Liquidity Services (LQDT) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Aug. 6, 2026 at 10:30 a.m. ET

CALL PARTICIPANTS

• Vice President and Controller - Michael Patrick
• Chairman and Chief Executive Officer - William Angrick
• Executive Vice President and Chief Financial Officer - Jorge A. Celaya

TAKEAWAYS

• Gross Merchandise Volume (GMV) -- $453.0 million, representing a 10% increase year over year and a new quarterly record.
• Total Revenue -- $129.6 million, an 8% increase from $119.9 million in the prior year quarter.
• GAAP Net Income -- $10.4 million, up 41% year over year from $7.4 million.
• GAAP Diluted EPS -- $0.32, a 39% increase from $0.23 in the third quarter of 2025.
• Non-GAAP Adjusted Diluted EPS -- $0.45, representing 32% growth year over year.
• Non-GAAP Adjusted EBITDA -- $22.0 million, a 30% increase reflecting improved transaction margins and operating leverage.
• Rule of 40 Score -- 51%, up from 42% a year ago, measuring the combination of growth and profitability.
• Cash and Short-Term Investments -- $231.1 million as of June 30, 2026, with the company maintaining zero financial debt.
• Retail Supply Chain Group (RSCG) GMV -- $121.6 million, a record 19% increase year over year driven by expanding consignment relationships.
• RSCG Direct Profit -- $25.2 million, a 30% increase resulting in a direct profit margin of 29%.
• GovDeals GMV -- $274.0 million, a record 9% increase year over year supported by record unique sellers.
• GovDeals Direct Profit -- $24.2 million, up 9% year over year with a 95% margin on total revenue.
• Capital Assets Group (CAG) GMV -- $57.5 million, a 1% decline year over year primarily due to the timing of several large projects.
• CAG Direct Profit -- $9.6 million, up 13% year over year due to stronger pricing and a favorable project mix.
• CAG Take Rate -- increased 270 basis points year over year, reflecting higher-margin consignment projects in heavy equipment and industrial verticals.
• Machinio and Software Solutions Revenue -- $5.4 million, a 4% increase driven by subscription growth and pricing.
• Registered Buyers -- 6.4 million at the end of the quarter, representing a 9% increase over the prior year.
• Completed Transactions -- 334,000, a 17% increase year over year.
• Auction Participants -- 1,046,000, a 5% decrease year over year as the company shifted toward higher-value asset categories.
• Consignment Mix -- 83% of consolidated GMV for the third quarter, compared to 17% for purchase-based transactions.
• GovDeals Bidders -- new bidders increased 42% while conversion rates improved 35% despite lower marketing spend.
• Q4 GMV Guidance -- estimated between $415 million to $455 million.
• Q4 Adjusted EBITDA Guidance -- projected to range from $22 million to $25 million.
• Q4 GAAP Diluted EPS Guidance -- expected to range from $0.30 to $0.39 per share.
• Capital Expenditures Guidance -- estimated between $2.5 million to $3 million for the fourth quarter.

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RISKS

• Angrick noted that Capital Assets Group GMV declined 1% due to project timing and lower volumes in EMEA, APAC, and selected North American industrial markets.
• Celaya warned that both GAAP and non-GAAP earnings are expected to reflect a higher effective tax rate approaching the low to mid-30% range for the fiscal fourth quarter.

SUMMARY

Management discussed the execution of the RISE strategy, which focuses on maximizing recoveries, increasing transaction volumes, and expanding services. The company reported record performance in the Retail Supply Chain Group and GovDeals segments, driven by increased buyer participation and the expansion of consignment relationships. Strategic initiatives include the use of machine learning and artificial intelligence to improve marketplace efficiency and buyer conversion rates. The company is tracking toward a $2 billion annual Gross Merchandise Volume target while maintaining a balance sheet with zero debt and $231.1 million in cash and investments.

