What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-06 · 116 added, 111 removed, 260 unchanged (47% of the section changed)

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The restrictions on economic activity were caused, in part, by business closures, limitations on the operations of business activity and significant prioritization of essential business functions.

Starting in May 2020, we have seen subsequent increases in Gross Merchandise Volume (GMV) and revenues as businesses and governments re-opened from government ordered closures which, combined with cost control measures, generated positive net income for the third and fourth quarters of fiscal 2020, and continued into the first and second quarters of fiscal 2021.

However, the likelihood, magnitude and timing of business developments across our segments are difficult to predict given the current economic uncertainty, unknown duration and overall impact of the global pandemic.

However, our international business continues to experience impacts to cross-border commerce due to ongoing travel restrictions in various countries.

At this time, the likelihood, magnitude and timing of business developments across our segments are difficult to predict given the current economic uncertainty, unknown duration and overall impact of the global pandemic.

As a result, prior trends in the Company's results of operations may not be applicable throughout the duration of the COVID-19 pandemic.

Throughout the COVID-19 pandemic, the Company has actively monitored its liquidity position and working capital needs.

In the first and second quarters of fiscal 2021, the Company determined that its liquidity position and working capital was more

than sufficient to meet its projected needs and commenced share repurchases, acquiring 647,583 shares for $12.0 million and 957,079 shares for $16.1 million during the three and six months ended March 31, 2021, respectively.

During each quarter of fiscal 2021 including during the three months ended June 30, 2021, the Company determined that its liquidity position and working capital were more than sufficient to meet its projected needs.

As discussed in Note 8 - Shareholder's Equity , during this time the Company repurchased 647,583 shares for $12.0 million and 957,079 shares for $16.1 million under our share repurchase program during the three and six months ended March 31, 2021 , respectively.

While we made no repurchases under our May 3, 2021 Stock Repurchase Plan during the three months ended June 30, 2021, the timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and the existence of alternative investment opportunities.

The repurchase program will be executed consistent with the Company's capital allocation strategy of prioritizing investment to grow the business over the long term.

In the longer term, we continue to be highly focused on creating efficiencies and benefits for our sellers and our buyers by focusing on the platform services and support that will deliver optimal liquidity in the reverse supply chain and further enable our growth through an asset light, low-touch marketplace solution.

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This flow of goods in turn attracts an increasing number of professional buyers to our marketplaces .

During the twelve months end ed March 31, 2021, the approximate number of registered buyers increased from 3,675,000 to 3,888,000, or 5.8%.

During the twelve months end ed June 30, 2021, the approximate number of registered buyers increased from 3,719,000 to 3,970,000, or 6.7%.

Substantially all of our revenue is earned through the following transaction models:

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The proceeds paid by buyers also include transaction fees, referred to as buyer premiums.

For the three and six months ended March 31, 2021, our purchase transaction model accounted for 18.2% and 17.2% of our GMV, and 58.2% and 57.0% of our total revenues, respectively.

For the three and six months ended March 31, 2020, our purchase transaction model accounted for 24.7% and 22.6% of our GMV, and 66.6% and 64.1% of our total revenues, respectively.

For the three and nine months ended June 30, 2021, our purchase transaction model accounted for 14.8% and 16.3% of our GMV, and 54.3% and 56.0% of our total revenues, respectively.

For the three and nine months ended June 30, 2020, our purchase transaction model accounted for 22.1% and 22.4% of our GMV, and 63.8% and 64.0% of our total revenues, respectively.

These amounts included sales of commercial merchandise sourced from vendor contracts with Amazon.com, Inc.

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The commercial merchandise we purchased under these contracts with Amazon.com, Inc.

represented 61.2% and 60.6% of consolidated Costs of goods sold for the three and six months ended March 31, 2021, respectively, and 55.3% and 51.9% of consolidated Cost of goods sold for the three and six months ended March 31, 2020, respectively.

represented 63.5% and 61.7% of consolidated Costs of goods sold for the three and nine months ended June 30, 2021, respectively, and 60.4% and 54.5% of consolidated Cost of goods sold for the three and nine months ended June 30, 2020, respectively.

Consignment model — fee revenue.

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In addition to seller commissions, we also collect buyer premiums.

For the three and six months ended March 31, 2021, our consignment model accounted for 81.8% and 82.8% of our GMV, and 34.4% and 35.5% of our total revenues, respectively.

