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Liquidity Services Inc. has a market cap of $1.16 billion; its shares were traded at around $39.25 with a P/E ratio of 34.4 and P/S ratio of 3.5.
Highlight of Business Operations:On October 1, 2011, LSI completed its acquisition of the assets of Jacobs Trading, LLC. The acquisition price includes an upfront cash payment of $80.0 million, a seller subordinated 5% unsecured note of $40.0 million, stock consideration of $24.5 million and an earn-out payment. Under the terms of the agreement, the earn-out is based on EBITDA earned by Jacobs during the trailing 12 months ending December 31, 2012 and 2013. The Company’s estimate of the fair value of the earn-out as of December 31, 2011 was $8.2 million out of a possible total earn out payment of $30.0 million. During the three months ended December 31, 2011, the Company incurred and expensed $0.3 million of acquisition costs. Jacobs is a leading remarketer for the sale of surplus and returned consumer goods. Jacobs conducts its sales on a purchase model basis using its marketplace, an extensive global buyer base and product domain expertise.
Revenue. Revenue increased $30.6 million, or 40.5%, to $106.0 million for the three months ended December 31, 2011 from $75.4 million for the three months ended December 31, 2010. This was primarily due to (1) an 18.9% increase, or $3.4 million, in our scrap business, which utilizes the profit sharing model, as a result of increasing commodity prices and a higher mix of high value metals; (2) a 15.1% increase, or $3.6 million, in our surplus business, as a result of increasing property flow from the DoD and a higher mix of high value capital assets such as rolling stock; and (3) a 73.4% increase, or $23.2 million, in our U.S. commercial business as a result of the acquisitions of Jacobs Trading on October 1, 2011 and TruckCenter.com on June 1, 2011as well as several new programs for large retailers. The amount of gross merchandise volume increased $55.5 million, or 44.9%, to $179.2 million for the three months ended December 31, 2011 from $123.7 million for the three months ended December 31, 2010, primarily due to (1) the growth in our U.S. commercial and the DoD businesses discussed above; and (2) a 16.4% increase, or $3.5 million, in our state and local government (GovDeals) business.
Technology and operations expenses. Technology and operations expenses increased $3.3 million, or 26.4%, to $15.8 million for the three months ended December 31, 2011 from $12.5 million for the three months ended December 31, 2010, primarily due to (1) expenses of $0.9 million in staff and temporary wages, including stock based compensation, and consultant fees associated with technology infrastructure projects; and (2) expenses of $2.4 million from the acquisitions of Jacobs Trading and TruckCenter.com. As a percentage of revenue, technology and operations expenses decreased to 14.9% from 16.6%, primarily due to the increase in revenue, while leveraging our fixed costs, such as distribution centers.
Sales and marketing expenses. Sales and marketing expenses increased $0.7 million, or 13.3%, to $6.5 million for the three months ended December 31, 2011 from $5.8 million for the three months ended December 31, 2010, primarily due to (1) expenses of $0.3 million in staff wages, including stock based compensation; and (2) expenses of $0.4 million for the acquisitions of Jacobs Trading and TruckCenter.com. As a percentage of revenue, sales and marketing expenses decreased to 6.2% from 7.6%, primarily due to the increase in revenue, while leveraging our fixed costs, such as marketing staff.
General and administrative expenses. General and administrative expenses increased $1.5 million, or 24.2%, to $7.8 million for the three months ended December 31, 2011 from $6.3 million for the three months ended December 31, 2010, primarily due to (1) expenses of $0.5 million in staff wages, including stock based compensation; and (2) expenses of $1.0 million for the acquisitions of Jacobs Trading and TruckCenter.com. As a percentage of revenue, general and administrative expenses decreased to 7.4% from 8.3%, primarily due to the increase in revenue while leveraging our fixed costs, such as corporate staff.
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