Welcome to Liquidity Services Inc. Second Quarter of Fiscal Year 2022 Financial Results Conference Call. My name is James and I will be your operator for today’s call. Please note that this conference call is being recorded. [Operator Instructions] On the call today are Bill Angrick, Liquidity Services’ Chairman and Chief Executive Officer and Jorge Celaya, its Executive Vice President and Chief Financial Officer. They will be available for questions after their prepared remarks. The following discussion and responses to your questions reflect Liquidity Services management’s view as of today, May 5, 2022 and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact the financial results is included in today’s press release and in filings with the SEC including the most recent annual report on Form 10-K. As you listen to today’s call, please have the press release in front of you, which includes Liquidity Services’ financial results as well as metrics and commentary on the quarter. During this call, Liquidity Services’ management will discuss certain non-GAAP financial measures. In its press release in filings with the SEC, each of which is posted on its website. You will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Liquidity Services management also use certain supplemental operating data as a measure of certain components of operating performance, which they 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 now turn the presentation over to Liquidity Services’ CEO, Bill Angrick.

Good morning and welcome to our Q2 earnings call. I will review our Q2 performance and provide an update on key strategic initiatives. Next, Jorge Celaya will provide more details on the quarter. Our long-term investments and our people, products and innovation have been rewarded as we set another quarterly GMV record. More business and government organizations are interested in the digital transformation of their supply chains and we are leading this generational transformation with our trusted marketplace platforms, flexible service models and worldwide reach. Our business is very resilient in both periods of economic contraction and expansion. This attribute was on display during Q2 as we continued to provide sellers and buyers with key tools to help them respond to challenges in global supply chain operations, inflation and uneven economic growth. We grew our GMV by 34% year-over-year in Q2 to approximately $277 million, an all-time record and our seventh consecutive quarter of 20% plus annual GMV growth, the continued relevance and leadership of our circular economy marketplace platform and every sector of the economy is driving us closer to our objective of $1.5 billion in annualized GMV. During this journey, our business continues to become a more asset-light capital efficient model as 87% of total GMV in Q2 utilized the consignment pricing model, up from 82% last year. GovDeals’ GMV increased 62% during Q2 driven by record new account acquisitions as more agencies choose our digital marketplace solutions over traditional sales methods for a broader array of assets, including vehicles, heavy equipment and real estate. The increase also reflects the inclusion of our acquired bid for assets online real estate marketplace and higher recovery rates in selected categories due to macroeconomic factors and strong buyer performance. Together, personal property and real estate represents an over $3 billion addressable…

Good morning. Our second quarter results reflect continued strong performance from our GovDeals segment, including growing contributions from bid for assets and its real estate vertical as integration progresses. Consistent with the first quarter, our results also include incremental resources in our sales, marketing and technology groups, investments in our new all-surplus deals growth initiatives, and expanding the operating capacity of our RSCG or retail segment in efforts to diversify our geographic reach, client base and sales channels. As global supply chains continue to experience turbulence in the near-term, we expect consignment transactions to be a driver of our GMV growth throughout the remainder of the fiscal year. We completed the second quarter of fiscal year 2022 with $276.9 million in GMV, a new quarterly record and we have exceeded $1 billion in GMV on a trailing 12-month basis. GMV was up 34% from $207.3 million in the same quarter last year. Revenue for this first fiscal quarter was $68.3 million, an 11% increase compared to the same quarter last year. As previously highlighted, our long-term strategy involves seeking higher growth in consignment GMV sales, while continuing to offer purchase options and other value-added services to our seller clients. The higher growth and proportion of consignment, including real estate sales has the effect of lowering our ratio of revenue as a percent of GMV and causing revenue to grow at a lower percentage than GMV despite market and market share increases. Gross profit as a percent of revenue remains steady within the most recent range. Net income for this second quarter was $12 million resulting in diluted earnings per share of $0.35. This includes an $8.5 million or $0.25 per share non-cash gain from a reduction in fair value of the bid for assets earn-out liability as certain flows of…

Thank you. [Operator Instructions] And our first questions from Gary Prestopino from Barrington Research.

Hi, good morning, everyone. Whole series of questions here. First of all, Bill, did you have what was the organic growth in GMV for the quarter?

