What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2021-02-04 · 144 added, 86 removed, 464 unchanged (33% of the section changed)

4 unchanged sentences

(Dollars in Thousands, Except Par Value)

December 31, 2020 September 30, 2020

March 31, 2021 September 30, 2020

Current assets:

28 unchanged sentences

120,000,000 shares authorized;

34,212,815 shares issued and outstanding at December 31, 2020;

35,115,307 shares issued and outstanding at March 31, 2021;

34,082,406 shares issued and outstanding at September 30, 2020

1 unchanged sentence

Treasury stock, at cost;

866,388 shares at December 31, 2020 and 547,508 shares at September 30, 2020

1,587,199 shares at March 31, 2021 and 547,508 shares at September 30, 2020

( 21,628 ) ( 3,983 )

8 unchanged sentences

(Dollars in Thousands, Except Per Share Data)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2021 2020 2021 2020

Revenue $ 35,968 $ 35,203 $ 67,040 $ 65,552

7 unchanged sentences

Depreciation and amortization 1,670 1,577 3,541 3,149

Other operating expenses 4 193

Other operating expenses (income) 206 ( 12 ) 210 181

Total costs and expenses 56,148 57,276 107,273 111,770

13 unchanged sentences

(Dollars in Thousands)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2021 2020 2021 2020

Net income (loss) $ 5,260 $ ( 4,238 ) $ 9,775 $ ( 9,434 )

Other comprehensive income:

Other comprehensive income (loss):

Foreign currency translation 123 ( 1,303 ) 1,019 ( 470 )

Other comprehensive income 896 833

Other comprehensive income (loss) 123 ( 1,303 ) 1,019 ( 470 )

Comprehensive income (loss) $ 5,383 $ ( 5,541 ) $ 10,794 $ ( 9,904 )

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Balance at December 31, 2020 34,212,815 $ 34 $ 250,002 ( 866,388 ) $ ( 8,255 ) $ ( 8,886 ) $ ( 117,832 ) $ 115,063

Net income — — — — — — 5,260 5,260

Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units 1,079,955 1 154 — — — — 155

Taxes paid associated with net settlement of stock compensation awards ( 177,463 ) — ( 3,145 ) — — — — ( 3,145 )

Common stock repurchased — — — ( 647,583 ) ( 12,040 ) — — ( 12,040 )

Common stock surrendered in the exercise of stock options — — 1,333 ( 73,228 ) ( 1,333 ) — — —

Stock compensation expense — — 1,522 — — — — 1,522

Foreign currency translation — — — — — 123 — 123

Balance at March 31, 2021 35,115,307 $ 35 $ 249,866 ( 1,587,199 ) $ ( 21,628 ) $ ( 8,763 ) $ ( 112,572 ) $ 106,938

See accompanying notes to the unaudited consolidated financial statements.

3 unchanged sentences

(Dollars In Thousands)

Three Months Ended December 31,

Six Months Ended March 31,

Operating activities

5 unchanged sentences

Deferred tax provision 64 362

(Gain) on disposal of property and equipment ( 1 ) ( 12 )

Loss (gain) on disposal of property and equipment 44 ( 25 )

Change in fair value of earnout liability — 200

Impairment of long-lived assets 203 —

Changes in operating assets and liabilities:

23 unchanged sentences

Proceeds from exercise of stock options 351 34

Payment of earnout liability related to business acquisition — ( 1,200 )

Common stock repurchased ( 16,143 ) —

1 unchanged sentence

Effect of exchange rate differences on cash and cash equivalents 853 ( 511 )

Net increase (decrease) in cash and cash equivalents 1,808 ( 12,314 )

Net increase in cash and cash equivalents 11,577 5,319

Cash and cash equivalents at beginning of period 76,036 36,497

8 unchanged sentences

Liquidity Services, Inc.

(the Company) operates a network of e-commerce marketplaces that enable buyers and sellers to transact in an efficient, automated environment offering over 600 product categories .

