LIQUIDITY SERVICES INC

Previous wording

GovDeals. The GovDeals reportable segment provides solutions that enable government entities including city, county, state and federal agencies located in the United States and Canada and related commercial businesses to sell surplus property and real estate assets through our GovDeals and Bid4Assets marketplaces.

Current wording

GovDeals. The GovDeals reportable segment provides solutions that enable government entities including city, county, state and federal agencies located in the United States and Canada and related commercial businesses to sell surplus property and real estate assets through our GovDeals, Bid4Assets and Sierra marketplaces; see Note 3 -Sierra Acquisition.

Previous wording

RSCG. The RSCG reportable segment consists of marketplaces that enable corporations located in the United States and Canada to sell excess, returned, and overstocked consumer goods. RSCG also offers a suite of services that includes returns management, asset recovery, and e-commerce solutions. This segment uses multiple selling channels across our network of marketplaces and others to optimize the best combination of velocity, volume, and value. This segment uses the AllSurplus, Secondipity, and Liquidation.com marketplaces.

Current wording

RSCG. The RSCG reportable segment consists of marketplaces that enable corporations located in the United States and Canada to sell excess, returned, and overstocked consumer goods. RSCG also offers a suite of services that includes returns management, asset recovery, and e-commerce solutions. This segment uses multiple selling channels across our network of marketplaces and others to optimize the best combination of velocity, volume, and value. This segment conducts its business-to-business sales on its Liquidation.com marketplace, and direct-to-consumer sales on its AllSurplus Deals and Secondipity marketplaces.

Previous wording

Effects of inflation and heightened interest rates. Rising inflation in both the U.S. and internationally has weighed on the global economy, increasing prices for energy, shipping, and labor, among other areas of the macroeconomic environment. These events have caused a rise in borrowing costs as well, partly driven by actions taken by central banks to curb rising inflation, which has impacted buyer qualification and transaction timelines.

Current wording

Effects of inflation and heightened interest rates. Sustained inflation in both the U.S. and internationally has weighed on the global economy, increasing prices for energy, shipping, and labor, among other areas of the macroeconomic environment. These events have caused a rise in borrowing costs as well, partly driven by actions taken by central banks to curb rising inflation, which has impacted buyer qualification and transaction timelines.

Previous wording

International armed and geopolitical conflicts. The global financial markets have experienced volatility subsequent to the invasion of Ukraine by Russia in February 2022, a conflict which remains ongoing, as well as the recent conflict in and adjacent to Israel. The Russia-Ukraine conflict specifically resulted in numerous countries, including the United States, imposing significant new sanctions and export controls against Russia, Russian banks, and certain Russian individuals. These sanctions and export controls and international responses to the ongoing conflict in and adjacent to Israel, have further heightened global supply chain disruptions and impacted the international trade markets. For the three months ended December 31, 2023, and 2022, the Company's total revenues directly associated with Russia, Ukraine, and Israel were not material to our consolidated financial results. We will continue monitoring these armed and geopolitical conflicts around the world and any potential future impacts on our business.

Current wording

International armed and geopolitical conflicts. The global financial markets have experienced volatility subsequent to the invasion of Ukraine by Russia in February 2022, a conflict which remains ongoing, as well as the recent conflict in and adjacent to Israel. The Russia-Ukraine conflict specifically resulted in numerous countries, including the United States, imposing significant new sanctions and export controls against Russia, Russian banks, and certain Russian individuals. These sanctions and export controls and international responses to the ongoing conflict in and adjacent to Israel, have further heightened global supply chain disruptions and impacted the international trade markets. For the three and six months ended March 31, 2024 and 2023, the Company's total revenues directly associated with Russia, Ukraine, and Israel were not material to our consolidated financial results. We will continue monitoring these armed and geopolitical conflicts around the world and any potential future impacts on our business.

