Q2 2025 Liquidity Services Inc Earnings Call
Okay.
Michelle: Welcome to the Liquidity Services, Inc. second quarter of fiscal year 2025 financial results conference call. My name is Michelle and I'll be your operator for today's call. Please note that this call is being recorded. At this time, all participants are in a listen-only mode.
Michelle: Welcome to the liquidity services, Inc. Second quarter of fiscal year 2025 financial results Conference call. My name is Michelle and I'll be your operator for today's call. Please note that this call is being recorded.
Michelle: At this time all participants are in listen only mode. Later, we will conduct a question and answer session.
Michelle: Later, we will conduct a question and answer session.
Michael Patrick: I will now turn the call over to Michael Patrick, Liquidity Services Vice President and Good morning.
Speaker Change: I'll turn the call over to Michael Patrick liquidity, Services', Vice President and controller.
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.
Speaker Change: Good morning.
Speaker Change: On the call today are bill and Greg, Our Chairman and Chief Executive Officer, Jorge Celaya.
Speaker Change: Our executive Vice President and Chief Financial Officer.
Speaker Change: They will be available for questions after their prepared remarks.
Unknown Executive: The following discussion and responses to your questions reflect management's views as of today, May 8, 2025, and will include forward-looking statements. Actual results may differ materially.
Speaker Change: The following discussion and responses to your questions reflect management's views as of today may eight 2025 and will include forward looking statements.
Speaker Change: <unk> results may differ materially.
Unknown Executive: 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: Additional information about factors that could potentially impact our financial results is included in today's press release and in filings with the SEC.
Speaker Change: Including our most recent annual report on Form 10-K.
Unknown Executive: 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 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, including the reconciliations of these measures with their most comparable GAAP measures as available. 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 investment.
Speaker Change: 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.
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, including 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.
Unknown Executive: This supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results.
Speaker Change: The supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results.
William Angrick: At this time, I will turn the presentation over to our Chairman and CEO, Bill Angrick. Good morning, and welcome to our Q2 earnings call. I'll review our Q2 performance and the progress of our business segments.
Speaker Change: At this time I will turn the presentation over to our chairman and CEO Bill angry.
Speaker Change: Good morning, and welcome to our Q2 earnings call.
Speaker Change: 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 Angrick: And next, Jorge Celaya will provide more details on the quarter. Our team made significant progress towards our strategic, financial, and operational goals this past quarter, notwithstanding emerging economic uncertainty. We expanded our market presence and service offerings and are moving closer to our midterm goal of $2 billion of annual GMV with our current GMV annualized run rate of $1.67 billion. We are growing our volumes, buyer base, and recovery rate in key high value categories, such as construction. Vehicles and Consumer Return Goods. During Q2, we set new records in the number of sellers, Assets Listed, and Bidder Participation in these categories.
Speaker Change: Our team made significant progress towards our strategic financial and operational goals this past quarter, notwithstanding emerging economic uncertainty.
Jorge Celaya: We expanded our market presence and service offerings and are moving closer to our midterm goal of $2 billion of Daniel G. M. B with our current G M B annualized run rate of $167 billion.
Speaker Change: We are growing our volumes.
Speaker Change: Your base and recovery rate in key high value categories, such as construction.
Speaker Change: Equipment trucks vehicles, and consumer returned goods during Q2, we set new records and the number of sellers.
Speaker Change: Assets listed and better participation in these categories.
William Angrick: We also continue to drive adoption of our asset light services in all segments and are transacting approximately 80% or more of our total GMV under the consignment pricing model. Despite significant investment in our business expansion and product roadmap initiatives, we are also meeting our goal of a 20% EBITDA margin as a percentage of direct profit or net revenue. We generated over $21 million of operating cash flow during Q2 and have a debt-free balance sheet with $149 million of cash to execute both our organic and M&A growth strategy.
Speaker Change: We also continue to drive adoption of our asset light services in all segments and are transacting, approximately 80% or more of our total G. M b under the consignment pricing model.
Speaker Change: Despite significant investment in our business expansion and product roadmap initiatives. We are also meeting our goal of a 20% EBITDA margin as a percentage of direct profit or net revenue.
We generated over $21 billion of operating cash flow during Q2 and have a debt free balance sheet with $149 billion of cash to execute both our organic and M&A growth strategies.
Unknown Executive: Now let's take a closer look at each site.
Speaker Change: Now, let's take a closer look at each segment.
William Angrick: Our GovDeals segment continues to successfully serve customers in both government and government-adjacent markets in the sale of used equipment, vehicles, and other commercial assets. Through this growth process, we have expanded our GovDeals target addressable market to an estimated $5.4 billion. During Q2, GovDeals attracted new, higher-volume clients who previously relied on full-service auctioneers by implementing our innovative hybrid solutions that leverage our scalable online marketplaces.
Our Gov deals segment continues to successfully serve customers in both government and government adjacent markets and the sale of used equipment vehicles and other commercial assets.
Speaker Change: Through this growth process, we have expanded arc of deals target addressable market.
Speaker Change: Two of the estimated $5.4 billion.
Speaker Change: During Q2 golf deals attracted new higher volume clients, who previously relied on full service auctioneers by implementing our innovative hybrid solutions that leverage our scalable online marketplaces. Recent examples of these wins include.