• Angrick stated, "Our strategy is bringing measurable results," noting that GAAP diluted earnings per share increased 39% year over year.
• The GovDeals segment reached a record for unique sellers, marking the seventh consecutive quarter of seller growth.
• CEO Angrick described the use of machine learning as "pattern recognition, augmented with an algorithm" to improve buyer conversion and retention by identifying lookalike buyers.
• The company is facilitating the sale of a 265,000-square-foot county courthouse in Miami Dade County, which management identified as an institutional-quality asset.
• Machinio reported a 95% year-over-year increase in its marine vertical, contributing to total system annual recurring revenue growth of 26%.
• Management indicated that delays in several large projects in the Capital Assets Group during the third quarter were due to timing rather than project losses.

INDUSTRY GLOSSARY

• RISE Strategy: A management initiative focused on Recovery, Increase in volume, Service expansion, and Efficiency.
• Gross Merchandise Volume (GMV): The total sales value of all transactions completed through marketplaces or other channels during a given period.
• Take Rate: The percentage of GMV that a marketplace operator retains as revenue.
• Rule of 40: A financial metric used to evaluate software and platform companies, calculated by adding the revenue growth rate and the profit margin.
• Consignment: A business arrangement where a seller provides goods to a third party to sell on their behalf, with the third party taking a commission.
• RSCG: Retail Supply Chain Group, the company's segment focused on consumer goods and retail surplus.
• CAG: Capital Assets Group, the segment handling industrial equipment, energy, and biopharma assets.
• Machinio: A global search engine platform for listings of pre-owned equipment.

Full Conference Call Transcript

Operator: Welcome to the Liquidity Services Third Quarter of Fiscal Year 26 Financial Results Conference Call. My name is Shannon, 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, Liquidity Services Vice President and Controller.

Michael Patrick: Good morning. On the call today are William Angrick, our Chairman and Chief Executive Officer and Jorge A. 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 questions reflect management's views as of today, 08/06/2026, 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 k. As you listen to today's call, please 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, 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, as available. 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, Bill Angrick.

William Angrick: Thanks, Michael. Good morning, and welcome to our earnings call. Our strong Q3 results reflect the continued successful execution of our RISE strategy, which focuses on 4 priorities. Maximizing recovery for sellers, increasing transaction volume, expanding value added services, and leveraging technology to drive operating efficiency. Together, these initiatives are producing stronger financial performance as we confidently march towards our $2 billion annual GMV target. And reinforce our leadership position in the $100 billion circular economy. Our strategy is bringing measurable results.

In Q3, GAAP diluted earnings per share of $0.32 was up 39% year over year driven by GMV growth of 10% year over year to $453 million GAAP revenue growth of 8% to $130 million direct profit growth of 17% year-over-year to $3.8 million and adjusted EBITDA growth to $22 million. Our rule of 40 score improved to 51% up from 42% a year ago. While cash and short term investments increased to $231 million. These results represent a 10th consecutive quarter of year over year EBITDA growth. Our retail segment GMV reached a record $122 million increasing 19% year over year. Growth was driven by expanding consignment relationships, and improved recovery rates across major programs.

Our managed direct to consumer consignment business nearly doubled from the prior year, and our international clients continued their strong growth trajectory. These programs demonstrate how our flexible service offerings help large retailers recover more value, from surplus inventory while improving speed, transparency, and sustainability. Finally, our retail-rest GMV grew sequentially by 50%, reflecting continued progress attracting demand to our proprietary D2C online auction platform. Our GovDeals segment achieved record GMV of $274 million up 9% year over year, and we set a new quarterly record for unique sellers, marking the 7th consecutive quarter of seller growth. Public sector clients continue to rely on our GovDeals to maximize proceeds from surplus assets.

As demonstrated by several notable transactions during the quarter, including a $7.7 million State Department of Transportation heavy equipment sale, a $2.5 million generator auction for a federal client, and a $2.6 million Canadian Our strong record of performance has allowed us to win increasingly lucrative engagements. For example, Miami Dade County is selling their landmark 28 story, approximately 265 thousand-square-foot county courthouse in the heart of Downtown Miami on our GovDeals marketplace. GovDeals also established new records for bidder and seller engagement including the most unique bidders in a single month, and most assets available for sale on a single day our buyer acquisition and engagement initiatives continue to produce strong results.

