Good day, ladies and gentlemen, and welcome to the second quarter 2009 Liquidity Services, Inc. earnings conference call. My name is Josh, 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 our host for today's call, Director of Investor Relations, Julie Davis, you may proceed ma’am.

Thank you, Josh. Good afternoon and welcome to Liquidity Services, Inc.’s earnings release conference call for the fiscal second quarter 2009 and the three months ending March 31, 2009. 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 Rallo, 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. Web site. 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 Web site 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 Web site. 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.

Thank you, and good afternoon. Welcome to our Q2 earnings call. I’ll begin this session by reviewing our Q2 financial performance and then outline our progress against the major initiatives we established for the current fiscal year. Then I will turn it over to Jim Rallo for more details on the quarter and on our business outlook for the year. In summary, LSI is navigating the current economic downturn quite well, and we are in a very strong position to accelerate our growth during the balance of fiscal year 2009. Despite continued tough economic conditions, Q2 GMV was $91.2 million, up 3% over last year’s results and above our guidance range. Q2 adjusted EBITDA was down 4% from last year and above our guidance range. Q2 adjusted EPS was $0.09 and at the high end of our guidance range. It is worth noting that adjusted EBITDA and EPS for Q2 were sharply up from Q1 driven by improved margins in our commercial business and the rollout of our new surplus contract with the DoD, which had its first significant month of operations in March. These efficiencies contributed to LSI generating $5.7 million of operating cash flow during Q2. Let’s take a look at the Q2 results of each of our major businesses. GMV and our DoD surplus business was down 8% from the prior year during Q2 as our new surplus contract contributed materially to only the last month of the quarter. As we ramp this business under the new contract, we expect to resume year over year growth with improved margins. GMV and our DoD scrap business was down 13% sequentially and 48% from the prior year due to a decrease in scrap metal prices caused by the economic recession; however, volumes have remained steady and prices have stabilized…

Thanks, Bill. The amount of gross merchandise volume or GMV increased $3 million or 3.4% to $91.2 million for the three months ended March 31, 2009 from $88.2 million for the three months ended March 31, 2008, primarily due to; one, our commercial business which grew 21.7% and generated 41.3% of our revenue and 42.3% of our GMV, for the three months ended March 31, 2009 as compared to 32.1% and 35.9% respectively for the three months ended March 31, 2008; two, our GovDeals business, which also grew 21.7% and generated 2.4% of our revenue and 21.2% of our GMV for the three months ended March 31, 2009 as compared to 1.8% and 18% respectively for the three months ended March 31, 2008; and three, the acquisition of Geneva completed on May 1, 2008, which generated 5.4% of our revenue and 3.6% of our GMV for the three months ended March 31, 2009. Revenue decreased $3.1 million or 5% to $59.7 million for the three months ended March 31, 2009 from $62.8 million for the three months ended March 31, 2008. This was primarily due to a 48.2% decrease in our scrap business which utilizes the profit sharing model as a result of a decrease in commodity prices. This business generated 15.9% of our revenue and 10.4% of our GMV for the three months ended March 31, 2009 as compared to 29.1% and 20.7% respectively for the three months ended March 31, 2008. GMV and revenue continue to diversify due to continued growth in our US commercial and GovDeals businesses in addition of our international commercial business. As a result, the percentage of GMV and revenue derived from our DoD contracts during the three months ended March 31, 2009 decreased to 31.6% and 48.2% respectively, compared to 44.6% and 62.6%…

We have built (inaudible) e-commerce marketplace with a largest buyer base addressing the $100 billion reverse supply chain market opportunity. And we have the financial strength and operating discipline to invest in future growth to create long term value for our stockholders. The bottom line is that we have a very strong competitive position that we continue to expect to strengthen during the balance of fiscal year 2009. That concludes our remarks, and we are pleased to take questions from those on the call.

