What changed in this filing

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Item 1. Business

2021-12-09 compared with 2020-12-08 · 128 added, 111 removed, 297 unchanged (45% of the section changed)

The Company operates a network of e-commerce marketplaces that enable buyers and sellers to transact in an efficient, automated environment offering over 500 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 its 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.

The Company organizes the products on its marketplaces into categories across major industry verticals such as consumer electronics, general merchandise, apparel, scientific equipment, aerospace parts and equipment, technology hardware, energy equipment, industrial capital assets, heavy equipment, fleet and transportation equipment and specialty equipment.

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.

We also operate a global search engine for used machinery and equipment at www.machinio.com.

The Company has over 14,000 sellers, including Fortune 1000 and Global 500 organizations as well as federal, state, and local government agencies.

Liquidity Services is a leading global commerce company providing trusted marketplace platforms that power the circular economy.

We create a better future for organizations, individuals, and the planet by capturing and unleashing the intrinsic value of surplus.

We connect millions of buyers and thousands of sellers through our leading 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.

We believe our ability to create liquid marketplaces for surplus and idle assets generates a continuous flow of goods from our sellers.

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

Increasing numbers of professional buyers to our marketplaces, in turn, attracts more sellers to our marketplace which, in turn, reinforces a valuable and reliable flow of surplus assets.

This valuable and reliable flow of goods, in turn, attracts an increasing number of buyers to our marketplaces.

Increasing numbers of buyers to our marketplaces, in turn, attracts more sellers to our marketplaces which, in turn, reinforces a valuable and reliable flow of surplus assets.

During the past three fiscal years, we have conducted over 1,863,000 online transactions generating $2.1 billion in gross merchandise volume or 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.

During 2020, the number of registered buyers grew from 3,580,000 to 3,772,000, or 5.4%.

During the year ended September 30, 2021, the number of registered buyers grew from 3,772,000 to 4,031,000, or 6.9%.

We believe the continuous flow of goods in our marketplaces attracts a growing buyer base which creates a self-sustaining cycle for our buyers and sellers.

During the year ended September 30, 2020, we generated GMV of $619.8 million and revenue of $205.9 million through multiple sources, including transaction fees from sellers and buyers, proceeds from the sale of products we purchased from sellers, and value-added service charges.

We generated GMV of $886.7 million and revenue of $257.5 million through multiple sources, including transaction fees from sellers and buyers, proceeds from the sale of products we purchased from sellers, and value-added service charges.

Our GMV has grown at a compound annual growth rate of 11.5% since 2006.

Our Machinio segment, which operates a global online platform for listing used equipment for sale in the construction, machine tool, transportation, printing and agriculture sectors, grew revenue 28.8% during fiscal year 2020.

We were incorporated in Delaware in November 1999 as Liquidation.com, Inc.

and commenced operations in early 2000.

Our Machinio segment, which operates a global search engine platform for listing used equipment for sale in the construction, machine tool, transportation, printing and agriculture sectors, grew revenue 32.5% during the year ended September 30, 2021.

Results from our operations are organized into four reportable segments:

Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), GovDeals, and Machinio.

See Note 17 to the Consolidated Financial Statements for Segment Information.

See Note 16 - Segment Information to the Consolidated Financial Statements for more information regarding our segments.

Liquidity Services, Inc.

(Liquidity Services, the Company) was incorporated in Delaware in November 1999 as Liquidation.com, Inc.

and commenced operations in early 2000.

On November 1, 2021, we acquired Bid4Assets, Inc.

(Bid4Assets), a Maryland corporation based in Silver Spring, MD.

Bid4Assets auctions distressed real estate for the federal government, sheriffs, county tax-collectors, financial institutions and real estate funds.

See Note 17 - Subsequent Events for more information regarding this transaction.

Industry Overview

While a well-established forward supply chain exists for the procurement of assets, many manufacturers, retailers, corporations and government agencies are finally making a shift to recognize the growing need for strategic reverse supply chain solutions.

While a well-established forward supply chain exists for the procurement of assets, many manufacturers, retailers, corporations and government agencies have recognized the growing need for strategic reverse supply chain solutions.

For example, research from Worldwide Business Research found the global reverse supply chain market generated $415.2 billion in 2017 and is expected to reach $604 billion by 2025, growing at a CAGR of 4.6% from 2017 to 2025.