Previous wording

We believe our marketplaces benefit over time from greater scale and adoption by our users creating a continuous flow of goods benefiting our buyers and sellers. As of December 31, 2023, we had 5.2 million registered buyers in our marketplaces. We had access to millions of additional end-users through a range of external consumer marketplaces. Aggregating this level of buyer demand and market data enables us to generate a continuous flow of goods from corporate and government sellers, which in turn attracts more buyers. During the twelve months ended December 31, 2023, the approximate number of registered buyers increased from 5.0 million to 5.2 million, or approximately 5%. As buyers continue to discover and use our e-commerce marketplaces as an effective method to source assets, we believe our solutions become a more attractive sales channel for corporate and government agency sellers. We believe this self-reinforcing cycle results in greater transaction volume and enhances the value of our marketplaces.

Current wording

We believe our marketplaces benefit over time from greater scale and adoption by our users creating a continuous flow of goods benefiting our buyers and sellers. As of March 31, 2024, we had 5.3 million registered buyers in our marketplaces. We had access to millions of additional end-users through a range of external consumer marketplaces. Aggregating this level of buyer demand and market data enables us to generate a continuous flow of goods from corporate and government sellers, which in turn attracts more buyers. During the twelve months ended March 31, 2024, the approximate number of registered buyers increased from 5.0 million to 5.3 million, or approximately 6%. As buyers continue to discover and use our e-commerce marketplaces as an effective method to source assets, we believe our solutions become a more attractive sales channel for corporate and government agency sellers. We believe this self-reinforcing cycle results in greater transaction volume and enhances the value of our marketplaces.

Previous wording

Transaction Model Mix. Most of our transactions are conducted under the consignment model, which represented 88.7% and 85.7% of our consolidated GMV for the three months ended December 31, 2023, and 2022, respectively; however, only the consignment fee, representing a small portion of the consignment GMV, is recognized as revenue, causing consignment revenues to account for 39.6% and 38.9% of our total revenues for the three months ended December 31, 2023, and 2022, respectively.

Current wording

Transaction Model Mix. Most of our transactions are conducted under the consignment model, which represented 82.9% and 85.7% of our consolidated GMV for the three and six months ended March 31, 2024, respectively, and 83.0% and 84.3% of our consolidated GMV for the three and six months ended March 31, 2023, respectively. However, only the consignment fee, representing a small portion of the consignment GMV, is recognized as revenue, causing consignment revenues to account for 34.7% and 36.9% of our total revenues for the three and six months ended March 31, 2024, respectively, and 35.1% and 36.8% of our total revenues for the three and six months ended March 31, 2023, respectively.

Previous wording

Purchase model transactions are a smaller proportion of our consolidated GMV, representing 11.3% and 14.3% of our consolidated GMV for the three months ended December 31, 2023, and 2022, respectively. However, all of the GMV associated with the purchase model transaction is generally able to be recognized as revenue, causing purchase revenues to account for 50.8% and 53.4% of our total revenues for the three months ended December 31, 2023, and 2022, respectively.

Current wording

Purchase model transactions are a smaller proportion of our consolidated GMV, representing 17.1% and 14.3% of our consolidated GMV for the three and six months ended March 31, 2024, respectively, and 17.0% and 15.7% of our consolidated GMV for the three and six months ended March 31, 2023, respectively. However, all of the GMV associated with the purchase model transaction is generally able to be recognized as revenue, causing purchase revenues to account for 58.1% and 54.9% of our total revenues for the three and six months ended March 31, 2024, respectively, and 58.0% and 55.9% of our total revenues for the three and six months ended March 31, 2023, respectively.

Previous wording

We have multiple vendor contracts with Amazon.com, Inc. under which we acquire and sell commercial merchandise. While purchase model transactions account for less than 20% of our total GMV, the cost of inventory for purchase model transactions is the most significant component of our consolidated Costs of goods sold. $8.3 million and $5.8 million of inventory purchased under such contracts with Amazon.com, Inc. is included in our Condensed Consolidated Inventory balances as of December 31, 2023, and September 30, 2023, respectively. Our vendor contracts with respect to sourcing or consigning merchandise for our RSCG segment generally reflect the concentration dynamics inherent to the retail industry.

