LIQUIDITY SERVICES INC

Previous wording

About us. Liquidity Services is a leading global commerce company providing trusted online marketplace platforms that power the circular economy. We create a better future for organizations, individuals, and the planet by using technology to capture and unleash the intrinsic value of surplus. We connect millions of buyers and thousands of sellers through our leading e-commerce auction marketplaces, search engines, asset management software, and related services. Our comprehensive solutions enable the transparent, efficient, sustainable recovery of value from excess items owned by business and government sellers.

Current wording

About us. Liquidity Services is a leading global commerce company providing trusted online marketplace platforms that power the circular economy. We create a better future for organizations, individuals, and the planet by using technology to capture and unleash the intrinsic value of surplus. We connect millions of buyers and thousands of sellers through our leading e-commerce auction marketplaces, search engines, asset management and auction software, and related services. Our comprehensive solutions enable the transparent, efficient, sustainable recovery of value from excess items owned by business and government sellers.

Previous wording

The Company has four operating and reportable segments under which we conduct business: GovDeals, Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), and Machinio. Further information and operating results of our reportable segments can be found in Note 14 -Segment Information.

Current wording

The Company has five operating segments and three reportable segments under which we conduct business: GovDeals, Retail Supply Chain Group (RSCG), and Capital Assets Group (CAG). Our separate Machinio and Software Solutions operating segments, which do not individually meet the quantitative thresholds to be reportable segments, are combined and presented together as Machinio & Software Solutions for segment reporting purposes. Further information and operating results of our reportable segments can be found in Note 14 -Segment Information.

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 its GovDeals, Bid4Assets and Sierra marketplaces; see Note 3 -Sierra Acquisition.

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 its GovDeals, Bid4Assets and Sierra marketplaces; see Note 3 -Acquisitions.

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 its network of marketplaces and others to optimize the best combination of velocity, volume, and value. This segment primarily conducts its business-to-business sales on its Liquidation.com marketplace and through Direct Sales, and direct-to-consumer sales on its AllSurplus Deals and Secondipity marketplaces and other third-party sales channels.

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 primarily conducts its business-to-business sales on its Liquidation.com marketplace and through Direct Sales, and direct-to-consumer sales on its AllSurplus Deals and Secondipity marketplaces and other third-party sales channels.

Previous wording

Machinio. The Machinio reportable segment operates a global search engine platform for listing equipment for sale in the construction, machine tool, processing, transportation, printing, agriculture, and laboratory/medical sectors. Machinio also offers the Machinio System service that provides equipment sellers with a suite of software tools that includes website hosting, email marketing, and inventory management, to support and enable equipment sellers’ online business.

Current wording

Machinio & Software Solutions. The Machinio operating segment operates the Machinio marketplace, a global search engine platform for listing equipment for sale in the construction, machine tool, processing, transportation, printing, agriculture, and laboratory/medical sectors, and the Machinio System platform that provides equipment sellers with a suite of software tools including website hosting, email marketing, and inventory management, to support and enable equipment sellers’ online business. The Software Solutions operating segment separately serves as the Company's private-label and software-as-a-service (SaaS) arm, offering scalable auction platform services to entrepreneurs and businesses.

Previous wording

Supply chain challenges and consumer sentiment. The supply of used vehicles available for sale on our marketplaces may be impacted by proposed tariffs in the U.S., as well as the slowing adoption of electric vehicles as a replacement to internal combustion vehicle fleets. Further, used car market price indices continue to experience heightened volatility. In addition, general consumer behavior can be turbulent, and changes in consumer sentiment can cause fluctuation in the mix, volumes, and demand for the products we receive. Change in these conditions or other challenges that may emerge in other key asset categories can impact our financial performance.

Current wording

Supply chain challenges and consumer sentiment. The supply of used vehicles available for sale on our marketplaces may be impacted by ongoing tariffs implemented, or actively being considered, by the U.S., as well as the slowing adoption of electric vehicles as a replacement to internal combustion vehicle fleets. Further, used car market price indices continue to experience heightened volatility. In addition, general consumer behavior can be turbulent, and changes in consumer sentiment can cause fluctuation in the mix, volumes, and demand for the products we receive. Change in these conditions or other challenges that may emerge in other key asset categories can impact our financial performance.