The retail industry, as indicated by an Appriss Retail report in 2019, estimates that approximately $309 billion of merchandise is returned on an annual basis, representing 8% of total sales.

The retail industry, as indicated by an Appriss Retail report in 2020, estimates that approximately $428 billion of merchandise is returned on an annual basis, representing almost 11% of total sales.

Liquidity Services estimates that at least $90 billion of these returns are moved through secondary markets, with the remaining volume returning to retailer shelves or being sold through discount retailers.

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Census, and World Bank reports, indicate that the global used equipment market is valued at approximately $350 billion.

Assets handled by reverse supply chain solutions generally consist of retail customer returns, overstock products and end-of-life goods or capital assets from both the corporate and government sectors.

Assets handled by reverse supply chain solutions generally consist of retail customer returns, overstock products and end-of-life goods or capital assets from both corporate and government sectors.

The supply of surplus and idle assets in the reverse supply chain results from a number of factors, including:

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• pricing transparency or ability to compare asset prices.

The Internet is a global medium enabling millions of people worldwide to share information, communicate and conduct business electronically.

Strong growth has occurred in the business-to-business (B2B) online retail market, which can be attributed to the rapid migration of manufacturers and wholesalers to open, online platforms.

According to McKinsey & Company, US e-commerce penetration grew two years’ worth in two months related to the COVID-19 pandemic.

Prior to the crisis in early 2020, e-commerce penetration rates were just over 15% but grew to nearly 35% penetration in spring of 2020.

Further, Grandview Research estimates the global business-to-business e-commerce market size was valued at $5.7 trillion in 2019 and is expected to expand at a compound annual growth rate (CAGR) of 17.5% from 2020 to 2027.

We believe professional buyers of surplus and salvage assets will increasingly use these B2B platforms to identify and source goods available for immediate online purchase.

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Our marketplaces and services provide sellers a comprehensive solution to quickly bring surplus assets to market and enhance the financial value realized from the sale of their surplus assets while providing buyers with confidence in the reliable flow of goods they purchase.

We provide our sellers access to a network of liquid marketplaces with over 3.7 million professional buyers and a suite of services including consultative surplus asset management, valuation, sales solutions, logistics capabilities, and self-directed service tools to efficiently manage our sellers' reverse supply chain and maximize total supply chain value.

We provide our sellers access to a network of liquid marketplaces with over 4 million buyers and a suite of services including consultative surplus asset management, valuation, sales solutions, logistics capabilities, and self-directed service tools to efficiently manage sellers' reverse supply chain and maximize total supply chain value.

We also seek the optimal methods to maximize our sellers' net recovery using channel strategies and dedicated programs to deliver transparent, sustained value.

Through our relationships with our sellers, we provide our buyers convenient access to a substantial and continuous flow of surplus and salvage assets.

Buyers can find products in over 500 categories in lot sizes ranging from full truck loads to pallets, packages and individual items.

Buyers can find products in over 600 categories in lot sizes ranging from full truckloads to pallets, packages and individual items.

Our solution combines leading e-commerce marketplaces with integrated sales, marketing, merchandising, fulfillment, payment collection, customer support, dispute mediation and logistics services.

We provide our buyers a convenient method for sourcing surplus consumer goods and commercial capital assets, including industrial equipment, energy equipment, and biopharma assets.

We also are continually looking for new categories in which we can expand our presence, including construction and heavy equipment.

For any given asset, our buyers have access to a detailed product description, product manifest, digital images, relevant transaction history regarding the seller, shipping weights, product dimensions and estimated shipping costs to the buyer's location.

We provide our buyers a convenient method for sourcing surplus consumer goods and electronics, commercial capital assets, industrial equipment, energy equipment, biopharma assets and real estate.

We continually look for new categories in which we can expand our presence.

For any given asset, our buyers have access to a detailed product description, product manifest, digital images, relevant transaction history regarding the seller, and, where appropriate, the shipping weights, product dimensions and estimated shipping costs to the buyer's location.

This enables our solutions to become an important source for surplus and salvage assets for many of our professional buyers and end-users.

We believe our marketplaces benefit over time from greater scale and adoption by our constituents creating a continuous flow of goods benefiting our buyers and sellers.

As of September 30, 2020, we had 3,772,000 registered buyers in our marketplaces and access to millions of end-users through a range of existing 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 an increasing number of professional buyers.

