Liquidity Services reported an increase in revenue and net income for the first quarter of fiscal year 2023.
Key Takeaways
Liquidity Services announced its financial results for the first quarter of fiscal year 2023, with revenue up 8% to $72.3 million and GAAP net income up to $4.0 million. The company highlighted its resilience amidst macroeconomic headwinds and its focus on market share expansion and diversification.
Gross Merchandise Volume (GMV) increased by 4% to $270.8 million.
GAAP Net Income rose by $0.4 million to $4.0 million, with EPS increasing by $0.02 to $0.12.
Non-GAAP Adjusted EBITDA increased by $0.4 million to $9.8 million, and Non-GAAP Adjusted Diluted EPS increased by $0.01 to $0.19.
The company repurchased 0.5 million shares for $7.2 million and maintained a cash balance of $79.9 million with zero financial debt.
Liquidity Services anticipates GMV to range from $260 million to $285 million, GAAP Net Income between $1.0 million and $3.5 million, GAAP Diluted EPS from $0.03 to $0.10, Non-GAAP Adjusted EBITDA from $6.5 million to $9.0 million, and Non-GAAP Adjusted EPS from $0.09 to $0.16 for Q2-FY23.
Positive Outlook
Continued R&D spending to support omni-channel behavioral marketing, analytics, and buyer/seller payment optimization
Spending in business development activities to capture market opportunities, targeting efficient payback periods
Longer-term trend of continued mix shift to consignment pricing model, which may lower revenue as a percent of GMV but can improve segment direct profit as a percentage of revenue, affected by heightened volumes of returned products from purchase model programs in RSCG during the holiday returns season
Continued growth and expansion resulting from the continuing acceleration of broader market adoption of the digital economy, particularly in our GovDeals and RSCG seller accounts and programs, including the execution by RSCG on its business plans for AllSurplus Deals and its expanded distribution network
Continued growth in our Machinio advertising subscription service and acceptance of other Machinio service offerings
Challenges Ahead
Historical Earnings Impact
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Global supply chain uncertainties, including impacts from the Russian invasion of Ukraine and the COVID-19 pandemic, are disrupting international trade and energy markets, and resulting in macroeconomic trends such as inflation, increased interest rates, fluctuations in foreign currency exchange rates, reduced consumer sentiment, and retailer inventory levels
Variability in the inventory product mix handled by our RSCG segment, which can cause a change in revenues and/or segment direct profit as a percentage of revenue, including variability from retailers increasing product flows to us on an episodic basis to solve capacity constraints at retailer warehouse or distribution centers and retailers decreasing product flows as they solve capacity constraints and return more product to store shelves or fulfillment centers
As growth in the government real estate category within the GovDeals segment occurs, take rates as a percentage of GMV are expected to become lower without significantly affecting segment direct profit as a percentage of revenue. GMV from real estate transactions can be subject to significant variability due to changes that include postponements or cancellations of scheduled or expected auction events, the value of properties to be included in the auction event, and the value of the properties that may be withdrawn due to the property holder curing their delinquency or taking other legal actions to delay the sale of their property
Continued variability in project size and timing within our CAG segment, especially as the Russian invasion of Ukraine and COVID-19 and its variants continue to impact the global economy and the ability to conduct transactions
Our annual FY23 effective tax rate (ETR) is expected to range from approximately 25% to 31%. This range excludes any potential impacts from legislative changes to U.S. corporate tax rates that may be enacted during Q2-FY23; and potential impacts from items that have limited visibility and can be highly variable, including effects of stock compensation due to participant exercise activity and changes in our stock price, and the effects of changes in the fair value of the Bid4Assets earn-out liability.