For the three and six months ended March 31, 2020, our consignment model accounted for 75.3% and 77.4% of our GMV, and 27.6% and 29.7% of our total revenues, respectively

For the three and nine months ended June 30, 2021, our consignment model accounted for 85.2% and 83.7% of our GMV, and 37.4% and 36.2% of our total revenues, respectively.

For the three and nine months ended June 30, 2020, our consignment model accounted for 77.9% and 77.6% of our GMV, and 30.2% and 29.9% of our total revenues, respectively

Other — fee revenue .

We also earn non-consignment fee revenue from Machinio's sales listing subscription and MachineryHost services, as well as other services including returns management, refurbishment of assets, and asset valuation services.

Other revenues accounted for 7.4% and 7.5% of our total revenues for the three and six months ended March 31, 2021, respectively, and 5.8% and 6.2% of our total revenues for the three and six months ended March 31, 2020, respectively.

Other revenues accounted for 8.2% and 7.8% of our total revenues for the three and nine months ended June 30, 2021, respectively, and 6.0% and 6.2% of our total revenues for the three and nine months ended June 30, 2020, respectively.

Industry trends.

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(2) the increase in government regulations and the need for corporations to have sustainability solutions necessitating verifiable recycling and remarketing of surplus assets;

(3) the increase in outsourcing the

disposition of surplus and end-of-life assets by corporations and government entities as they focus on reducing costs, improving transparency, compliance and working capital flows, and increasingly prefer service providers with a proven track record, innovative scalable solutions and the ability to make a strategic impact in the reverse supply chain;

(3) the increase in outsourcing the disposition of surplus and end-of-life assets by corporations and government entities as they focus on reducing costs, improving transparency, compliance and working capital flows, and increasingly prefer service providers with a proven track record, innovative scalable solutions and the ability to make a strategic impact in the reverse supply chain;

(4) the increase in buyer demand for surplus merchandise as consumers trade down by purchasing less expensive goods and seek greater value from their purchases, which results in lower per unit prices and margins in our retail goods vertical;

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We have multiple vendor contracts with Amazon.com, Inc.

under which we acquire and sell commercial merchandise.

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.

under which the Company acquires and sells commercial merchandise.

The property purchased under these contracts with Amazon.com, Inc.

represented 63.5% and 60.4% of consolidated Cost of goods sold for the three months ended June 30, 2021 and 2020, respectively, and 61.7% and 54.5% of consolidated Cost of goods sold for the nine months ended June 30, 2021 and 2020, respectively.

These contracts are included within our RSCG segment.

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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, 2021 and 2020, we had approximately 3,888,000 and 3,675,000 registered buyers, respectively.

As of June 30, 2021 and 2020, we had approximately 3,970,000 and 3,719,000 registered buyers, respectively.

Total auction participants.

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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, 2021 and 2020, approximately 561,000 and 490,000, respectively, total auction participants participated in auctions on our marketplaces.

During the six months ended March 31, 2021 and 2020, approximately 1,078,000 and 945,000, respectively, total auction participants participated in auctions on our marketplaces.

During the three months ended June 30, 2021 and 2020, appr oximately 617,000 and 420,000, respectively, total auction participants participated in auctions on our marketplaces.

During the nine months ended June 30, 2021 and 2020, approximately 1,695,000 and 1,363,000, respectively, total auction participants participated in auctions on our marketplaces.

Completed transactions.

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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,

2021 and 2020, we completed approximately 174,000 and 150,000 transactions, respectively.

During the six months ended March 31, 2021 and 2020, we completed approximately 326,000 and 286,000 transactions, respectively.

During the three months ended June 30, 2021 and 2020, we completed approximately 185,000 and 134,000 transactions, respectively.

During the nine months ended June 30, 2021 and 2020, we completed approximately 511,000 and 420,000 transactions, respectively.

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA.

EBITDA is a supplemental non-GAAP financial measure and is equal to net income (loss) plus interest and other income, net excluding the non-service components of net periodic pension (benefit);

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, net excluding the non-service components of net periodic pension (benefit);

provision for income taxes;

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Interest and other income, net, can include non-operating gains and losses, such as from foreign currency fluctuations.

Our definition of Adjusted EBITDA differs from EBITDA because we further adjust 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.

We believe EBITDA and Adjusted EBITDA are useful to an investor in evaluating our performance for the following reasons:

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.