During the quarter, GovDeals buyer registrations increased 23%. New bidders increased 42%. And conversion rates improved 35% even as marketing spend declined. These gains reflect investments in AI enabled marketing, personalization, buyer education, and improved marketplace experiences. These milestones illustrate the growing network effects of our platform and our ability to connect more buyers with more inventory than ever before. Our capital assets group segment continued to demonstrate the strength and resilience of its marketplace platform during Q3, While quarterly results were impacted by the timing of several large projects, CAG delivered another quarter of year over year direct profit growth, expanded its client base, improved pricing, performance, and strengthened its pipeline entering the fourth quarter.

Importantly, these large project delays during Q3 reflect timing issues rather than project losses. And if strengthened our outlook for upcoming quarters. During Q3, CAG generated $57.5 million of GMV and $9.6 million of direct profit, while GMV declined 1% year over year primarily due to project timing and lower volumes in EMEA, APAC, and selected North American industrial markets. Direct profit increased 13% year over year as a result of stronger pricing and mix. 1 of the most encouraging indicators during Q3 was our continued improvement in CAG unit economics. CAG's take rate increased 270 basis points from a year ago, reflecting higher margin consignment projects and strong execution across our heavy equipment fleet and industrial verticals.

This helped offset the impact of lower transaction volume and enabled direct profit growth despite a roughly-- New CAG account activity remained healthy with 175 new accounts signed during Q3, including a growing mix of recurring and annuity style relationships. CAG secured several notable customer engagements during the quarter that reinforce our leadership position across industrial, energy, biopharma, and manufacturing sectors. Recent wins reflect our competitive advantages, including the largest buyer base, within these industrial verticals, our global execution capabilities, our differentiated sell-in-place offering for heavy equipment fleet owners, and our asset zone redeployment platform. On the buyer side, demand for CAG industrial used equipment, energy assets, and heavy equipment remained robust, particularly in North America.

Where bidder participation across auction events continued at elevated levels during Q3. Our Machinio business also delivered strong momentum with 26% year-over-year and vertical serve Let me Ladies and gentlemen, please stand by.

Operator: Your conference will resume momentarily. Once again, please stand by. Your conference will resume momentarily.

William Angrick:

Operator: Once again, please remain on your line. Your conference will resume momentarily. Once again, please remain on your line. Your conference Ladies and gentlemen, please remain on your line. Sir, you may resume your conference.

William Angrick: Finally, our Machinio business also delivered strong momentum. With total system ARR increasing 26% year over year and our Machinio marine vertical growing 95% year over year. We continue to modernize our platform ecosystem through auction.io and related software initiatives. During the quarter, we improved user experiences across multiple liquidity services marketplaces and prepared new marketplace capabilities designed to support future growth. Looking ahead, liquidity services is well positioned to continue delivering profitable growth as we reach our $2 billion annual GMV target. Our expanding buyer and seller networks, strong debt free balance sheet, technology investments, and growing portfolio of services, provide multiple avenues for value creation.

Most importantly, we remain focused on helping our customers maximize recovery, improve sustainability outcomes, and unlock value from their assets. On behalf of our team, thank you for your continued support and confidence. in Liquidity Services. I will now turn it over to Jorge for more details on our results and near term outlook.

Jorge A. Celaya: Good morning. As Bill indicated, our consolidated results for the fiscal third quarter of 2026 included a 10% increase in GMV to $453 million setting a new quarterly record. With consolidated revenue of a $130 million, up 8%., GAAP earnings per share was up 39% to 32¢ per share. Non GAAP adjusted earnings per share was $0.45, Up 32%, and non GAAP adjusted EBITDA was $22 million up 30%. This quarter demonstrates how we have been executing on our strategy with the strength of our diversified marketplace platform and how mix and scale can be leveraged for strong fall-through to profit. Retail and GovDeals each achieved record levels of volume and profitability.

