Welcome to Liquidity Services Inc. Fourth Quarter of Fiscal Year 2024 Financial Results Conference Call. My name is Lisa, and I will be your operator for today's call. Please note that this conference is being recorded. [Operator Instructions] 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..

Good morning. 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.

The following discussion and responses to your questions reflect management's views as of today, December 12, 2024, 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 filings with the SEC, including our most recent annual report on Form 10-K, [indiscernible] 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 investors. This supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results.

At this time, I will turn the presentation over to our Chairman and CEO, Bill Angrick..

one, increasing our market share and the sales volume transacted on our marketplace; two, expanding our buyer base and sales channels to enhance recovery on the assets we sell; three, infusing and modernizing our platform with new technologies, including AI tools to increase our operational efficiencies and improve the customer experience.

And finally, four, executing complementary bolt-on acquisitions. We expect to realize these goals in the next few years, which in turn will deliver tremendous value for our customers and our shareholders. I'll now turn it over to Jorge for more details on the quarter..

we expect GMV to range from $350 million to $385 million. GAAP net income is expected in the range of $2.5 million to $5 million with a corresponding GAAP diluted earnings per share ranging from $0.08 to $0.16 per share. Non-GAAP adjusted diluted earnings per share is estimated in the range of $0.18 to $0.26 per share.

We estimate non-GAAP adjusted EBITDA to range from $9.5 million to $12.5 million. The GAAP and non-GAAP EPS guidance assumes that we have approximately 31.5 million to 32 million fully diluted weighted average shares outstanding for the first quarter of fiscal year 2025. Thank you, and we will now take your questions..

[Operator Instructions] And the first question for today will be coming from the line of Gary Prestopino of Barrington..

Bill and George, a couple of questions here. The growth from the participants this quarter was pretty strong and I guess as well as transactions.

I want to get an idea of what segments you're seeing the highest growth in participants in or maybe asking it another way, is the Sierra acquisition -- Sierra auction acquisition really driving some of this growth in the participants?.

And it's not a catalyst for that. I think we've seen broad-based expansion of our buyer base led by our Retail segment, followed by our GovDeals segment as we've broadened the range of assets that we're selling in both of those areas.

And I think just in general, there's been a nice appreciation for the value of our marketplace on behalf of both small business buyers and end consumers. They shop liquidity services marketplaces because they're able to access used and returned goods that have a long useful life, but at prices that are far lower than buying new.

So I think those are the drivers..

Okay. And then in terms of continuing investments for growth, at least in the last 2 years, we had a situation where you've stepped up your investments for growth. And it seems like that is not going to really be the case in this quarter, for fiscal '25.

It seems like given your guidance at least for Q1, that your -- the investments you've made are sufficient here to drive growth at least for this year and maybe going into next year.

Can you comment on that?.

Yes, I would agree that our growth has leveraged investments made in prior years and that going forward, we're making incremental investment in continued modernization in areas that will help expand margins.

For example, we have harnessed the value of certain machine-driven and AI-driven functionality to drive better descriptions of our assets, better matching of assets with buyers in a much more automated way, better merchandising of the assets that we sell through the marketplace, a better registration process to onboard buyers and retarget buyers with less effort and less friction and cost.

And I think these incremental investments going forward will also continue to improve the mobile experience on our platform, which will ultimately increase -- continue to increase buyer participation and continue to increase recovery, which is a key lever for any [indiscernible] we're very excited about for Liquidity Services..

Okay. And then just 2 more. In terms of the numbers you threw out with $2 billion GMV, $100 million of EBITDA.

What is the time frame for that? Is that over -- you have a 5-year target, a 10-year target? Can you give us some idea of how -- where you're looking to achieve that?.

We got right in front of us, I think the markets had the credibility and the capabilities to arrive at that $2 billion GMV destination certainly inside of 5 years, and we'd say, the next few years, whether that's 2 years or 4 years or somewhere in between, the market will reveal its health.

What we have great confidence in is that are solutions that our customers need and value that we have a market-leading position to execute on that growth. And just by continuing to view what we're doing, we're on our way to that type of trajectory.

And I think first, you have to create the value for the client and we do that through a self-directed and fully managed solutions. We do that by having the largest buyer base and liquidity, both in the B2B and direct-to-consumer channels for our clients and that we have incredible data to value and provide expertise to our clients on return.

So if you have that, Gary, you have the opportunity to grow and hitting that $2 billion time frame milestone in a shorter time frame, certainly is our goal, but we're very comfortable with our competitive position and our ability to do that.

And I'd say the margins that you derive from volume are also an exciting part of a marketplace business model we're growing both our GMV on the platform but also our non-GMV related services. We talked about the growth of Machinio. We have a lot of software-enabled self-directed flows on our marketplace.