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, 2024, we had 5.7 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, 2024, the approximate number of registered buyers increased from 5.2 million to 5.7 million, or approximately 9%. 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, 2025, we had 5.8 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, 2025, the approximate number of registered buyers increased from 5.3 million to 5.8 million, or approximately 9%. 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

Other — fee revenue. We also earn non-consignment fee revenue from Machinio's subscription services, as well as other services including asset valuation, product handling, and storage fees. Non-consignment fee revenue is recorded within the Consignment and other fee revenues line-item on the Condensed Consolidated Statements of Operations.

Current wording

Other — fee revenue. We also earn non-consignment fee revenue from our Machinio and Software Solution subscription services, auction listing service fees for foreclosed real estate at our GovDeals segment (payable regardless of whether or not an auction is completed), as well as other services including asset valuation, product handling, and storage fees. Non-consignment fee revenue is recorded within the Consignment and other fee revenues line-item on the Consolidated Statements of Operations.

Previous wording

Transaction Model Mix. Most of our transactions are conducted under the consignment model, which represented 79.8% and 88.7% of our consolidated GMV for the three months ended December 31, 2024 and 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 27.0% and 39.6% of our total revenues for the three months ended December 31, 2024 and 2023, respectively.

Current wording

Transaction Model Mix. Most of our transactions are conducted under the consignment model, which represented 80.1% and 79.9% of our consolidated GMV for the three and six months ended March 31, 2025, respectively, and 82.9% and 85.7% of our consolidated GMV for the three and six months ended March 31, 2024. However, only the consignment fee, representing a small portion of the consignment GMV, is recognized as revenue, causing consignment revenues to account for 27.3% and 27.1% of our total revenues for the three and six months ended March 31, 2025, respectively, and 34.7% and 36.9% of our total revenues for the three and six months ended March 31, 2024, respectively.

Previous wording

Purchase model transactions are a smaller proportion of our consolidated GMV, representing 20.2% and 11.3% of our consolidated GMV for the three months ended December 31, 2024 and 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 67.7% and 50.8% of our total revenues for the three months ended December 31, 2024 and 2023, respectively.

Current wording

Purchase model transactions are a smaller proportion of our consolidated GMV, representing 19.9% and 20.1% of our consolidated GMV for the three and six months ended March 31, 2025, respectively, and 17.1% and 14.3% of our consolidated GMV for the three and six months ended March 31, 2024, 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 66.9% and 67.3% of our total revenues for the three and six months ended March 31, 2025, respectively, and 58.1% and 54.9% of our total revenues for the three and six months ended March 31, 2024.

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 25% of our total GMV, the cost of inventory for purchase model transactions is the most significant component of our consolidated Costs of goods sold. $8.4 million and $12.2 million of inventory purchased under such contracts with Amazon.com, Inc. is included in our Condensed Consolidated Inventory balances as of December 31, 2024 and September 30, 2024, 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 25% of our total GMV, the cost of inventory for purchase model transactions is the most significant component of our consolidated Costs of goods sold. $15.6 million and $12.2 million of inventory purchased under such contracts with Amazon.com, Inc. is included in our Condensed Consolidated Inventory balances as of March 31, 2025 and September 30, 2024, 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 5.4% and 9.6% of our total revenues for three months ended December 31, 2024 and 2023, respectively.

Current wording

Other fee revenues accounted for 5.8% and 5.6% of our total revenues for three and six months ended March 31, 2025, respectively, and 7.2% and 8.3% of our total revenues for three and six months ended March 31, 2024, 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, 2024 and 2023 was $386.1 million and $305.9 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, 2025, was $367.4 million and $753.4 million, respectively, increasing from the three and six months ended March 31, 2024 by $48.0 million, or 15.0%, and $128.2 million, or 20.5%, 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, 2024 and 2023, we had 5.7 million and 5.2 million registered buyers, respectively.

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, 2025 and 2024, we had 5.8 million and 5.3 million registered buyers, respectively.

