Liquidity Services (LQDT) Misses Q4 EPS by 2c

Liquidity Services (NASDAQ: LQDT) reported Q4 EPS of $0.13, $0.02 worse than the analyst estimate of $0.15. Revenue for the quarter came in at $118.4 million versus the consensus estimate of $105.1 million.

Liquidity Services sees Q1 2015 EPS of $0.16-$0.22, versus the consensus of $0.25.

Business Outlook

It is difficult for us to forecast the sales and margins of our business in FY-15 while we are awaiting the final specifications and timing of the work we will be performing under the new DoD surplus contract. In addition, our DoD business has seen significant changes in the volume and mix of property we handle which has reduced sales values and increased costs. Global economic conditions have improved, however our overall outlook remains cautious regarding our commercial capital assets business due to volatility in capital spending patterns. Our retail supply chain business has seen significant changes in consumer spending habits, which have been affected by continued weakness in the consumer goods vertical, as a result of increases in payroll taxes, and continued high unemployment, resulting in decreased spending and decreased pricing in the secondary market. In some cases, the mix of property received under selected retail client programs is unpredictable, resulting in margin pressure and actions on our part to improve the terms under which we do business. Lastly, we plan to further allocate management time and resources to accomplish our Liquidity One transformation program which may result in reduced productivity and growth during FY-15 that is difficult to forecast.

In light of these factors, we have elected to change our guidance practices. Beginning with fiscal year 2015, we will provide shareholders and the investment community with GMV, Adjusted EBITDA and Adjusted Diluted EPS guidance on a quarterly basis only.

In the longer term, we expect our business to continue to benefit from the following trends: (i) as consumers trade down and seek greater value, we anticipate stronger buyer demand for the surplus merchandise sold in our marketplaces; (ii) as corporations and public sector agencies focus on reducing costs, improving transparency, compliance and working capital flows by outsourcing reverse supply chain activities, we expect our seller base to increase; and (iii) as corporations and public sector agencies increasingly prefer service providers with a proven track record, innovative scalable solutions and the ability to make a strategic impact in the reverse supply chain, we expect our seller base to increase.

The following forward looking statements reflect trends and assumptions for the first quarter FY 2015:

GMV – We expect GMV for Q1-15 to range from $200 million to $225 million.

Adjusted EBITDA – We expect Adjusted EBITDA for Q1-15 to range from $10.0 million to $13.0 million.

Adjusted Diluted EPS – We estimate Adjusted Earnings Per Diluted Share for Q1-15 to range from $0.16 to $0.22. This guidance assumes that we have an average fully diluted number of shares outstanding for the quarter of 29.8 million, and that we will not repurchase shares with the approximately $5.1 million yet to be expended under the share repurchase program.

Our guidance adjusts EBITDA and Diluted EPS for (i) acquisition costs including transaction costs and changes in earn out estimates; (ii) amortization of contract related intangible assets of $33.3 million from our acquisition of Jacobs Trading; and (iii) for stock based compensation costs, which we estimate to be approximately $3.5 million to $4.0 million per quarter for fiscal year 2015. These stock based compensation costs are consistent with fiscal year 2014.

For earnings history and earnings-related data on Liquidity Services (LQDT) click here.

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