We believe Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA are useful to an investor in evaluating our performance for the following reasons:

• Depreciation and amortization expense primarily relates to property and equipment and the amortization of intangible assets.

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We believe adjusting for this stock-based compensation expense is useful to investors when evaluating the operating performance of our business on a consistent basis from year to year.

• The authoritative guidance related to business combinations requires the initial recognition of contingent consideration at fair value with subsequent changes in fair value recorded through the statements of operations and disallows the capitalization of transaction costs.

• The authoritative guidance related to business combinations requires the initial recognition of contingent consideration at fair value with subsequent changes in fair value recorded through the Consolidated Statements of Operations and disallows the capitalization of transaction costs.

We believe adjusting for these acquisition related expenses is useful to investors when evaluating the operating performance of our business on a consistent basis from year-to-year.

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• We believe isolating non-cash charges, such as amortization and depreciation, and other items, such as impairment costs incurred outside our ordinary course of business, provides additional information about our cost structure, and, over time, helps track our performance.

• We believe EBITDA and Adjusted EBITDA are important indicators of our operational strength and the performance of our business because they provide a link between profitability and operating cash flow.

• We also believe that analysts and investors use EBITDA and Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry.

Our management uses EBITDA and Adjusted EBITDA:

• We believe Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA are important indicators of our operational strength and the performance of our business because they provide a link between profitability and operating cash flow.

• We also believe that analysts and investors use Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry.

Our management uses Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA:

• as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis as they remove the impact of items not directly resulting from our core operations;

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• to evaluate our capacity to fund capital expenditures and expand our business.

EBITDA and Adjusted EBITDA as calculated by us are not necessarily comparable to similarly titled measures used by other companies.

In addition, EBITDA and Adjusted EBITDA:

Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA as calculated by us are not necessarily comparable to similarly titled measures used by other companies.

In addition, Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA:

(a) do not represent net income (loss) or cash flows from operating activities as defined by GAAP;

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and (c) should not be considered as alternatives to net income (loss), income (loss) from operations, cash provided by (used in) operating activities or our other financial information as determined under GAAP.

We prepare Adjusted EBITDA by adjusting EBITDA to eliminate the impact of items that we do not consider indicative of our core operating performance.

We prepare Non-GAAP Adjusted EBITDA by adjusting Non-GAAP EBITDA to eliminate the impact of items that we do not consider indicative of our core operating performance.

You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis.

As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA.

Our presentation of Adjusted EBITDA should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.

The table below reconciles net income (loss) to EBITDA and Adjusted EBITDA for the periods presented.

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

As an analytical tool, Non-GAAP Adjusted EBITDA is subject to all of the limitations applicable to Non-GAAP EBITDA.

Our presentation of Non-GAAP Adjusted EBITDA should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.

The table below reconciles net income (loss) to Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA for the periods presented.

Three Months Ended June 30, Nine Months Ended June 30,

2021 2020 2021 2020

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Depreciation and amortization 1,705 1,567 5,246 4,716

EBITDA $ 7,406 $ (2,785) $ 13,986 $ (6,116)

Non-GAAP EBITDA

$ 10,396 $ 1,833 $ 24,381 $ (4,284)

Stock compensation expense

1,803 1,516 5,793 3,785

Acquisition costs and impairment of long-lived assets 2

Acquisition costs and impairment of long-lived and other assets 2

1,136 — 1,338 5

Business realignment expenses 2, 3

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Deferred revenue purchase accounting adjustment — — — 3

Adjusted EBITDA $ 9,370 $ (1,554) $ 18,184 $ (3,638)

Non-GAAP Adjusted EBITDA

$ 13,335 $ 3,677 $ 31,517 $ 37

1 Represents Interest and other income, net, per the Statement of Operations, excluding the non-service components of net periodic pension (benefit).

2 Acquisition costs, impairment of long-lived assets, fair value adjustments to acquisition earn-outs, and business realignment expenses are components of Other operating expenses (income) on the Statements of Operations.

2 Acquisition costs, impairment of long-lived assets and other assets, fair value adjustments to acquisition earn-outs, and business realignment expenses are components of Other operating expenses on the Statements of Operations.

For the three and nine months ended June 30, 2021, this amount included a $1.1 million impairment expense from the settlement of a note receivable associated with a previous divestiture (see Note 2 to the Consolidated Financial Statements).

