Welcome to the Liquidity Services, Inc. Fourth Quarter of Fiscal Year 2025 Financial Results Conference Call. My name is Liz, and I will be your operator for today's call. Please note that this conference call is being recorded. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. I will now turn the call over to Michael Patrick, the services vice president and controller.

Good morning. On the call today are William Angrick, our Chairman and Chief Executive Officer, and Jorge Celaya, our Executive Vice President and Chief Financial Officer. They will be available for questions after their prepared remarks. The following discussion and responses to your question reflect management's views as of today, November 20, 2025, 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 filings with the SEC, including our most recent annual report on Form 10-Ks. As you listen to today's call, please have the press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. During this call, management will discuss certain non-GAAP financial measures. In our press release and filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP measures, including the reconciliations of these measures with their most comparable GAAP measures. Management also uses certain supplemental operating data as a measure of certain components of operating performance, which we also believe is useful for management and investors. This supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results. At this time, I will turn the presentation over to our Chairman and CEO, William Angrick.

Good morning, and welcome to our Q4 earnings call. I will review our Q4 performance and the progress of our business segments. Next, Jorge Celaya will provide more details on the quarter. Our outstanding Q4 results reflect the depth, scale, and liquidity of our proprietary e-commerce marketplaces, value-added software solutions, and our team's customer-focused culture. Our ability to connect buyers and sellers in the circular economy across hundreds of diverse categories, ranging from multimillion-dollar industrial and construction assets to vehicles and retail consumer goods, is a key competitive advantage and positions us well in any economic climate. We continue to expand and enhance our capabilities, including our recent integration of a new payment solution to improve the buyer experience and operational efficiency of our marketplaces. Our growth in Q4 reflects the strong operational execution of our RISE strategy, as GMV, adjusted EBITDA, and our adjusted EPS grew 12%, 28%, and 16% year over year, respectively, all above our guidance range. Our Q4 adjusted EBITDA margins as a percentage of direct profit grew over 310 basis points over the prior year to 32.8%, reflecting a continued mix shift to higher-margin consignment and software solutions and the operating leverage of our technology platform. For the full year fiscal 2025, Liquidity Services made strong financial and strategic gains, and we see a clear path to our midterm goals of $2 billion in annual GMV and $100 million of annual adjusted EBITDA. Let me now cover some of the key highlights from our fiscal year 2025. We achieved a record $1.57 billion in GMV in fiscal 2025, eclipsing the $1.5 billion GMV milestone for the first time and achieved revenues of nearly $477 million, up 31% year over year. We achieved these marks with an increasingly diversified business as every Liquidity Services business segment…

Good morning. For the full year fiscal year 2025, we surpassed $1.5 billion of GMV, setting a new annual record. We exceeded our rule of 40 goal with solid double-digit top-line growth and strong adjusted EBITDA growth of 25% to $61 million, the highest profitability in over a decade. And on the heels of the past four years, where we consistently grew adjusted EBITDA steadily from $43 million to $48 million, fiscal year 2025 reflected our capacity for operating leverage with our resilient diversified business model that delivered the $61 million this year in adjusted EBITDA, which was a 300 basis point improvement in our adjusted EBITDA margin as a percent of our segment's direct profit. Our cash flow performance also remained strong, generating $66.8 million in operating cash flow and achieving significant free cash flow conversion, which on average over the last five years has exceeded 100% where free cash flow is operating cash flow less CapEx. Our business model is focused on key financial objectives, including growing our segment's direct profit, a metric that serves to equalize the effect of growing consignment versus purchased GMV streams. We therefore also focus on adjusted EBITDA as a percent of our segment's direct profit. Consistently serving our customers with reliability while providing technology-enabled solutions and seller access to our significant buyer base globally has enabled our market share gains. Investing in our marketplaces and embedding leading technologies into our platform, including AI enhancements, reflects our commitment as industry leaders. Our fiscal year 2025 financial results are highlighted by strong year-over-year growth across each of our key metrics. Our consolidated GMV increased 15% and revenue grew 31% to $476.7 million, reflecting the significant purchase volumes in our retail segment earlier in the year. Our segment's direct profit in total grew 13% year…

Thank you. We will now begin the question and answer session. If you have a question, please press 11 on your touch-tone phone. If you wish to be removed from the queue, please press 11 again. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Gary Prestopino from Barrington is on the line with a question.

Good morning, William and Jorge. Several questions. Hey, William, you know, good margin improvement here. You mentioned a new payment solution that is lowering, I guess, your cost of transactions. Could you maybe go into a little more detail on that and some of the things that also, you know, are positively impacting that adjusted EBITDA margin you are generating?