The Company’s marketplaces provide professional buyers access to a global, organized supply of new, surplus and idle assets presented with digital images and other relevant product information.

Additionally, the Company enables corporate and government sellers to enhance their financial return on offered assets by providing a liquid marketplace and value-added services that encompass the consultative management, valuation and sale of surplus assets.

(the Company) operates a network of e-commerce marketplaces that power the circular economy which benefits businesses, society, and the environment through the safe and effective resale and redeployment of surplus assets;

reducing waste, carbon emissions and transportation costs;

and by creating markets for items that would otherwise be landfilled.

The Company's marketplaces enable buyers and sellers to transact in an efficient, automated environment offering over 600 product categories and provide professional buyers access to a global, organized supply of new, surplus and idle assets presented with digital images and other relevant product information.

The Company's marketplaces enable corporate and government sellers to enhance their financial return on offered assets by providing a liquid marketplace and value-added services that encompass the consultative management, valuation and sale of surplus assets.

The Company's services include program management, valuation, asset management, reconciliation, refurbishment and recycling, fulfillment, marketing and sales, warehousing and transportation, buyer support, compliance and risk mitigation, as well as self-directed service tools for its sellers.

1 unchanged sentence

The Company’s marketplaces are:

www.allsurplus.com, www.liquidation.com, www.govdeals.com, www.networkintl.com, www.secondipity.com, and www.go-dove.com.

www.allsurplus.com, www.liquidation.com, www.govdeals.com, www.secondipity.com, and www.go-dove.com.

The Company also operates a global search engine for listing used machinery and equipment for sale at www.machinio.com.

3 unchanged sentences

The Company's operations are subject to certain risks and uncertainties, many of which are associated with technology-oriented companies, including, but not limited to, the Company's dependence on use of the Internet;

the effect of general business and economic trends, including the extent and duration of the COVID-19 pandemic;

the effect of general business and economic trends, including the extent and duration of travel restrictions and the COVID-19 pandemic's impact on current and future macroeconomic conditions;

the Company's susceptibility to rapid technological change;

8 unchanged sentences

The information disclosed in the notes to the consolidated financial statements for these periods is unaudited.

Operating results for the three months ended December 31, 2020 are not necessarily indicative of the results that may be expected for the year ending September 30, 2021 or for any future period.

Operating results for the three and six months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending September 30, 2021 or for any future period.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts in the consolidated financial statements and accompanying notes.

For the three months ended December 31, 2020, these estimates required the Company to make assumptions about the extent and duration of the COVID-19 pandemic and its impacts on the Company's results of operations.

For the three and six months ended March 31, 2021, these estimates required the Company to make assumptions about the extent and duration of travel restrictions and the impact of the COVID-19 pandemic on macroeconomic conditions and, in turn, the Company's results of operations.

As there remains uncertainty associated with the COVID-19 pandemic, the Company will continue to update its assumptions as conditions change.

2 unchanged sentences

Contract assets reflect an estimate of expenses that will be reimbursed upon settlement with a seller.

The contract asset balance was $ 0.4 million as of December 31, 2020 and $ 0.4 million as of September 30, 2020, and is included in the line item Prepaid expenses and other current assets on the Consolidated Balance Sheets.

Contract liabilities reflect obligations to provide services for which the Company has already received consideration, and generally arise from up-front payments received in connection with Machinio's subscription services.

The contract liability balance was $ 3.4 million as of December 31, 2020 and $ 3.3 million as of September 30, 2020, and is included in the line item Deferred revenue on the Consolidated Balance Sheets.

Of the September 30, 2020 contract liability balance, $ 1.4 million was earned as Fee revenue during the three months ended December 31, 2020.

The contract asset balance was $ 0.5 million as of March 31, 2021 and $ 0.4 million as of September 30, 2020 and is included in the line item Prepaid expenses and other current assets on the Consolidated Balance Sheets.

Liquidity Services, Inc.