3 Business realignment expense includes the amounts accounted for as exit costs under ASC 420 as described in Note 11 to the Consolidat ed Financial Statements, and the related impacts of business realignment actions subject to other accounting guidance.

There were no related impacts for the three and six months ended March 31, 2021 and 2020.

There were no related impacts for the three and nine months ended June 30, 2021 and 2020.

Critical Accounting Policies and Estimates

The Company's critical accounting policies and estimates are described in our Annual Report on Form 10-K for the year ended September 30, 2020, and in Note 2 — Summary of Significant Accounting Policies to the consolidated financial statements.

As of June 30, 2021 , the Company has a valuation allowance of $28 million against its net deferred tax assets in the United States.

The Company intends to continue to maintain its valuation allowance on these net deferred tax assets until there is sufficient positive evidence to support a partial or full reversal.

Should the Company’s improved operating results continue, sufficient positive evidence may accumulate in a future period that changes our valuation allowance conclusions, resulting in a partial or full reversal.

In a period where significant valuation allowances are reversed, the Company will reflect a material tax benefit in its provision (benefit) for income taxes that could cause its effective tax rate to be negative.

Components of Revenue and Expenses

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Other operating expenses (income).

Other operating expense includes impairment of long-lived assets, the change in fair value of contingent consideration, as well as business realignment expenses, including those associated with restructuring initiatives and the exit of certain business operations.

Other operating expense includes impairment of long-lived and other assets, the change in fair value of contingent consideration, as well as business realignment expenses, including those associated with restructuring initiatives and the exit of certain business operations.

Interest and other income, net.

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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 (loss).

Our effective income tax rate before discrete items was 6.7% for the six months ended March 31, 2021.

Our effective income tax rate before discrete items was 5.9% for the nine months ended June 30, 2021.

The effective tax rate differed from the statutory federal rate of 21% primarily as a result of the utilization of net operating losses and the impact of foreign, state, and local income taxes and permanent tax adjustments.

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The following table sets forth, for the periods indicated, our operating results:

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

Three Months Ended June 30, Nine Months Ended June 30,

(dollars in thousands) 2021 2020 $ Change % Change 2021 2020 $ Change % Change

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Depreciation and amortization 1,705 1,567 138 8.8 5,246 4,716 530 11.2

Other operating expenses (income) 206 (12) 218 NM 210 181 29 16.0

Other operating expenses 1,180 319 861 269.9 1,390 500 890 178.0

Total costs and expenses 61,072 47,524 13,548 28.5 168,346 159,294 9,052 5.7

Income (loss) from operations 5,638 (4,452) 10,090 NM 10,265 (9,442) 19,707 NM

Income (loss) from operations 8,594 198 8,396 4,240.4 18,858 (9,244) 28,102 NM

Interest and other income, net (254) (224) (30) (13.4) (468) (733) 265 36.2

Income (loss) before provision for income taxes 5,667 (4,195) 9,862 NM 10,479 (8,933) 19,412 NM

Income (loss) before provision for income taxes 8,848 422 8,426 1,996.7 19,326 (8,511) 27,837 NM

Provision for income taxes 429 209 220 105.3 1,133 710 423 59.6

Net income (loss) $ 5,260 $ (4,238) $ 9,498 NM $ 9,775 $ (9,434) $ 19,209 NM

Net income (loss) $ 8,419 $ 213 $ 8,206 3,852.6% $ 18,193 $ (9,221) $ 27,414 NM

NM = not meaningful

The following table presents segment GMV, revenue, gross profit (which is calculated as total revenue less cost of goods sold (exclusive of depreciation and amortization)), and gross profit margin for the periods indicated:

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

Three Months Ended June 30, Nine Months Ended June 30,

(dollars in thousands) 2021 2020 2021 2020

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Gross profit margin 59.0 % 52.9 % 58.6 % 51.2 %

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

Segment Results

Revenue from our GovDeals segment increased 40.3%, or $3.2 million, due to a 43.8%, or $33.8 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate, and an increase in recovery rates on assets sold, driven by our growing buyer base, automated asset promotion tools, and favorable macroeconomic factors in certain asset categories.

Revenue from our GovDeals segment increased 143.4%, or $8.6 million, due to a 152.2%, or $88.2 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate, and an increase in recovery rates on assets sold, driven by our growing buyer base, automated asset promotion tools, and favorable macroeconomic factors in certain asset categories, such as transportation assets.