As of September 30, 2021, we had 4,031,000 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 an increasing number of buyers.

During the year ended September 30, 2021, we had approximately 2,279,000 auction participants in our online auctions.

During 2020, we grew our registered buyer base by 5.4% or 192,000.

During fiscal 2021, we grew our registered buyer base by 6.9% or 259,000.

None of our buyers represented more than 10% of our revenue during the year ended September 30, 2021.

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We believe this self-reinforcing cycle results in greater transaction volume and enhances the value of our marketplaces.

Our marketplaces serve clients in a large variety of industry verticals, including:

Competitive Factors

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Our marketplaces provide sellers and buyers with a comprehensive solution for the online sale and purchase of surplus and salvage assets.

We offer marketplaces with full-service solutions such as Liquidation.com, GoIndustry DoveBid, and Network International and we offer self-directed service solutions on GovDeals, Network International, Liquidiation.com, and AllSurplus.com, our newly launched aggregated marketplace that provides transaction settlement and marketing support while allowing sellers to save on their commissions by undertaking the work of photographing, cataloging, and building auctions.

We also have a full suite of value-added services to simplify the sales and supply chain processes for our sellers and improve the utility of our marketplaces for our buyers.

We offer marketplaces with full-service and self-directed solutions.

Our self-directed solutions provide transaction settlement and marketing support while allowing sellers undertake the work of photographing, cataloging, and building auctions.

Our value-added services simplify the sales and supply chain processes for our sellers and improve the utility of our marketplaces for our buyers.

For corporate and certain government sellers, we provide sales, marketing, logistics and seller support services that are fully integrated with our marketplaces, creating operational and system efficiencies.

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Sellers simply make goods available at their facilities or deliver them to our distribution centers and we deliver the sale proceeds, less our portion of such proceeds and/or our commissions or fees, after the sale is completed.

In response to feedback from our sellers, we have learned that our sellers would like bespoke returns process management or return to vendor solutions tailored to their own systems, and accordingly, we shifted focus from developing SaaS solutions to refining our own internal returns management processes that we use to serve our sellers.

In response to feedback from our sellers, we have learned that our sellers prefer bespoke returns process management or return to vendor solutions tailored to their own systems, and accordingly, we shifted focus from developing SaaS solutions to refining our own internal returns management processes that we use to serve our sellers.

We have also expanded our capabilities to process individual items, pallets, less-than-truckload (LTL) and full-truckload (FTL) auctions.

This provides our retail sellers with flexible solutions that can scale to solve their unique liquidity challenges while leveraging our various retail channels to maximize their recovery value.

Our buyer services include intelligent alerts, search tools, dynamic pricing, shipping and delivery, secure settlement, live buyer support and dispute resolution to enable effective methods to source assets for their businesses.

Our buyer services include intelligent alerts, search tools, dynamic pricing, shipping and delivery where available, secure payment, live buyer support and dispute resolution to enable effective methods to source assets for their businesses.

Flexible and aligned transaction model

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Faster transaction cycle times for our sellers and buyers

We believe our marketplace solutions allow our sellers to complete the entire sales process more rapidly than through other liquidation methods by generally reducing the complexities in the reverse supply chain and utilizing our multi-channel strategies to optimize recovery and velocity.

We believe our marketplace solutions allow our sellers to complete the entire sales process more rapidly than through other liquidation methods by reducing the complexities in the reverse supply chain and utilizing our multi-channel strategies to optimize recovery and velocity.

As a result, our sellers can reduce surplus or less valuable inventory quickly, generate additional working capital and reduce the cost of carrying unwanted assets.

We provide a one stop solution to enable professional buyers of any size throughout the world to purchase assets efficiently.

We provide a complete solution to enable professional buyers of any size throughout the world to purchase assets efficiently.

For these buyers, we provide a broad range of services to give them the information necessary to make an informed bid and ensure they quickly and efficiently receive the goods purchased.

Solutions that promote sustainability and green solutions for improved corporate/government stewardship

Our solutions provide a range of capabilities that enable corporate and government agency sellers to directly reduce waste generated by redistributing end-of-life products or assets through our solutions, thereby improving the net financial recovery generated while positively impacting the communities they serve.

Solutions that promote sustainability for improved corporate/government stewardship

Our pioneering e-commerce marketplace solutions continue to power the circular economy and our triple bottom line, which benefits businesses, communities, and the environment.