Sure. Thanks for the question. I think one is just inherent operating leverage we are generating and putting more volume through our fixed cost, Gary, which is the beauty of a two-sided marketplace once you get the scale. Additionally, this is all with respect to the margin question. Like many firms, you know, we are studying and integrating AI-assisted technologies to maintain or improve quality of service but also reduce cost or efficiencies. We are seeing that play out in a number of areas: customer service and customer support, onboarding, identifying, recruiting, and onboarding employees, the payment solutions process, which does incorporate both some internally developed and third-party functionality to streamline and enhance how buyers pay. You know, we want to make sure that buyers have the full range of payment options, ease of sign-on, ease of payment, tracking their invoice. And because we are able to spread that investment over now $1.6 billion of GMV, you know, every basis point of savings is starting to multiply and reflect in our EBITDA margin. Also, we will see continued enhancement of our search and the matching of assets to buyers based on predictive analytics and also the historical record of bidding and buying. We are also introducing AI tools with regards to seller asset listing processes. We can enhance and improve and streamline that process for both third-party seller organizations and our internal organizations, which just means that we are enhancing and automating the data that is tagged to the assets being uploaded. It is a lot less manual and a richer description, and this is a huge opportunity in a business like ours where, you know, each asset has some unique provenance or unique condition categories. So we are excited about that. Part of that is in the seller asset management tool set I mentioned on the call, SAM, which touches every seller in our government business and our industrial CAG business. We rolled that out in Canada as a phase one to get feedback from clients on what they like, what they would continue to put in our suggestion queue, and with that feedback, we are now taking aim at the much larger US market. So that is another part of the lift of EBITDA. So there is just a ton of opportunity for our business, combining continued scale, continued enhancement of the buyer and seller experience, and then the use of AI.

Okay. But when you say a new payment solution, you are not, like, now allowing, you know, some of your buyers to use something like, say, a buy now pay later. You got a better rate on a credit card or credit agreement. These are all internally developed things.

These are payment processing capabilities. We are not providing credit or a new payment solution like you mentioned, you know, buy now, pay later. That is not what this is about. This is about taking the combination of third-party available technologies, integrating them into our processes, and so it is a software-driven upgrade. It has nothing to do with providing financing solutions.

Okay. And then your guidance for consignment sales as a percent of GMV is about, what, 82% for Q1. As the company is evolving, do you think that can stay in the low eighties because that definitely also leads to some margin improvement, obviously, because...

Yeah. I would expect that to tick up over time, Gary.

Okay. And then lastly, RetailRush. I think you said you were doing this in Columbus. Is that right? Are you expanding this nationwide?

We have a single fulfillment activity in Columbus. It is an online consumer auction experience, and we are testing it in Columbus. As the customer, the winning bidder on the platform is responsible for picking up the item that they won. And we are using our own internally developed software to, essentially, on an expedited basis, screen and list and then make available for customer pickup in a location in Columbus. There absolutely is application for both internal and third parties to use the software and the platform nationally, but we are working on a prototype and a test in a single location prior to expanding beyond the single location.

Okay. Thank you. George Sutton from Craig Hallum is on the line with a question.

Thank you. Nice results. So, for those listening or reading the transcript versus listening, recognize that William has a cold. So I am curious. You mentioned diversification of GovDeals in a variety of different routes that you are taking there. Can you just walk through what is the goal with GovDeals? How broad do you see that being? When you talk about government adjacent, what kinds of things are you talking about?

Sure. Well, the public sector agencies that sell on GovDeals have a recurring flow of assets, and in some cases, they may use assets that they do not own. And in that case, we would be using the platform to service lessors who own the assets that the governments might lease or service providers that may take possession of assets at some point in the process. And when you look at the used vehicle market, the construction equipment market, which is a big part of GovDeals' historical liquidity and volume, adjacent sellers in the markets that we are serving, when I say markets, you have physical locations. They are asking us, hey, how can we get involved here? And so we are very deliberate on who we can invite and support in the marketplace. And we do segregate the account management when a commercial seller comes on board. So if you are leasing equipment, maybe it is construction equipment, and you have some government accounts, you may be interested in selling with us. And when I highlighted that our heavy equipment category in CAG for commercial sellers has grown from essentially a startup to over $100 million of GMV, that is a great example of a government-adjacent market. Sellers on AllSurplus, they have government clients and commercial clients, and they have a lot of used equipment, and they want to have a great experience and good recovery. So we are basically giving the same value prop to them that we have delivered successfully for over twenty years on the government side.

Gotcha. Okay. That is helpful. One other question on retail. And just want to make sure we understand the focus on consignment versus purchase. You mentioned new recurring program flows. I assume you are referring to consignment flows. Can you give us kind of a broader picture of the competitive landscape and why you are heading in this consignment direction?

Well, people who followed our business for a long time know that when we started in this business, we offered a consignment-only solution. And the market spoke and said, we want value-added services. We have some accounting reasons or SOX control reasons. We want to be able to use a purchase model arrangement. And so from really the beginning of the business, we have been agnostic. We will provide the bundle of services and different pricing models depending on what you need. And we will share the data. We will give you our advice, and the advice has always been you, the seller, you can make more money selling on consignment with our platform because you are sharing and retaining most of the upside. And I think people that have become more comfortable with our scale and service and transparency are more comfortable with consignment. You know, the old SOX rule was if you have your inventory leaving your facility, you are losing physical custody of that. You might only allow that to happen if you have a purchase invoice. And that really has nothing to do with the economics. It has to do with financial controls, account controllership. So I think that is the bias that has existed in the retail world for a long time. We have changed the narrative there because, you know, we can track that license plate of every item, and the client can see that virtually on their dashboard. And when we sell it, you know, they keep the majority of that net proceeds. And that is where I think the market is going. We facilitated that transition because of our success and ability and willingness to share data. And so, I would say the majority of new client programs coming online with us are consignment-oriented, and we are excited by that.

Perfect. Okay. Thanks, guys. Appreciate it.

That will conclude today's question and answer session. This concludes today's conference call. Thank you for participating. You may now disconnect.