Current wording

We have multiple vendor contracts with Amazon.com, Inc. under which we acquire and sell commercial merchandise. While purchase model transactions account for less than 20% of our total GMV, the cost of inventory for purchase model transactions is the most significant component of our consolidated Costs of goods sold. $11.1 million and $5.8 million of inventory purchased under such contracts with Amazon.com, Inc. is included in our Condensed Consolidated Inventory balances as of March 31, 2024, and September 30, 2023, respectively. Our vendor contracts with respect to sourcing or consigning merchandise for our RSCG segment generally reflect the concentration dynamics inherent to the retail industry.

Previous wording

Other fee revenues accounted for 9.6% and 7.7% of our total revenues for the three months ended December 31, 2023, and 2022, respectively.

Current wording

Other fee revenues accounted for 7.2% and 8.3% of our total revenues for three and six months ended March 31, 2024, respectively, and 6.9% and 7.3% of our total revenues for the three and six months ended March 31, 2023, respectively.

Previous wording

Gross merchandise volume (GMV). GMV is the total sales value of all merchandise sold by us or our sellers through our marketplaces or by us through other channels during a given period of time. We review GMV because it provides a measure of the volume of goods being sold in our marketplaces and thus the activity of those marketplaces. GMV also provides a means to evaluate the effectiveness of investments that we have made and continue to make, including in the areas of buyer and seller support, value-added services, product development, sales and marketing, and operations. Our GMV for the three months ended December 31, 2023 and 2022, was $305.9 million and $270.8 million, respectively.

Current wording

Gross merchandise volume (GMV). GMV is the total sales value of all merchandise sold by us or our sellers through our marketplaces or by us through other channels during a given period of time. We review GMV because it provides a measure of the volume of goods being sold in our marketplaces and thus the activity of those marketplaces. GMV also provides a means to evaluate the effectiveness of investments that we have made and continue to make, including in the areas of buyer and seller support, value-added services, product development, sales and marketing, and operations. Our GMV for the three and six months ended March 31, 2024, was $319.4 million and $625.2 million, respectively.

Previous wording

Total registered buyers, as of a given date, represent the aggregate number of persons or entities who have registered on one of our marketplaces. We use this metric to evaluate how well our marketing and promotional efforts are performing. Total registered buyers exclude duplicate registrations, buyers who are suspended from utilizing our marketplaces and buyers who have voluntarily removed themselves from our registration database. In addition, if we become aware of registered buyers that are no longer in business, we remove them from our database. As of December 31, 2023, and 2022, we had 5.2 million and 5.0 million registered buyers, respectively. None of our buyers represented more than 10% of our revenue during the three months ended December 31, 2023.

Current wording

Total registered buyers, as of a given date, represent the aggregate number of persons or entities who have registered on one of our marketplaces. We use this metric to evaluate how well our marketing and promotional efforts are performing. Total registered buyers exclude duplicate registrations, buyers who are suspended from utilizing our marketplaces and buyers who have voluntarily removed themselves from our registration database. In addition, if we become aware of registered buyers that are no longer in business, we remove them from our database. As of March 31, 2024, and 2023, we had 5.3 million and 5.0 million registered buyers, respectively. None of our buyers represented more than 10% of our revenue during the three months ended March 31, 2024.

Previous wording

Total auction participants. For each auction we manage, the number of auction participants represents the total number of registered buyers who have bid one or more times in that auction. As a result, a registered buyer who bids, or participates, in more than one auction is counted as an auction participant in each auction in which he or she participates. Thus, total auction participants for a given period is the sum of the auction participants in each auction conducted during that period. We use this metric to allow us to compare our online auction marketplaces to our competitors, including other online auction sites and traditional on-site auctioneers. In addition, we measure total auction participants on a periodic basis to evaluate the activity level of our base of registered buyers and to measure the performance of our marketing and promotional efforts. During the three months ended December 31, 2023 and 2022, 848,000 and 744,000 participants participated in auctions on our marketplaces, respectively.