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, 2024 and 2023, 960,000 and 848,000 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, 2025 and 2024, 982,000 and 1,139,000 participants participated in auctions on our marketplaces, respectively. During the six months ended March 31, 2025 and 2024, approximately 1,942,000 and 1,987,000 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, 2024 and 2023, we completed 253,000 and 239,000 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, 2025 and 2024, we completed 258,000 and 300,000 transactions, respectively. During the six months ended March 31, 2025 and 2025, we completed 511,000 and 539,000 transactions, respectively.

Previous wording

CAG. Revenue from our CAG reportable segment increased by $2.0 million, or 25.7%, due to a $15.3 million, or 31.2%, increase in GMV driven by consignment sales in our heavy equipment and energy categories, while prior year results were impacted by project delays in certain international sales events. While there are inherent variations in the mix of assets sourced and sold by the CAG segment in any given period, Segment direct profit as a percentage of total revenue remained relatively consistent between the periods. As a result of the increase in revenues, Segment direct profit increased by $1.9 million, or 26.7%. 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.

Current wording

CAG. Revenue from our CAG reportable segment decreased by $2.7 million, or 21.9%, despite an increase in GMV of $7.7 million, or 14.3%, primarily driven by consignment sales in our heavy equipment category, due to completion of large international spot purchase transactions in the three months ended March 31, 2024. As a result of the decrease in revenues, Segment direct profit decreased by $0.6 million, or 6.3%. Segment direct profit as a percentage of total revenue increased from 75.2% to 90.2% due to the prior year international spot purchase transactions. As a reminder, there are 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 10.5%, or $0.4 million, due to price increases and continued growth in subscribers. As a result of the increase in revenues, segment direct profit increased 10.1%, or $0.4 million. Segment direct profit as a percentage of total revenue remained relatively consistent between the periods.

Current wording

Machinio & Software Solutions. Revenue in our Machinio & Software Solutions businesses increased 21.8%, or $0.9 million, due to Machinio price increases and continued growth in its subscribers, and from the acquisition of Auction Software. As a result of these increase in revenues, segment direct profit increased 18.8%, 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 increased $51.0 million, or 71.5%. Refer to the discussion of Segment Results above for discussion of the increase in revenue.

Current wording

Total revenues. Total consolidated revenue increased $24.9 million, or 27.3%. Refer to the discussion of Segment Results above for discussion of the increase in revenue.

Previous wording

Cost of goods sold (excludes depreciation and amortization). Cost of goods sold increased $40.6 million, due to increased purchase transaction volumes at our RSCG reportable segment during the three months ended December 31, 2024.

Current wording

Cost of goods sold (excludes depreciation and amortization). Cost of goods sold increased $24.7 million, primarily due to increased purchase transaction volumes at our RSCG reportable segment during the three months ended March 31, 2025.

Previous wording

Technology and operations expenses. Technology and operations expenses increased $3.2 million, or 22.3%, primarily in support of the increased transactions volumes across our segments, including operating costs associated with expanded full-service consignment solutions in our GovDeals segment through our acquisition of Sierra, temporary storage costs in our RSCG segment from the initial stages of its purchase programs expansion that are expected to normalize during the three months ended March 31, 2025, and a $0.2 million increase in stock compensation expense.

Current wording

Technology and operations expenses. Technology and operations expenses increased $1.4 million, or 8.7%, primarily in support of the increased transactions volumes across our segments, including operating costs associated with expanded service offerings in our GovDeals segment, temporary storage costs in our RSCG segment from the initial stages of its purchase programs expansion that are expected to normalize during the three months ended June 30, 2025, and a $0.1 million increase in stock compensation expense.

Previous wording

Depreciation and amortization. Depreciation and amortization expense decreased $0.4 million, or 13.4%, due to historically acquired intangible assets reaching the end of their useful lives.

Current wording

Depreciation and amortization. Depreciation and amortization expense decreased $0.6 million, or 19.6%, due to historically acquired intangible assets reaching the end of their useful lives.