William Angrick: Recent examples of these wins include New York City, Buffalo, New York. Boston. Sacramento, California, Fairfax County, Virginia, and Amarillo, Texas. GovDeals has also driven consistent account acquisition and expansion of existing accounts, which has resulted in 12% organic growth and the number of assets listed in the first half of fiscal year 25 on our GovDeals platform.
Speaker Change: New York City, Buffalo, New York.
Speaker Change: Boston.
Speaker Change: Sacramento, California, Fairfax County, Virginia.
Speaker Change: And Amarillo, Texas.
Speaker Change: Gov deals has also driven consistent account acquisition and expansion of existing accounts, which has resulted in 12% organic growth in the number of assets listed in the first half of fiscal year 'twenty five on our Gulf deals platform.
William Angrick: Vehicle volumes have also grown steadily year over year, noting, however, that given the current tariff policies is likely that vehicle supply chains will undergo some disruption in the future. End-use vehicle prices are likely to rise at some point during this period.
Speaker Change: Vehicle volumes have also grown steadily year over year, noting however that given the current tariff policies is likely that vehicle supply change will undergo some disruption in the future.
Speaker Change: And used vehicle prices are likely to rise at some point during this period.
William Angrick: Our CAG segment posted solid results during Q2 with double-digit organic growth in GMB. The breadth of our CAG marketplace was on display during Q2 as we completed transactions in the U.S., the U.K., India, Poland, Sweden, and China across A variety of verticals including energy, biopharma, consumer packaged goods, and industrial machinery.
Speaker Change: Our CAG segment posted solid results during Q2 with double digit organic growth in GMP.
Speaker Change: Wrapped up our CAG marketplaces on display during Q2, as we completed transactions in the U S. The U K, India, Poland, Sweden, and China across.
Speaker Change: A variety of verticals, including energy Biopharma consumer packaged goods and industrial machinery.
William Angrick: are growing keg-heavy equipment. category continued its rapid growth setting records for the number of unique sellers, repeat sellers, GMV, and completed transactions during Q2. Buyers continue to be attracted to the savings, immediacy, and convenience offered in our used equipment marketplace. During Q2, we enjoyed record buyer participation in our CAG segment as the number of auction participants grew 95% and 70% year-over-year, respectively, in our heavy equipment and CAG industrial verticals during Q2. Our RSCG segment expanded its relationships with sellers across categories and geographies to drive 29% year-over-year growth in GMB during Q2.
Speaker Change: Our growing cash.
Speaker Change: Heavy equipment.
Speaker Change: Category continued its rapid growth setting records for the number of unique sellers repeat sellers G M B and completed transactions during Q2.
Speaker Change: Buyers continue to be attracted to the savings immediacy and convenience offered and our used equipment market places.
Speaker Change: During Q2, we enjoyed record buyer participation in our CAG segment as the number of auction participants grew 95% and 70% year over year, respectively.
Speaker Change: Our heavy equipment.
Speaker Change: CAG industrial protocols during Q2.
Speaker Change: Our RFC G segment expanded its relationships with sellers across categories and geographies to drive 29% year over year growth in.
Speaker Change: G M B during Q2.
William Angrick: margins were roughly flat year over year due to a weakening consumer, higher inbound purchase rates, and logistics costs. Our market share gains have been fueled by the high quality and reliability of our solution, which ensures that our retail clients benefit financially and operationally from our services. In fact, we are now offering our sell-in-place software solution to some of the largest e-commerce players outside of the U.S. to manage and sell their return goods on our platform, demonstrating how our investment in easy-to-use listing tools and multilingual capabilities is paying off.
Speaker Change: Margins were roughly flat year over year due to a weakening consumer higher inbound purchase rates and logistics costs.
Speaker Change: Our market share gains have been fueled by the high quality and reliability of our solution, which ensures that our retail clients benefit financially and operationally from our services and.
Speaker Change: In fact, we are now offering our sell in place software solution to some of the largest e-commerce players outside of the U S to manage and sell their return goods on our platform demonstrating how our investment in easy to use listening tools and multi lingual capabilities is paying off.
William Angrick: Our observation is that the current economic climate is putting pressure on many players in the retail liquidation industry, which has historically led to greater levels of insolvency or bankruptcy of service providers, which has adverse operational and financial impacts on retailers. Also, it is unclear whether cash-strapped consumers are prepared to absorb higher costs of goods due to new tariff policies. Against this backdrop, Liquidity Services offers the retail industry a safe harbor for our clients and buyers by providing consistent, reliable, secure, and scalable performance. In particular, our multi-channel buyer base and value-added logistics services have been critical to assisting our retail clients in navigating this uncertain economic environment.
Speaker Change: Our observation is that the current economic climate is putting pressure on many players in the retail liquidation industry, which has historically led to greater levels of insolvency or bankruptcy. It service providers, which has adverse operational and financial impacts.
Speaker Change: On retailers.
Speaker Change: Also it is unclear whether cash strapped consumers are prepared to absorb higher costs of goods due to new tariff policies against this backdrop liquidity services.
Speaker Change: First the retail industry, a safe harbor for our clients and buyers by providing consistent reliable secure and scalable performance in particular, our multichannel buyer base of value added logistics services have been critical to assisting our retail clients and navigate.