We achieve this through our safe and effective resale and redeployment of surplus assets;

our reduction of waste;

and by creating markets for items that might otherwise have been landfilled.

Some of the world's largest forward-thinking corporations and government agencies have enhanced their stewardship of communities and the environment by utilizing our services and selling their surplus assets through our marketplaces.

Technology, data & analytics are enhancing our services and solutions for buyers and sellers

Technology, data & analytics enhance our services and solutions for buyers and sellers

We continue to make strategic investments in our technology capabilities.

Aligning the capabilities of our auction platforms with the Company’s unique, vertical-specific knowledge has enabled us to develop our newest marketplace, AllSurplus.com.

This platform provides an aggregated view of all assets available globally in our government and commercial sectors.

By coupling an intuitive, mobile optimized design with machine-learning driven site search and recommendations, the platform is optimized to assist buyers in quickly finding the assets that meet their needs.

Aligning the capabilities of our auction platforms with the Company’s unique, vertical-specific knowledge has enabled us to develop our newest marketplace, AllSurplus.

This platform provides an aggregated view of all assets available globally in our government and commercial sectors, and retail assets for select local markets.

By coupling an intuitive, mobile-optimized design with site search and recommendations driven by machine learning, the platform is optimized to assist buyers in quickly finding the assets that meet their needs.

Our sellers benefit from the unique nature of our unified platform by having their assets available, simultaneously, on multiple marketplaces while guaranteeing the integrity of the cross-site auction bidding.

Placing the assets on multiple sites enables the marketing organization to directly target unique buyer segments that resonate with a brand's identity.

Our data infrastructure and analytics continue to evolve to provide near real-time operational insights.

By coupling our click-stream data and bid activity with our campaign activity, the marketing organization is able to create a feedback loop on campaign effectiveness and optimizing spend.

Placing the assets on multiple sites enables the marketing organization to directly target unique buyer segments that resonate with an asset’s unique audience niche.

Our data infrastructure and analytics continue to provide near real-time operational insights.

By coupling our click-stream data and bid activity with our campaign activity, the marketing organization leverages a feedback loop that increases campaign effectiveness and optimizes spend.

The focus of our growth strategy is to build the world’s leading marketplace for surplus assets to benefit buyers, sellers, and the planet.

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Based on feedback from our sellers, we believe recovery maximization is the single most important driver to attracting sellers to our marketplaces.

We believe that the key to achieving higher net recovery is, in turn, driven by attracting buyers to our marketplace which we believe that we can do through technology and innovation that improves the buyer experience across our network of marketplaces.

An improved buyer experience should drive growth in our buyer base which will, in turn, improve recovery rates for our sellers.

We believe that the key to achieving higher net recovery is, in turn, driven by attracting buyers to our marketplace which we believe that we do through technology and innovation that improves the buyer experience across our network of marketplaces.

An improved buyer experience drives growth in our buyer base which will, in turn, improve recovery rates for our sellers.

Increase Volume

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We also anticipate increasing volume by placing a greater focus on certain categories, including construction and heavy equipment.

We also intend to grow our volume within the retail supply chain by leveraging the self-directed service model.

We intend to grow our volume within the retail supply chain by leveraging the self-directed service model.

We will continue to provide flexible pricing models that allow our sellers to use either a consignment or a principal-based model.

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Expense Leverage

We intend to improve operating expense leverage by controlling costs and through technology and innovation that increases productivity.

We intend to improve operating expense leverage by controlling costs and through technology innovation that increases productivity.

We have simplified and streamlined our operations and consolidated business processes and systems, which has reduced our fixed costs and improved scalability.

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In sum, we intend to deliver a more diversified, asset light business with recurring revenue that focuses on profitability while growing a solid foundation for long-term growth.

As we re-establish organic growth in GMV and revenues, grow our asset light technology enabled services, and build more recurring revenue, we believe our long-term value and ability to serve our sellers and buyers will grow.

As we continue to drive organic growth in GMV and revenues, grow our asset light technology enabled services, and build more recurring revenue, we believe our long-term value and ability to serve our sellers and buyers will grow.

Our Marketplaces

Our e-commerce marketplaces are efficient and convenient methods for the sale of surplus and salvage consumer goods and capital assets.