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Notes to the Unaudited Consolidated Financial Statements - (Continued)

The contract liability balance was $ 4.2 million as of March 31, 2021 and $ 3.3 million as of September 30, 2020, and is included in the line item Deferred revenue on the Consolidated Balance Sheets.

Of the September 30, 2020 contract liability balance, $ 2.4 million was earned as Fee revenue during the six months ended March 31, 2021.

For the Company's Machinio business segment, performance obligations are satisfied over time as the Company provides the services over the term of the subscription.

At December 31, 2020, the Machinio business segment had a remaining performance obligation of $ 3.4 million;

At March 31, 2021, the Machinio business segment had a remaining performance obligation of $ 4.2 million;

the Company expects to recognize the substantial majority of that amount as Fee Revenue over the next 12 months.

2 unchanged sentences

Contract costs are amortized over the expected life of the customer contract.

The contract cost balance w as $ 0.9 million a s of December 31, 2020 and $ 0.7 million as of September 30, 2020 and is included in the line item Prepaid expenses and other current assets and Other assets on the Consolidated Balance Sheet.

Amortization expense was immaterial during the three months ended December 31, 2020 and 2019.

The contract cost balance w as $ 1.3 million a s of March 31, 2021 and $ 0.7 million as of September 30, 2020 and is included in the line item Prepaid expenses and other current assets and Other assets on the Consolidated Balance Sheet.

Amortization expense was $ 0.2 million and $ 0.3 million during the three and six months ended March 31, 2021 and was $ 0.1 million and $ 0.2 million during the three and six months ended March 31, 2020.

Other Assets - Promissory Note

5 unchanged sentences

Upon execution of the Forbearance Agreement, JTC repaid $ 2.5 million in principal, plus $ 0.4 million in accrued interest.

JTC had the opportunity to prepay the full amount remaining before May 15, 2020 at a $ 0.5 million discount.

Of the $ 12.3 million owed to t he Company, $ 7.3 million has been repaid as of December 31, 2020.

Of the $ 5.0 million in principal outstanding at December 31, 2020, $ 3.4 million was recorded in Other assets, and $ 1.6 million in Prepaid expenses and other current assets based on the scheduled repayment dates.

Of the $ 12.3 million owed to t he Company, $ 7.7 million has been repaid as of March 31, 2021.

Of the $ 4.6 million in principal outstanding at March 31, 2021, $ 2.9 million was recorded in Other assets, and $ 1.7 million in Prepaid expenses and other current assets based on the scheduled repayment dates.

Risk Associated with Certain Concentrations

2 unchanged sentences

For consignment sales transactions, funds are typically collected from buyers and are held by the Company on the sellers' behalf.

The funds are included in Cash and cash equivalents in the consolidated financial statements.

The funds are included in Cash and cash equivalents on the Consolidated Balance Sheets.

The Company releases the funds to the seller, less the Company's commission and other fees due, to the seller through Accounts payable after the buyer has accepted the goods or within 30 days, depending on the state where the buyer and seller conduct business.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of Cash and cash equivalents in banks over FDIC limits, Short-term investments, and Accounts receivable.

The Company deposits its Cash and cash equivalents with and acquires Short-term investments from financial institutions that the Company considers to be of high credit quality.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of Cash in banks and cash equivalent money market funds in accounts which may at times exceed federally insured limits (FDIC and/or SIPC), and Accounts receivable.

The Company deposits its Cash and acquires cash equivalent money market funds with financial institutions that the Company considers to be of high credit quality.

Additionally, the Company has multiple vendor contracts with Amazon.com, Inc.

under which it acquires and sells commercial merchandise.

The property purchased under this contract represented 60.0 % and 48.3 % of consolidated Cost of goods sold for the three months ended December 31, 2020 and 2019, respectively.

The property purchased under this contract represented 61.2 % and 55.3 % of consolidated Cost of goods sold for the three months ended March 31, 2021 and 2020, respectively, and 60.6 % and 51.9 % of consolidated Cost of goods sold for the six months ended March 31, 2021 and 2020, respectively.