Speaker Change: During this uncertain economic environment.
William Angrick: Finally, our Machinio and our newly launched software solutions business each continue to add customer value by enhancing our service offerings and expanding our market reach. Machinio is strengthening its value proposition by integrating e-commerce payment, shipping services, and new email marketing campaign tools to enable used equipment sellers to more efficiently manage their sales. We continue to invest in platform improvements and have increased our capacity to innovate through our software solutions business, which includes our acquired auction software business and software development team. Collectively, our product teams are hard at work introducing new features in the front end and back end of our marketplace platform, including AI-assisted asset description tools and asset alerts, white-label client landing pages, text notifications during the bid process, and mobile-responsive asset upload templates.
Speaker Change: Finally, our machines and our newly launched software solutions business, each continue to add customer value by enhancing our service offerings and expanding our market reach machinery O is strengthening its value proposition by integrating e-commerce payment shipping services.
Speaker Change: A new email marketing campaign tools to enable used equipment sellers to more efficiently manage their sales.
Speaker Change: We continue to invest in platform improvements and have increased our capacity to innovate through our software solutions business, which includes our acquired auction software business and software development team.
Speaker Change: Collectively our product teams are hard at work introducing new features and the front end and back end up our marketplace platform, including AI assisted asset description tools and asset alerts white label client landing pages text notifications during the bid process and mobile responsive asset.
Speaker Change: <unk> upload templates.
William Angrick: As we've noticed, Clients across all industries are grappling with the effects of emerging tariffs on their supply chains, which could impact the timing and volume of asset sales. including retail goods and used vehicles. However, Our market-leading solutions help our seller clients and buyers respond to economic uncertainty and evolving supply chains by offering flexible and liquid marketplaces to transact any type of equipment, or Asset. and all regions of the globe.
Speaker Change: As we've noticed.
Speaker Change: Clients across all industries are grappling with the effects of emerging tariffs on their supply chain, which could impact the timing and volume of asset sales.
Speaker Change: Building retail goods and used vehicles.
Speaker Change: However.
Speaker Change: Our market, leading solutions help our seller clients and buyers respond to economic uncertainty and evolving supply chains by offering flexible and liquid marketplaces to transact any type of equipment.
Speaker Change: Or asset.
Speaker Change: In all regions of the globe.
William Angrick: With our strong financial foundation and strategic focus, we are very well positioned to seize emerging opportunities to drive long-term growth, even in uncertain times.
Speaker Change: With our strong financial foundation and strategic focus.
Speaker Change: We are very well positioned to seize emerging opportunities to drive long term growth even in uncertain times ill now turn it over to Jorge for more details on the quarter.
Jorge Celaya: I'll now turn it over to Jorge for more details on the quarter. Good morning and thank you, Bill. During the second quarter of fiscal year 2025, we grew our consolidated GMV 15% to $367.4 million as each of our segments advance their goals to generate growth through expanding service offerings and market Our ongoing efforts to create operating expense leverage was again realized during this quarter, resulting in the improvement across our key profitability metrics. Our fiscal second quarter performance was consistent with our guidance range, despite encountering some weather related delays earlier in the quarter. comparing our results for the second quarter of fiscal year 2025 to the same quarter last year.
Jorge Celaya: Good morning, and thank you Bill.
Jorge Celaya: During the second quarter of fiscal year 2025, we grew our consolidated <unk>, 15% to 367 $4 million.
Jorge Celaya: As each of our segments advance their goals to generate growth through expanding service offerings and market share.
Jorge Celaya: Our ongoing efforts to create operating expense leverage was again realized during this quarter, resulting in the improvement across our key profitability metrics.
Jorge Celaya: Our fiscal second quarter performance was consistent with our guidance range. Despite encountering some weather related delays earlier in the quarter.
Jorge Celaya: Comparing our results for the second quarter of fiscal year 2025 to the same quarter last year.
Jorge Celaya: Our revenue grew 27% to $116.4 million, consistent with the guidance we provided with our revenue-to-GMV ratio. Consistent with the first quarter of fiscal year 2025, revenue has continued to grow faster than GMV mainly due to our market share gains resulting in expansion of lower touch purchase programs in our retail segment. Our GAAP earnings per share increased 22% to $0.22 and 15% to $0.31 on a non-GAAP-adjusted basis. Our non-GAAP-adjusted EBITDA was $12.2 million, slightly above last year. In addition to the early quarter weather-related delays that affected GovDeals, our retail segment experienced some delays in buyer demand.
Jorge Celaya: Our revenue grew 27% to $116 $4 million consistent with the guidance, we provided with our revenue to <unk> ratio.
Jorge Celaya: Consistent with the first quarter of fiscal year 2025.
Jorge Celaya: Revenue has continued to grow faster in <unk>, mainly due to our market share gains, resulting in expansion of lower touch purchase programs at our retail segment.
Jorge Celaya: Our GAAP earnings per share increased 22% to 22 six and.
Jorge Celaya: A 15% to 31 cents on a non-GAAP adjusted basis.
Jorge Celaya: Our non-GAAP adjusted EBITDA was $12 2 million slightly above last year.
