Good day, ladies and gentlemen, and welcome to the Q1 Fiscal Year 2019 Liquidity Services Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will have a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's conference will be recorded for replay purposes. It is now my pleasure to turn the conference over to Ms. Julie Davis, Senior Director of Investor Relations. Please proceed.

Thank you, Haley. Hello and welcome to our first quarter fiscal year 2019 financial results conference call. Joining us today are Bill Angrick, our Chairman and Chief Executive Officer; and Jorge Celaya, our Chief Financial Officer. We will be available for questions after our prepared remarks. The following discussion or responses to your question reflects management's views as of today, February 7, 2019, 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 then 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 this call we will discuss certain non-GAAP financial results and our press release and our filings with 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 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, Julie. Good morning, and welcome to our Q1 earnings call. I will review our Q1 performance and provide an update on key strategic initiatives. Next, Jorge Celaya will provide more details on the quarter and our outlook for the current Q2 quarter. Our first quarter results reflect continued execution of our growth strategy and improving results across all of our business segments. As a refresher, our RISE growth strategy has four key pillars: one, recovery maximization, two, increasing volume, three, service expansion, and finally, expense leverage. The objective of our RISE strategy is to deliver a diversified asset-light business with a solid foundation or a long-term growth. We are in a terrific position to advance our strategy with many growth opportunities. During Q1, excluding the completed DoD Surplus Contract, our consolidated GMV grew 12% year-over-year and our GAAP revenue grew 20% year-over-year. Additionally, our consolidated non-GAAP adjusted EBITDA increased 42% over the prior year, reflecting operating efficiencies in the business that will drive improved results over time. Q1 marks the third consecutive quarter that we've achieved double-digit organic GMV growth, excluding our completed DoD Surplus Contract, and demonstrates that we are successfully executing on our strategy to deliver long-term value for our sellers, our buyers, and our shareholders. Next, we'll take a look at highlights of our business segments. GMV grew 23% year-over-year in our retail supply chain group segment due to higher-than-expected volumes across multiple seller accounts for both our full service and self-service solutions. Our retail business is benefiting from strong demand for both our marketplace and our integrated services such as returns management, refurbishing, and self-service apps, which help retail supply chain customers combat the $300 billion of annual returns volume. Indeed the secular growth of e-commerce continues to expand our market opportunity as we…

Good morning, and thank you, Bill. First I will comment on select first quarter results. We finished the first quarter of fiscal year 2019 above the company's guidance range for GAAP, net loss GAAP diluted EPS, adjusted EBITDA and non-GAAP EPS. Results were within the guidance range for GMV as compared to the first quarter 2019 GMV and adjusted EBITDA were up and reflect ongoing execution of our growth strategy despite the completion of the DoD Surplus Contract last year. Comparing to the first quarter of 2018 GMV improved 2%, adjusted EBITDA improved 42% and adjusted net loss improved 28%. GAAP net loss increased $3.8 million as prior year results included onetime tax benefits from the new corporate tax law. Our revenue was down 12% and reflects a higher proportion of consignment and self-service revenue, with our consignment model representing 78% of total first quarter GMV as compared to 75% in the prior year. As these first quarter results reflect we are successfully executing against our rise strategy that have more than offset impacts from the completion of the DoD Surplus Contract in the first-half of fiscal year 2018. In the first quarter, we reported GMV of a $158.5 million reflecting year-over-year increases in our RSCG and GovDeals segments. RSCG GMV was up 23.3% from a year ago due to an increase in product flows from existing client accounts and new business development efforts. GovDeals GMV was up 7.3% from the first quarter of fiscal year 2018, driven by the additional sales volume from existing and new sellers. This was partly offset by 14.1% year-over-year decrease in our CAG segment which was impacted by the lower volume of goods sold under both our DoD Surplus and Scrap Contracts. Partly offsetting both the DoD contracts DMV from our CAG commercial business…

Thank you, ladies and gentlemen. [Operator Instructions] Our first question comes from Colin Sebastian of Robert Baird. Your line is now open.

Hey, thanks, guys. A few questions from my end, first of all, as the EBITDA losses continue to moderate, I guess I'm wondering if the structure of the business should allow you to get back to similar levels of profitability or margin profile and cash flow that we saw a couple of years ago with the inclusion of the full DOD business, that's really just a matter of scale getting back to that level of scale and I have couple of follow-ups?