Previous wording

Provision for income taxes. Provision for income taxes increased $1.5 million due to the higher pre-tax income and the impact of foreign, state, and local taxes and permanent tax adjustments.

Current wording

Provision for income taxes. Provision for income taxes decreased $0.8 million due to an increase in tax benefits from stock compensation vesting activity, and the impact of foreign, state, and local taxes and permanent tax adjustments.

Previous wording

GovDeals. Total revenues from our GovDeals reportable segment increased 29.1%, or $4.6 million, due to a $21.7 million, or 11.4%, increase in GMV driven by increased personal property sales, particularly in vehicles despite some softening in market prices, and continued growth in our seller base. 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 $3.8 million, or 25.0%, consistent with the increase in revenues. Segment direct profit as a percentage of total revenue decreased from 94.7% to 91.7% due to transportation costs associated with Sierra and other expanded service locations.

Current wording

GovDeals. Total revenues from our GovDeals reportable segment increased 16.0%, or $5.5 million, due to a $38.9 million, or 10.3%, increase in GMV driven by new seller acquisition, service expansion and strong results across our personal property and real estate categories, partially offset by weather-related delays. 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 $4.3 million, or 13.2%, and Segment direct profit as a percentage of total revenue decreased from 94.1% to 91.9%, as our expanded service offerings for higher-volume sellers have a higher revenue take-rate but require additional costs of goods sold relative to our core self-service model.

Previous wording

RSCG. Revenue from our RSCG reportable segment increased by $44.0 million, or 100.5%, due to a $43.2 million, or 64.9%, increase in GMV due to expansion in our purchase programs. Segment direct profit increased by $4.4 million, or 31.1%, and Segment direct profit as a percentage of total revenue decreased from 32.3% to 21.1%, due to increased volumes from expanded purchase programs, driven by general merchandise categories that are lower-touch and do not generally have a significant impact on RSCG's operating expenses, and a lower blended take-rate on our consignment sales. These increased purchase volumes and their effect of lowering Segment direct profit as a percentage of total revenue are expected to continue.

Current wording

RSCG. Revenue from our RSCG reportable segment increased by $69.80 million, or 69.5%, due to a $66.4 million, or 45.4%, increase in GMV due to expansion in our purchase programs. Segment direct profit increased by $4.0 million, or 12.7%, and Segment direct profit as a percentage of total revenue decreased from 30.9% to 20.6%, due to increased volumes and purchase-rate changes from expanded purchase programs, driven by general merchandise categories that are lower-touch and do not generally have a significant impact on RSCG's operating expenses, and a lower blended take-rate on our consignment sales. These increased purchase volumes and their effect of lowering Segment direct profit as a percentage of total revenue are expected to continue.

Previous wording

Sales and marketing expenses. Sales and marketing expenses increased $1.8 million, or 13.8%, primarily due to our market share expansion and client diversification efforts, and a $0.4 million increase in stock compensation expense.

Current wording

Sales and marketing expenses. Sales and marketing expenses increased $1.4 million, or 5.2%, primarily due to our market share expansion and multi-channel buyer development efforts, and a $0.6 million increase in stock compensation expense.

Previous wording

General and administrative expenses. General and administrative expenses increased $0.7 million, or 9.0%, primarily due to a $0.6 million increase in stock compensation primarily from variable stock awards tied to financial performance targets.

Current wording

General and administrative expenses. General and administrative expenses increased $0.1 million, or 0.9%, driven by a $0.5 million increase in stock compensation primarily from variable stock awards tied to financial performance targets, offset slightly by ongoing cost management and streamlining efforts.

Previous wording

2 Acquisition-related costs are included in Other operating expenses, net on the Condensed Consolidated Statement of Operations.