These contracts are included within the RSCG segment.

Earnings per Share

For the three months ended December 31, 2020, diluted weighted average common shares outstanding contains 1,734,225 shares representing the dilutive impact of stock options, RSUs and RSAs.

1,711,221 s tock options, RSUs and RSAs were excluded from the computation of diluted weighted average common shares outstanding as they were anti-dilutive.

For the three months ended December 31, 2019, basic and diluted weighted average common shares were the same because the Company operated at a net loss, causing any inclusion of potentially dilutive securities in the computation of diluted net income (loss) per share to be anti-dilutive.

See Note 7 for the amounts of outstanding stock options, restricted stock awards and restricted stock units that could potentially dilute net income (loss) per share in the future.

Recent Accounting Pronouncements

Accounting Standards Adopted

Liquidity Services, Inc.

1 unchanged sentence

Notes to the Unaudited Consolidated Financial Statements - (Continued)

Recent Accounting Pronouncements

Accounting Standards Adopted

On October 1, 2020, the Company adopted ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract .

12 unchanged sentences

The Company is currently evaluating the effect that the adoption of this ASU may have on its consolidated financial statements.

Earnings per Share

Basic net income per share is computed by dividing net income for the period by the weighted average number of shares outstanding during the period.

Diluted net income per share is computed by dividing net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period.

The calculation of diluted net income per share excludes all anti-dilutive common shares.

The computation of basic and diluted net income per share is as follows:

Three Months Ended March 31, Six Months Ended March 31,

2021 2020 2021 2020

Net income (loss) $ 5,260 $ ( 4,238 ) $ 9,775 $ ( 9,434 )

Basic weighted average shares outstanding 33,491,395 33,624,889 33,332,417 33,584,844

Dilutive impact of stock options, RSUs and RSAs 2,068,352 — 1,582,132 —

Diluted weighted average shares outstanding 35,559,747 33,624,889 34,914,549 33,584,844

Basic income (loss) per common share $ 0.16 $ ( 0.13 ) $ 0.29 $ ( 0.28 )

Diluted income (loss) per common share $ 0.15 $ ( 0.13 ) $ 0.28 $ ( 0.28 )

Stock options, RSUs and RSAs excluded from income (loss) per diluted share because their effect would have been anti-dilutive

367,539 5,051,829 969,089 5,051,829

Liquidity Services, Inc.

9 unchanged sentences

The components of lease expense are:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(in thousands) 2021 2020 2021 2020

2 unchanged sentences

Operating lease cost 1,249 1,344 2,655 2,680

Operating lease impairment expense 172 — 172 —

Short-term lease cost 47 23 121 44

Variable lease cost (1)

455 420 818 751

Sublease income ( 30 ) ( 20 ) ( 106 ) ( 139 )

3 unchanged sentences

Maturities of lease liabilities are:

December 31, 2020

March 31, 2021

(in thousands) Operating Leases Finance Leases

13 unchanged sentences

Supplemental disclosures of cash flow information related to leases are:

Three Months Ended December 31,

Six Months Ended March 31,

(in thousands) 2021 2020

4 unchanged sentences

adjustments to lease assets and liabilities 3,286 1,675

(1) The December 31, 2019 a mount includes $ 12.2 million of lease liabilities recognized upon the adoption of ASC 842 on October 1, 2019.

Liquidity Services, Inc.

1 unchanged sentence

Notes to the Unaudited Consolidated Financial Statements - (Continued)

(1) Six months ended March 31, 2020 amount includes $ 12.2 million of lease liabilities recognized upon the adoption of ASC 842 on October 1, 2019.

The carrying value and changes in the carrying value of goodwill attributable to each reportable segment were as follows:

6 unchanged sentences

Translation adjustments 147 — — 147

Balance at December 31, 2020

Balance at March 31, 2021

$ 21,697 $ 23,731 $ 14,558 $ 59,986

Goodwill is tested for impairment at the beginning of the fourth quarter and during interim periods whenever events or circumstances indicate that the carrying value may not be recoverable.