Our network of marketplace brands serves buyers and sellers in numerous industries across hundreds of product categories.

Our e-commerce marketplaces are efficient and convenient methods for the sale of surplus and salvage consumer goods and capital assets in over 600 product categories including consumer electronics, general merchandise, apparel, scientific equipment, aerospace parts and equipment, technology hardware, real estate, energy equipment, industrial capital assets, heavy equipment, fleet and transportation equipment and specialty equipment.

They are designed to address the particular requirements and needs of buyers and sellers.

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This leading B2B marketplace and our related value-added services are designed to meet the needs of our sellers by selling their surplus assets to domestic and international buyers.

• Our GovDeals.com marketplace provides self-directed service solutions in which sellers list their own assets, and enables local and state government entities including city, county and state agencies, located in the United States and Canada to sell surplus and salvage assets.

• Our GovDeals marketplace provides self-directed service solutions in which sellers list their own assets, and enables local and state government entities including city, county and state agencies, located in the United States and Canada to sell surplus and salvage assets.

GovDeals also offers a suite of self-directed solutions that include transaction settlement and buyer marketing.

• Our AllSurplus.com marketplace, launched in fiscal 2020, leverages our 20 years of experience in the online surplus industry to create a centralized marketplace that connects our entire global buyer base with assets from across our network of legacy marketplaces in a single destination.

This marketplace also serves our heavy equipment vertical as we ramp up our service for this industry.

AllSurplus will continually evolve as we enhance our marketplace platform technology and add new seller and buyer services.

• Our NetworkIntl.com marketplace enables corporations to sell idle, surplus, and scrap equipment in the oil and gas, petrochemical and power generation industries.

This marketplace and our related services are designed to meet the unique needs of energy sector sellers.

• Our Go-Dove.com marketplace enables corporations located in the United States, Europe, and Asia to sell manufacturing surplus, salvage capital assets, and scrap material.

This marketplace and our related services are designed to meet the specific needs of manufacturing sector sellers selling their surplus assets to domestic and international buyers.

• Our AllSurplus marketplace, launched in fiscal 2020, leverages our 20 years of experience in the online surplus industry to create a centralized marketplace that connects our entire global buyer base with assets from across our network of marketplaces in a single destination.

The AllSurplus platform will continually evolve as we enhance our marketplace technology and add new seller and buyer services.

We also provide a global search, advertising, and inventory management platform that connects dealers and sellers of used machinery and equipment in the construction, machine tool, transportation, printing, and agriculture sectors with interested buyers through our Machinio segment.

Besides these leading business-to-business marketplaces, we recognize the need to reach end users for some assets our sellers have entrusted to us.

We have developed the capability to sell products on our sellers' behalf directly to end-users and/or consumers using a range of existing marketplaces.

Our www.secondipity.com marketplace provides consumers a trusted source of value products through a socially conscious online experience designed to provide "Better Value, Better Life," by donating a portion of the proceeds of every sale to charity.

We also have an established global buyer base that seeks to buy in larger quantities than are offered through our standard auction platform.

We have dedicated sales teams to support their needs and supply chain.

In 2021, AllSurplus Deals was born as an expansion of the core platform enabling a hyper-localized direct to consumer experience.

AllSurplus Deals provides a convenient, local pickup solution connecting our retail supply directly to consumers in our target markets.

In addition to our e-commerce marketplaces, we have dedicated sales teams supporting the needs of our established global buyer base that seeks items in larger quantities than are offered through our standard auction platforms.

These range from a single truckload to ongoing flows of goods for export anywhere in the world, where we market, handle, and support the full transaction on behalf of our buyers.

We expect to continue to meet the needs of our sellers and to access a growing range of products for all our buyers by enhancing our multi-channel strategy to ensure we create value for assets at the end of their initial product life cycle.

We also operate www.machinio.com and www.machineryhost.com, which provide a global online platform and search engine for listing used equipment for sale in the construction, machine tool, transportation, printing and agriculture sectors.

We expect to continue to meet the needs of our sellers and to access a growing range of products for all buyers by enhancing our multi-channel strategy to ensure we create value for assets at the end of their initial product life cycle.

Our Value-Added Services for Buyers and Sellers

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• Merchandising and Channel Optimization.