Jorge Celaya: <unk> to the early quarter weather related delays that affected GAAP deals.
Jorge Celaya: Our retail segment experienced some delays in buyer demand and last year, our fiscal second quarter benefited.
Jorge Celaya: And last year, our fiscal second quarter benefited from catching up on retail and CAG GMV delayed from the first quarter of fiscal year 2024. We ended the fiscal second quarter of 2025 with $149 million in cash, cash equivalents, and short-term investments. We generated $21.6 million of cash from operations during the quarter and used $6.3 million to acquire auction software. We continue to have zero debt, and following an amendment entered into this week, improving our line of credit capacity and terms, we currently have $26 million of available borrowing capacity under our credit facility. We continue to expect our near-term capital expenditures to not significantly vary relative to our recent historical average.
Jorge Celaya: From catching up on retail and tag <unk> delayed from the first quarter of fiscal year 2024.
Jorge Celaya: We ended the fiscal second quarter of 2025 with a $149 billion in cash cash equivalents and short term investments, we generated 21 $6 million of cash from operations during the quarter and used $6 3 million to acquire auction software.
Jorge Celaya: We continue to have zero debt.
Jorge Celaya: And following an amendment entered into this week, improving our line of credit capacity and terms. We currently have $26 million of available borrowing capacity under our credit facility.
Jorge Celaya: We continue to expect our near term capital expenditures to not significantly vary relative to our recent historical averages.
Jorge Celaya: Specifically comparing segment results from this fiscal second quarter of 2025 to the same quarter last year, our retail segment was up 29% on GMV and up 46% on revenue, driven by increased volumes from our client purchase model programs relative to our consignment program. segment direct profit was slightly down by 3%. Our capital assets group segment was up 14% on GMB, led especially by continued market share increases with recurring sellers of low touch heavy equipment. Revenue was down 22% and segment direct profit was down 6% as increases in heavy equipment consignment GMV were offset by last year's comparable fiscal second quarter of 2024 that included large international spot purchase transactions that had been delayed from the first fiscal quarter of 2024.
Jorge Celaya: Specifically comparing segment results from this fiscal second quarter of 2025 to the same quarter last year, our retail segment was up 29% of <unk> and up 46% of revenue driven.
Jorge Celaya: Driven by increased volumes from our client purchase model programs relative to our consignment Brooks Simon.
Jorge Celaya: Segment direct profit was slightly down by 3%.
Jorge Celaya: Our capital assets Group segment was up 14% of GM being led especially by continued market share increases with recurring sellers of low touch heavy equipment.
Jorge Celaya: Revenue was down 22% and segment direct profit was down 6% as increases in heavy equipment confinement G. M. B were offset by last year's comparable.
Jorge Celaya: Fiscal second quarter of 2024 that included large international spot purchase transactions that had been delayed from the first fiscal quarter of 2024.
Jorge Celaya: Our GovDeal segment's GMV was up 9%, revenue up 5%, and segment direct profit up 3%. These results reflect impacts from weather-related delays during the quarter and reflects growth in our lower take rate real estate category. are machinio and software solutions businesses in total, increased revenue by 22%, resulting in segment direct profit being up 19% on a combined basis. Driven by Machinio's continued solid performance and from the acquisition of Auction Soft. Our outlook for the third quarter of fiscal year 2025 reflects solid year-over-year growth at the midpoint of our rate. While we currently have a positive outlook to this upcoming quarter, our low end of guidance reflects the potential for more volatility given the uncertainties in the macroeconomic environment.
Jorge Celaya: Our Gulf deal segments, <unk> was up 9% revenue up 5% with segment direct profit up 3%. These.
Jorge Celaya: These results reflect impacts from weather related delays during the quarter reflect growth in our lower take great real estate category.
Jorge Celaya: Our machines and software solutions businesses in total increased revenue by 22%, resulting in segment direct profit being up 19% on a combined basis drill.
Jorge Celaya: Driven by machine yields continued solid performance and from the acquisition of auction software.
Jorge Celaya: Our outlook.
Jorge Celaya: For the third quarter of fiscal year, 2025 reflect solid year over year growth at the midpoint of our range.
Jorge Celaya: While we currently have a positive outlook to this upcoming quarter.
Jorge Celaya: Our low end of guidance reflects the potential for more volatility given the uncertainties in the macroeconomic environment.
Jorge Celaya: We do not currently anticipate significant near-term disruptions from the global economic uncertainty. with mainly our CAG segment experiencing some delayed cross-border transactions as we entered this fiscal third quarter. We still anticipate the CAD segment to grow the top line year over year, led by our heavy equipment and industrial categories. while vehicle volumes were tempered this past fiscal second quarter. and can experience delays during uncertain economic cycles. We began the fiscal third quarter with solid volumes year over year in our GovDeal segment. In our guidance, our fiscal third quarter for gov deals reflect its traditional seasonal peak in GMB.
Jorge Celaya: We do not currently anticipate significant near term disruptions from the global economic uncertainties.
Jorge Celaya: With mainly our CAG segment experiencing some delayed cross border transactions as we entered this fiscal third quarter.
Jorge Celaya: We still anticipate the CAG segment to grow the top line year over year led by our heavy equipment and industrial categories.