The Company did not identify any indicators of impairment that required an interim impairment test during the three months ended December 31, 2020.

The Company did not identify any indicators of impairment that required an interim impairment test during the three and six months ended March 31, 2021.

The Company has continued to evaluate the impact of the COVID-19 pandemic on the recoverability of its goodwill.

As there have been favorable developments in the factors that previously indicated an interim goodwill impairment test was necessary during the prior fiscal year, the Company did not identify any indicators of impairment that required an interim goodwill impairment test during the three months ended December 31, 2020.

Intangible Assets

Intangible assets consist of the following:

December 31, 2020 September 30, 2020

March 31, 2021 September 30, 2020

(dollars in thousands) Useful

9 unchanged sentences

Total intangible assets $ 8,150 $ ( 4,040 ) $ 4,110 $ 8,129 $ ( 3,371 ) $ 4,758

Future expected amortization of intangible assets at December 31, 2020, is as follows:

Future expected amortization of intangible assets at March 31, 2021, is as follows:

(in thousands) Expected Amortization Expense

2 unchanged sentences

Total $ 4,110

Intangible asset amortization expense was $ 0.3 million and $ 0.3 million for the three months ended December 31, 2020 and 2019, respectively.

Intangible asset amortization expense was $ 0.3 million and $ 0.3 million for the three months ended March 31, 2021 and 2020, respectively and $ 0.7 million and $ 0.7 million for the six months ended March 31, 2021 and 2020, respectively.

The Company has continued to evaluate the impact of the COVID-19 pandemic on the recoverability of its long-lived assets.

As there have been favorable developments in the factors that previously indicated an interim long-lived assets impairment test was necessary during the prior fiscal year, the Company did not identify any indicators of impairment that required an interim long-lived assets impairment test during the three months ended December 31, 2020.

The Company has not identified indicators of impairment requiring an interim impairment test on material long-lived assets during the three and six months ended March 31, 2021.

Liquidity Services, Inc.

2 unchanged sentences

The Company’s interim effective income tax rate is based on management’s best current estimate of the Company's expected annual effective income tax rate.

The Company recorded pre-tax income in the first three months of fiscal year 2021 and its corresponding effective tax rate is 6.2 % compared to ( 9.7 %) for the first three months of fiscal year 2020.

The change in the effective tax rate for the three months ended December 31, 2020 as compared to the same period in the prior year was primarily due to state and foreign taxes.

Tax expense in the three months ended December 31, 2020 is due to state and foreign taxes paid.

The Company recorded pre-tax income in the first six months of fiscal year 2021 and its corresponding effective tax rate is 6.7 % compared to ( 5.6 %) for the first six months of fiscal year 2020.

The change in the effective tax rate for the six months ended March 31, 2021 as compared to the same period in the prior year was primarily due to state and foreign taxes.

Tax expense in the six months ended March 31, 2021 is due to state and foreign taxes paid.

The effective tax rate differed from the U.S.

2 unchanged sentences

ASC Topic 740, Income Taxes , states that a benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, on the basis of technical merits.

The Company identified no new uncertain tax positions during the three months ended December 31, 2020.

The Company identified no new uncertain tax positions during the six months ended March 31, 2021.

The Company and its subsidiaries file income tax returns in the U.S.

federal jurisdiction, various state and local jurisdictions and in foreign jurisdictions, primarily Canada and the United Kingdom.

As of December 31, 2020, none of the Company's federal or state income tax returns are under examination, however, we remain subject to examination for certain of our foreign income tax returns.

As of March 31, 2021, none of the Company's federal or state income tax returns are under examination, however, we remain subject to examination for certain of our foreign income tax returns.

The Company has no open income tax examinations in the U.S.

