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Liquidity Services (LQDT)

Q3 2012 Earnings Call

July 31, 2012 10:30 am ET


Julie Davis - Director of Corporate Communications

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William P. Angrick - Co-Founder, Chairman, Chief Executive Officer, President, Interim Chief Information Officer and Chief Executive Officer of Dod Surplus Llc

James M. Rallo - Chief Financial Officer, Principal Accounting Officer and Treasurer


Colin A. Sebastian - Robert W. Baird & Co. Incorporated, Research Division

Jordan Rohan - Stifel, Nicolaus & Co., Inc., Research Division

Shawn C. Milne - Janney Montgomery Scott LLC, Research Division

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

Gary F. Prestopino - Barrington Research Associates, Inc., Research Division

Daniel L. Kurnos - The Benchmark Company, LLC, Research Division



Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Liquidity Services, Inc. Earnings Conference Call. My name is Keith, and I'll be your operator for today. [Operator Instructions] As a reminder, today's conference is being recorded for replay purposes. And I would now like to turn the conference over to your to Ms. Julie Davis, Director of Investor Relations. Please go ahead.

Julie Davis

Thank you, Keith. Hello, and welcome to our third quarter fiscal year 2012 financial results conference call. Joining us today are Bill Angrick, our Chairman and Chief Executive Officer; and Jim Rallo, our Chief Financial Officer and Treasurer. We will be available for questions after our prepared remarks.

The following discussion or responses to your questions reflect management's views as of today, July 31, 2012, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and in our filings with the SEC, including our most recent Annual Report on Form 10-K. As you listen to today's call, we encourage you to 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, we will discuss certain non-GAAP financial measures. In our press release and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. We also use certain supplemental operating data as a measure of certain components of operating performance, which we also believe is useful for management and investors. The supplemental operating data includes Gross Merchandise Volume and should not be considered as substitute for, or superior to, GAAP results.

At this time, I'd like to turn the presentation over to your our CEO, Bill Angrick.

William P. Angrick

Thanks, Julie. Good morning, and welcome to our Q3 earnings call. I'll begin the session by reviewing our Q3 financial performance. Next, I will turn it over to Jim for more details on the quarter and on our outlook for the remainder of fiscal year 2012. Finally, I'll provide context on where we stand in our company's overall development.

During Q3, Liquidity Services reported strong financial results as we expanded our share and leadership position in the reverse supply chain market by delivering significant value to our clients and buying customers. We exceeded our guidance range for GMV, adjusted EBITDA and adjusted EPS while continuing to make important investments for the future.

Q3 GMV was up 52% year-over-year to $225.6 million, driven by growth in the volume of goods in our retail supply chain and government marketplaces by both existing and new clients. Adjusted EBITDA of $33.4 million was up 121% year-over-year. And adjusted EPS during Q3 was $0.56, up 115% year-over-year when excluding tax items, driven by improved operating leverage on higher volume.

In addition to generating strong financial results, our team advanced all key elements of our growth strategy during this quarter, driving organic growth, innovation and external growth via acquisitions.

During the quarter, we enjoyed broad-based organic growth as we expanded our market share within both the commercial and public sector market. Our value proposition is resonating with retailers, manufacturers and public sector agencies, which is reinforcing our network effect and resulting in new client wins in the reverse supply chain market. Our team has done an excellent job handling our increased volumes while maintaining a high level of service and quality to our clients and buying customers. Our consistent execution has enabled Liquidity Services to become the trusted provider of choice in our industry with over 75 Fortune 500 corporations; over 4,700 federal, state and local government agencies; and over 1.8 million registered buyers utilizing our marketplaces.

As evidence of our customer focus, Liquidity Services was recently selected to receive the prestigious Vendor Excellence Award for Large Business by the U.S. Defense Logistics Agency for our work supported the DoD's surplus sales program. This is our second DLA award in as many years and fourth overall, and demonstrates our unwavering commitment to relentless improvement and client service.

During the quarter, we also continue to drive innovation to support our market leadership position as we rolled out our next-generation BUX technology on our award-winning government liquidation marketplace. Our BUX technology enables the seamless cross listing of relevant client assets on the website, to further monetize our buyer base, provide enhanced merchandising options, such as the use of streaming video, improve the overall experience in managing their account and finding desired assets and it supports the rendering of our marketplace on mobile devices.

Following its initial introduction to our and government marketplaces, our proprietary BUX platform now covers approximately 70% of our user base and is just one recent example of how we leverage technology to improve the operational efficiency, reliability and scalability of our business.

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