The three months ended June 30, 2020 also contained the negative impact of the economic restrictions put in place at the onset of the COVID-19 pandemic.

As a result of the increase in revenues, gross profit increased 147.7%, or $8.3 million.

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Revenue from our RSCG segment increased 31.4%, or $10.5 million, due to a 36.1%, or $16.2 million, increase in GMV driven by growing volumes within existing seller accounts and launching new programs with mid-sized and large retailers looking to capitalize on the secular growth in online retail.

Revenues did not increase at the same rate as GMV due to an increase in the mix of transactions conducted under the consignment model.

As a result of the increase in revenues, gross profit increased 28.6%, or $3.5 million.

Gross profit margin increased 6.6% due to an increase in the mix of transactions conducted under the consignment model and improved recovery rates on assets sold.

Revenues grew at a slightly lower rate than GMV due to an increase in the mix of transactions conducted under the consignment model.

This mix however, served to increase gross profit by 47.7%, or $5.7 million.

Gross profit margin increased 4.5% due to this change in the mix of transactions conducted under the consignment model as well as improved recovery rates on assets sold.

Revenue from the CAG segment increased by 32.9%, or $2.1 million , due to a 37.5%, or $10.2 million, increase in GMV from continued growth of our industrial and heavy equipment categories, increases in principal transactions across the EMEA and Asia-Pacific regions, and increased use of the consignment model internationally .

Revenues did not increase at the same rate as GMV due to increases in transactions using partner organizations and in the mix of transactions conducted under the consignment model.

Revenues did not increase at the same rate as GMV due to increases in transactions using partner organizations.

As a result of the increase in revenues, gross profit increased 20.5%, or $1.2 million.

Gross profit margin increased 3.7% due to increases in the mix of transactions conducted under the consignment model and in the recovery rates on principal transactions.

Gross profit margin decreased 8.7% due to an increase in the mix of transactions conducted under the purchase model, responding to the reducing levels of COVID-19 related restrictions on cross-border transactions.

Revenue from our Machinio segment increased 37.7%, or $0.7 million, due to an increase in subscription activity.

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Cost of goods sold (excludes depreciation and amortization).

Cost of goods sold decreased $0.2 million, or 0.9%, which changed at a lower rate than Revenue primarily due to an increase in the mix of transactions conducted under the consignment model.

Cost of goods sold increased $6.0 million, or 26.9%, which changed at a lower rate than Revenue primarily due to an increase in the mix of transactions conducted under the consignment model.

Technology and operations expenses.

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Sales and marketing expenses.

Sales and marketing expenses decreased $1.2 million, or 11.9%, due to actions taken to reduce operating expenses in response to the COVID-19 pandemic.

The impact of these actions on our operating expense levels will lessen as business conditions continue to recover.

These decreases were partially offset by an increase in marketing expenses to promote our consolidated marketplace and expand market share in key verticals.

Sales and marketing expenses increased $2.2 million, or 30.3%, as a result of our continued efforts to promote our consolidated marketplace and expand market share in key verticals.

General and administrative expenses.

General and administrative expenses decreased $0.5 million, or 6.8%, and was impacted by actions taken to reduce operating expenses in response to the COVID-19 pandemic.

The impact of the actions taken to reduce operating expenses in response to the COVID-19 pandemic will lessen as business conditions continue to recover.

General and administrative expenses increased $1.5 million, or 23.5%, as the temporary actions taken in the prior year to reduce operating expenses in response to the COVID-19 pandemic are no longer in place.

Depreciation and amortization .

Depreciation and amortization expense were consistent between the three months ended March 31, 2021 and 2020.

Other operating expenses (income) .

Other operating expenses of $0.2 million for the three months ended March 31, 2021 primarily related to a long-lived asset impairment charge.

Other operating (income) was not significant for the three months ended March 31, 2020.

Depreciation and amortization expense was consistent between the three months ended June 30, 2021 and 2020.

Other operating expenses .

Other operating expenses of $1.2 million for the three months ended June 30, 2021 primarily related to the $1.1 million loss following the full satisfaction and discharge of JTC's indebtedness to the Company.

Refer to the discussion in Note 2 — Summary of Significant Accounting Policies .

Interest and other income, net.