(Operator instructions) Our first question comes from the line of Shawn Milne from Janney Montgomery Scott. Shawn, you may proceed. Shawn Milne – Janney Montgomery Scott: Hi, good afternoon. It’s Shawn Milne from Janney Montgomery. A couple questions, and thanks for taking my questions and I apologize in advance for the background noise. But, Bill, good solid commercial growth this quarter. Can you talk about the linearity in the quarter? Did you see better growth in March? It sounded like it was and our data would suggest that it did. And in terms of the pipeline of new partners, when can we start to see that come on to the platform and potentially accelerate growth. And then, Jim, if you could address the margin potential in terms of increased operating efficiencies in your commercial business, what kind of magnitude are we potentially looking at here? Thank you very much.

Sure, I’ll take the first part of the question. With regard to the commercial business, we’ve seen consecutive months really dating back to November of improving auction volume, buyer participation, recovery rates, and therefore, GMV. Now it is true March is a seasonally longer month than others, yet the recurring ramp that we are seeing across the buyer and the seller side is very encouraging for commercial. As we noted one quarter ago, we have invested in expanding the size of our business development team. We brought two new Directors on in early March. So we expect to get traction in some of the prospects in that pipeline during the second half of the year; by the way of example, we are looking at expanding into new product verticals such as personal care and accessories, non-perishable food, appliances, certain branded apparel items, a variety of gaming systems and consoles. So there is a wide range of Fortune 500 retail and manufacturing prospects in that frontal, and I do believe we are going to see the benefit of that. I think I would add that one other reasons we’ve had such a focus on operational productivity and efficiency is we want to create the capacity given what we observed in our business development pipeline. When you look at the inventory turnover numbers, I’ve been around a lot of traditional distribution businesses, to improve as rapidly as we’ve improved in the span of three months in terms of throughput and velocity is a real testament to the team, but also I think our acknowledgement that we have some big [ph] opportunities on the business development side and need to have that capacity. So we are well positioned to execute during the last half of the year. And that’s part of the margin story that you saw in the March quarter. And I think that will continue.

On the last part of your question, the margin. As we had predicated in the beginning of the year we expect significant margin improvement in the back half of the year. That’s really been driven by two components of the business. One is the commercial business which has seen improving margins throughout the year. We do anticipate that to continue. As Bill has mentioned in his comments, we’ve seen significant operating efficiencies gained particularly in the last quarter alone where we went from 64 days of inventory turns in the commercial business down to 38 days in a single quarter. Now we are anticipating those kinds of gains throughout the rest of the year. But again, we do expect to gain further operating efficiencies. The commercial business in addition will have a margin pick up as we probably get significant contribution out of the new surplus contract which, again from my comments earlier on the call, we really just brought out in the month of March for our first full month of operations. So we are looking at margins really in the back half of the year on a GMV basis that are somewhere between 9% and 10%, that is EBITDA GMV and on a GAAP revenue basis – adjusted EBITDA on a GAAP revenue, you are talking somewhere between 14% and 15% probably for the back half of the year, which on a full year basis to margins that are in line with last year, maybe slightly above last year’s margins. And we expect to have to continue, I guess, all of those improvements into 2010. So we would continue to expect margins, well, let’s say, on a GMV basis and kind of the higher single digits lower double digits and on a GAAP revenue basis kind of low-teens, maybe, 12.5 to 14, something like that Shawn. Shawn Milne – Janney Montgomery Scott: Okay. Thank you very much.

And our next question comes from the line of Sri Anantha from Oppenheimer. Sri, you may proceed. Sri Anantha – Oppenheimer: Yes, thank you. Bill, I know in your prepared remarks you mentioned about stabilization in scrap pricing. Have you guys seen that in your transactions today? That’s first question. Second one, I know in the prior calls, you talked about the ASPs declining in your commercial business, even though volumes have been pretty strong. Are we still seeing those ASP declines or are you beginning to see stabilization in the ASP declines. Thank you.

