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LIQUIDITY SERVICES INC (LQDT)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 FY24 delivered double-digit growth: GMV $319.4M (+13% YoY), revenue $91.5M (+12%), GAAP EPS $0.18 (+38%), and adjusted EBITDA $12.1M (+22%) as market share expansion drove record buyer engagement and transaction volumes .
  • Segment highlights: RSCG set a quarterly GMV record (~$79.6M), AllSurplus Deals GMV grew >60% sequentially; GovDeals (+11% GMV) and CAG (+29% GMV) benefited from vehicle availability and heavy equipment consignment, while Machinio posted record revenue and paying customer counts .
  • Q3 FY24 guidance implies continued momentum: GMV $350–$385M, GAAP EPS $0.11–$0.21, adjusted EBITDA $10.5–$13.5; revenue/GMV expected low-to-mid 20% and segment direct profit low-to-mid 50% of revenue; ETR 25–31%, diluted shares 31.5–32.0M .
  • Strategic catalysts: Sierra Auction acquisition (Jan 2024) strengthens GovDeals’ full-service footprint in the Southwest, adds fleet logistics services, and is expected to be accretive in FY24 (not material at the consolidated level) .

What Went Well and What Went Wrong

What Went Well

  • “We shattered records for the number of completed transactions up 44% YoY and the number of auction participants up 43% YoY,” reflecting supply breadth and buyer liquidity on the platform (Bill Angrick) .
  • RSCG GMV hit a new quarterly record (~$80M), with AllSurplus Deals direct-to-consumer GMV up >60% sequentially, improving recovery and velocity in retail flows .
  • Machinio achieved record revenue and paying customers, expanded classifieds marketplace and China presence to more than double its addressable market (Q1) and sustained record trajectory (Q2 commentary) .

What Went Wrong

  • Retail segment mix headwind: “lower value product mix” dampened direct margins in certain consignment and purchase programs; retail margins expected similar to Q2 levels in Q3 .
  • CAG timing variability: Q2 benefited from completion of sales delayed from Q1; management continues to flag variability by project size/timing and category (energy) .
  • Higher operating expenses: Sierra acquisition, investments in AllSurplus Deals, sales, and technology raised OpEx year over year; Q3 OpEx to remain elevated to support platform enhancements and market share gains .

Financial Results

MetricQ4 2023Q1 2024Q2 2024
GMV ($USD Millions)$315.6 $305.9 $319.4
Revenue ($USD Millions)$80.0 $71.3 $91.5
GAAP Diluted EPS ($)$0.20 $0.06 $0.18
Non-GAAP Adjusted EPS ($)$0.26 $0.14 $0.27
Non-GAAP Adjusted EBITDA ($USD Millions)$12.8 $7.3 $12.1
Cash & Short-term Investments ($USD Millions)$118.2 (Cash $110.3; STI $7.9) $107.0 (Cash $98.6; STI $8.5) $117.0 (Cash $108.6; STI $8.4)

Segment breakdown (GMV and Revenue):

SegmentQ4 2023 GMVQ4 2023 RevenueQ1 2024 GMVQ1 2024 RevenueQ2 2024 GMVQ2 2024 Revenue
GovDeals$184.1M $16.054M $190.408M $15.900M $186.226M $18.374M
RSCG$74.661M $49.561M $66.561M $43.721M $79.634M $56.813M
CAG$56.814M $10.681M $48.895M $7.834M $53.511M $12.280M
MachinioN/A GMV $3.678M N/A GMV $3.886M N/A GMV$4.002M
Consolidated$315.575M $79.957M $305.864M $71.325M $319.371M $91.453M

Segment direct profit ratios (% of segment revenue):

SegmentQ4 2023Q1 2024Q2 2024
GovDeals94.9% 95% 94%
RSCG35.3% 32% 30%
CAG81.9% 89% 75%
Machinio95.2% 95% 95%

KPIs:

KPIQ4 2023Q1 2024Q2 2024
Registered Buyers~5.1M ~5.2M ~5.3M
Auction Participants~836,000 ~848,000 ~1,139,000
Completed Transactions~250,000 ~239,000 ~300,000

Notes:

  • Q2 FY24 consignment mix: 83% of consolidated GMV .
  • Q1 FY24 consignment mix: 89% of consolidated GMV .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GMV ($USD Millions)Q3 FY24N/A$350–$385 New quarter guidance issued
GAAP Net Income ($USD Millions)Q3 FY24N/A$3.5–$6.5 New quarter guidance issued
GAAP Diluted EPS ($)Q3 FY24N/A$0.11–$0.21 New quarter guidance issued
Non-GAAP Adjusted EBITDA ($USD Millions)Q3 FY24N/A$10.5–$13.5 New quarter guidance issued
Non-GAAP Adjusted Diluted EPS ($)Q3 FY24N/A$0.20–$0.28 New quarter guidance issued
Revenue/GMV (%)Q3 FY24Low-to-mid 20s (Q2 guide) Low-to-mid 20s (Q3 guide) Maintained framework
Segment Direct Profit / Revenue (%)Q3 FY24Similar to Q1 mix Low-to-mid 50s Maintained/clarified
Effective Tax Rate (%)Q3 FY24Q2 guide: 21–27; FY24 26–32 Q3 ETR: 25–31; FY24 26–32 Slightly raised Q3 range
Diluted Shares (M)Q3 FY24~32.0 ~31.5–32.0 Maintained range
OpExQ3 FY24Slight increase from Sierra & investment Up similar YoY to Q2; continued investment Maintained trajectory