Jorge Celaya: While vehicle volumes were tempered this past fiscal second quarter.
Jorge Celaya: And Curt experienced delays during uncertain economic cycles, we began the fiscal third quarter with solid volumes year over year, and our Gov deal segments.
Jorge Celaya: In our guidance, our fiscal third quarter for Gov deals reflected traditional seasonal peak in GMP.
Jorge Celaya: The expanded purchase programs in our RSCG segment are expected to increase retail GMV and revenue year over year and sequentially. with revenue growing at a higher rate than GMB and with a higher overall mix of lower touch product flows, improving the overall result. Machinio and our newly acquired software solutions business are expected to see growth in revenues year over year. On a consolidated basis, consignment GMV is expected to continue to be in the low 80s as a percentage of total GMV. as our GovDeal segment enters its seasonally high quarter. Consolidated revenue as a percent of GMV is expected to be approximately 30 percent.
Jorge Celaya: The expanded purchase programs at our <unk> segment are expected to increase retail G. M. B, a revenue year over year and sequentially.
Jorge Celaya: With revenue growing at a higher rate than <unk> and with a higher overall mix of lower touch product flows improving the overall results.
Jorge Celaya: Massena and our newly acquired software solutions business are expected to see growth in revenues year over year.
Jorge Celaya: On a consolidated basis consignment G. M. D is expected to continue to be in the low eighties as a percentage of total GMB.
Jorge Celaya: As our golf deal segment enters its seasonally high quarter.
Jorge Celaya: Consolidated revenue as a percent of G M D.
Jorge Celaya: Expected to be approximately 30%.
Jorge Celaya: and the total of our segment direct profits as a percent of consolidated revenue is expected to again be in the low to mid 40 percentage range. These ratios can vary based on our overall business mix, including asset categories in any given period. Consistent with prior year trends, we anticipate sequential growth in our top-line results for the second half of our fiscal year compared to the first half. This growth and related operating leverage have historically driven sequential improvement in our key profit metrics and ratios when comparing the second fiscal year half to the first half of a fiscal year.
Jorge Celaya: And the total of our segment direct profit as a percent of consolidated revenue is expected to again be in the low to mid 40 percentage range.
Jorge Celaya: These ratios can vary based on our overall business mix, including asset categories in any given period.
Jorge Celaya: Consistent with prior year trends, we anticipate sequential growth in our topline results for the second half of our fiscal year compared to the first half.
Jorge Celaya: This growth in related operating leverage have historically, driven sequential improvement in our key profit metrics and ratios when comparing the second fiscal year half to the first half of our fiscal year.
Jorge Celaya: Management guidance for the third quarter of fiscal year 2025 is as follows. We expect GMB to range from $395 million to $430 million. Gap net income is expected to range in the range of $6 million to $9 million, with corresponding gap diluted earnings per share ranging from $0.18 to $0.28 per share.
Jorge Celaya: Management guidance for the third quarter of fiscal year 2025 is as follows.
Jorge Celaya: We expect <unk> to range from $395 million to $430 million GAAP net income is expected to range in the range of $6 million to $9 billion with corresponding GAAP diluted earnings per share ranging from 18 to 28 cents per share.
Jorge Celaya: non-gap adjusted diluted earnings per share is estimated in the range of 27 cents to 36 cents per share. We estimate non gap adjusted EBITDA to range from $14.5 million to $17.5 million. The GAAP and non-GAAP EPS guidance assumes that we have approximately $32.5 to $33 million fully diluted weighted average shares outstanding for the third quarter of fiscal year 2025.
Jorge Celaya: non-GAAP adjusted diluted earnings per share is estimated in the range of 27 to 36 per share.
Jorge Celaya: We estimate non-GAAP adjusted EBITDA to range from $14 5 million to $17 $5 million.
Jorge Celaya: The GAAP and non-GAAP EPS guidance assumes that we have approximately 32.5% to 33 million fully diluted weighted average shares outstanding for the third quarter of fiscal year 2025.
Unknown Executive: Thank you, and we will now take your questions. Thank you.
Jorge Celaya: Thank you and we will now take your questions.
Jorge Celaya: Okay.
Michelle: We will now begin the question and answer session. If you have a question, please press star 1 1. If you wish to be removed from the queue, please press star 1 1 again. If you're using a speakerphone, you may need to pick up the handset first before pressing the number.
Jorge Celaya: Thank you we will now begin the question and answer session. If you have a question. Please press star one one.
Jorge Celaya: Wish to remove removed from the queue. Please press star one again.
Jorge Celaya: Youre using a speakerphone you may need to pick up the handset first before pressing the numbers.
Jorge Celaya: Okay.
Gary Prestopino: And our first question comes from Gary Prestopino with Barrington, your line is open. Good morning, Bill and Jorge. Um, all right. I'm sorry. How are you guys doing? Very well. Thank you. Good. A couple of questions. I just.
Speaker Change: And our first question comes from Gary pressed the piano with Barrington. Your line is open.
Jorge Celaya: Okay.
Speaker Change: Good morning, Bill and George.
Jorge Celaya: Alright, I'm sorry, how are you guys doing.
Speaker Change: Very well thank you.
Jorge Celaya: Okay.
Jorge Celaya: A couple of questions I just.
