Good day ladies and gentlemen and welcome to the fiscal first quarter 2009 Liquidity Services, Inc. earnings conference call. My name is Tonya and I will be your coordinator for today. At this time all participants are in listen only mode. We will be facilitating a question and answer session towards the end of this conference. (Operator Instructions) I would now like to turn the presentation over to your host for today's call, Ms. Julie Davis, Director of Investor Relations.

Good afternoon and welcome to Liquidity Services, Inc.’s earnings release conference call for the fiscal first quarter 2009 and the three months ending December 31, 2008. During this call we will refer to Liquidity Services, Inc. as LSI. Presenting today are Bill Angrick, our Chairman and Chief Executive Officer, and Jim Rollo, our Treasurer and Chief Financial Officer. This conference call is also being broadcast through the internet and is available through the Investor Relation section of the Liquidity Services Inc. website. Before we begin, I’d like to remind you that matters discussed on this call contain forward looking statements that involve risks and uncertainties concerning LSI’s expected financial performance as well as LSI’s strategic and operational plan. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks and uncertainties include a variety of factors, some of which are beyond our control. These forward-looking statements speak as of today and you should not rely on them as representing our views in the future and we undertake no obligation to update these statements after this call. Please refer to our SEC filings as well as our current earnings release posted a few minutes ago on our website for a more detailed description of the risk factors that may affect our results. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our website. To supplement the company’s consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures. These non-GAAP measures include EBITDA, adjusted EBITDA, adjusted net income, and adjusted EPS. We believe these non-GAAP measures provide useful information to both management and investors. These measures, however, should not be considered a substitute for or superior to GAAP results. A reconciliation of all non-GAAP measures included in this conference call to the nearest GAAP measure can be found in the financial tables included in the press release. 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 GMV and should not be considered a substitute for or superior to GAAP results. At this time I’d like to turn the presentation over to our CEO, Bill Angrick.

Good afternoon and welcome to our Q1 earnings call. I’ll begin this session by reviewing our Q1 financial performance and then outline our progress against the major initiatives we established for the current fiscal year. Finally I will offer a perspective on our business outlook and then turn it over to Jim for more details on the quarter and on our outlook for the year. Q1 GMV was $82 million, up 21% over last year’s results and at the mid point of our guidance. Q1 adjusted EBITDA and adjusted EPS were $2.1 million and $0.03 respectively and were below guidance due to three factors. First, the economic downturn has caused a sharp reduction in scrap metal prices which severely impacted our scrap business during Q1. While scrap metal prices have stabilized, the drop during Q1 was greater than expected. Second, in an effort to salvage a dismal holiday season, retailers uncharacteristically held on to slow moving inventory and slashed the price of first quality goods in their primary channel by as much as 80%. This behavior temporarily reduced the flow of goods into our marketplace during the months of October and November and reset the price for goods in the secondary market. This resulted in lower than anticipated volumes and margins in our commercial business during Q1. Third, in order to ramp up new programs with commercial clients and close our Las Vegas facility due to overlap with our California distribution centers, our remaining aged inventory was cleared out. In January these last two factors ceased to impact us resulting in improved margins in our commercial business, but together these factors resulted in lower than anticipated profitability and the earnings versus guidance. Despite the challenging economic environment, LSI continued to grow and diversify its business. During Q1 we grew GMV…

Thanks, Bill. The company continues to experience strong top line growth as the amount of gross merchandise volume or GMV increased $14.5 million to 21.5 % to $82.1 million for the three months ended December 31, 2008 from $67.6 million for the three months ended December 31, 2007, primarily due to one, an increase in the number of completed transactions, which increased from $63,000 to $108,000 or 70.5%. Two, our surplus business, which grew 16.5% and generated 36.7% of our revenue, and 24.9% of our GMV for the three months ended December 31, 2008 as compared to 29.6% and 25.9% respectively for the three months ended December 31, 2007. Three, the acquisition of GovDeals as completed on January 1, 2008 which generated 2.1% of our revenue and 19% of our GMV for the three months ended December 31, 2008, and four, the acquisition of Geneva completed on May 1, 2008 which generated 7.1% of our revenue and 4.8% of our GMV for the three months ended December 31, 2008. Revenues decreased $3.7 million or 6.1% to $55.6 million for the three months ended December 31, 2008 from $59.3 million for the three months ended December 31, 2007. This was primarily due to a 44.9% decrease in our scrap business which utilizes the profit sharing model as a result of a decrease in commodity pricing. Costs of goods sold excluding amortization increased $3.2 million or 20.7% to $18.6 million for the three months ended December 31, 2008 from $15.4 million for the three months ended December 31, 2007. As a percentage of revenue cost of goods sold excluding amortization increased to 33.4% from 26%. These increases are primarily due to one, the acquisition of Geneva which was completed on May 1, 2008 and utilizes the purchase model which is a higher…

(Operator Instructions) Your first question comes from Colin Sebastian with Lazard Capital Markets. Colin Sebastian – Lazard Capital Markets: I guess first of all, wondered if you could provide a little background on the renegotiation of the surplus contract. At what point did you realize that the original terms needed to be changed? Then secondly, I think Bill you mentioned in April ramp in the surplus. Does that mean that you’re still operating under the interim contract terms in the meantime?