Sure. Well, the RISE strategy is focused on infrastructure and ability to handle the used cases of both full service and self-service on $1 billion plus GMV scale and with the ability to continue to sustain growth beyond that. We believe that the market opportunity with retail, municipal, industrial supply chain is there. We're a market leader today and we have introduced as you seen new services into the product mix for us that are very high margin. We're talking about subscription businesses and SaaS solutions, which are very attractive high margin cash flow positive type of businesses, and the signal of demand in the marketplace for us, Colin, is increasingly asking us not only to provide the marketplace with access to our buyers, but also integrated value-added services to solve financial reconciliation around return merchandise, to allow our customers to use self-service apps. And these add-on services have as good or better margin profile of the business we had three or four years ago. So we're very focused on new business development. We like our positioning in the marketplace, and we'll continue to grow that overall volume on our platform.

I'm curious what the split is between the professional or business resellers and the self-employed individuals and whether you think you're under indexed in both or either one of those categories in terms of the opportunity on the demand side?

So just to be clear on the buyer side, buyers are typically what we call B2B customers. These are folks that have built a business model that in part is served by accessing the goods from our marketplace that they either use them to support their own businesses in terms of operating equipment, fleet equipment, and in the case of retail supply chain goods often they're adding value or product warranting and then reselling to individual consumers. In terms of the terminology around self-service versus full-service, this is simply a function of what level of support we provide as a service provider. In many cases, our clients are comfortable using tools that we've provided to photograph, manifest, upload the equipment they like to sell directly on our marketplace. We provide technical support and training, but then our focus is primarily on driving the maximum buyer participation and delivering the highest recovery value for those sellers. And I think as sort of the world evolve more and more, the business community are comfortable using self-service apps to access our marketplace, upload equipment to our marketplace, access reporting, and we're providing those services and we're testing various apps. There's an app on our marketplace you may have heard about called Scan and Sell, and Scan and Sell basically is an IoS device that allows our customers either in their own facilities or in the field to scan an item through their phone, access various product details and historical pricing information from our database, launch the sale of that item almost immediately in multiple B2B and B2C channels. So that's a very interesting use of our data and technology to enable the seller to quickly solve an issue and that would be an example of a self-service solution.

Okay. In terms of revenue growth exceeding GMV growth in the RSCG segment, does that reflect a continuing shift away from the consignment model there or is that something on the pricing side, you could just explain that again.

Two drivers, one, when we have growth of service activity, there is no GMV associated with that. So that falls directly to the revenue line and as we continue to expand the range of services that will show up on revenue and not GMV. Having said that, over the last year plus we have seen a mix of GMV to shift more to consignment purchase purchased - there are periods where we'll have clients ask us to take title to goods to achieve some business transaction by end of the period, we call that the principal business. So from time to time that will show up in results. We did have some activity in the quarter in the principal business, but I think the broader trend is the shift to more services, which have no GMV associated with them.

Okay. And then lastly for me you mentioned acquisitions of complementary businesses as part of the growth strategy was just hoping you could put that in the context in terms of profile of acquisition, timing that sort of thing? Thank you.

Well, I wanted to highlight the growth and success of Machinio, which was acquired in the summer of 2018 and this is a business that is using technology, using data to aggregate supply in the used equipment market place. It attracted an enormous amount of traffic and interest and is adjacent to our auction channel up the upper funnel of equipment is often using classified advertising and listings to generate buyer interest and thats where Machinio has a more efficient model than traditional advertising platforms whether it be Craigslist, Google, any number of traditional trade magazines, they're providing not only the channel to drive buyers and they essentially provide a subscription service for sellers to list all their equipment. They're also now providing a platform, a technology platform for dealers to manage their inventory to advertise inventory to sell directly through a custom branded marketplace storefront, and our Liquidity Services and acquisition like that provides access to the this data around the entire market of used equipment access to potential buyer collaboration and cross-fertilization. So if an item is available on Machinio and the buyers interested we also have items available in our online marketplace for sale. They can cross. We can cross-promote those assets and then also the Machinio storefront technology allows us to bring more than just our marketplace to the conversation, if a dealer wants their own identity on an e-commerce storefront. We now have the opportunity to provide that as well as a sales channel. So, lots of interesting things there. I think in terms of allocation of capital we have tremendous organic growth happening in the core business, we'll continue to invest in that. We're always looking for adjacencies around services that our buyers might need to manage value and sell assets, but we think we've got a good coverage of the client need today and will be focused primarily on the organic growth through fiscal 2019.

Great. Than you, Bill.

Thank you. [Operator Instructions] Our next question comes from Gary Prestopino of Barrington. Your line is now open.