Interest and other income, net decreased $0.2 million due the effect of changes in foreign exchange rates.

Interest and other income, net was consistent between the three months ended June 30, 2021 and 2020.

Provision for income taxes .

Provision for income taxes increased $0.4 million due to the impact of foreign, state, and local taxes and permanent tax adjustments.

Six Months Ended March 31, 2021 Compared to the Six Months Ended March 31, 2020

Provision for income taxes increased $0.2 million due to the impact of foreign, state, and local taxes and permanent tax adjustments, as well as the increase in our Income from operations.

Nine Months Ended June 30, 2021 Compared to the Nine Months Ended June 30, 2020

Segment Results

Revenue from our GovDeals segment increased 37.6%, or $6.0 million, due to a 39.8%, or $62.2 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate, and an increase in recovery rates on assets sold, driven by our growing buyer base, automated asset promotion tools, and favorable macroeconomic factors in certain asset categories.

Revenue from our GovDeals segment increased 66.7%, or $14.6 million, due to a 70.2%, or $150.3 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate.

The gain also reflects an increase in recovery rates on assets sold, driven by our growing buyer base, automated asset promotion tools, and favorable macroeconomic factors in certain asset categories, such as transportation assets.

The nine months ended June 30, 2020 also contained the negative impact of the economic restrictions put in place at the onset of the COVID-19 pandemic.

As a result of the increase in revenues, gross profit increased 69.7%, or $14.2 million.

Gross profit margin remained relatively consistent between the periods.

Revenue from our RSCG segment increased 8.9%, or $6.0 million, due to an 31.0%, or $26.1 million, increase in GMV driven by growing volumes within existing seller accounts and launching new programs with mid-sized and large retailers looking to capitalize on the secular growth in online retail.

Revenues did not increase at the same rate as GMV due to an

increase in the mix of transactions conducted under the consignment model.

Revenue from our RSCG segment increased 16.3%, or $16.6 million, due to a 32.8%, or $42.4 million, increase in GMV driven by growing volumes within existing seller accounts and launching new programs with mid-sized and large retailers looking to capitalize on the secular growth in online retail.

Revenues did not increase at the same rate as GMV due to an increase in the mix of transactions conducted under the consignment model.

As a result of the increase in revenues, gross profit increased 39.2%, or $13.6 million.

Gross profit margin increased 6.7% due to an increase in the mix of transactions conducted under the consignment model and improved recovery rates on assets sold.

Revenue from the CAG segment increased by 16.2%, or $2.4 million due to a 31.5%, or $16.5 million increase in GMV continued growth of our industrial and heavy equipment categories, increases in principal transactions across the EMEA and Asia-Pacific regions, and increased use of the consignment model internationally .

Revenue from the CAG segment increased by 21.2%, or $4.5 million due to a 33.5%, or $26.7 million increase in GMV due to continued growth of our industrial and heavy equipment categories, increases in principal transactions across the EMEA and Asia-Pacific regions, and increased use of the consignment model internationally .

Revenues did not increase at the same rate as GMV due to increases in transactions using partner organizations and in the mix of transactions conducted under the consignment model.

As a result of the increase in revenues, gross profit increased 23.0% or $3.8 million.

Gross profit margin increased 5.0% due to increases in the mix of transactions conducted under the consignment model and in the recovery rates on principal transactions.

Gross profit margin remained relatively consistent between the periods.

Revenue from our Machinio segment increased 27.6%, or $1.5 million, due to an increase in subscription activity.

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Cost of goods sold (excludes depreciation and amortization).

Cost of goods sold decreased $1.8 million, or 3.6%, which changed at a lower rate than Revenue primarily due to lower cost of sales associated with the principal transactions, which benefited from higher recovery rates during the year, and an increase in the mix of transactions conducted under the consignment model.

Cost of goods sold increased $4.2 million, or 5.7%, which changed at a lower rate than Revenue primarily due to lower cost of sales associated with principal transactions, which benefited from higher recovery rates during the period, and an increase in the mix of transactions conducted under the consignment model.

Technology and operations expenses.

Technology and operations expenses were consistent between the six months ended March 31, 2021 and 2020 as the actions taken to reduce operating expenses in response to the COVID-19 pandemic were offset by an increase in operations expenses to support the increased transaction volumes in the RSCG segment.

The impact of the actions in response to the COVID-19 pandemic on our operating expense levels will lessen as business conditions continue to recover.

