Good day, ladies and gentlemen, and welcome to the Q4 and Fiscal Year Liquidity Services Incorporated Earnings Conference Call. My name is Catherine, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Ms. Julie Davis, Director of Investor Relations. Please proceed, ma'am.

Thank you, Catherine. Hello, and welcome to our Fourth Quarter and Fiscal Year 2012 Financial Results Conference Call. Joining us today are Bill Angrick, our Chairman and Chief Executive Officer; and Jim Rallo, our Chief Financial Officer and Treasurer. We will be available for questions after our prepared remarks. The following discussion or responses to your questions reflect management's views as of today, November 29, 2012, 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 our filings with the SEC, including our most recent annual report on Form 10-K. As you listen to today's call, we encourage you to have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter. During the call, we will discuss certain non-GAAP financial measures. In our press release and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. 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 Gross Merchandise Volume and should not be considered as substitute for or superior to GAAP results. At this time, I'd like to turn the presentation over to our CEO, Bill Angrick.

Thanks, Julie. Good morning, and welcome to our Q4 earnings call. I'll begin this session by reviewing our Q4 financial performance. Next, I'll turn it over to Jim for more details on the quarter and on our outlook for the remainder of -- for fiscal '13. And finally, I'll provide an update on our long-term growth strategy. During Q4, Liquidity Services reported strong financial results as we continued to grow our market share and build on our leadership position in the reverse supply chain market. We continued to benefit from large commercial and government clients placing their trust in us to handle more of their excess inventory and high valued capital assets, which drove strong results this past quarter. We exceeded our guidance range for GMV and adjusted EBITDA and adjusted EPS while continuing to make important investments for the future. Q4 GMV was up 65% year-over-year to $241 million, driven by growth in the volume of goods in our commercial and government marketplaces by existing and new clients. Adjusted EBITDA of $23.1 million was up 85% year-over-year, and adjusted EPS during Q4 was $0.40, up 186% year-over-year, driven by improved operating leverage on higher volumes. This quarter also caps off another strong year for Liquidity Services, in which our team continue to advance our business strategy of building a defensible leadership position in the reverse supply chain market, while also generating outstanding financial results for our shareholders and clients. With our large and growing buyer marketplace, integrated services and domain expertise, we are enabling retailers, manufacturers and government agencies to drive efficiencies in their global supply chains and better compete in an increasingly complex business environment. During the past year, we enjoyed broad-based organic growth as we expanded our market share within both the commercial and public sector markets.…

Thanks, Bill. Our record full year results and strong fourth quarter results reflect market share gains and enhanced service levels and operating efficiencies across our entire business as a result of investments we have made to support our growth over the last several years. Our strategy of bringing innovative technology to the reverse supply chain market and our efficient business model has translated into strong results for stockholders. Fiscal year 2012 adjusted earnings before interest, tax and depreciation and amortization, or adjusted EBITDA, has improved 109.1% to a record $110.1 million. Our seller base has continued to grow as over 125 Fortune 1000 corporations and over 5,000 public sector agencies focused on reducing costs, improving transparency and working capital flows by outsourcing reverse supply chain activities. As corporations and public sector agencies increasingly prefer service providers with a proven track record, innovative technology solutions and demonstrated financial strength, we have continued to penetrate our large, highly fragmented markets. Our buyer base has grown significantly over the last year to approximately 2.2 million, or 36.3%, as we added almost 600,000 new buyers, including over 300,000 from GoIndustry, where we had very little overlap and added significant number of international capital asset buyers to the Liquidity Services marketplaces. In addition to strong core business operating results for the quarter, we embarked on several key initiatives to continue to drive significant shareholder returns in fiscal year 2013 and beyond. We closed the GoIndustry acquisition in July and have commenced the integration of this business including adding the additional capabilities of the Liquidity Services marketplaces to expand the opportunity for GoIndustry clients to maximize the value of their surplus assets outside the manufacturing vertical. On November 1, we also completed the acquisition of NESA, which expanded our capabilities and value-added services in the consumer…

