Ladies and gentlemen, thank you for standing by. And welcome to the Fourth Quarter 2019 Liquidity Services Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions]. Please be advised that today's conference is being recorded. Now, I would like to hand the conference over to your speaker today, Ms. Julie Davis, Senior Director of Investor Relations.

Thank you, Carmen. Hello, and welcome to our fourth quarter and fiscal year 2019 financial results conference call. Joining us today are Bill Angrick, our Chairman and Chief Executive Officer and Jorge Celaya, our Executive Vice President and Chief Financial Officer. 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, December 10, 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 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 this call, we will discuss certain non-GAAP financial measures. In our press release and our filings with SEC, each of which is posted in our Web site. 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 Q4 earnings call. I'll review our Q4 performance and provide an update on key strategic initiatives, as Jorge Celaya will provide more details on the quarter and our outlook for Q1 fiscal '20. Our Q4 results reflect continued execution of our RISE growth strategy with solid results, including our sixth consecutive quarter of organic GMV growth, our second consecutive quarter of GAAP revenue growth, and our eighth consecutive quarter of non-GAAP adjusted EBITDA improvement. Our strategy continues to deliver more efficient operations for effective asset promotion, which drives higher recovery, a broader choice of seller services and an increased flow of assets from sellers in our Retail Supply Chain and GovDeals segments. Our adjusted EBITDA improved 60% over the prior year in Q4 fiscal '19 and we had positive operating cash flow in Q4 fiscal '19, reflecting top line growth and continued benefits from operational efficiencies, enhanced marketing and organizational realignment efforts. Further, our fiscal 2019 bottom line results marked a $20.3 million improvement in adjusted EBITDA over the past two years. Stepping back and looking at the full year of fiscal '19, our objective was to resume organic growth. While investing in our product, services and people to sustain market leadership, we accomplish these objectives. For the full year of fiscal 2019, we grew GMV by $14 million to $640 million despite the loss of the DoD scrap contract and the full unwind of our DoD programs. Of note, fiscal 2019 was the first year of consolidated GMV and GAAP revenue growth in six years. For the full year 2019, we increased adjusted EBITDA by $6.1 million, driven by top line growth in all segments and lower sales and operations expenses, partly offset by the wind down of our DoD…

Thank you, Bill, and good morning. First, I will comment on select fourth quarter and fiscal year 2019 results. We finished the quarter of fiscal year 2019 within guidance range of GMV, adjusted EBITDA and adjusted EPS. GAAP net loss and GAAP EPS were below the range, reflecting the earnout for Machinio based on the solid business performance. Our fourth quarter results reflected the ongoing execution of our RISE growth strategy. As compared to the fourth quarter 2018, GMV and adjusted EBITDA were up and continued to reflect positive trends in our RSCG and GovDeals segments, offset by the wind-down period of the DoD scrap contract within the quarter and the lumpiness in our commercial business within the CAG segment. Comparing to the fourth quarter of 2018, GMV improved 2% and revenue was up 12%. Fourth quarter GAAP net loss was higher, reflecting one-time expenses, while non-GAAP adjusted EBITDA results improved year-over-year for the eighth consecutive quarter. Non-GAAP adjusted net loss improved $2.1 million in the fourth quarter over the prior year. In the fourth quarter, we reported GMV of $157.8 million. GovDeals' GMV was up 4% from the fourth quarter of fiscal year 2018, driven by the additional sales volume from existing and new sellers. Retail supply chain group GMV was up 18% from a year ago on an increase in product flows from existing client accounts, new business development efforts and adoption of seller solutions and new service offerings. Results were partly offset by 15% year-over-year decrease in our CAG segment on the decline in the DoD scrap contract activities and lower CAG consignment activity in the energy vertical pipe market. We reported fourth quarter of fiscal year 2019 revenue of $58.8 million. GovDeals revenue increased 8%, RCG increased 15% and our CAG segment increased 2% compared to…

[Operator Instructions] And we have a question from the line of Gary Prestopino with Barrington Research. Please go ahead.

Could you maybe -- are you seeing anything competitively in GovDeals in the market in terms of that it could be timing, your growth a little bit there? I think this is the second consecutive quarter where we haven't had that kind of teens' growth that we have had in the first, or the last couple of quarters.

No, I think the competitive landscape continues to offer the various in-house solutions. Certainly, there is different types and varieties of marketplace solutions for companies. I think one of the fundamental things we did, Gary, in fiscal 2019 is, we realigned our organization. And you may recall that previously in fiscal '19 our acting CIO was also the President of the GovDeals segment. We brought on a new CTO, gentlemen named, Steve Weiskircher, we're very excited about. He came over from GameStop, and assumed that role effectively in the September timeframe, so really at the tail end of fiscal '19. Additionally, we organized our sales and go-to-market organization around the Chief Commercial Officer role, and that role, occupied by JD Daunt is undoubtedly going to make a huge difference, not just for GovDeals, but for everything we're doing. And I think that organizational realignment would be one factor in GovDeals performance during fiscal '19.