Current wording

2 Acquisition-related costs, and business realignment expenses are included in Other operating expenses, net on the Condensed Consolidated Statement 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, 2024, we had $128.7 million in Cash and cash equivalents and $10.4 million in Short-term investments, 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, 2025, we had $138.5 million in Cash and cash equivalents and $10.5 million in Short-term investments, 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

The Company accepts multiple forms of payment including payment cards, bank transfers, and other merchant account providers. Generally, we require receipt of payment prior to shipment or buyer-arranged pick-up at the point of sale, which minimizes our collection risk on those transactions. However, for a limited number of financially qualified buyers, we may from time-to-time extend credit for certain large purchases with negotiated payment periods. Credit terms commonly require payment to be made within 30 days, but where commercial terms or market conditions warrant these payment terms may be extended for up to six months. As a result, our consolidated accounts receivable balances are typically a small component of our overall financial position but may, at times, be concentrated among a small number of such buyers. These buyers are not considered to be "major customers" of Liquidity Services which would otherwise be subject to additional disclosure requirements. Collection risk from and credit exposure to these financially qualified buyers is regularly reviewed by management and adjusted as needed.

Current wording

The Company accepts multiple forms of payment including payment cards, bank transfers, and other merchant account providers. Generally, we require receipt of payment prior to shipment or buyer-arranged pick-up at the point of sale, which minimizes our collection risk on those transactions. However, for a limited number of financially qualified buyers, which can include re-sellers, we may from time-to-time extend credit for certain large purchases with negotiated payment periods. Credit terms commonly require payment to be made within 30 days, but where commercial terms or market conditions warrant these payment terms may be extended for up to six months. As a result, our consolidated accounts receivable balances are typically a small component of our overall financial position but may, at times, be concentrated among a limited, small number of such buyers. Collection risk from and credit exposure to these financially qualified buyers is regularly reviewed by management and adjusted as needed.

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 $9.8 million of undistributed foreign earnings as of December 31, 2024. A total of $24.4 million of cash and cash equivalents and short-term investments was held out of the U.S. as of December 31, 2024. These amounts are not currently considered in our evaluation of near-term liquidity needs in the U.S. due to the potential for adverse tax consequences upon repatriation.

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 $9.5 million of undistributed foreign earnings as of March 31, 2025. A total of $30.3 million of cash and cash equivalents and short-term investments was held out of the U.S. as of March 31, 2025. These amounts are not currently considered in our evaluation of near-term liquidity needs in the U.S. due to the potential for adverse tax consequences upon repatriation.

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, 2024 and 2023, were $1.8 million and $1.7 million, respectively. This increase was primarily driven by enhancements to our platforms and marketplaces. As of December 31, 2024, 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 six months ended March 31, 2025 and 2024, were $3.7 million and $4.1 million, respectively. This decrease was primarily driven by the timing of enhancements to our platforms and marketplaces. As of March 31, 2025, we had no significant outstanding commitments for capital expenditures.

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, 2024, the Company did not make any draws under the Line of Credit, had no outstanding borrowings under the Line of Credit and had $7.5 million of standby letters of credit outstanding. The amount of standby letters of credit are reserved against the Line of Credit and are not available for borrowing, resulting in $17.5 million of remaining borrowing capacity under the Line of Credit as of December 31, 2024.

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, 2025, the Company did not make any draws under the Line of Credit, had no outstanding borrowings under the Line of Credit and had $7.5 million of standby letters of credit outstanding. The amount of standby letters of credit are reserved against the Line of Credit and are not available for borrowing, resulting in $17.5 million of remaining borrowing capacity under the Line of Credit as of March 31, 2025.

Previous wording

The Company made no repurchases during the three months ended December 31, 2024. As of December 31, 2024, the Company had $17.6 million of remaining authorization to repurchase shares through December 31, 2026.

Current wording

The Company made no repurchases during the three and six months ended March 31, 2025. As of March 31, 2025, the Company had $17.6 million of remaining authorization to repurchase shares through December 31, 2026.

Previous wording

Changes in Cash Flows: Three Months Ended December 31, 2024, Compared to the Three Months Ended December 31, 2023

Current wording

Changes in Cash Flows: Six Months Ended March 31, 2025, Compared to the Six Months Ended March 31, 2024

Previous wording

Net cash used in operating activitieswas $12.1 million and $8.9 million for the three months ended December 31, 2024 and 2023, respectively. The $3.2 million increase in cash used in operating activities between periods was primarily attributable to an $11.8 million decrease in cash inflows associated with Accounts receivable primarily due to qualified buyers with credit terms transacting in our expanded purchase program volumes in our RSCG segment. This was partially offset by a $5.6 million increase in our Net income as adjusted for non-cash items, and a $2.2 million decrease in cash outflows associated with Prepaid expenses from the return of a commercial contract deposit.