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’23 and Q1’24)Current Period (Q2’24)Trend
AI/Technology initiativesModernized GovDeals platform; plan to leverage AI and 1:1 marketing (Q1) Taxonomy upgrades in GovDeals and high-speed receiving tool using “machine automation” to enhance listing quality and reduce labor Expanding practical deployment to ops and search
Supply chain/retail mixRSCG strong volumes but lower value product mix persisting (Q4, Q1) Mix dampened direct margins; AllSurplus Deals scaling with >60% sequential GMV Improving channel mix; recovery aided by D2C
Macro/vehicles/heavy equipmentVehicle availability improved; some price softness flagged later (Q3) Expectation of softer used vehicle prices than last year in guidance commentary for next quarter Prices softening, volumes robust
Segment strategy (GovDeals/Sierra)Sierra acquired to expand fleet services (Jan) GovDeals higher take-rate via full-service offerings; onboarding large fleets (NY state/city) Integration accretive; service expansion
Machinio global expansionXCMG program; Asia presence doubled TAM (Q1) Record revenue and paying customers; China expansion underway Sustained double-digit growth trajectory
CAG project timingQ1 delays expected to close in Q2 Q2 captured delayed sales; variability remains (energy projects) Timing variability persists, pipeline strong

Management Commentary

  • “Our marketplace platform and services continue to delight customers, fueling double digit organic revenue and GMV growth year-over-year.” (CEO Bill Angrick) .
  • “We shattered records for the number of completed transactions up 44% year-over-year and the number of auction participants up 43% year-over-year.” (CEO) .
  • “We are actively developing a high-speed receiving tool… using enhanced data and… machine automation… to improve listing quality… and materially reduce labor costs.” (CEO on tech investment) .
  • “GovDeals revenue is expected to grow at a faster year-over-year rate than GMV due to expansion of more full-service consignment offerings since the acquisition of Sierra Auction.” (CFO) .
  • “Our diluted weighted average number of shares outstanding is expected to be approximately 31.5 to 32.0 million… we have $8.0 million in remaining authorization to repurchase shares.” .

Q&A Highlights

  • GovDeals organic growth remains strong despite slower real estate volumes; legacy business continues onboarding large fleets (State/City of New York) .
  • Sell‑in‑place consignment solutions expanding across segments, with API feeds enabling elegant listing from stores/warehouses; continuum from self-managed to full-service .
  • Q3 EBITDA guide step-down reflects unbudgeted IT hires to pull forward key projects (GovDeals taxonomy, high-speed receiving tool) and retail mix normalization; expected ROI from tech investments (CEO) .
  • Strategic pipeline: disciplined consolidation, targeting “1+1=3” outcomes; Sierra integration opens additional government and commercial fleet opportunities .
  • Auction participant strength supported by AllSurplus Deals growth; broad buyer demand across segments .

Estimates Context

  • S&P Global consensus EPS, revenue, and EBITDA estimates were unavailable in this session due to a data access limit, so we cannot quantify beat/miss versus Wall Street estimates.
  • Relative to company-issued guidance for Q2 (from Q1 release), GMV of $319.4M came in essentially at the low end of the $320–$350M range, while GAAP EPS of $0.18 was within the guided $0.09–$0.19 range and adjusted EBITDA of $12.1M exceeded the $9–$12M range .

Key Takeaways for Investors

  • GovDeals momentum plus service expansion (Sierra integration) is lifting take rates and revenue growth faster than GMV; continued seller acquisition in fleet categories is a near-term driver .
  • Retail headwinds from lower-value mix are being offset by AllSurplus Deals scaling and operational tech upgrades; expect margins similar to Q2 in Q3 with potential sequential improvements from efficiency gains .
  • CAG variability persists, but delayed projects from Q1 closed in Q2; pipeline additions in heavy equipment/industrial increase recurring flow potential, tempering cyclicality .
  • Machinio’s record revenue and global expansion underpin a durable mid-teens growth vector, enhancing marketplace liquidity across regions .
  • Q3 guidance implies sequential GMV uplift vs Q2 and sustained profitability, though near-term EBITDA is moderated by accelerated tech investment; watch execution of GovDeals taxonomy and RSCG receiving tools as catalysts .
  • Balance sheet remains a strength (cash + STI $117.0M, zero debt); ongoing share repurchases provide capital return flexibility alongside M&A capacity .
  • Trading lens: narrative skew is positive on growth and platform enhancements; key monitoring items include used vehicle price softness impact on GovDeals and the mix effects in RSCG that influence margin realization .

Appendix: Other Relevant Q2 FY24 Press Releases

  • Sierra Auction acquisition (Jan 3, 2024): accelerates penetration in Southwest US for municipal surplus, expands fleet logistics services, expected FY24 accretive (not material consolidated) .