Technology and operations expenses increased $2.6 million, or 8.1%, to support the increased transaction volumes in the RSCG and CAG segments.

Sales and marketing expenses.

Sales and marketing expenses decreased $1.7 million, or 8.6%, due to actions taken to reduce operating expenses in response to the COVID-19 pandemic.

The impact of these actions on our operating expense levels will lessen as business conditions continue to recover.

These decreases were partially offset by an increase in marketing expenses to promote our consolidated marketplace and expand market share in key verticals.

Sales and marketing expenses increased $0.6 million, or 2.0%, primarily due to increase in marketing expenses to promote our consolidated marketplace and expand market share in key verticals.

General and administrative expenses.

General and administrative expenses decreased $1.2 million, or 8.0%, and was impacted by actions taken to reduce operating expenses in response to the COVID-19 pandemic.

The impact of the actions taken to reduce operating expenses in response to the COVID-19 pandemic will lessen as business conditions continue to recover.

General and administrative expenses were consistent between the nine months ended June 30, 2021 and 2020.

Depreciation and amortization .

Depreciation and amortization expense increased $0.5 million, or 11.2%, due to an increase in amortization of capitalized software related to the continued development and enhancement of our e-commerce platform and tools.

Other operating expenses (income) .

Other operating expenses were consistent between the six months ended March 31, 2021 and 2020.

Other operating expenses .

Other operating expenses increased $0.9 million, or 178.0%, primarily related to the $1.1 million loss following the full satisfaction and discharge of JTC's indebtedness to the Company.

Refer to the discussion in Note 2 — Summary of Significant Accounting Policies .

Interest and other income, net.

Interest and other income, net decreased $0.3 million due the effect of changes in foreign exchange rates.

Interest and other income, net increased $0.3 million due the effect of changes in foreign exchange rates.

Provision for income taxes .

Provision for income taxes increased $0.2 million due to the impact of foreign, state, and local taxes and permanent tax adjustments.

Provision for income taxes increased $0.4 million due to the impact of foreign, state, and local taxes and permanent tax adjustments, as well as the increase in our Income from operations.

Liquidity and Capital Resources

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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, 2021, we had $87.6 million in cash and cash equivalents.

The COVID-19 pandemic has caused the Company's GMV and revenues to fluctuate, and the Company implemented cost control measures to protect against those fluctuations.

From a cash flow perspective, the Company employed working capital management practices, primarily in the form of temporary extensions to vendor payment terms, and also experienced accumulation in its payables to sellers balance due to COVID-19 restrictions causing some buyer delays in their ability to pick up purchased assets.

We expect to continue to invest in enhancements to our e-commerce technology platform, marketplace capabilities and tools for data-driven product recommendations, omni-channel behavioral marketing, predictive analytics, and the implementation of integrated services for our retail supply chain segment.

As of June 30, 2021, we had $112.7 million in Cash and cash equivalents.

Most of our sales are recorded subsequent to receipt of payment authorization, utilizing credit cards, wire transfers, and PayPal, an Internet based payment system, as methods of payments.

As a result, we are not subject to significant collection risk, as goods are generally not shipped before payment is received.

The COVID-19 pandemic has caused the Company's GMV and revenues to fluctuate, and the Company initially implemented cost control measures to protect against the uncertainties created by the severe economic restrictions in its initial phases.

From a cash flow perspective, the Company employed working capital management practices, primarily in the form of temporary extensions to vendor payment terms, and also experienced accumulation in its payables to sellers balance due to COVID-19 restrictions, which continue to be a factor in certain countries, causing some buyer delays in their ability to pick up purchased assets.

We did not record a provision for deferred U.S.

tax expense on the undistributed earnings of foreign subsidiaries because we intend to indefinitely reinvest the earnings of these foreign subsidiaries outside the United States.

The amount of such undistributed foreign earnings was $6.0 million as of March 31, 2021.

As of March 31, 2021 and September 30, 2020, $19.9 million and $19.5 million, respectively, of cash and cash equivalents was held outside of the U.S.

The amount of such undistributed foreign earnings was $7.0 million as of June 30, 2021.

As of June 30, 2021 and September 30, 2020, $21.8 million and $19.5 million, respectively, of Cash and cash equivalents was held outside of the U.S.