Our efforts encompass the services necessary to prepare merchandise for a successful auction and include the following:

Our efforts encompass the services necessary to prepare retail merchandise for a successful auction and include the following:

◦ Channel Optimization—we determine the marketplace and channel sales strategy that we believe will create the most value for the individual asset using our real-time transaction systems and proprietary data to support ongoing optimization.

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Our invoicing and reporting tools can be integrated with the seller's information system, providing a more efficient flow of data.

• Seller support and dispute resolution.

We provide full support throughout the transaction process and dispute resolution for our buyers and sellers if needed.

◦ Seller support and dispute resolution—we provide full support throughout the transaction process and dispute resolution for our buyers and sellers if needed.

• Buyer services.

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In addition, we provide buyers the information they need to make informed decisions, including product data, seller performance, and online shipping quotes to help understand their landed cost.

• Broad and flexible range of shipping/pick-up options—we can provide packaging and shipping services for each transaction, whether it is a small item or container loads for export, including buyer pick-up at our premises, for the majority of transactions, or support buyer arranged transportation.

◦ Broad and flexible range of shipping/pick-up options—we can provide packaging and shipping services for many transactions, whether it is a small item or container loads for export, including buyer pick-up at our premises, for the majority of transactions, or support buyer arranged transportation.

◦ Secure settlement and buyer support—besides qualifying sellers, providing several electronic payment options and serving as a trusted market intermediary, we verify transaction completion, which enhances buyer confidence.

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Sales and Marketing

We utilize a direct sales and marketing force to acquire and manage our seller and buyer accounts.

We use sales and marketing activities to acquire and manage our seller and buyer accounts.

Our sales activities are focused on acquiring new sellers and expanding existing sellers' use of our solutions.

Our marketing activities are focused on acquiring and activating new buyers and increasing existing buyers' participation.

Our marketing activities are focused on acquiring and

activating new buyers and increasing existing buyers' participation.

Our marketing team also manages our marketplace brands and drives seller lead generation efforts that support the sales team.

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Our sales personnel receive salary and performance-based commissions.

We use a variety of online and traditional marketing strategies to attract and activate professional buyers to maximize the number of bidders participating in our e-commerce marketplaces as well as to support our sales team:

We use a variety of online and traditional marketing strategies to attract and activate buyers to maximize the number of bidders participating in our e-commerce marketplaces as well as to support our sales team:

• Buyer acquisition.

We utilize marketing automation and digital online marketing, including paid search advertising, search engine optimization, affiliate programs and cross promotion to acquire new buyers.

We utilize marketing automation and digital marketing, including paid search advertising, search engine optimization, affiliate programs and cross promotion to acquire new buyers.

We supplement this online marketing with special event print media, classified advertisements and selected direct mail campaigns.

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Our marketing department employs a robust lead generation program, creates documentation and research to support our sales team in presenting our company to potential sellers and buyers, including sales brochures and white papers, and participates in selected trade shows.

All marketing activities are evaluated based on the level of auction participation in our marketplaces, the cost to acquire new sellers, and the cost effectiveness of each action.

All marketing activities are evaluated based on the level of auction participation in our marketplaces, the cost to acquire new participants, and the cost effectiveness of each action.

Technology and IT Infrastructure

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Since January 1, 2003, we have experienced no financially material service interruptions on our e-commerce marketplaces.

Our applications support multiple layers of security, including password-protected log-ins, encryption technology to safeguard information transmitted in web sessions and firewalls to help prevent unauthorized access to our network and servers.

Our applications support multiple layers of security, including password-protected logins, encryption technology to safeguard information transmitted in web sessions and firewalls to help prevent unauthorized access to our network and servers.

We devote resources to protecting our systems from intrusion.

Further, we devote resources to continuous improvement of our technology and IT infrastructure.

In fiscal 2020, we continued to expand the capabilities of our newest e-commerce platform including:

• launching our new, aggregated marketplace, AllSurplus.com;

• incorporating a machine learning powered product recommendation engine;

• introduction of an improved site search engine, leveraging natural language processing and filtered navigation to assist customers with quickly identifying relevant assets;

• creation of dedicated page templates, search, and navigation features supporting grouped asset auctions;

virtual ‘events’ to facilitate clustered auctions in specific verticals.

Additionally, we introduced cross-listing and cross-bidding to our AllSurplus.com marketplace.