So with this new individual coming in, what did he change that with -- besides the fact that you had a tough comparison. What has changed in the go-to-market strategy that would cause the GMV to not emulate that growth that we had historically?

Well, what I said is that during fiscal '19, you had the person overseeing effectively the sales organization also occupying the CIO role. So that, the fusion of focus and attention, important for continuity at the time, it's not ideal for driving maximum year-over-year growth in the sales function. And what I'm saying is that the new role created is fully dedicated to managing the sales organization, the sales process. We had a number of open positions that were unfilled in the GovDeals segment actually that are now built. And I think when you look at the growth opportunity, we continue to be very optimistic, both the U.S. and Canada, a very receptive to what we're doing. And we're seeing that growth is picking up as we move into fiscal '20.

And then would you categorize fiscal '20 as another year of investment and what you're doing in the sales side, in the marketing side? And then maybe obviously if you're investing in sales, you're adding to your sales force. Is that correct? But what are you also doing on the marketing side that we're looking at a higher level investment in those categories versus where we had there?

Well, a couple of things. Clearly, products in the platform are the focus of our investment efforts and we will continue to make aggressive investments in those areas, because we feel like there is market demand for the service offering. We've taken many Fortune 500 accounts where we were getting a sliver of their volume and expanding the volume we can manage and sell because we're offering them technology enabled self-directed tools and analytics tools, allowing their organizations to be more in control of the process. So we're very excited by that. In terms of the sales organization, yes, we will be adding headcount to both the commercial and the government verticals. These could be offering, both fully managed support for clients that ask us to be involved in the asset management and project management functions, but also inside sales teams that will be enabling sellers to act as the tools and will help set them up and train them, will be a lighter touch. And we believe that these lighter touch lower-fee offerings have a role in the marketplace that people are hungry for those types of options, and are excited to have a sales organization that's geared to providing that type of support. In terms of the marketing tech stack, I think there are two aspects to that. One is that the buyer facing side creating more automated, algorithmic tools to match product with buyers based on their observed behavior, that sort of machine driven approach to asset promotion and asset marketing is the best practice and one that will increase our recovery rates. We'll do so leveraging the large store data that we have on our own transactions and third-party data sets. And our marketing team has continued to build that capability. Heading into the New Year,…

[Operator Instructions] All right, we have a question from Gary Prestopino, Barrington Research. Please go ahead.

I just had two more follow-ups and then I'll jump off. In terms of the scrap contract, has that been totally wound down and that's not going to have any GMV effects in fiscal '20?

That is right. The fiscal wind down -- the wind-down of the scrap contract will not impact fiscal '20. There will be year-over-year drag on a comparative basis, but we are out of that contract and fully removed from the legacy DoD business.

When you're saying the drag, is there -- there is a drag on GMV but is it a big drag on profitability, Bill?

No, we've realigned to remove direct costs associated with that contract.

And then also on -- Jorge, I think on -- you were going through your narrative you said the self-directed business was up 40%. Was that just in the retail category, or s that across the board for the whole company?

That's across the board.

Can you maybe share with us what percentage of your business is now self-directed versus where it was...

We haven't disclosed or broken that out. It's not a business segment per se. But what it means is that in every conversation, we're now able to offer a continuum of solutions that helps us capture volumes that would be circumventing what we do. I believe in our investor deck, Jorge and the team have added some deltas on GMV mix by consignment versus purchase and then within consignment the portion that is self-directed. And again, where the world is going, we believe clients want to have control over various aspects of the service. And I would tell you more than half of our overall GMV is now in a self-directed business model for us.

I mean if you look at your, the metrics that you're generating. If you look at, if you put gross profit to -- revenue to GMV, gross profit to revenue, gross profit to GMV, in Q4, most of those metrics are up pretty dramatically…

Yes, exactly. When you look at our business, you're going to see higher margin business over time. That's a percent of gross profit measurements. And one of the things that -- two things to keep in mind, one is on one hand, I tried to indicate that it's a bit lumpy, so if we have a particular principal deal or purchase deal in the CAG segment then you get a bit of a mix issue. But generally speaking, the trend as we expand our self-directed solutions within the consignment business that will -- we create that volume in that leverage that is a higher gross profit margin, a higher overall margin business. Yet it, for every dollar of GMV, it generates obviously less revenue. So it's important as you have noted there that we need to keep a very close eye on, not just revenue but GMV and the margins and see the relationship as they go over time, any one quarter is a little hard to gauge, but I'll let you get into the weeks. But generally speaking, the trend is, we may have a little tempered growth on the revenue as we scale up more and more self-directed solutions, but the margin more than offsets that situation.

Thank you. And I'm not showing any further questions in the queue. I would like to turn the call back to Julie Davis for any final remarks.

Thank you. Thanks to everyone for your participation in today's call. If you have additional follow-up questions, please reach out to me. This now concludes our call. Thank you and have a nice afternoon.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.