If you’re looking at the bid for assets piece, we’re still in the mid to upper teens close to 20%.

Okay. That’s without bid for assets, right? Or you, or that’s like, like bid for assets.

Correct.

Okay, alright. And then could you maybe talk a little bit about what is going on in the RS and CG segment? You know, the shift in what you’re processing and whatever, is it because of the fact that people are not locked down in their houses, there is less big ticket items being returned and more whatever that might have more touch points or less profitable to you.

That’s right. And we noted that in the call you’ve seen that pervasively in retail supply chain trends instead of buying high ticket loan and garden equipment to have a staycation at home, or do major renovation with building tools. And maybe in-home entertainment, people have shifted spending to out-of-the-home travel and entertainment or travel and experiences. And so we have very strong activity in reverse supply chain, just that the average order size, I think, of the original purchase has come down and people have you know, been shifting dollars into other categories.

Okay. So alright. And this would, will probably be continuing, on a comparable basis throughout the year. Correct. Cause nothing’s really going to change there unless, I mean, with the new facility that you built out in Pennsylvania, was that really a function of signing new clients or is that existing clients that you know, want to try and process more products through you?

The initial underwriting of the expansion was based on existing clients who were close closer to high density population centers, selling more omni-channel on the channel online. So it’s a great example of, for penetrating these relationships, but we’ve picked up new business since we’re there. So I think the good news for our growth plan is we’re getting traction with many new clients helping us offset what I think everyone would agree was sort of a unique set of circumstances in latter part of 2020, 2021 with significant dollars being spent online and for major cocooning activity with a lot of high ticket items. There is a pervasive need for the management and sale of returns where the, the leader in that space, Gary and we’re making a lot of progress growing the business.

Okay. I’ll let somebody else go. And then I have some further questions.

Actually, Gary, we have no further questioners, so please.

Okay. I got it. That’s fine. Thank you for that. So then in the CAG segment I think Bill, you mentioned that there were some canceled projects, sales coming out of China with COVID and all that, but you expect that growth in the back half of the year. Does that mean when you’re saying canceled? Does that mean they were pushed back or did they go away?

Deferred. Delayed.

Okay. So you feel, you feel like they’ll come into the fold in the next 6 months?

Yes.

Okay. Alright. So and then on your head count, which was up 23%, are the majority of that those additions, sales and marketing personnel to support your, your expansion activities, growth activities?

Yes. Three areas we noted sales demand generation, which is a marketing function supporting that sales effort and the technology product development function. In areas like Machinio, we’re building out more services, we’re having great success with our self-directed programs. And so we’re continuing to provide ways to make it easier for people to list and sell and transact in the capital assets, heavy equipment category, which is another bright spot for us. Overall, we’re seeing very, very good adoption of the self-directed consignment model in areas like heavy equipment and real estate.

Okay. So, then as we look at the expense line, Jorge, as a percentage of say total revenues. I don’t have it broken down any other way. Would those levels that we see in Q2 basically kind of hold for the, within reason for the rest of the year or is it more or less those absolute levels will stay there?

Gary, we also have because of the Pennsylvania facility and the growth in our all surplus deals, Phoenix location, our headcount in the operations line is also part of that, that growth in headcount. But jump so tech and Ops, sales and marketing will grow in absolute dollars each quarter moderately, I would say. Our gross profit certainly should outgrow our operating expense increase, but the actual dollars as of this point, I don’t see flat. I see just slightly up each quarter.

Okay. And then just lastly…

Variable expense.

Okay. And then just lastly, on your cost of goods sold is that number is reflective of just what you do on a purchase basis for product. Is that the spread there, or are there other expenses in there that deal with the fee generation revenue.

That that’s basically it, but we can take a quick peek at the, at the 10-K you’ll see the, the other details, but it’s probably not worth going through them on this call.

But no, that’s fine. That’s fine. I just want to get some idea cause it seems to be running higher than your fee-based revenue growth. And I just wanted to get, I can look at that myself. Alright. Thank you, guys. Appreciate it.

Okay, thank you, Gary.

Bye-bye.

And we have no more questions.

Operator, you can conclude the call.

Okay. Thank you. And thank you, ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.