Thank you, Jim. As we reflect on our strong fiscal year '12 results, we have renewed excitement of where we can take our business. Though we now have the scale of a $1 billion GMV business, we have only 1% penetration of the highly fragmented $100 billion global reverse supply chain market. At the beginning of fiscal year 2012, we established a 5-year goal of tripling our business to $1.5 billion of GMV. Based on our strong execution, and growing credibility in the marketplace, we are ahead of plan. And therefore, we've established a new goal of reaching $2 billion of GMV by fiscal year '16, or $500 million higher than the previous target. We are confident in our ability to achieve our long-range goals due our many strengths. Liquidity Services has the largest global buyer base for surplus assets, which continues to grow. We possess proprietary market data and knowledge derived from over $3 billion of completed asset sales to assist our growing clients base in the valuation and sale of assets in over 500 product categories in all condition types. And we possess the most innovative sales channels and services to meet the needs of the marketplace. Building enduring market-leading businesses requires vision and conviction on the future trends and client needs in a given industry. It requires assembling talent with a passion for relentless improvement, discipline and the willingness to invest and manage for the long haul, not for a given quarter or a year. Growth and success does not occur in a straight line. And as we expand into new verticals, and to new geographies, and integrate selected acquisitions, results may vary in the short term. However, we have strong convictions that the asset recovery process will move online to capture efficiencies and improve transparency for…

[Operator Instructions] From the line of Colin Sebastian from Robert Baird & Co. Colin A. Sebastian - Robert W. Baird & Co. Incorporated, Research Division: I guess, first off, I wonder if you can break out more of the contribution in GMV from GoIndustry in the quarter and what you're expecting you had there? And some additional perspective would be helpful in terms of what changed since the acquisition was announced, is this more of an integration issue or is it also that the direction of that business has changed compared to the assumptions that you made when you first announced the deal?

Well, sure, let me first introduce the rationale for the GoIndustry transaction. Global clients increasingly need and expect uniform service globally for all of their equipment. And having met with many of the top clients of that business, we are not only seeing that rationale play out, but we're even more enthusiastic about the long-term growth prospects of cross-selling services to many large companies. In fact, companies that have traditionally been selling equipment on the GoDove marketplace also are major players in consumer packaged goods and have inventory and scrap material that needs to be handled and sold. And so, we like very much the opportunity to integrate a global enterprise sales organization, integrate their 300,000 global buyers and then continue to scale the business. And so I think our comments with regard to investment merely relate to the experience of having 5 months being able to be on the ground around the world and investigate the level of software integration, staffing and other investments to position the company to scale and grow, not just next year, but obviously, for the next 4 to 6 years, in line with our long-term growth targets. So relative, I guess, another aspect of the question was relative to the contribution of the business. We see that not changing from a GMV standpoint. Colin A. Sebastian - Robert W. Baird & Co. Incorporated, Research Division: And I guess, more broadly, on the commercial side, if we think about growth there, organically, is the opportunity, generally speaking, more about increasing your activity in the buyer base or is it new sellers or increasing the business from existing sellers? I guess, maybe it'd be helpful if you can kind of rank those in terms of the impact on commercial?