William Angrick: in the segments where you cited weather, particularly gov deals. Was that impact there related to more of the vehicle? turnover versus what you're doing in real estate. And it really just stemmed from cold weather or whatever. I'm just trying to get a handle on what happened in the quarter related to weather. Sure, the Storms that came through, particularly the southeast, you had a variety of tornadoes and extreme weather events that came through that does affect a lot of the rolling stock. a listing process that occurs at these various locations. So people are, you know, Under shelter, closing offices, and therefore access to the physical assets is interrupted.
Jorge Celaya: And in the end.
Jorge Celaya: Segments, where you cited weather, particularly.
Jorge Celaya: Gov deals.
Jorge Celaya: Was that impact there related to more of the vehicle.
Jorge Celaya: Turnover versus what Youre doing in real estate and it really just stemmed from cold weather or whatever I'm, just trying to get a handle on.
Jorge Celaya: What happened in the quarter related to weather for you guys.
Jorge Celaya: Sure the.
Jorge Celaya: Storms that came through particularly the southeast yet a variety of tornadoes and extreme weather events that came through that does affect.
Jorge Celaya: A lot of the rolling stock.
Jorge Celaya: Listing process.
Jorge Celaya: Occurs at these various locations so people.
Jorge Celaya: Are you now.
Under shelter closing offices.
Jorge Celaya: And therefore access to the physical assets is.
William Angrick: That's primarily what we're referring to. Okay.
Jorge Celaya: Interrupted that's primarily what we're referring to.
Jorge Celaya: Okay.
Jorge Celaya: That's fine.
Gary Prestopino: And then I want to just talk about Briefly, what happened in the quarter? It looks like. on $78 million or so of purchase revenue, you generated about 8.9 million of gross last year you did 53 million of revenue and 8.8 or 8.9 million of gross profit.
Jorge Celaya: And then.
Jorge Celaya: I wanted to just talk about.
Jorge Celaya: Briefly.
Jorge Celaya: It happened in the quarter.
Jorge Celaya: It looks like.
Jorge Celaya: On $78 million or so of purchase revenue.
Jorge Celaya: You generated about $8 9 million of gross.
Jorge Celaya: Profit.
Jorge Celaya: Last year, you did $53 million of revenue and $8 eight or $8 9 million of gross profit. So bottom line is you had a significant step down in the gross profit on the purchase transactions and I think that kind of skewed the quarter.
William Angrick: So bottom line is you had a significant step down in the gross profit on the purchase transactions and I think that kind of skewed the quarterly results in terms of the adjusted EBITDA. So was that something where you're working with third parties and they got a percentage of the profitability on a sale or could you elaborate on that?
Jorge Celaya: Quarterly results in terms of the adjusted EBITDA.
Jorge Celaya: No.
Jorge Celaya: Was that something where you are working with third parties and they got a percentage of.
Jorge Celaya: The profitability on a sale or could you elaborate on that.
William Angrick: Sure, I'll give a couple comments that Jorge can add his. There's a mix there, both between industrial CAG, principal deals, and then retail supply chain purchase model programs. We have used a variety of third parties to refer business to us. And in some cases, sales can occur with a ref share that would reduce the margin, our take rate and margin realized on the sales. Additionally, we had a number of inbound logistics costs, setup costs for some new purchase model programs in retail, which reduced profitability on that, along with some multi-year agreed step up in rates for certain product categories that also compress margins.
Jorge Celaya: Sure I'll give a couple comments said Jorge Ken.
It is.
Jorge Celaya: There's a mix there both between industrial CAG principal deals and then.
Jorge Celaya: Our retail supply chain.
Jorge Celaya: The purchase model programs.
Jorge Celaya: We have used a variety of third parties too.
Jorge Celaya:
Jorge Celaya: Refer business to us and in some cases sales can occur.
Jorge Celaya: With a Rev share that would reduce the the mart, our take rate and margin realized on those sales. Additionally, we had.
Jorge Celaya: A number of inbound logistics costs setup costs for some new purchase funnel programs in retail, which reduced profitability on that along with.
Jorge Celaya: Some multiyear.
Jorge Celaya: Great step.
Jorge Celaya: Step up in rates for certain product categories that also compressed margins and.
William Angrick: And I think there was a little ripple of consumer demand being tempered as people were holding on to cash, trying to understand exactly to what extent, you know, the economy would you know, change relative to, you know, some of these new policies at the federal level.
Jorge Celaya: And I think there was a little ripple of.
Jorge Celaya: Consumer demand being tempered as people were holding onto cash trying to understand exactly what to what extent the economy with.
Jorge Celaya: Change relative to you know.
Jorge Celaya: Some of these new policies at the federal level.
Jorge Celaya: Yes, Gary, just to add to that a bit, so We also have to remember that in the second quarter of last year, we had all the catch-up. from the first quarter of CAG and retail. So when we're comparing this second quarter to the last second quarter last year, we had some unusual benefits last year in the second quarter.
Gary: Yes, Gary.
Gary: To add to that a bit so.
Gary: We also have to remember that in the second quarter of last year, we had all the catch up.
Gary: From the <unk>.
Gary: First quarter.
Gary: Of CAG in retail.
Gary: So when we're comparing the second quarter to the last second quarter last year, we had some unusual benefits last year in the second quarter.