Current wording

Total auction participants. For each auction we manage, the number of auction participants represents the total number of registered buyers who have bid one or more times in that auction. As a result, a registered buyer who bids, or participates, in more than one auction is counted as an auction participant in each auction in which he or she participates. Thus, total auction participants for a given period is the sum of the auction participants in each auction conducted during that period. We use this metric to allow us to compare our online auction marketplaces to our competitors, including other online auction sites and traditional on-site auctioneers. In addition, we measure total auction participants on a periodic basis to evaluate the activity level of our base of registered buyers and to measure the performance of our marketing and promotional efforts. During the three months ended March 31, 2024 and 2023, 1,139,000 and 797,000 participants participated in auctions on our marketplaces, respectively. During the six months ended March 31, 2024 and 2023, approximately 1,987,000 and 1,541,000 participants participated in auctions on our marketplaces, respectively.

Previous wording

Completed transactions. Completed transactions represents the number of auctions in a given period from which we have recorded revenue. Similar to GMV, we believe that completed transactions is a key business metric because it provides an additional measurement of the volume of activity flowing through our marketplaces. During the three months ended December 31, 2023 and 2022, we completed 239,000 and 214,000 transactions, respectively.

Current wording

Completed transactions. Completed transactions represents the number of auctions in a given period from which we have recorded revenue. Similar to GMV, we believe that completed transactions is a key business metric because it provides an additional measurement of the volume of activity flowing through our marketplaces. During the three months ended March 31, 2024 and 2023, we completed 300,000 and 209,000 transactions, respectively. During the six months ended March 31, 2024 and 2023, we completed 539,000 and 423,000 transactions, respectively.

Previous wording

Other operating expenses, net. Other operating expenses, net includes impairment of long-lived and other assets, impacts of lease terminations, as well as business realignment expenses, including those associated with restructuring initiatives and the exit of certain business operations.

Current wording

Other operating expenses (income), net. Other operating expenses (income), net includes acquisition-related costs, impairment of long-lived and other assets, impacts of lease terminations, as well as business realignment expenses, including those associated with restructuring initiatives and the exit of certain business operations.

Previous wording

Interest and other income, net. Interest and other income, net consists of interest income on interest-bearing checking accounts, money market funds, interest and unused commitment fees in connection with the Company's Credit Agreement, the components of net periodic pension (benefit) cost other than the service component and impacts of foreign currency fluctuations.

Current wording

Interest and other income, net. Interest and other income, net consists of interest income on interest-bearing checking accounts, money market funds, interest and unused commitment fees in connection with the Company's Credit Agreement, the components of net periodic pension cost (benefit) other than the service component and impacts of foreign currency fluctuations.

Previous wording

Income taxes. Income taxes include current and deferred income tax expense for the U.S. federal, state, and foreign jurisdictions. For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income. Our effective income tax rate after discrete items was 31.6% for the three months ended December 31, 2023. The effective tax rate differed from the statutory federal rate of 21% primarily as a result of the impact of foreign, state, and local income taxes and permanent tax adjustments.

Current wording

Income taxes. Income taxes include current and deferred income tax expense for the U.S. federal, state, and foreign jurisdictions. For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income. Our effective income tax rate after discrete items was 23.7% for the six months ended March 31, 2024. The effective tax rate differed from the statutory federal rate of 21% primarily as a result of the impact of foreign, state, and local income taxes and permanent tax adjustments.

Previous wording

The following table presents reportable segment GMV, revenue, segment direct profit is calculated as total revenue less cost of goods sold (excluding depreciation and amortization), and segment direct profit as a percentage of total revenue for the periods indicated:

Current wording

The following table presents reportable segment GMV, revenue, segment direct profit (calculated as total revenue less cost of goods sold (excluding depreciation and amortization)), and segment direct profit as a percentage of total revenue for the periods indicated:

Previous wording

CAG. Revenue from the CAG reportable segment decreased by $1.6 million, or 16.6%, due to a large international spot purchase transaction in the prior year. GMV increased by $4.1 million, or 9.2%, driven by consignment sales in our energy and industrial categories. As a result of the decrease in revenues, Segment direct profit decreased by $1.6 million, or 18.3%. Segment direct profit as a percentage of total revenue decreased 1.9%, which may fluctuate due to inherent variations in the mix of assets sourced and sold by the CAG segment in any given period, and due to favorable margins on a large international spot transaction in the prior year. Challenged global supply chains are experiencing heightened disruptions due to international tensions and other factors, which could limit the volume of assets made available for sale in any period.