24 unchanged sentences

Balance at December 31, 2019 33,887,591 $ 34 $ 243,311 $ ( 7,140 ) $ ( 123,768 ) $ 112,437

Net loss — — — — ( 4,238 ) ( 4,238 )

Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units 111,272 — 32 — — 32

Taxes paid associated with net settlement of stock compensation awards ( 10,065 ) — ( 60 ) — — ( 60 )

Stock compensation expense — — 1,244 — — 1,244

Foreign currency translation — — — ( 1,303 ) — ( 1,303 )

Balance at March 31, 2020 33,988,798 $ 34 $ 244,527 $ ( 8,443 ) $ ( 128,006 ) $ 108,112

Liquidity Services, Inc.

3 unchanged sentences

The Company has several incentive plans under which stock options, restricted stock units (RSUs), restricted stock awards (RSAs), and cash-settled stock appreciation rights (SARs) have been issued, including the Third Amended and Restated 2006 Omnibus Long-Term Incentive Plan, as amended, and a plan and private placement issuances related to the Company’s acquisition of Machinio.

As of December 31, 2020, the Company has reserved at total of 19,100,000 shares of its common stock for exercises of stock options, vesting of RSUs, and grants of RSAs under these plans.

As of March 31, 2021, the Company has reserved at total of 19,100,000 shares of its common stock for exercises of stock options, vesting of RSUs, and grants of RSAs under these plans.

Vesting of RSUs and grants of RSAs count as 1.5 x shares against the plan reserves.

As of December 31, 2020, 2,037,876 shares of common stock remained available for use.

As of March 31, 2021, 1,865,347 shares of common stock remained available for use.

Stock Compensation Expense

Stock-based compensation expense was $ 2.2 million for the three months ended December 31, 2020, which included $ 1.8 million of expense related to equity-classified stock options and RSUs & RSAs (restricted stock units and awards) and a $ 0.4 million benefit related to liability-classified SARs (cash-settled stock appreciation rights).

The table below presents the components of share-based compensation expense (in thousands):

Three Months Ended March 31, Six Months Ended March 31,

2021 2020 2021 2020

Equity-classified awards:

Stock options $ 844 $ 561 $ 1,729 $ 977

RSUs & RSAs 678 683 1,594 1,389

Total equity-classified awards $ 1,522 $ 1,244 $ 3,323 $ 2,366

Liability-classified awards:

SARs 239 ( 13 ) 667 ( 96 )

Total stock compensation expense:

$ 1,761 $ 1,231 $ 3,990 $ 2,270

Stock Options and RSUs & RSAs

The following table presents stock option and RSUs & RSAs grant activity:

Three Months Ended

December 31, 2020

Six Months Ended

March 31, 2021

Stock Options granted:

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Vesting is measured the first day of each fiscal quarter over the four-year terms of the awards, starting with the first fiscal quarter after the first anniversary of the grant date, based upon the trailing 20-days average of the Company’s share price.

The range of assumptions used to determine the fair value of stock options containing only service conditions using the Black-Sc holes option-pricing model during the three months ended December 31, 2020 include a dividend yield of 0.0 %, expected volatility rates of 51.0 % to 51.7 %, risk-free interest rates of 0.36 % to 0.42 %, and expected terms of 4.6 to 5.0 years.

The range of assumptions used to determine the fair value of stock options and RSUs & RSAs containing market conditions using Monte Carlo simulations during the three months ended December 31, 2020 include a dividend yield of 0.0 %, expected volatility rates of 51.6 % to 54.6 %, risk-free interest rates of 0.3 % to 0.9 %, and expected holding period (% of remaining term for stock options only) of 31.7 % to 100 %.

Liquidity Services, Inc.

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Notes to the Unaudited Consolidated Financial Statements - (Continued)

During the three months ended December 31, 2020, the Company did no t issue any SARs, 28,379 SARs were exercised requiring the Company to make cash payments of $ 0.2 million, and 72,681 SARs were canceled.

As of December 31, 2020 , 59,750 SARs were outstanding.