Well, commercial and public sector both operate in a 2-sided marketplace business model. And as we have consistently done over the years, we invest on both sides of that marketplace. We have seen very strong linkage of when adding a supply in certain categories is a catalyst for growing the buyer base, and we have earmarked certain investments in the year ahead to attack both sides of that marketplace. For example, on the buyer side, we are moving all of our marketplaces on to a single marketing automation platform that allows our buyers to receive information according to their purchasing criteria on assets available, not just in the initial marketplace they're registered on, but in all marketplaces that Liquidity Services operate. That's adding service and enhancing the value to the buyer and the relationship with the company, and ultimately, will drive greater competition and higher sales value realized by our sellers. So that would be an example on our buyer side. On our seller side, frankly, we have such a great story to tell, and we've done limited investment in branding of our services. And so this is a big opportunity for the company, to expand on the messaging you'll see on our corporate website, which was launched today, and equip our sales organization to not only serve a large Fortune 500 client in the area that would traditionally serve them, but to bring in other subject matter experts within Liquidity Services that allow us to expand the range of services we offer to that client. And so that's a huge opportunity for the company. I mean, we have great coverage of large, in many cases, the most influential players in all of the big industry sectors. As I mentioned, retail, both on the retail side and the manufacturer side and supply retailers, we have a lot of growth opportunity simply by further penetrating these relationships and adding product categories and expanding our service offering there. We also have examples now of branded manufacturers who want to bring in-house and centralize the way that their brands are sold in the secondary marketplace and they're asking Liquidity Services to provide that full service solution to move products through our own channels and also manage any outlet channels they have online to ensure they have access to our proprietary market data on what these assets should be selling for, what this inventory is worth in the marketplace and to maintain velocity on the movement of those goods to avoid loss in value. This is a potential new way of thinking in the return to vendor process and something we're very excited about.

The next question is from the line of Shawn Milne from Janney Capital Markets.

I just wanted to go back to the prior question. I mean, Jim or Bill, can you just -- you talked a lot about -- I mean, there's the comment about the dilution around GoIndustry, but then there's a whole commentary around bigger investments, is there a way to disaggregate that? And very specifically, there was a prior expectation that GoIndustry was, I believe, $0.02 to $0.03 accretive this year. So Jim, what is it now? Is it $0.02 to $0.03 dilutive? What is the exact math behind that, if you can provide it. And then, Bill, you mentioned all things that should help drive growth, investing in the branding, the solution, expanding your sales force, all those things, what is that level of investment in '13?

Sure. So Shawn, first off, I think, when you look at the quarter that just closed, GoIndustry came in really in line with expectations. We had said on our last earnings call that we expected GoIndustry, again, the first quarter that we were operating with them, to be somewhere in the mid to high 30s of GMV and to be around breakeven on the bottom line, and that came in pretty much as expected. I think, when you look out at next year, we don't really see any change in our top line expectations at this point. As Bill commented earlier, our initial meeting with the clients have been strong, the opportunities between the 2 organizations are tremendous. What we want to do is simply accelerate what we believe is the long-term opportunity that we see with the business and we moved our integration, I think, up more than the first half of this year. So to be specific, on your question, as far as what changed, I think what changed was our timetable, a greater knowledge of the business, now operating it for the last 4 to 5 months. And we expected, yes, I would say $0.02 to $0.03 as you indicated, dilutive, if you would, for the first 2 quarters of the year and then breakeven to making money in the second half of the year. And again, I mean, I think that's reflected in our full year guidance, which represents over 18% organic growth year-over-year.

And let me on the back end of the question, we've added a couple million dollars of corporate overhead to expand our global HR function, a product development function that's centralized, that's taking on the asset zone enhancements that's integrating our sales force, enterprise system that's adding this marketing automation platform. I mean, the thing we all have to realize is if you're successful in branding and selling your services, and we have every expectation that we'll be very successful, we're going to be asked to step up operationally to handle a much larger volume of business. And so we have always, going back to the beginning of the company, been very disciplined and long-term oriented about making the investments upfront in the right manner to make sure that we make the best first impression one can make when adding a new, in this case, mostly global large organization to our client portfolio. So that's our philosophy.

That's helpful. And I guess, Jim, what's the -- you kind of did the math for us, what's the pro forma cash balance after the acquisition. And the Jacobs -- no -- and why -- what would preclude or why wouldn't you be more willing to buy your stock back here, especially with what we're seeing today?