Jorge Celaya: But also to add to what Bill said, the mix of product. or the mix of contract that we're getting when we refer, for example, in retail. a shift to lower touch purchase products. That usually means that lower touch, we have a lower operating. So despite the potential of having on those individual contracts, even when blended take rates or direct profits may look like they're down, they can be offset by the operating expenses that we don't necessarily need to have to support this lower touch programs. So if you look at our operating tech and ops line, you're going to see a sequential drop in expense.
Gary: But also this.
Bill Angry: To add to what Bill said the mix of product.
Bill Angry: Or the mix of contract that we're getting when we refer for example in retail.
Bill Angry: Two.
Bill Angry: But a shift to lower touch.
Bill Angry: Purchase products.
Bill Angry: That usually means that lower touch we have a lower operating expense. So despite the potential of having on those individual contracts.
Bill Angry: Even.
Bill Angry: When blended take rates or direct profits may look like they're they're down they can be offset.
Bill Angry: By the operating line operating expenses that we don't necessarily need to have to support this lower touch programs. So if you look at our operating tech and ops line Youre going to see a sequential drop in expense.
Jorge Celaya: And when we commented on operating leverage, these are the kind of things that that we mean. So it's not necessarily a direct correlation between the direct profit and EBITDA, for example, because it'll depend on your mix that you may not need, you know, all the operational costs.
Bill Angry: And what we comment said on operating leverage these are the kind of thing that we mean, so it's not necessarily a direct correlation between.
Bill Angry: The direct profit and EBITA for example, because it'll depend on your mix that you may not need.
Bill Angry: All the operational.
Jorge Celaya: And as Bill said, we also had some delays on selling through like in retail. So we're holding inventory. We have transportation costs. And these are things that should be sold in the next month or the next quarter. And then you're not going to have those. You know, those transportation costs, right? You've already taken them in the prior course. So things like that, all of the above is what What, you know, slightly changes these numbers, right? Not anything is perfect and timed perfectly in business.
Bill Angry: Cost and as Bill said, we also had some.
Bill Angry: Some delayed delays on selling through like in retail.
Bill Angry: So we're holding inventory we have transportation costs.
These are things that should be sold.
Bill Angry: In the next month or the next quarter, and then youre not going to have those.
Bill Angry: Those transportation costs right, you've already taken live in the prior quarter, so things like that all of the above is what.
Bill Angry: What a.
Bill Angry: Slightly changes these numbers right not everything is perfect.
Bill Angry: Perfect and timed perfectly in business.
Gary Prestopino: Okay, thank you. That's all. Thank you.
Speaker Change: Okay. Thank you that's helpful.
Bill Angry: Okay.
George Sutton: Our next question comes from George Sutton with Craig Hallam. Your line is open. Thank you, Bill.
Operator: Thank you. Our next question comes from George Sutton with Craig Hallum. Your line is open.
William Angrick: I wondered if we could just walk through a world where tariffs increase the cost for new items. and you obviously are a predominantly used marketplace. Generically, shouldn't that be to your favor? Yes, we know from few business cycles over the last 20 years. There's a preference to trade down to the used equipment market when either there's a price gouging effect on new equipment or new equipment is simply not available. We've seen this in the construction vertical, the used equipment vertical, a variety of other industrial categories. So, on balance, used equipment is a safe harbor for buyers, certainly stimulates activity on the marketplace.
George Sutton: Thank you Bill I wondered if we could just walk through a world where tariffs increase the cost for new items and you obviously are predominantly used marketplace.
Operator: Generically shouldnt that be to your favor.
George Sutton: Yes.
George Sutton: We know from.
George Sutton: Few business cycles over the last 20 years.
George Sutton: There is a preference to trade down to the use equipment market went either there's a price gouging effect on new equipment or equipment simply not available. We've seen this in the construction vertical the used equipment vertical Friday or other industrial categories. So on balance used equipments of safe Harbor for buyers certainly stimulate.
William Angrick: And we saw, Jorge, record activity.
George Sutton: Activity in the marketplace and we saw George record activity.
William Angrick: and our Heavy Equipment Marketplace and our Industrial Vertical and in the Used Vehicle Gov Deals vertical.
George Sutton: In our heavy equipment marketplace at our industrial vertical.
George Sutton: And the used vehicle golf deals are vertical.
William Angrick: You have been targeting more of the federal agencies and federal government for opportunities with DOJ being as impactful as we would expect it to be. How do you feel positioned for opportunities there? I think we've got a perfect complement of solutions. I think the reality is this is a slow-moving, very complex interagency process. We are a known quantity. I think we'll have an opportunity, the timing of which we can't. precisely predict, but we have done pilots successfully for federal agencies and we stand ready to serve.
George Sutton: You have been targeting.
George Sutton: More of the federal agencies and.
George Sutton: The federal government for opportunities with those being.
George Sutton: As impactful as we would expect it to be.
George Sutton: How do you feel positioned for opportunities there.
George Sutton: We've got a perfect complement of solutions I think the reality is.
George Sutton: This is a slow moving.
George Sutton: Very complex inter agency process.
George Sutton: We are a known quantity I think we'll have an opportunity the timing of which we can't.