Current wording

CAG. Revenue from our CAG reportable segment increased by $2.9 million, or 30.4%, due to a $12.0 million, or 28.8%, increase in GMV driven by consignment sales in our industrial and heavy equipment categories, and completion of large international automotive purchase transactions during the three months ended March 31, 2024. As a result of the increase in revenues, Segment direct profit increased by $2.2 million, or 31.5%. Segment direct profit as a percentage of total revenue increased 0.6%, which may fluctuate due to inherent variations in the mix of assets sourced and sold by the CAG segment in any given period. Global supply chains may experience heightened disruptions due to international tensions and other factors, which could limit the volume of assets made available for sale in any period.

Previous wording

Machinio. Revenue from our Machinio reportable segment increased 18.4%, or $0.6 million, due to price increases and continued growth in subscribers. As a result of the increase in revenues, segment direct profit increased 18.7%, or $0.6 million. Segment direct profit as a percentage of total revenue remained relatively consistent between the periods.

Current wording

Machinio. Revenue from our Machinio reportable segment increased 21.2%, or $0.7 million, due to price increases and continued growth in subscribers. As a result of the increase in revenues, segment direct profit increased 22.2%, or $0.7 million. Segment direct profit as a percentage of total revenue remained relatively consistent between the periods.

Previous wording

Total revenues -Total consolidated revenue decreased $1.0 million, or 1.3%. Refer to the discussion of Segment Results above for discussion of the increase in revenue.

Current wording

Total revenues -Total consolidated revenue increased $10.0 million, or 12.3%. Refer to the discussion of Segment Results above for discussion of the increase in revenue.

Previous wording

Depreciation and amortization. Depreciation and amortization expense was consistent between the three months ended December 31, 2023 and 2022.

Current wording

Interest and other income, net. Interest and other income, net was consistent between the three months ended March 31, 2024 and 2023.

Previous wording

Provision for income taxes. Provision for income taxes decreased $0.3 million due to the impact of foreign, state, and local taxes and permanent tax adjustments.

Current wording

Provision for income taxes. Provision for income taxes decreased $0.1 million due to the impact of foreign, state, and local taxes and permanent tax adjustments.

Previous wording

GovDeals. Total revenues from our GovDeals reportable segment increased 16.9%, or $2.3 million, due to a $29.3 million, or 18.2%, increase in GMV driven by increased personal property sales, including improved availability of used vehicles and increased take-rate pricing, and an increase in volume in our real estate category. Revenue grew at a lower rate than GMV due to an increase in the mix of lower take-rate foreclosed real estate properties available for auction. In periods where GovDeals real estate sales increase, GovDeals revenue as a percent of GMV would be expected to decline, as these higher value real estate sales are generally conducted at a lower take-rate than our traditional GovDeals asset categories. Segment direct profit increased by $2.2 million, or 16.8%, consistent with the increase in revenues. Segment direct profit as a percentage of total revenue remained relatively consistent between the periods.

Current wording

GovDeals. Total revenues from our GovDeals reportable segment increased 19.5%, or $5.6 million, due to a $47.7 million, or 14.5%, increase in GMV driven by increased personal property sales, including improved availability of used vehicles and increased take-rate pricing, and an increase in volume at our real estate category during the first quarter of the current fiscal year. Revenue grew at a higher rate than GMV due to the expansion of service offerings to new, higher-volume sellers, including through the acquisition of Sierra. Segment direct profit increased by $5.1 million, or 18.7%, consistent with the increase in revenues. Segment direct profit as a percentage of total revenue remained relatively consistent between the periods.

Previous wording

RSCG. Revenue from our RSCG reportable segment decreased by $2.3 million, or 5.0%, as GMV growth in our consignment solutions, which provide for a lower revenue take-rate, outpaced purchase programs. GMV increased by $1.7 million, or 2.6%, reflecting an increase in sell-in-place consignment solutions partially offset by an inferior product mix in certain full-service consignment and purchase programs. Segment direct profit decreased by $1.9 million, or 11.9%, and segment direct profit as a percentage of total revenue decreased from 34.8% to 32.3%, due to a lower blended take-rate on our consignment sales from growth in our sell-in-place consignment solutions, and an inferior product mix in certain other programs.