Well, on a pro forma cash balance, Shawn, it will leave us with over $50 million of cash still on the balance sheet. As a reminder, we also have a line of credit, a $75 million line which we have not tapped at all. So the company continues to have plenty of growth capital available with its current structure. As far as the buyback goes, I mean, the buyback is really a Board-type decision. We look at that on a regular basis, depending on the strategic opportunities we see in front of us and what's the best use of cash to support the long-term return of our shareholders. And so obviously, the stock prices is a factor that goes into that equation, and we'll review that as necessary.

The next question is from the line of Ross Sandler of Deutsche Bank.

Jim, just one question. I know you don't talk about it or think about it this way, but the gross profit to GMV margin ticked down a couple of hundred basis points and I know scrap was a little bit light this quarter, that can be a noisy line. Surplus looked pretty good. So you can you just talk about what the kind of above average businesses in commercial are in the quarter? Like was that what was causing that kind of a mix shift? Was that causing the take rate compression or how do we think about that going forward? And then the second question is the re-up investment for GoIndustry, just to go back to this one, seems like it caught you guys somewhat by surprise, you're usually pretty tight on assessing what's going on and messaging it appropriately, so can you just give us a little bit more color on what kind of investments need to be made there and what exactly you're doing?

Sure. Let me first address the margin issue. I think, again, the margins for the quarter came in, frankly, in line, Ross, with what we expected. To reiterate, we were ahead of our guidance ranges on all fronts. I think, particularly the EPS result was significantly above the high end of the guidance range. So really, nothing unusual there. I think, the way you're looking at the business, again, is not the way we normally look at it, but as you know, that can fluctuate just basic -- based on the change and the different models of our business. Meaning, consignment model or purchase model primarily, we had much more consignment model in the business and so that may be moving your -- the gross profit margin that you're looking at. Again, we don't look at the business that way. That's the only thing I can think of, Ross, because, again, on our side, margins came in as or better than expected. What I would -- one comment on margins for next year, I think it's -- our margins for next year that are represented in our guidance are actually in line with exactly what we said last quarter. So we expected to finish this year around 13% EBITDA, adjusted EBITDA to GMV margin. I believe the year was 12.8%, 12.7%, something like this. So again, in line with our expectation. When we discussed the GoIndustry acquisition in our last call, we said mathematically, once you put that business on our platform and the investments we need to make in the first year, its breakeven status at the time of acquisition, that was going to affect the overall aggregate margin by 1.5 points to 2 points. And when you look at our guidance this year, that's exactly where we ended up. I think it's, what, 1.6% or 1.7%, something in that range, again, that 1.5% to 2%. So I think margins really are unchanged from our expectations that we've discussed about before, both in the current quarter and for the next year. As far as investment goes, I think Bill hit a fair amount of those during his overview. But specifically -- and what changed our expectations, I think, was when we really dug into the global opportunity for the $100 billion capital asset market and we looked at the disparate organization of GoIndustry, one that has not been run historically with common systems and common processes, which is a departure from the normal Liquidity Services philosophy, we just saw an opportunity to change those things more quickly and more dramatically than we had originally thought, again, from a due diligence process versus running the business for the last 4 or 5 months, and we believe that's going to create more opportunity in the long run.

Look, I think the GoIndustry transaction was something like $11 million of equity value investment. This is a business that, in the long term, is going to be very successful as part of an integrated capital asset group. With take rates of in the range of 20% for the bundle of services we're providing, with 0 inventory risk, a very asset-light model, a business that leverages our global data, our global buyer base and increasing cross-selling opportunities, this is a very, very unique opportunity for us from an acquisition perspective and one that will pay great dividends for Liquidity Services stockholders over time. I sat down with a gentleman who runs about $10 billion of capital equipment purchases for a very well-known Fortune 100 company, and there's very limited amount of business that GoIndustry had been doing with that client. And together, we explained the full range of services we're providing in information technology, property, plant and equipment, scrap material, and it became very clear that there was a significant opportunity to expand our business. And so we are smart and experienced to know that be careful what you ask for in the sense of if clients like the value proposition, they're going to want to do a lot of business and they're going to, in this case, want to do it globally, so we want to get ahead of the curve in terms of our financial reporting systems, our global sales force, automation and sharing of data and our operations teams so that we execute crisply against we anticipate to be a lot of future growth.