In our bid for assets business, we have fee-for-service to allow government entities, including counties and sheriffs to manage the entire foreclosure process online and some of that activity is not recorded in GMV.

So a combination of getting to a $2 billion GMV threshold plus growth of non-GMV value-added services puts us well on our way towards that $100 million annual EBITDA milestone. It's not directly correlated to the point estimate of $2 billion of GMV, but certainly attainable in the next few years.

And also, I'd like to point out that we are really the consolidator of choice in the circular economy. If we see these small niche businesses express a desire to become part of a market-leading platform, we're getting that call and a lot of these are founder-led businesses and so Sierra is one example of that.

We think there's a lot of opportunities in that inorganic growth category as we move forward..

[Operator Instructions] And our next question will be coming from the line of Logan [indiscernible].

This is Logan on for George. Congrats on the nice quarter here. I think the big number that stands out is that retail GMV, and Bill, I'm just wondering if you can put a little finer point on that kind of you guys have outlined the case as to why you're kind of the best player in the market.

But I'm just wondering if you can speak a little bit to why now, why you think those retailers are expanding their relationship now? Is that something you guys are doing on your end, operational improvements or just gaining their trust and just kind of what drives that right now?.

Sure. Well, if you've looked at the history of the company, we have been working in the retail supply chain for over 20 years and have been, in many ways, the bearer of best practices in this marketplace.

And I think what has helped continue to grow our share is it to provide the full range of solutions that a retail supply chain client, whether it's a brick-and-mortar omnichannel player, whether it's a born-in-the-cloud e-commerce online retailer or any hybrid, anyone of those players has a set of solutions that they can lever in our portfolio from self-directed solutions where our clients are listening directly on the platform with their own teams and their own facilities, whether they're using our distribution center platforms, locations to sell on our platform in more of a fully managed way, we're able to do business with our clients and meet them where their needs are.

And we also provide different pricing models from consignment to purchase model alternatives. So clients feel like they can tell us what their needs are, and we can solve for those needs versus us dictating to them to only use a specific solution or a specific pricing model. So I think that's one of the keys to growth. And scale, matters a lot.

I mean we have the largest buyer base able to buy new use salvage returns, any type of product that is in the retail supply gene.

So that large lot that liquidity by individual SKU, the ability to do both B2B and direct-to-consumer transactions and also supplement that with expertise to protect these clients' brands do be able to [indiscernible] that product into different geographic locations, including outside the United States, all of those collectively are why retailers have increasingly turned to liquidity services.

And I think the secular growth, which you're well aware of, online retail is continuing to capture more volume, capture more product categories that inexorable March means that there's more returns to manage and sell, which is what we do.

So those are the things that I think are driving the growth of the repo, as we said on the call, new quarterly records in GMV revenue and segment direct profit..

Great. And then one thing I don't think we've talked about today is the real estate opportunity and bid for assets. I know you've talked in the past about making some progress. Just trying to get some of those municipalities to adopt.

Going to the online auction channel, I just love an update on how you think that's going and how immediate you think that opportunity is, I think you've talked about a $100 million GMV opportunity?.

Sure. Public sector real estate is definitely part of the needs of our customer base to find efficiencies and more transparency in how either government-owned or distressed real estate is brought to market.

We highlighted in the quarter, we had a record real estate sale this quarter over an $8 million asset sold in an online auction marketplace -- on our online auction marketplace GovDeal. So that was an all-time record, which is very exciting. And just an illustrative example of how big the relisting opportunity can be over time.

Our current results, frankly, hasn't been a large result of the real estate category, real estate is something that we think will expand and grow in the next few years. It's a natural add-on to the work we've done on the personal property side, and we're committed to growing the real estate category.

We look at the public sector is the right place to focus on and we have over 15,000 government entities, including states, counties, cities, public universities. And if you look at some of the trends, there's going to be a need for some of these public entities to be more efficient and probably less asset heavy with some of the real estate assets.

So we're well positioned to help them sell online to realize the value and more competitive auction result in value, and we provide a lot of the software and services pre and post sale to handle the buyer experience, the pants, the collections, the invoicing and the settlement. So that's an opportunity to grow.

Now real estate doesn't have the same level of take rate. This is a single-digit take rate. So we're really focused on growing the direct profit associated with online real estate sales. And we have great capabilities there. So we expect real estate to play a role in our growth to the $2 billion milestone over the next few years.

And I don't think we fully have capitalized on it yet. It's something that's certainly in our growth priorities, and we're well positioned to execute..

Thank you. And that does conclude our Q&A session for today as well as the conference call. Thank you all for joining. You may all disconnect..