Thank you for the question with regard to our scrap business. Well, as you know all of our results have been notwithstanding a significant year over year decline in scrap, roughly 50% year over year declines. Yet in the last 60 days or so we have seen stabilization, Sri, of scrap pricing. In fact, in some categories like copper and brass, we’ve even see a little bit of an uptick. It’s been noted in number of statements this week around the world that you are seeing some ramp in production in places like China stimulating the flow of material and construction activity, and all of that trickles back into the scrap marketplace. I would remind listeners that our guidance for fiscal ’09 does not include a recovery of the scrap marketplace. But we call it as – as we see in every quarter end [ph] we see stabilization, which is welcome, and certainly any improvement would create additional contribution margin, which falls mostly to the bottom line for the business. With regard to the commercial, and I’ll add public sector arena, we have as well seen stabilization of pricing. I think what affected pricing was the dramatic overhang of supply in the November, December time frame in retail supply chain. As a result, most retailers adapted an aggressive in-store discounting posture to flush through that inventory and that overhang of supply affected the secondary marketplace as well. I think heading into the June quarter, a lot of those issues have been addressed by retailers. The queue of chapter 7 situation seems to be lightening up as well when you have companies like Circuit City declare bankruptcy and you know several billion dollars of product, certain categories like consumer electronics coming to the marketplace, that can affect pricing. The culture and mindset, however, of our team has been to be very proactive in managing changes in street retail prices, and I would amplify that our contracts and relationships typically (inaudible) any profit sharing or other pricing reflects our current retail street pricing so that we are not penalized in the short term for any broad changes in pricing. Buyer demand has resulted in increasing buyer participation in our commercial business, which has the effect of driving higher recovery rates. So we’ve seen that February over January, March over February. So if that continues that bodes well for the second half of the year. Sri Anantha – Oppenheimer: Yes, thanks Bill. And Jim, one just quick question. I know you guys have taken a number of restructuring initiative. Are we seeing the benefits of all those initiatives and is 2Q a good baseline going forward? Thanks.

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And I think the other thing is, maybe restructuring is not a perfect adjective. We have frontloaded a lot of investment to prepare for the new DoD surplus contract, people, 665,000 square feet of warehouse space. So, we had an overhang of capacity carry through at the first part of this year that we’re finally getting some leverage on. So that’s also driving additional margin. Sri Anantha – Oppenheimer: Thanks Bill, thanks Jim.

And our next question comes from the line of Colin Sebastian from Lazard. Colin, you may proceed. Colin Sebastian – Lazard Capital Markets: Okay, thanks, and good afternoon. I guess, first let me call upon the earlier questions on the commercial segment, which if I am doing the math correctly, it accounted for about 46% of GMV. And I think it’s the highest level it’s been for a couple of years. So, my question is what portion of this growth would be attributable from the weaker holiday retail? And given the leaner inventory and production levels that you talked about now to sort of middle of this year, do you have any concern that the supply of commercial goods on the marketplace might tapper off? And then secondly, if you could provide a little more color on the purchase model in the commercial segment, which stepped up a bit in the quarter. Is this related to a particular partner and more generally what is the profile of partners who are typically taking advantage of this model?

So thank you for the question Colin. I will address first part of it and then pass it on to Jim regarding purchase model. So, on the commercial business there are at least three things that are helping drive GMV in our model. First, we are an auction model, so we are all about driving the maximum amount of competition to each and every auction. And the buyer base that we have continues to grow. We have more customers. We have more auction participants for each completed transaction, which has a very positive impact on both our sellers experience in terms of financial recovery and also on our economic model, because independent of prevailing trends, more people bidding for that item we are getting a higher average sale price as a result. And as I mentioned in my first response to Shawn Milne, we’ve seen continued record growth in the buyer participation as we move through the quarter. So that bodes well for us in terms of seller satisfaction, in terms of getting the maximum economic return out of our merchandising and auction activities. With regard to supply, well, yes the US economy shrunk in the last quarter. So, we are down 6% in GDP, well, it’s going to the marketplace. But this is a $100 billion marketplace; we processed just under $40 million during the quarter and $160 million annualized. So we’re very small percent of retail supply chain. And therefore, this macro trend will not limit us as we build out our client base. And we are building out the client base on the seller side with enterprise customers, Fortune 500 retailers who – retail finished goods and brick-and-mortar stores whether that would be warehouse clubs, big box retail store chains or department store chains. And across the…