The next question is from the line of Jordan Rohan. Jordan E. Rohan - Stifel, Nicolaus & Co., Inc., Research Division: I'm trying to look out to fiscal 2013, if you take apart with the organic growth business, of the businesses that haven't just been bought, in other words, everything but NESA and GoIndustry. And I'm having a little bit of a tough time discerning from the 1,000,150,000 GMV midpoint of guidance. About how much of the growth will come from the core, if you define the core as what I just said, that is not GoDove and not NESA? Can you give me some clarification or conversely, and I realize this was asked before, but I'm not sure what you really answered, what would be the contribution of those businesses in 2013, so we can back that out, and what was the contribution looking retroactively for fiscal '12, so we can get sort of a common baseline for organic growth?

Sure. Thanks, Jordan. I touched base on the organic growth looking at next year, I think, in one of my prior answers, but when you strip out GoIndustry, which again, as Bill indicated, is a pretty business where it was running at breakeven and we consider to be breakeven to a slight loss next year, so not adding anything to the bottom line. NESA, obviously a very small acquisition, adding a few pennies and a few million dollars to EBITDA. If you're looking at 18% organic growth next year, both top and bottom line, obviously, the top line growing more quickly than that because there is a decent GMV run rate from GoIndustry, which again, is really unchanged from our prior call, Jordan, we'd expect somewhere between $165 million to $185 million of GMV from GoIndustry next year. Again, that's in line with what we discussed last quarter. So really, no changes to our thoughts there.

And can you remind us what the seasonality is for GoDove, it seems like if there is a $35 million to $40 million kind of in the quarter, in the October quarter, and you're guiding to $175 million roughly for GoDove in fiscal '13, that we should have pretty sizable March or June quarters in that business. Am I thinking about it the right way, is that where we'd really get to the answer to the GMV to really kick in?

Sure. Good question on the seasonality. So that really follows the seasonality of the typical capital assets marketplace, which is that it tends to be fairly slow in the first quarter of our fiscal year, Jordan, so that's December quarter. It will pick up a little bit in March as they roll into the next year. And in June, June tends to be fairly good, and September should be a pretty good quarter as well.

The next question is from the line of Jason Helfstein from Oppenheimer. Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division: Two questions. One, just I don't think you commented but if you can comment on what the organic growth was? So again, stripping out the acquisitions for both the quarter and for the year, I mean, we have our estimates, but if you can give us some direction of what it was historically? And then secondly, just following on to Bill's comments, I mean, it seems that you guys have added a lot of capabilities over the last 18 months, and can you go into a bit more detail on, I guess, as you look at the business, the ability to cross-sell those or areas that you considered new because, I think, kind what the street is missing is that you are spending money to drive the business going forward, that's going to show up in technology and operations, it's going to show up in sells and marketing. And ultimately, right now, the street is looking at that as a negative and it seems like you have a different view on that?

Sure. Let me take the first part of that question, Jason, on organic growth. So organic growth continues to be strong. I obviously discussed that going forward. When you look at the last year and the last quarter, very nice results. Organically, for the quarter, we were up over 50% on GMV. On -- actually, I'm sorry, up over 60% on GMV and over 50% on EBITDA organically. When you look at the full year, you're talking about EBITDA of over 75% organically, again, a reminder, we were up 109% for the year on EBITDA. And when you look at GMV, again, as a reminder, we were up 55% for the year, over 40% organically. So very strong organic growth next year. And again, we see good organic growth into next year.