Yes, with regard to the resolution of open business issues on the surplus contract, it became apparent over the course of December that the government would require a change in the scope of work under that contract and had other additional enhancements that they felt would serve the interest of the agency and therefore there was a discussion and a resolution of those issues that ultimately was manifested in the contract modification that was disclosed today in an 8-K and which we’ve discussed during the call, so there are a few other issues that were noted in that 8-K that we didn’t discuss. I think the principal economic terms resulting from that were outlined principally a change in the inventory price. That’s prospective as we will expect to begin receiving property under the new surplus contract in the next week or so and operationally we’ll begin to ramp up under that new contract over the course of March and then as we’ve mentioned fully ramped up in April. In the interim, we will continue to operate under sort of a hybrid situation. I mean technically the new contract was [inaudible], we just hadn’t had any property flow and we had the issuance of a large volume of property under the old contract in mid-December and are still working through the sale of that inventory, so business continues to pace although we sort of have one foot in the new contract and one foot in the old. That will switch the bulk of which to the new contract as we get into April, May, June. Colin Sebastian – Lazard Capital Markets: On the commercial side, first on the lower ASPs, are you seeing a change in the mix of products or are we talking about roughly the same base of products, just lower average auction values?

I think this is a broad-based change in retail pricing and behavior in the primary retail channel. I think no one could deny the fact that whether you went to a better department store, a mainstream community shopping center, or online, that you saw a dramatic reduction in pricing during the holiday, so when first quality merchandise is discounted heavily, that resets the price in the secondary market as well which is no surprise so we have observed an average decline in the range of 10% to 15% for average sale prices and a range of categories. We’re okay working through that environment I think. No one would have expected the precipitous to climb like we saw in November but most of our discussions with suppliers are based on what street retail prices are and so we continually monitor what street retail prices are which do reflect the sort of discounting activity. The last point I would make is that the current cycle of discounting among retailers is not sustainable. At some point they will correct their business and try to restore pricing levels for first quality merchandise. When that happens we don’t know precisely but that’s the rationale come here. Colin Sebastian – Lazard Capital Markets: My last question then also on the commercial side, are you factoring into your guidance that as we move through the year that many retailers have been moving to leaner inventory levels and maybe after an initial post-holiday surge of inventory, excess inventory and returns, that it might drop back down as the supply/demand balance is fixed?

I think we factor that in. I believe that we have a good sense of what the rebalancing effects are among our existing clients and what the seasonal holiday returns are with our existing clients, but we’re also very much in an attractive position to talk about our solution with new clients and new prospects and in this environment it comes as no surprise that you’re reducing costs, improving cash flow, working capital positions for retailers, this top of mind, and so that’s an ideal environment for us to be out and sharing a terrific [story and] solution.

Your next question comes from Shawn Milne with Janney Montgomery Scott.

Just a few questions. Bill, we had talked last time in late or mid-December. I’m trying to reconcile the GMV was roughly in line but the $0.03 miss on the bottom line. What changed there towards the end? Was it the scrap got incrementally worse towards the end of the quarter, was it retail pricing that got worse, or is there some transition costs in the commercial warehouse business embedded in these first quarter numbers? Secondly, in terms of looking at the commercial business in January, we’ve been looking at our listing the data, it certainly shows a big uptick. You talked about the level over November. Can you give me a sense for what the revenue or what the volume growth is January over January and I think I just want to clarify your comment. Do you expect the commercial business to be up 15% to 25% for the remainder of ’09 or does that include the 5% gross in the current quarter?

First, with regard to the December quarter and looking in the rear view mirror, that miss really came from three areas approximately one-third due to lower scrap pricing than expected, one-third due to lower average sale prices and to some degree volume shift in November because of the very abrupt and really unprecedented behavior by a number of retailers reacting to the slowdown in consumer spending, and a one-third due to the one-time clean up of warehouses and the closing of our Las Vegas facility which really was at the expiration of an existing lease and given the success we’ve had serving clients out of Sacramento and Fullerton, didn’t feel we needed to continue that Las Vegas facility, so we had to clear it out and close it so that’s with regard to the last quarter. On the January business trends, while we’ve seen December improve over November and January over December, I’d say in the range of 10% sequential growth January versus December. On a year-over-year basis in the range of 15% to 20% improvement and if you look at the full year, we are giving wider ranges than normal because of the volatility in the business environments so for the balance of the year, we’re seeing 15% to 25% year-over-year growth. Again, that’s wider than one normally would be but that’s I think prudent in the current environment.