Hi. Good morning everyone. Hey, Bill, I had to calls, so I kind of got on your call a little bit late, so I may have missed some things. But I just want to get an idea on LiquidityOne of the platform transformations. What's left? Is it just this GoDev marketplace and then the consolidated marketplace, and are your expectations that this will all be completed by calendar 2019?

That's our goal, and we've been very, very, judicious in the rollout timeframe, knowing that our technology organization serves the entire enterprise not just the transformation and we've had opportunities to accelerate deployment of things like Returns Management our RPM SaaS solution. And in response to an RFP, we were able to secure a multi-year agreement with a Fortune 500 retailer to use our Returns Management Software solution. So we did allocate some resources to that. In parallel, we will be going live with GoDev this spring. We've done all the important work functionally to deliver the solution in the marketplace. What we are focused on Gary is ensuring we've done testing with our internal users, with customers and we have stress tested all relevant backend tools to support a -- not just the GoDev marketplace, but all of the Liquidity Services, so when you think about CRM, you think about financial accounting integration, that's the type of stress testing and volume testing we're doing, which is a forklift upgrade from anything we've done before. So we're very focused on our capital assets marketplace going live our aggregation marketplace going live and our retail business migrating to the new technology platform in calendar 2019.

And would you just refresh my memory, the Go-Dove marketplace is what, that's capital assets.

That's capital assets and that's a global marketplace when we talk about growth in Asia like we experienced during Q1. That's happening on this multilingual international marketplace called GoDev [ph].

Okay. And then a couple of other questions, in terms of the marketplaces that you have converted, what metrics are you focusing on to gauge that, you know, for lack of a better word consumer satisfaction or user satisfaction, user participation, I mean how are you able to measure the benefit to the company from some of these marketplaces being transformed over to the L1 platform.

Sure. Yes, absolutely, I think you have a combination of both financial metrics such as the number of bidders per lot sold, which requires us to be able to serve more volume and scale, the number of bidders per lot sold is a metric we track since inception and when we drive more bidder activity we drive higher recovery and seller satisfaction, so that's very important. We also use metrics like net promoter score, we've invested heavily in our marketing function and organization and we're rolling out tools that capture real time feedback daily on how buyers are interacting with the platform and that's part of our LOT investment. So when you think about net promoter score, you think about you better participation. We think about scalability and reliability, so, page load time, the ability to track bounce rate. Another key investment, Gary, which will clearly have an impact on all of the business is just having best-in-class mobile first design of our marketplaces and that's in the pipeline and coming they will be part of the LOT platform investment. And with that, we are going to get a nice bump and participation as we believe that this low hanging fruit for us on the mobile responsive, mobile first design of our marketplaces.

Okay. And then lastly, just in terms of just looking at the metrics on the income statement for Q1, technology and operations about $12.5 million, 23% of sales it looks like, is that kind of a number, are you looking as you go forward to maybe increase that here, I'm just trying to get an understanding of what's going on that would cause the guidance for Q2, even it looks like the way that trend lines running that you wouldn't have a much better Q2 number out there than you have right now and I'm going to -- I'm just trying to understand is that because there is some ramp up in spending here with these marketplaces that are still going to be transformed?

So Gary, what was something that you may have missed at the beginning is that, we have indicated that the second quarter should look pretty much similar to our performance in the first quarter where we have the seasonality on retail and CAG, on retail going one way and on CAG and Dove deals going the other way generally speaking in the second quarter there shouldn't be really a lot of movement from an expense standpoint. This is something that we may see as we go forward for the second-half of the year in our investments in marketing that are more on the -- it is not in the IT and operations line, but maybe more on our sales and marketing. We've always indicated that part of what we've strived to do over the implementation of design and implementation of our technology platform is that we wanted to get to a certain point in those investments as they taper down we would then really refocus efforts on the top-line growth based on that platform and that focus on the top-line growth would be potential investments in sales and marketing and with our consolidated marketplace being planned and with an implementation on the horizon this is the time where we're going to start as we made in our earnings release and in our opening comments this is where we're going to start to look more heavily on those kind of growth investments that touch not only our sellers, but in particular the buyers side of marketing.

Okay. So the short answer is that there is no real anticipation of an increase in technology spend relative to Q1?

No.

Okay. Thank you.

Thank you. Ladies and gentlemen, this concludes today's question-and-answer session. I would like to turn the conference back over to Julie Davis for any closing remarks.

Thank you for joining our call this morning. Please reach out to me directly if you have any follow-up. Thanks and have a nice day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may now disconnect. Everyone have a great day.