George Sutton: Precisely predict but.
George Sutton: We have done.
George Sutton: Don pilots successfully for federal agencies, and we stand ready to serve.
William Angrick: You mentioned with your auction software business, you've created some new features, both in the front and the back end. I think you've also been looking to marry that with your Machinio to perhaps make that a more vibrant set of offerings.
Speaker Change: You mentioned with your auction software business you've created some new features both in the front and the backend I think <unk> also been looking to marry that with your machines.
Speaker Change: To perhaps make that a more vibrant set of offerings can you just give us some more specificity as to what kinds of things.
William Angrick: Can you just give us some more specificity as to what kinds of... you're creating there and what types of opportunities that create. Sure. Well, everything we sell has to be described and photographed and listed. So there's tremendous potential with AI computer vision tools to use, you know, image recognition and supplement that with some automated rich listing that will be very easy to feed to search engines and around internal, you know, marketplace categories. So that process that automation process has great mid and long term potential to reduce. lifting costs and labor costs. On the buyer side, the ability to more precisely match what buyers have demonstrated their interests are through browsing, bidding, history, is another area of improvement.
Speaker Change: Youre, creating there and what what types of opportunities that creates.
Speaker Change: Sure well everything we sell has to be described and photograph unlisted set us tremendous potential with AI.
Speaker Change: Peter vision tools to use image recognition and supplement that with some automated rich listing that.
Speaker Change: That will be very.
Speaker Change: Easy to feed to search engines, and our own internal marketplace categories. So that process that automation process has great.
Speaker Change: Mid and long term potential to reduce.
Speaker Change: Lifting costs and labor costs.
Speaker Change: On the buyer side, the ability to more precisely match.
Speaker Change: What buyers have demonstrated their interests are through browsing.
Speaker Change: Bidding.
Speaker Change: <unk> is another area of improvement we think we can increase the conversion rate on the platform, which ultimately approve JMP revenue direct profit.
William Angrick: We think we can increase the conversion rate on the platform, which will ultimately improve GMB revenue, direct profit. We have a number of activities on the uploading of assets through mobile devices. That process just reduces the number of steps and makes it easier to use a handheld mobile device to take take the process from cradle to grave, you know, going out, capturing the images, uploading them in fewer steps. That's tremendous. We've also been giving sellers more personalized landing pages inside our marketplace to append data that buyers might find interesting. If you have a seller, perhaps it's this New York City.
Speaker Change: We have a number of activities on the.
Speaker Change: Uploading of assets through mobile devices that process, just reduces the number of steps that makes it easier to use.
Speaker Change: A handheld mobile device to take.
Speaker Change: Take the process from cradle to grave going out capturing the images uplift them fewer steps.
Speaker Change: That's tremendous.
Speaker Change: We've also been giving sellers more personalized landing pages inside our marketplace too.
Speaker Change: <unk>.
Speaker Change: Out of that buyers might find interesting if you're a seller.
Speaker Change: Perhaps it's the New York City.
William Angrick: New York City has a little bit more brand identity inside our GovDeals marketplace. We're testing a lot of features that give buyers greater visibility to that particular seller, what their history is, how quickly they ship, what type of assets they sold. I think that's very helpful.
Speaker Change: New York City.
Speaker Change: Has a little bit more brand identity inside.
Speaker Change: Our Gulf Coast marketplace.
Speaker Change: We're testing lab features that give buyers greater visibility to that particular seller what their history is how quick of a ship and what type of assets. They so I think that.
William Angrick: We've also been using the software engineering team to expand third party selling tools on our platform. We have a very large international e-commerce player who's now listing and selling returned goods on our retail platform. And the ability to make it easy for them to access our tools through and integrate tools through publicly available APIs and have that listing come in across different languages is very helpful. And that's another. mid-sized small businesses selling online and that's an area of opportunity, Jorge.
Speaker Change: That's very helpful.
Speaker Change: We've also been using the software engineering team.
Speaker Change: To.
Speaker Change: To expand third party selling tools on our platform.
Speaker Change: We have a very large internationally commerce player, who is now listing and selling.
Speaker Change: Returned goods on our retail platform.
Speaker Change: The ability to.
Speaker Change: Make it easy for them to access our tools through and integrate tools for Aps publicly available api's.
Speaker Change: And have that listing come in.
Speaker Change: Across different languages is.
Speaker Change: It's very helpful.
Speaker Change: And that's another.
Speaker Change: Vector of growth for us.
Speaker Change: Where we don't have to touch the asset we're simply expanding the use cases to international users. So just a variety of things in many cases the auction software transaction was an acquisition of talent and engineering capacity as well as a book of business.
George Sutton: Mid sized small businesses selling online and that's an area of opportunity George.
Jorge Celaya: All right, perfect.
Unknown Executive: That's it for me. Thank Thank you. We have no further questions at this time.
Speaker Change: Alright, perfect. That's it for me thank you.
Speaker Change: Thank you we have no further questions at this time. This does conclude the question and answer session. You may now disconnect everyone have a great day.
Unknown Executive: This does conclude the question and answer session.
Unknown Executive: You may now disconnect. Everyone have a great day.
Speaker Change: Yeah.
Speaker Change: [music].
Unknown Executive: Thank you for watching!