So a couple of quick things there Colin, one, the commercial business accounts for just over 42% of the total business on a GMV basis that actually is the strongest quarter we have had, so you are correct it is obviously the major component of the company right now. That is no surprise given the growth rate that it continues to have. We will expect that obviously to expand further over the next several quarters. On the purchase model, the purchase model was up slightly this quarter. Our purchase model was about 42% of the commercial business last quarter. It is 48% of the commercial business this quarter so you know a 6% change. As you know, we do not necessarily control that, I would tell you that it is really just a mix of goods, in particular we have one of our larger consignment sellers that did have a slight pause this quarter in product moving to us and obviously we had good growth this quarter in the commercial business. We have plenty of products to move but it just so happened that we moved a little bit more purchase model product in consignment. Again I would expect that mix to be somewhere around where it is in the last few quarters as we continue throughout the year. Colin Sebastian – Lazard Capital Markets: Okay thanks and then just lastly on the GovDeals side which performed very well in the quarter, was there anything or one-time in nature about that segment in the quarter or is this the pace of growth we should expect from the segment over the next couple of quarters, it sounds like you had a good number of ads, new partner ads.

With regard to the municipal government agency market opportunity, this is a market of 60,000 cities, towns, as well as 50 states. It is a very interesting entirely fragmented market and I think one of the virtues of the GovDeals’ business is there is no customer concentration of any material level. So we are simply executing the strategy of expanding one, the volume of goods and participation of our existing sellers and we have continued to invest in our outreach to support existing sellers. We brought out a new vice president of client services in that organization just within the last 30 days so it is an interesting time for public sector agencies, receipts are down, costs are well ahead of revenue and so they are looking for creative ways to fill budgetary deficits and GovDeals, that is an outstanding value proposition to bring to the table and these agencies are embracing it. So that is helping drive activity Colin, second, the brand name and frankly the word-of-mouth referral within the municipal government arena is very strong. So the brand and the value add that we are bringing with other clients is helping us bring new clients onboard and that is helping us to grow. So to grow that business 20% to 25% year-over-year consistently has been the track record, we believe it will continue to be the track record and it is another way that the company has multiple engines for growth as we move to the second-half of the year.

Yes Colin, also as a reminder, the fiscal third quarter which is coming up here is the seasonally high quarter for GovDeals that is typically when there is a lot of activity within the municipal sector there and so there is a lot of assets being sold. So we do not – as you mentioned earlier was there something one-time in nature, we do not expect that. We do expect sequentially a growth quarter for the company. Colin Sebastian – Lazard Capital Markets: Thank you very much.

Our next question comes from the line of Stephen Ju from RBC Capital Markets. Stephen, you may proceed. Stephen Ju – RBC Capital Markets: Good afternoon guys. Circling back on the GovDeals side of things again, it looks like you implied take rate for that segment is about 7.5% which seems to lag the other parts of the company. Any chance to take this up over the course of time and also any change in the competitive landscape, I recall last quarter you guys were talking about how some of your competitors were falling by the wayside or running into some difficulties and as you walk into the picture, services to new clients, are you indeed seeing less competition and are you starting to see some of the clients come back to you guys because those competitors are now gone? Thanks.

Thanks for the question Steve. With regard to GovDeals, well, GovDeals it is inception to date has styled itself as a seller self-service model. So once a client is enrolled and signed up and executes a contract that seller is able to list its own assets and collect its own money and leverage the GovDeals marketplace and buyer base and auction model and there are some other value added services it provides such as a realization tool if the assets would be offered to other government users before going to the marketplace. So 7.5% is appropriate for the level of the base offering and yet what we have seen is a number of these agencies who are facing staff reductions or cost reductions as a result of the budgetary deficit they face are looking for us to step in and provide more services and one of the things that we observed as an opportunity and we are pursuing is to provide financial settlement services to those municipal government clients such that LSI/ GovDeals deals handles the payment by providing online payment tools. We collect a buyer premium in return for providing those services which would have a material impact on our overall take rate and that program has been launched, it has been well received, it is steadily gaining increasing acceptance. So over a time, I don’t have a date certain, but over a time we do expect that to positively influence the take rate but also create a stronger value proposition for buyers, buyers who want can begin to pay online, they can pay online, they can remit funds more expediently to the seller, the seller can get their money, get their funds more rapidly. They can in fact fund their agency needs. So this is a win-win for…