In retail, our focus on buyer liquidity and channel optimization drove expanded margins, while GovDeals continued to scale by expanding marketplace adoption and services. These results underscore the strategic advantage of scale, our diversification, platform positioning, and proven service offerings that our customers count on. Which increasingly position Liquidity Services as a 1 stop platform for sellers and buyers to transact across all asset classes. We ended the fiscal third quarter of 2026 with $231 million in cash, cash equivalents and short term investments. We continue to have zero debt and we have approximately $24 million in available borrowing capacity under our credit facility.

At the end of this fiscal third quarter, we had $15 million remaining from our authorization to perform additional share repurchases. Turning to our fiscal third quarter segment performance, compared to the same quarter last year. Our RSCG or Retail segment increased GMV by 19% revenue by 8%, and direct profit by 30%. Each setting a new quarterly record. Reflecting an expanded buyer base for low touch purchase flows, as well as an increased mix of consignment flows, all while maintaining operating leverage. Our GovDeals segment increased GMV 9% revenue by 7%, and direct profit by 9%, each setting new quarterly record.

Performance was driven by continued expansion of our buyer and seller base and increased adoption of value-added services, with a record high number of unique clients who sold and customers who bought on the platform during the quarter. In our Capital Assets Group or CAG segment, GMV decreased 1%, while revenue increased by 18% and direct profit increased 13% driven by a favorable mix of high take rate projects across multiple regions. Machinery and software solutions combined to increase revenue 4% and direct profit by 3% with a focus on transformational initiatives and expanding service capabilities. Moving on to our fiscal fourth quarter outlook.

We expect to complete our full fiscal year 2026 with continued annual growth across all key metrics. Our guidance positions us for the highest annual fiscal year adjusted EBITDA in 13 years. For the fiscal fourth quarter of 26, we expect continued strong profitability led by our retail supply chain group solid performance from GovDeals, and growth in CAG. GovDeals is expected to remain a major contributor to consolidated profitability supported by continued marketplace adoption and seller activity. In retail, expanded channel placement, current backlog, product mix, and higher demand during the fiscal fourth quarter are expected to support continued strong direct profit performance with operating leverage despite anticipating sequentially lower GMV and revenue for retail.

Our capital assets group has a strong pipeline of international project-based work and continued momentum in its North American heavy equipment category. On a consolidated basis, consignment GMV for the fiscal fourth quarter is expected in the mid-80s as a percent of total GMV. Consolidated revenue as a percent of GMV is expected to be in the mid-20s. And total segment direct profit as a percent of consolidated revenue is expected to be in the mid-50% range. Resulting in the improved direct profit margins year over year from the expected changes in mix. These ratios can vary based on overall business mix including asset categories in any given period.

Management's guidance for the fiscal fourth quarter of 26 is as follows. We expect GMV to range from $415 million to $455 million. We estimate non GAAP adjusted EBITDA to range from $22 million to $25 million GAAP net income is expected in the range of $10 million to $13 million with corresponding GAAP diluted earnings per share ranging from $0.30 to $0.39 per share. Non GAAP adjusted diluted earnings per share is estimated from $0.41 to $0.50 per share. Both GAAP and non GAAP earnings per share are expected to reflect a higher effective tax rate approaching the low to mid-30s for the fiscal fourth quarter Of 2026.

The GAAP and non GAAP earnings per share guidance assumes that we have approximately $33 million fully diluted weighted average shares outstanding for the fiscal fourth quarter of 2026. And capital expenditures are expected to be between 2.5 to $3 million for the fiscal fourth quarter of 2026.

William Angrick: Thank you, and we will now take your questions.

Operator: Thank you. We will now begin the question-and-answer session. If you have a question, please press 11 at this time. 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. George Frederick Sutton from Craig Hallum is on the line with a question.

George Sutton: Thank you. Great results, guys. So a couple metrics I found interesting. Registered buyers up 9%. Transactions up 17%, but your auction participants were down 5%. It sort of sounds like an 80-20 rule play here, but I am just curious looking at that auction participant number particularly, how do you market differently, or how do you put more pressure on that statistic? Going forward?