Current wording

RSCG. Revenue from our RSCG reportable segment increased by $0.8 million, or 0.9%, due to growth in our sell-in-place consignment solutions and purchase programs, partially offset by a lower value product mix in selected full-service consignment and purchase programs. Segment direct profit decreased by $1.6 million, or 4.8%, and segment direct profit as a percentage of total revenue decreased from 32.8% to 30.9%, due to a lower blended take-rate on our consignment sales from growth in our sell-in-place consignment solutions and the lower value product mix in selected programs.

Previous wording

Sales and marketing expenses. Sales and marketing expenses increased $2.2 million, or 20.3%, due to our market share expansion and client diversification efforts, as well as a $0.9 million non-recurring benefit from a concluded client program during the three months ended December 31, 2022.

Current wording

Sales and marketing expenses. Sales and marketing expenses increased $4.5 million, or 20.0%, due to our market share expansion and client diversification efforts, a $0.9 million non-recurring benefit from a concluded client program during the six months ended March 31, 2023, and a $0.5 million increase in bad debt expense.

Previous wording

General and administrative expenses. General and administrative expenses increased $0.2 million, or 2.7%, due to increased legal fees incurred during the three months ended December 31, 2023; see Note 12 -Legal Proceedings and Other Contingencies.

Current wording

General and administrative expenses. General and administrative expenses increased $1.5 million, or 10.5%, due to increases in stock compensation, other variable compensation, and increased legal fees incurred during the six months ended March 31, 2024; see Note 13 -Legal Proceedings and Other Contingencies.

Previous wording

Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA. Non-GAAP EBITDA is a supplemental non-GAAP financial measure and is equal to Net income (loss) plus Interest and other (income) expense, net excluding the non-service components of net periodic pension (benefit) cost; Provision (benefit) for income taxes; and Depreciation and amortization. Interest and other (income) expense, net, can include non-operating gains and losses, such as from foreign currency fluctuations. Our definition of Non-GAAP Adjusted EBITDA differs from Non-GAAP EBITDA because we further adjust Non-GAAP EBITDA for stock-based compensation expense, acquisition costs such as transaction expenses and changes in earn out estimates, business realignment expense, deferred revenue purchase accounting adjustments, and goodwill and long-lived asset impairment.

Current wording

Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA. Non-GAAP EBITDA is a supplemental non-GAAP financial measure and is equal to Net income (loss) plus Interest and other (income) expense, net excluding the non-service components of net periodic pension cost (benefit); Provision (benefit) for income taxes; and Depreciation and amortization. Interest and other (income) expense, net, can include non-operating gains and losses, such as from foreign currency fluctuations. Our definition of Non-GAAP Adjusted EBITDA differs from Non-GAAP EBITDA because we further adjust Non-GAAP EBITDA for stock-based compensation expense, acquisition costs such as transaction expenses and changes in earn out estimates, business realignment expense, deferred revenue purchase accounting adjustments, and goodwill and long-lived asset impairment.

Previous wording

1 Interest and other income, net excludes non-services pension and other postretirement (benefit) expense.

Current wording

1 Interest and other income, net excludes non-services pension and other postretirement expense (benefit).

Previous wording

2 Acquisition costs and impairment of long-lived and other non-current assets, are components of Other operating expenses, net on the Condensed Consolidated Statements of Operations.

Current wording

2 Acquisition costs and impairment of long-lived and other non-current assets, are components of Other operating expenses (income), net on the Condensed Consolidated Statements of Operations.

Previous wording

Our operational cash needs primarily relate to working capital, including staffing costs, technology expenses, leases of real estate, and equipment used in our operations, and capital used for inventory purchases, which we have funded through existing cash balances and cash generated from operations. The Company has not paid a dividend historically, nor do we have any intention to do so in the foreseeable future. From time to time, we may use our capital resources for other activities, such as contract start-up costs, joint ventures, share repurchases and acquisitions. As of December 31, 2023, we had $98.6 million and $8.5 million in Cash and cash equivalents and Short-term investments, respectively, which we believe is sufficient to meet the Company’s anticipated cash needs for at least one year from the date of these financial statements.