You know in some cases, Stephen, we are but it is very modest. The team that is managing that part of our business is very excited about the opportunity to increase throughput and capacity if we were to do things like add a weekend day or double shift if needed. I mean, we are poised to take on significant volumes from the types of companies we are prospecting and we intend to do that. Stephen Ju – RBC Capital Markets: Do you think your footprint right now in terms of the distribution center is appropriate or do you foresee a need for more?

As I mentioned on the call, we believe we can manage a three-fold increase in the GNP flowing through our commercial distribution network. So we are well positioned without adding space to ramp our business. Stephen Ju – RBC Capital Markets: Okay, thank you.

Our next question comes from the line of Gary Prestopino from Barrington Research. Gary, you may proceed. Gary Prestopino – Barrington Research: Thanks. Most of my questions have been answered but how many sellers do you now have on GovDeals and what is the potential market out there of sellers, so roughly 2000 sellers of 60,000 municipal government agency target market. And then in terms of buyers, what do you doing to attract more buyers and are you seeing a phenomenon where possibly because of a sluggish economy people are trying to do some things on their own with self-employed business through your Web site?

Absolutely I think well before the current economic downturn we have always been an incubator for small businesses and entrepreneurs who are looking to source goods from us and to do that through a Web browser without having to get into their truck and drive to the local auction or drive to a sellers warehouse stock that saves him time and it is very convenient and a number of the activities we have discussed in terms of our operational excellence and improvement have made it even more convenient for these buyers to be sourcing goods on our Web-based platform server. So people that have lost their jobs because of the economy, you know, coming out a variety of industries are finding their way to our marketplace and so that is helping drive the potential size of the addressable audience for these buyers and the material that we sell, the goods that we sell are all below the selling cost. So many of our buyers purchase goods and resell them to consumers and online store fronts they manage or brick and mortar discount stores that they manage, some export outside the United States, some buy even salvage or scrap items for us for parts, they reconstitute those parts as part of their value-added depot repair, other operations and re-sell. So this is a very interesting and organic and we believe growth market will continue to benefit from transparency, the amount of supply that we bring, we are bringing new categories of items that open up entire new channels of buyers. We have got now a wide range of jewelry items that are in the marketplace, household appliance items, gaming systems and consoles, things like iPods and GPS systems and home theatre, plasma TV systems through the holiday season and that is…

Certainly, I mean, in theory there is scarcity value and we continue to grow our buyer base that drives higher pricing in an auction format and in certain spot categories we have seen that. Yet we benefit from a continuous flow of store returns, you know 6% or so of everything sold of retail is returned. So the fact in the United States is that return activity continues the amount of returns for online retailers is probably double that of brick and mortar that continues. There is an intractable challenge of having the right product, the right size in the hands of the consumer, and if they don’t like it they take it back and we solve the burden and the friction and complexity around that returns process and the recovery of value for the retailer. Increasingly retailers who have their own network of suppliers are saying, “Hey, maybe you can be the single point of service for all of us, not just the retailers but the manufacturers as well. So yes the GDP has been off but the absolute size of our market opportunity and the step function improvement in net recovery to the retailer and manufacturer of using our marketplace are such that we have a lot of growth ahead of us. Thank you.

Ladies and gentlemen, that is all the time we have for today’s call. Ms. Davis, you may proceed.

Thank you. Thanks everyone for joining the call today. If there are additional questions Jim Rallo and myself are available for those. Thanks so much.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a wonderful day.