If I could just follow up on that. The 15% and 25% is below what you had said prior, in the previous call, I think it was 25%. Was that because the transaction volume is offset by lower prices so if we were to see ASP move up you’d be toward the higher end of that range?

I did a couple things. One, the 25% we were referring to on our last call really wasn’t about year-over-year growth and so one, we’re off to a tough start obviously in the commercial business for all the points Bill mentioned in his remarks, and two, yes, it does take into account what we expect to see throughout the year which is a continued reduction in ASPs in that marketplace which our estimation is somewhere between 10% and 15%.

Just lastly, I have to look at the 8-K but it just seems that Bill I haven’t seen the whole filing but there has to be an offset for the surplus contract. I mean, you’re getting much better inventory pricing. What brought them back to the table to give you that kind of better margin opportunity?

I think from the DoD perspective they understood the contract scope of work had changed and the integration of our marketplace for example with the GSA’s federalized sales program was removed with the exception of something called “Exchange Sales” which was a material change to the contract. They also asked for some additional value-added services and some value engineering, if you will, around software enhancement to the quarantine tool which we noted some flexibility about access to our new storage facilities and some integration work with the government and so the only way that you can adapt a contract that’s already been awarded and one which is a sales contract is to look to the bid price and so when you factor all those issues in, ultimately it comes out as a change to the bid price.

I can see the change to the bid price but you are doing more work yet you’re saying margins are going to improve and it looks like pretty significantly so...

The point to note, there is a cost reimbursement clause with regard to the additional work, software development work, so we feel like on the cost side we’re protected there.

Your next question comes from Steven Ju with RBC Capital Market. Stephen Ju – RBC Capital Markets: Kind of circling back to the full year guidance here, so given your prior commentary about the continued weakness in scrap and GovDeals and what are the levels for the other segments, looking at a trend for the balance of the year. It seems like to me that you need the commercial segment run rate from the front half of the year to the back half of the year. It’s wrapped pretty heavily here. Can you help us out in terms of how we get there in order to make your full year numbers?

It is indeed the case that we’ve looked at the GovDeals business and taken a more tempered outlook because of where we think asset sales, pricing will remain throughout the year. In terms of our view of the commercial business, well, we really are in the same place we’ve been on any particular call. We look at our current business trends, we look at our business development pipeline, we look at the size of the business relative to fixed costs, and in all three respects, the commercial business is performing better than it ever has in the past. The operational throughput that we’re able to achieve now is at an all time high. We’ve had consecutive record weeks in January at the number of auctions posted. We have about 52% utilization in our warehouse distribution centers which is an operational target. We had coming out of the December quarter because we knew that there would be an influx of product in the post-holiday returns season and in addition because we are not able to serve the amount of inquiries on the business development front, we’ve hired two additional enterprise sales directors to keep up with the demand there. So we will have a record March quarter in the commercial business and we think we’re going to get incremental improvement in margins as we move through the year so we’re really, the guidance is really just mapping to where we’ve been with this business. Some of the activities and actions have been over many months. I’d also say that we actually trimmed or outlook for commercial a bit and if you look at the business on an overall basis, it’s a little bit more tempered than where we were last quarter. Stephen Ju – RBC Capital Markets: Also the purchase model GMV seems to be accounting for a smaller percentage of the total commercial GMV. Should we expect this mix shift to continue?

That’s a good point. I think we were at 15% of over on mix coming out of the December quarter. As we said in the past, when you’re sitting down with large companies and doing enterprise sales, you want to have multiple pricing models to adapt to whatever their unique needs or constraints are. We've seen just an embrace of consignment on a more consistent basis. Part of that is due to the maturity of our marketplace, the size of our buyer base. I think that gives people more and more comfort. Secondly, some of the new verticals that we’re serving such as capital assets historically has been more of a consignment auction model than the inventory side. Third I think in some of our existing relationships we just had more experience with those companies and in some cases we’ve opened up newer facilities that they are co-located or near where their distribution center hub, so there’s sort of a level of comfort and a level of transparency that we’ve provided over multiple years of doing business that some of their purchase model business is going to consignment or they’re adding to the mix with consignment business instead of the original purchase model business. So all of that has resulted in more growth in the consignment model than the purchase model. That’s the current trend whether it continues will remain to be seen but certainly we’ve got a stronger value proposition for sellers to access the market if sellers are taking less risk and listing assets on our marketplace because of the robust activity with our buyer base continues to grow. The fact that we’ve got more depth in all of the categories that we sell in.

There are no further questions at this time. This concludes the question and answer session. I would now like to turn the call over to Miss Julie Davis for closing remarks.

Thank you. This concludes our fiscal first quarter 2009 earnings conference call. If you have any further questions please contact me or Jim Rallo. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation and you may now disconnect.