The range of assumptions used to determine the fair value of stock options containing only service conditions using the Black-Sc holes option-pricing model during the six months ended March 31, 2021 were as follows:

Six Months Ended

March 31, 2021

Dividend yield —

Expected volatility 51.0 % - 55.9 %

Risk-free interest rate 0.4 % - 0.8 %

Expected term 4.6 - 7.6 years

The range of assumptions used to determine the fair value of stock options and RSUs & RSAs containing market conditions using Monte Carlo simulations during the six months ended March 31, 2021 were as follows:

Six Months Ended

March 31, 2021

Dividend yield —

Expected volatility 51.6 % - 54.6 %

Risk-free interest rate 0.3 % - 0.9 %

Expected holding period (% of remaining term) 31.7 % - 100.0 %

During the six months ended March 31, 2021, the Company did no t issue any SARs, 38,434 SARs were exercised requiring the Company to make cash payments of $ 0.3 million, and 73,681 SARs were canceled.

As of March 31, 2021 , 48,695 SARs were outstanding.

Share Repurchase Program

3 unchanged sentences

The repurchase program may be discontinued or suspended at any time and will be funded using our available cash.

The Company repurchased 309,496 shares for $ 4.1 million under this program during the three months ended December 31, 2020 .

As of December 31, 2020 , the Company may repurchase an additional $ 2.0 million of shares under this program.

As of the fiscal year ended September 30, 2020, we had $ 6.1 million of remaining share repurchase authorization.

On March 8, 2021, our Board of Directors authorized an additional $ 10 million of share repurchases of the Company's outstanding shares of common stock through March 31, 2023.

The Company repurchased 647,583 shares for $ 12.0 million and 957,079 shares for $ 16.1 million under this program during the three and six months ended March 31, 2021, respectively.

As of March 31, 2021, the Company had no remaining authorization to repurchase shares under this program.

On May 3, 2021, the Company's Board of Directors authorized the repurchase of up to $ 15 million of the Company's outstanding shares of common stock through June 30, 2023.

Other Share Repurchases

Separate from the share repurchase program, our stock incentive plans allow for participants to exercise stock options by surrendering shares of common stock equivalent in value to the exercise price due.

During the three months ended December 31, 2020, participants surrendered 9,384 shares of common stock in the exercise of stock options.

During the three and six months ended March 31, 2021, participants surrendered 73,228 an d 82,612 share s of common stock in the exercise of stock options, respectively.

Any shares surrendered to the Company in this manner are not available for future grant.

Liquidity Services, Inc.

and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements - (Continued)

Fair Value Measurement

5 unchanged sentences

Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect those that a market participant would use.

The Company had $ 30.0 million of money market funds considered cash equivalents at December 31, 2020 and September 30, 2020 .

These assets were measured at fair value at December 31, 2020 and September 30, 2020 and were cl assified as Level 1 assets within the fair value hierarchy.

The Company had $ 40.0 million of money market funds considered cash equivalents at March 31, 2021 and September 30, 2020 .

These assets were measured at fair value at March 31, 2021 and September 30, 2020 and were cl assified as Level 1 assets within the fair value hierarchy.

There were no transfers between levels during the periods presented.

The Company’s financial assets and liabilities not measured at fair value are cash, accounts receivable, a promissory note, and accounts payable.

The Company believes the carrying values of these assets and liabilities approximate fair value.

As of December 31, 2020 and September 30, 2020, the Company did no t have any assets or liabilities measured at fair value on a non-recurring basis.

As of March 31, 2021 and September 30, 2020, the Company did no t have any material assets or liabilities measured at fair value on a non-recurring basis.

Defined Benefit Pension Plan

2 unchanged sentences

The Scheme was closed to new members on January 1, 2002.

