own auctions, you would sell on the platform and they would be able to to do that across all three of your segments or is that kind of how you see this.
Speaker Change: Be leveraged across your portfolio of businesses, yes, there are a couple of areas that have application.
Speaker Change: <unk>.
Speaker Change: First in the retail supply chain there are a lot of.
Speaker Change: Individual resellers, who.
Speaker Change: No that digital presence is important and these are largely companies that specialize in particular categories and they're reselling to consumers.
Speaker Change: They want to have a good experience and so we think we can bundle.
This this auction platform with those use cases and help many people who buy from us here someone who's buying a truckload might be reselling to consumers. So we think it's a nice adjacency that we can serve within the retail.
Speaker Change: Marketplace, you'll also see that in the.
Speaker Change: The machining segment, where you have.
Speaker Change: Something like $20 billion of used equipment looking for a home on machinery is classifieds marketplace.
Speaker Change: Machine is not a transactional platform and dealers often like to control their brand and their experience and so our white label auction.
Speaker Change: Marketplace platform.
Speaker Change: Our sales platform would be a very good fit for those dealer customers. They got to control the brand.
Speaker Change: Well the pricing, what we help them do carriers.
Speaker Change: Convert that traffic to their marketplace to e-commerce sales and handle the payment heavily invoicing and billing something we do very well. So I think that's another area of application.
Speaker Change: Okay. Thank you.
Speaker Change: We have no further questions at this time. This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Yeah.
Speaker Change: [music] okay.
Speaker Change: Okay.
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