We have been authorized to repurchase issued and outstanding shares of our common stock under a share repurchase program approved by our Board of Directors.

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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.

Most of our sales are recorded subsequent to receipt of payment authorization, utilizing credit cards, wire transfers, and PayPal, an Internet based payment system, as methods of payments.

As a result, we are not subject to significant collection risk, as goods are generally not shipped before payment is received.

We 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 , we had no remaining authorization to repurchase shares under this program.

On May 3, 2021, the Company's Board of Directors authorized a new stock repurchase plan (the “May 3, 2021 Stock Repurchase Plan”) of up to $15 million of our outstanding shares of common stock through June 30, 2023.

We made no repurchases under the May 3, 2021 Stock Repurchase Plan during the three months ended June 30, 2021.

Changes in Cash Flows:

Six Months Ended March 31, 2021 Compared to the Six Months Ended March 31, 2020

Net cash provided by (used in) operating activities was $31.3 million and $(12.1) million for the six months ended March 31, 2021 and 2020, respectively.

Nine Months Ended June 30, 2021 Compared to the Nine Months Ended June 30, 2020

Net cash provided by operating activities was $54.3 million and $9.2 million for the nine months ended June 30, 2021 and 2020, respectively.

The $45.1 million increase in cash provided by operations between periods was attributable to $31.2 million of higher Net income as adjusted for non-cash items;

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changes to accounts payable, accrued expenses and other liabilities driven by the management of working capital;

and partially offset by a $4.9 million increase in inventory driven by our RSCG and CAG segments.

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 our variations in our transaction volumes are related to settlements between our buyers and sellers.

and partially offset by a $6.6 million increase in inventory driven by the continued growth in our RSCG and CAG segments.

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.

However, there have been no significant changes to the working capital requirements for the Company.

Net cash (used in) provided by investing activities was $(1.6) million for the six months ended March 31, 2021, and $19.7 million for the six months ended March 31, 2020.

The $(21.3) million increase in cash used in investing activities was driven by $(20.0) million net impact of maturities of Short-term investments during the six months ended March 31, 2020 as the Company transitioned to using Cash equivalent money market funds in its treasury strategy.

A further increase in the cash used in investing activities was a result of proceeds from the JTC promissory note being $2.6 million during the six months ended March 31, 2020 compared to $0.8 million during the six months ended March 31, 2021.

The Company continues to monitor for changes that could impact the recoverability of the promissory note, which will depend on JTC's subsequent operating performance and ability to make the payments required by the new repayment schedule.

Net cash used in financing activities was $19.0 million for the six months ended March 31, 2021, and $1.7 million for the six months ended March 31, 2020.

The $17.3 million increase in cash used by financing activities was primarily driven by $16.1 million in common stock repurchases and a $2.6 million increase in taxes paid associated with net settlement of stock

compensation awards from vesting of awards with market conditions due to the achievement of increases in the Company's share price.

Net cash provided by investing activities was $0.9 million for the nine months ended June 30, 2021, and $28.9 million for the nine months ended June 30, 2020.

The $(28.0) million decrease in cash provided by investing activities was driven by a $(30.0) million net impact of maturities of Short-term investments during the nine months ended June 30, 2020 as the Company transitioned to using cash equivalent money market funds in its treasury strategy.

This activity was partially offset by a $1.8 million increase in proceeds from the JTC promissory note during the nine months ended June 30, 2021 due to receipt of $3.5 million during the three months ended June 30, 2021 as a result of the Company entering into the First Amendment to the Forbearance Agreement with JTC as discussed in Note 2 - Summary of Significant Accounting Policies .

Net cash (used in) financing activities was $(19.4) million for the nine months ended June 30, 2021, and $(1.8) million for the nine months ended June 30, 2020.

The $(17.6) million increase in cash used in financing activities was primarily driven by $16.1 million in common stock repurchases and a $3.0 million increase in taxes paid associated with net settlement of stock compensation awards, primarily from the vesting of awards with market conditions due to the achievement of increases in the Company's share price.

Capital expenditures.

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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, 2021 were $2.4 million.

As of March 31, 2021, we had no significant outstanding commitments for capital expenditures.

Our capital expenditures for the nine months ended June 30, 2021 were $3.5 million.

As of June 30, 2021, we had no significant outstanding commitments for capital expenditures.

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 establish additional distribution centers.

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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 2. Management’s Discussion and Analysis