William Angrick: Well, we talk about capturing the full value within client engagements and accounts. So we have moved upstream to capture higher value assignments and asset categories, which on balance has moved our average GMV for lot per lot closed up. it is important to get the number of unique bidders per lot at a healthy level that has been maintained. So if we have fewer lots at higher value, that number of auction participants can tick down but GMV can still grow, and we can have a very efficient business. The mix will vary quarter to quarter, for example, when you are selling heavy equipment fleet for millions of dollars, and maybe fewer low value individual consumer items.

That could actually result in mathematically auction participants going down because you have fewer lots sold in a given period, but the GMV can be higher. So we are very dialed in at the asset category level and at the unique lots sold level to make sure we have the right buyers bringing competitive liquidity to each of our seller assignments. And we have benefited, as I called out, despite limiting marketing spend, we are seeing better yield and better recovery rates. And recovery rates, that is the R in RISE. That leads the way to a more efficient business model.

George Sutton: Gotcha. In your press release, you mentioned the smart use of machine learning AI, and software. To drive a lot of these improvements. I wondered if you could just point to a couple of the more tangible examples where you are seeing that impact.

William Angrick: Well, it is it is pattern recognition, augmented with an algorithm. So we know who is browsing, you know, every moment On our marketplaces and who are the lookalike buyers that should be bidding on lots based on relationships of asset classes if I am looking at a forklift, I probably need to be seeing other material handling equipment if I am looking at over the road vehicles, I want to see all of the commercial heavy equipment items. Marine assets that we have been growing within Machinio system. We have been able to cross pollinate legacy LSI buyers for marine assets with new dealer customers on Machinio.

And so it is a combination of more browsing on the sites, good organic traffic, and then higher conversion rates to show browsers the right equipment, and then that evolves into registration, evolves into a bidder. And then eventually that drives recovery rate and higher buyer participation and retention. And so we are pleased that fine tuning this algorithm has at least improved retention, which means we are doing a good job showing buyers something that is relevant to their interests. Most of our buyers are business oriented, so they do not want to waste time. And they want to see things that bring value to their supply chain or their operation. And that is exactly what we do.

And there is also importantly a trust factor. You know, being in business as long as we have, you bring credibility, bringing blue chip clients with well maintained, well documented assets to the marketplace, George, all allow us to improve that relationship with buyers. And then you overlay this orchestration of AI-enabled automation. enabled automation. It just means that you are doing things at scale with less cost.

George Sutton: Gotcha. Well, the algos are probably picking up that Logan and I have been actively watching the Miami courthouse auction. First, a comment. Make sure you are in front of the Ken Griffin folks. They came in some money recently and may want a place to hang out. But I am curious if you can give us any perspective on that auction specifically. We have seen the appraisal values, but any sense on that auction from your perspective, it could Provide a meaningful bump in Q3.

William Angrick: Well, there are a couple elements there. 1, it just shows the level of trust we have earned with our clients, particularly I think 1 of the most discerning client bases, which are government agencies, government agencies entrusting us with the most valuable jewels in the crown type of assets. Like this Gothic design 1.92 thousands office building shows that we have a tremendous amount of performance and reliability.

So that is point 1.2. it is also showing that we can move up into very high value assets and execute a well designed go to market strategy getting the right buyers on the platform who are-- we are talking about, you know, we are talking about, you know, 30 million plus value here So there is a wide range of activities that go on to support that. We think that is an institutional quality asset, institutional quality buyers. And certainly, we want to make sure they get you on the mailing list if that is a condo conversion for you and your team to have a second place to come, you know, when it is cold up north.

But I think the thing about real estate is it is a very fragmented business. We are very well known and trusted within public sector agencies, federal state, and local. So we think the real estate vertical continues to offer growth opportunities and then we have expanded services. You know, that S in RISE, service expansion, we have expanded services in tax lien, and judicially foreclosed real estate through sheriffs. And other law enforcement channels that also augment this type of program. So we will see the results just like you. You can log in and you know, that auction in Miami will be coming to a head in a few weeks in August. And we are excited. Great.

George Sutton: it is only cold 8 to 9 months. Per year in the North, just to be clear. But, good luck with the auction. Thanks, guys.

William Angrick: Thank you.

Operator: Thank you. We have no further questions at this time. This concludes today's conference. Thank you all for your participation. You may now disconnect.

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