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Liquidity Services Inc. Reports Operating Results (10-Q)

February 08, 2013 | About:
10qk

10qk

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Liquidity Services Inc. (LQDT) filed Quarterly Report for the period ended 2012-12-31.

Liquidity Service, Inc. has a market cap of $1.09 billion; its shares were traded at around $34.7 with a P/E ratio of 23.5294 and P/S ratio of 2.3849. Liquidity Service, Inc. had an annual average earning growth of 26% over the past 10 years. GuruFocus rated Liquidity Service, Inc. the business predictability rank of 5-star.

Highlight of Business Operations:

The Company has a Scrap Contract with the DLA Disposition Services in which the base term expired in June 2012 with three one year renewal options. The DoD has exercised the first two 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. For the three months ended December 31, 2012 and 2011, profit-sharing distributions to the DLA Disposition Services under the Scrap Contract were $8,410,000 and $12,487,000, including accrued amounts, as of December 31, 2012 and 2011, of $3,508,000 and $6,308,000, 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 December 31, 2012.

Profit-sharing distributions. Profit-sharing distributions decreased $4.1 million, or 32.6%, to $8.4 million for the three months ended December 31, 2012 from $12.5 million for the three months ended December 31, 2011. As a percentage of revenue, profit-sharing distributions decreased to 6.9% from 11.8%. These decreases are primarily due to the decrease in our scrap business discussed above.

Technology and operations expenses. Technology and operations expenses increased $6.7 million, or 42.9%, to $22.5 million for the three months ended December 31, 2012 from $15.8 million for the three months ended December 31, 2011. As a percentage of revenue, technology and operations expenses increased to 18.5% from 14.9%. These increases are primarily due to (1) expenses of $5.2 million from the acquisitions of Go-Industry and NESA; and (2) expenses of $1.5 million in staff and temporary wages, including stock based compensation, and consultant fees associated with technology infrastructure projects.

Sales and marketing expenses. Sales and marketing expenses increased $3.8 million, or 58.0%, to $10.3 million for the three months ended December 31, 2012 from $6.5 million for the three months ended December 31, 2011. As a percentage of revenue, sales and marketing expenses increased to 8.4% from 6.2%. These increases are primarily due to (1) expenses of $3.2 million for the acquisitions of Go-Industry and NESA; and (2) expenses of $0.6 in staff wages, including stock based compensation.

General and administrative expenses. General and administrative expenses increased $6.2 million, or 78.7%, to $14.0 million for the three months ended December 31, 2012 from $7.8 million for the three months ended December 31, 2011. As a percentage of revenue, general and administrative expenses increased to 11.4% from 7.4%. These increases are primarily due to (1) expenses of $3.7 million for the acquisitions of Go-Industry and NESA; and (2) expenses of $2.5 million in staff wages, including stock based compensation and overhead expenses.

Read the The complete Report

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