Yes, think the question regarding cross-selling of services relates to the target market of Fortune 1000 companies, these are companies that, in many cases, are on the manufacturing side of the supply chain. These are companies that manufacture things and sell widgets, if you will, to the retail channel. There's a huge base of property, plant and equipment, rolling stock, IT hardware that is subject to product obsolescence and use and must be lifted out of those companies, valued and sold. There's a huge void in that marketplace, and therefore, great opportunity for us. There's really no enterprise system that multinational companies use to track surplus and idle equipment. We are filling that void with the increased investment and deployment of the assets on system I referred to in the call earlier. That's sort of like the a salesforce.com system and the assets recovery function allows plant managers and procurement managers around the world to be collaborating online, dragging and dropping formation using data images, even video, to understand what they have and when an item is no longer needed by one part of the organization, it's made available to their peers within a company. In some cases, through our collaboration tools, it might be made available within an industry vertical among companies. And if there's no interest in the redeployment, which is a sustainability goal, if you can you use something that's used, you don't have to buy new. If it's not -- if that's not the case, then these items move immediately to one of our online marketplace events. And so it's really aggregating more and more usage within these large organizations, they're very sticky, desirable reporting tool for these companies that actually do have to report on how they track and manage this equipment, how they redeploy…

Sure. I guess, Jason, I'm sorry if I didn't answer your question specifically on organic growth, those numbers are in-line, absolutely. As far as the investments go, we absolutely expect to see improvements in margins going forward out to fiscal 2014 and '15 from our investments. Primarily, a lot of those investments are bringing everybody together as it relates to the GoIndustry acquisition. And we've indicated, again, starting with our last call, our plans to do that. So again, taking a business that's running at breakeven to a level of profitability that is consistent with the other capital markets pieces of our business today. So we would expect to see leverage on margins moving forward. After this year.

I think, as I mentioned, if you're going to have a long-term orientation about where you're taking your business, we understand that there's growth outside the United States and there is a fixed level of investment that's necessary to set up shop, if you will, in major economic centers including the Asia Pacific region. And as we absorb those fixed costs, right, based on cross-selling services, improving our volumes, naturally, we'll get operating leverage out of that.

The last question comes from the line of Nat Shindler from Bank of America.

Most of my questions have been asked already, but can you guys go a little bit more into the GovDeals business? I would imagine that this business would have a very large TAM and a low penetration right now. And yet, it seems to have fallen off to kind of single-digit growth rate in the last 2 quarters. What's holding you back in kind of the state and local municipality business?

Well, I think, first, anyone who's been in the public sector marketplaces knows that, again, disciplined long-term orientation is important to procurement cycle for the larger state and local agencies is a long sales cycle. And there's no question that you have evaluation processes that take months, in some cases, years. But we've been in this business for 12 years, and we now serve 20 of the 50 state agencies. We're getting access to larger municipalities based on credibility and track record. We just won a piece of business with the Chicago Transit Authority, that brings together a variety of services we're providing in sort of a unique differentiation on how to serve the needs of a large agency. We expect that this $2 billion roughly GMV market will clearly embrace transparent online marketplaces. We'll move away from live, local auctions. And we're going to be the large force of change in making that happen. And whether that happens in fiscal '13 or fiscal '15, we can't put a precise projection on. But what we know is, as we've added resources and sales and as we move geographically west of the Mississippi, we're having great success.

I think, Nat, when you look at GovDeals, and we saw some phenomenal growth in the beginning of the year, the growth, absolutely, as you pointed out, tapered off a little bit at the end of the year. But as I've indicated before, we're a growth company, as you know, Nat, and we don't grow in a straight line. So I think different pieces of our marketplaces will ebb and flow as far as growth rates. We end up the year with 18% growth in the business, which was frankly in line with what we expected at the beginning of the year. We are looking at 20%. So again, not too far off. When we look at that business for next year, as some of the things Bill indicated we've got in the hopper, with some new clients and existing clients, and we expect that business to grow over 20% in fiscal '13.

I'd now like to turn the call over to Julie for closing remarks.

I would just like the thank everyone for joining our call today. And as always, Jim Rallo and myself will be available for any follow-up questions you may have. Thank you.