Current wording

Our operational cash needs primarily relate to working capital, including staffing costs, technology expenses, leases of real estate, and equipment used in our operations, and capital used for inventory purchases, which we have funded through existing cash balances and cash generated from operations. The Company has not paid a dividend historically, nor do we have any intention to do so in the foreseeable future. From time to time, we may use our capital resources for other activities, such as contract start-up costs, joint ventures, share repurchases and acquisitions. As of March 31, 2024, we had $108.6 million and $8.4 million in Cash and cash equivalents and Short-term investments, respectively, which we believe is sufficient to meet the Company’s anticipated cash needs for at least one year from the date of these financial statements.

Previous wording

Our capital expenditures consist primarily of capitalized software, warehouse equipment, computers and purchased software, office equipment, furniture and fixtures, and leasehold improvements. The timing and volume of such capital expenditures in the future will be affected by the addition of new sellers or buyers or expansion of existing seller or buyer relationships. We intend to fund those expenditures primarily from our existing cash balances and operating cash flows. Our capital expenditures for the three months ended December 31, 2023 and 2022, were $1.7 million and $1.2 million, respectively. This increase was primarily driven by enhancements to our platforms and marketplaces. As of December 31, 2023, we had no significant outstanding commitments for capital expenditures.

Current wording

Our capital expenditures consist primarily of capitalized software, warehouse equipment, computers and purchased software, office equipment, furniture and fixtures, and leasehold improvements. The timing and volume of such capital expenditures in the future will be affected by the addition of new sellers or buyers or expansion of existing seller or buyer relationships. We intend to fund those expenditures primarily from our existing cash balances and operating cash flows. Our capital expenditures for the three months ended March 31, 2024 and 2023, were $4.1 million and $2.7 million, respectively. This increase was primarily driven by enhancements to our platforms and marketplaces. As of March 31, 2024, we had no significant outstanding commitments for capital expenditures.

Previous wording

Our future capital requirements will depend on many factors including our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the development and deployment of new marketplaces, the introduction of new value-added services and the costs to expand our network of warehouses including our lease for warehouse space in Brownsburg, IN as entered into during the three months ended December 31, 2023, but which has not yet commenced. We may seek to enter agreements with respect to potential investments in, or acquisitions of, complementary businesses, products or technologies, which could also require us to seek additional equity or debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders. Additional debt would result in increased interest expense and could result in covenants that would restrict our operations. There is no assurance that such financing, if required, will be available in amounts or on terms acceptable to us, if at all.

Current wording

Our future capital requirements will depend on many factors including our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the development and deployment of new marketplaces, the introduction of new value-added services and the costs to expand our network of warehouses including our lease for warehouse space in Brownsburg, IN as entered into during the six months ended March 31, 2024, but which has not yet commenced. We may seek to enter agreements with respect to potential investments in, or acquisitions of, complementary businesses, products or technologies, which could also require us to seek additional equity or debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders. Additional debt would result in increased interest expense and could result in covenants that would restrict our operations. There is no assurance that such financing, if required, will be available in amounts or on terms acceptable to us, if at all.

Previous wording

The Company maintains a $25.0 million Credit Agreement with Wells Fargo Bank, National Associated (the Credit Agreement). During the year ended September 30, 2023, the Credit Agreement was amended to extend the maturity date by 12 months to March 31, 2025 (the First Amendment). No other changes, including with respect to the borrowing terms or capacities, were made to the Credit Agreement as a result of the First Amendment).

Current wording

During the six months ended March 31, 2024, the Credit Agreement was amended to extend the maturity date by 12 months to March 31, 2026 (the Second Amendment). No other changes, including with respect to the borrowing terms or capacities, were made to the Credit Agreement as a result of the First Amendment or the Second Amendment.