Current wording

Net cash provided by operating activitieswas $9.5 million and $26.0 million for the six months ended March 31, 2025 and 2024, respectively. The $16.5 million decrease in cash provided by operating activities between periods was primarily attributable to an $11.9 million decrease in cash flows associated with Accounts Payable due to the timing of seller settlements at our GovDeals and CAG businesses including impacts from weather-related delays, a $7.2 million decrease in cash flows associated with Accounts receivable primarily due to qualified buyers with credit terms transacting in our expanded purchase program volumes in our RSCG segment, and a $4.7 million increase in cash tax payments. These were partially offset by a $4.4 million increase in our Net income as adjusted for non-cash items.

Previous wording

Our working capital accounts are subject to natural variations depending on the rate of change of our transaction volumes, the timing of cash receipts and payments, and variations in our transaction volumes related to settlements between our buyers and sellers. RSCG's expanded purchase program volumes may cause operating cash flow fluctuations from Accounts receivable, Accounts payable and Inventory to increase. As GovDeals real estate sales with settlement services increase, operating cash flow fluctuations from Accounts payable and Payables to sellers may become more variable. The amount of cash received and settled will be substantially higher than our take-rate on such transactions, and the timing of auction events, cash collection period, and payment of settlements relative to period end dates can potentially drive substantial cash movements to the extent the timing of such activities cross fiscal periods. We are also expecting to begin increasing our payments for US federal income taxes in fiscal 2025 as our remaining net operating loss carryforwards are used. There have been no other significant changes to the working capital requirements for the Company.

Current wording

Our working capital accounts are subject to natural variations depending on the rate of change of our transaction volumes, the timing of cash receipts and payments, and variations in our transaction volumes related to settlements between our buyers and sellers. RSCG's expanded purchase program volumes may cause operating cash flow fluctuations from Accounts receivable, Accounts payable and Inventory to increase. As GovDeals real estate sales with settlement services increase, operating cash flow fluctuations from Accounts payable and Payables to sellers may become more variable. The amount of cash received and settled will be substantially higher than our take-rate on such transactions, and the timing of auction events, cash collection period, and payment of settlements relative to period end dates can potentially drive substantial cash movements to the extent the timing of such activities cross fiscal periods. We have also recently began increasing our payments for US federal income taxes in fiscal 2025 as our remaining net operating loss carryforwards are used. There have been no other significant changes to the working capital requirements for the Company.

Previous wording

Net cash used in investing activitieswas $10.4 million and $2.1 million for the three months ended December 31, 2024 and 2023, respectively. The $8.3 million increase in cash used in investing activities was primarily driven by an $8.3 million increase in the purchase of short-term investments during the three months ended December 31, 2024.

Current wording

Net cash used in investing activitieswas $18.6 million and $17.6 million for the six months ended March 31, 2025 and 2024, respectively. The $1.0 million increase in cash used in investing activities was primarily driven an $11.0 million increase in the purchase of short-term investments, offset by an increase of $2.7 million in maturities of short-term investments and a $7.0 million decrease in cash paid for business acquisitions; see Note 3 -Acquisitions.

Previous wording

Net cash used in financing activitieswas $0.9 million and $1.3 million for the three months ended December 31, 2024 and 2023, respectively. The $0.4 million decrease in cash used in financing activities was primarily driven by a $1.1 million decrease in share repurchases, partially offset by a $0.7 million increase in taxes paid associated with the net settlement of stock compensation awards.

Current wording

Net cash used in financing activitieswas $4.8 million and $10.3 million for the six months ended March 31, 2025 and 2024, respectively. The $5.5 million decrease in cash used in financing activities was primarily driven by a $9.0 million decrease in share repurchases partially offset by a $3.5 million increase in taxes paid associated with the net settlement of stock compensation awards.