Liquidity Services, Inc.

and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements - (Continued)

The net periodic (benefit) is recognized within Interest and other income, net in the Consolidated Statements of Operations, and for the three months ended December 31, 2020 and 2019 included the following components:

Three Months Ended December 31,

The net periodic (benefit) is recognized within Interest and other income, net in the Consolidated Statements of Operations, and for the three and six months ended March 31, 2021 and 2020 included the following components:

Three Months Ended March 31, Six Months Ended March 31,

(in thousands) 2021 2020 2021 2020

9 unchanged sentences

Business realignment expenses are recorded as a component of Other operating expenses on the Consolidated Statements of Operations.

For the year ended September 30, 2020, business realignment expenses were incurred related to the elimination of certain positions in response to the COVID-19 pandemic.

The table below sets forth the significant components and activity in the liability for business realignment initiatives during the year ended September 30, 2020 and for the three months ended December 31, 2020, on a segment and consolidated basis:

For the year ended September 30, 2020, business realignment expenses were incurred related to the elimination of certain employee positions in response to the COVID-19 pandemic.

The table below sets forth the significant components and activity in the liability for business realignment initiatives, on a segment and consolidated basis:

(in thousands) Liability Balance at September 30, 2019 Adoption of ASC 842 Business

2 unchanged sentences

Expenses Cash

Payments Liability Balance at December 31, 2020

Payments Liability Balance at March 31, 2021

Employee severance and benefit costs:

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On December 22, 2020, the Company’s former Vice President, Human Resources filed a claim with the Equal Employment Opportunity Commission for wrongful termination on the basis of gender, race, and age.

Separately, he has alleged wage and hour violations under Maryland law for failure to pay his fiscal year 2020 performance bonus.

The Company believes the allegations are without merit and cannot estimate a range of potential liability, if any, at this time.

The Company’s employment practices liability insurance carrier, CNA, has accepted tender of these claims.

The Company believes this claim is without merit and cannot estimate a range of potential liability, if any, at this time.

The Company’s employment practices liability insurance carrier, CNA, has accepted tender of this claim.

The same former executive also has alleged wage and hour violations under Maryland law for failure to pay his fiscal year 2020 performance bonus.

The parties have reached a settlement in principle of the wage and hour claims and the Company expects that the amount of such settlement will be immaterial.

Unless otherwise noted, there are no claims or actions pending or threatened against the Company that, if adversely determined, would in the Company's management's judgment have a material adverse effect on the Company.

11 unchanged sentences

Commercial sellers are located in the United States, Europe, Australia and Asia.

This segment includes the Company's Network International and GoIndustry DoveBid marketplaces and self-directed service solutions for commercial businesses on the AllSurplus marketplace.

This segment includes the Company's GoIndustry DoveBid marketplace and self-directed and full-service solutions for commercial businesses on the AllSurplus marketplace.

• The Machinio reportable segment operates a global online platform for listing used equipment for sale in the construction, machine tool, transportation, printing and agriculture sectors.

8 unchanged sentences

The following table sets forth certain financial information for the Company's reportable segments:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(in thousands) 2021 2020 2021 2020

26 unchanged sentences

The following table presents a reconciliation of gross profit used in the reportable segments to the Company's consolidated results:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(in thousands) 2021 2020 2021 2020

2 unchanged sentences

Operating expenses 29,557 30,669 58,105 60,794

Other operating expenses 4 193

Other operating expenses (income) 206 ( 12 ) 210 181

Interest and other income, net ( 29 ) ( 257 ) ( 214 ) ( 509 )

3 unchanged sentences

Notes to the Unaudited Consolidated Financial Statements - (Continued)

The percent of our revenues that came from transactions conducted outside of the United States for the three months ended December 31, 2020 and 2019 was 9.6 % and 13.9 %, respectively.

The percent of our revenues that came from transactions conducted outside of the United States for the three months ended March 31, 2021 and 2020 was 18.4 % and 10.9 %, respectively, and the percent of our revenues that came from transactions conducted outside the United States for the six months ended March 31, 2021 and 2020 was 17.2 % and 13.1 %, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements