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Liquidity Services, Inc. has a market cap of $1.39 billion; its shares were traded at around $40.47 with a P/E ratio of 31 and P/S ratio of 4.3.
Highlight of Business Operations:The Company has a Scrap Contract with the DLA Disposition Services in which the base term expires in August 2013 with two one year renewal options. Under the terms of the Scrap Contract, the Company is required to purchase all scrap government property referred to it by the DLA Disposition Services. The Company distributes to the DLA Disposition Services 77% of the profits realized from the ultimate sale of the inventory, after deduction for allowable expenses, as provided for under the terms of the contract. The Contract also has a performance incentive that allows the Company to receive up to an additional 2% of the profit sharing distribution. This incentive is measured annually on June 30th, and is applied to the prior 12 months. The Company earned a performance incentive for the 12 months ended June 30, 2012, of approximately $1,651,000, in the quarter ended June 30, 2012. The performance incentive is recorded in Profit-sharing distributions in the Consolidated Statements of Operations. For the three and nine months ended June 30, 2012 and 2011 profit-sharing distributions to the DLA Disposition Services under the Scrap Contract were $10,245,000 and $34,117,000; and $12,324,000 and $34,529,000, respectively, including accrued amounts, as of June 30, 2012 and 2011, of $2,938,000 and $5,126,000, respectively. The Scrap Contract may be terminated by either the Company or the DLA Disposition Services if the rate of return performance ratio does not exceed specified benchmark ratios for two consecutive quarterly periods and the preceding twelve months. The Company has performed in excess of the benchmark ratios throughout the contract period through June 30, 2012.
Technology and operations expenses. Technology and operations expenses increased $3.0 million, or 23.9%, to $15.9 million for the three months ended June 30, 2012 from $12.9 million for the three months ended June 30, 2011, primarily due to (1) expenses of $2.0 million for the acquisitions of Jacobs Trading and TruckCenter.com; and (2) expenses of $1.0 million in staff wages, including stock based compensation, and consulting expenses. As a percentage of revenue, technology and operations expenses decreased to 13.1% from 15.5%, 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 $1.8 million, or 32.2%, to $7.4 million for the three months ended June 30, 2012 from $5.6 million for the three months ended June 30, 2011, primarily due to (1) expenses of $1.0 million in staff wages, including stock based compensation; and (2) expenses of $0.5 million for the acquisitions of Jacobs Trading and TruckCenter.com. As a percentage of revenue, sales and marketing expenses decreased to 6.1% from 6.7%, primarily due to the increase in revenue, while leveraging our fixed costs, such as marketing staff.
Technology and operations expenses. Technology and operations expenses increased $8.6 million, or 22.1%, to $47.5 million for the nine months ended June 30, 2012 from $38.9 million for the nine months ended June 30, 2011, primarily due to (1) expenses of $2.4 million in staff and temporary wages, including stock based compensation, and consultant fees associated with technology infrastructure projects; and (2) expenses of $6.8 million from the acquisitions of Jacobs Trading and TruckCenter.com, offset in part by a $0.6 million decrease in technology and operations expense due to warehouse consolidation. As a percentage of revenue, technology and operations expenses decreased to 13.4% from 15.7%, 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 $3.5 million, or 20.4%, to $20.8 million for the nine months ended June 30, 2012 from $17.3 million for the nine months ended June 30, 2011, primarily due to (1) expenses of $1.6 million in staff wages, including stock based compensation; and (2) expenses of $1.5 million for the acquisitions of Jacobs Trading and TruckCenter.com. As a percentage of revenue, sales and marketing expenses decreased to 5.9% from 7.0%, primarily due to the increase in revenue, while leveraging our fixed costs, such as marketing staff.
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