Previous wording

The Company may draw upon the Credit Agreement for general corporate purposes. Repayments of any borrowings under the Credit Agreement shall become available for redraw at any time by the Company. The interest rate on borrowings under the Credit Agreement is a variable rate per annum equal to the Daily Simple Secured Overnight Financing Rate (SOFR) in effect plus a margin ranging from 1.25% to 1.75%. Interest is payable monthly. During the three months ended December 31, 2023, the Company did not make any draws under the Credit Agreement. As of December 31, 2023, the Company had no outstanding indebtedness under the Credit Agreement and our borrowing availability was $25.0 million.

Current wording

The Company may draw upon the Credit Agreement for general corporate purposes. Repayments of any borrowings under the Credit Agreement shall become available for redraw at any time by the Company. The interest rate on borrowings under the Credit Agreement is a variable rate per annum equal to the Daily Simple Secured Overnight Financing Rate (SOFR) in effect plus a margin ranging from 1.25% to 1.75%. Interest is payable monthly. During the six months ended March 31, 2024, the Company did not make any draws under the Credit Agreement. As of March 31, 2024, the Company had no outstanding indebtedness under the Credit Agreement and our borrowing availability was $25.0 million.

Previous wording

We intend to indefinitely reinvest the earnings of our foreign subsidiaries outside the United States. As a result, we did not record a provision for deferred U.S. tax expense on the $10.7 million of undistributed foreign earnings as of December 31, 2023. As of December 31, 2023, and September 30, 2023, $16.8 million and $19.1 million, respectively, of cash and cash equivalents was held outside of the U.S.

Current wording

We intend to indefinitely reinvest the earnings of our foreign subsidiaries outside the United States. As a result, we did not record a provision for deferred U.S. tax expense on the $11.0 million of undistributed foreign earnings as of March 31, 2024. As of March 31, 2024, and September 30, 2023, $20.5 million and $19.1 million, respectively, of cash and cash equivalents was held outside of the U.S.

Previous wording

The Company repurchased 68,692 shares for $1.2 million during the three months ended December 31, 2023. As of December 31, 2023, the Company had $15.8 million of remaining authorization to repurchase shares through December 31, 2025.

Current wording

The Company repurchased 473,953 shares for $7.9 million, and 542,645 shares for $9.0 million, during the three and six months ended March 31, 2024, respectively. As of March 31, 2024, the Company had $8.0 million of remaining authorization to repurchase shares through December 31, 2025.

Previous wording

Changes in Cash Flows: Three Months Ended December 31, 2023, Compared to the Three Months Ended December 31, 2022

Current wording

Changes in Cash Flows: Six Months Ended March 31, 2024, Compared to the Six Months Ended March 31, 2023

Previous wording

Net cash used in investing activitieswas $2.1 million and $3.0 million for the three months ended December 31, 2023 and 2022, respectively. The $0.9 million decrease in cash used in investing activities was driven by a $2.0 million increase in the maturity of short-term investments. This was partially offset by a $0.5 million increase in the purchase of short-term investments, and a $0.5 million increase in the purchase of property and equipment.

Current wording

Net cash used in investing activitieswas $17.6 million and $6.4 million for the six months ended March 31, 2024 and 2023, respectively. The $11.2 million increase in cash used in investing activities was primarily driven by $13.3 million in cash paid, net of cash acquired, for the Sierra acquisition. See Note 3 -Sierra Acquisition for further information. This was partially offset by a $2.0 million increase from the maturity of short-term investments.

Previous wording

Net cash used in financing activitieswas $1.3 million and $7.0 million for the three months ended December 31, 2023 and 2022, respectively. The $5.7 million decrease in cash used in financing activities was primarily driven by a $6.0 million decrease in share repurchases. This was partially offset by a $0.4 million decrease in the proceeds from the exercise of stock options.

Current wording

Net cash used in financing activitieswas $10.3 million and $17.3 million for the six months ended March 31, 2024 and 2023, respectively. The $7.0 million decrease in cash used in financing activities was primarily driven by an $8.0 million decrease in share repurchases. This was partially offset by a $0.4 million decrease in the proceeds from the exercise of stock options.