This capability provides our GovDeals and commercial sellers’ assets additional visibility by presenting them on multiple marketplaces, simultaneously, allowing real-time bidding to occur across marketplaces, while guaranteeing the integrity of the bid process.

In fiscal 2021, we continued to expand the capabilities of our flagship e-commerce platform, AllSurplus, to enable support for direct-to-consumer transactions.

This expansion of the platform, AllSurplus Deals, provides a hyper-localized selling platform connecting our retail supply with customers in specific geographies.

The key features of this expansion include:

• dedicated, location specific shopping experience

• mobile optimized, curbside pickup solution that informs and engages customers through each step of a contactless pickup experience

• channel integration with retail warehouse systems providing additional sales channel to localized retail partners

Additionally, we introduced the following new features:

• Updated payment processor integration further enhancing our payment processing capabilities and reducing risk

• Automated buyer payment reminders

• Enabled buyers to easily find assets listed by government sellers on the AllSurplus marketplace

• Enhanced the buyer Saved Search experience increasing use of the daily emails and adding click tracking

• Updated the AllSurplus URLs structure to support SEO friendly URLs enabling better site discovery and more organic traffic

For our existing marketplaces we continue to deploy new capabilities to improve the customer experience.

GovDeals is now optimized for mobile device viewing via responsive design while Liquidation.com has an improved site-wide navigation.

Liquidation.com’s truckload purchase experience has been expanded to provide more robust manifest and ship quoting information, enabling our buyers to make more informed bid decisions.

Our core back-office infrastructure is flexible by design.

In response to the COVID-19 travel restrictions and shelter-in-place orders, we quickly pivoted to a virtual working environment for both our corporate staff as well as our sales/sales support staff.

We were able to swiftly transition to remote work because of the investments we had previously made in VoIP telephony, collaboration software, mobile device support, cloud-based enterprise services, as well as ‘always on’ VPN technology.

In response to the continued COVID-19 travel restrictions and shelter-in-place orders, we continued to leverage the remote work capabilities we had previously made in VoIP telephony, collaboration software, mobile device support, cloud-based enterprise services, as well as ‘always on’ VPN technology.

These investments enable a global, remote workforce to service our customers’ needs regardless of location.

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Shipping logistics

Our shipping logistics group manages and coordinates inbound and outbound shipping of merchandise for sellers and buyers.

Our shipping logistics group manages and coordinates inbound and outbound shipping of merchandise for sellers and buyers of our Retail services.

We offer, as part of our value-added services, integrated shipping services using our own fleet or multiple vetted and pre-qualified carrier partners.

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Distribution center and field service operations

Our distribution center and field service operations group performs selected pre-sale and post-sale value-added services at our distribution centers and at seller locations globally.

Our distribution center and field service operations group perform selected pre-sale and post-sale value-added services at our distribution centers and at seller locations globally.

These activities include unloading, manifesting and reporting discrepancies for all received assets and sales preparation of offered assets, including merchandising and organizing offered assets, writing product descriptions, capturing digital images and/or video and providing additional optional value-added services such as returns management (RM) services, return to vendor (RTV) services and product delabelling, data cleaning/wiping, testing, refurbishment and repackaging.

Our distribution center and field service operations group personnel also arranges the outbound shipping or pick-up of purchased assets for our buyers.

Our distribution center and field service operations group personnel also arrange the outbound shipping or pick-up of purchased assets for our buyers.

The online services market for auctioning or liquidating surplus and salvage assets is competitive and growing rapidly.

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The commercial merchandise we purchased under this contract represented 60.7%, 55.1% and 43.6% of consolidated cost of goods sold for the years ended September 30, 2021, 2020 and 2019, respectively.

DoD agreements.

Historically, we had two material vendor contracts with the Department of Defense (DoD):

the Scrap Contract and the Surplus Contract.

Both contracts were included in the results of our CAG segment.

DoD agreement.

Historically, we had a material vendor contract with the Department of Defense (DoD) referred to as the Scrap Contract.

The contract results were included in the results of our CAG segment.

• Scrap Contract.

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The resale transactions for scrap property sourced under this contract followed the purchase model.

Resale of scrap property that we purchased under the Scrap Contract accounted for 7.4% and 10.2% of our total revenues and 2.6% and 3.6% of our GMV in the years ended September 30, 2019 and 2018, respectively.

• Surplus Contract.

Under the Surplus Contract, which concluded on June 30, 2018, we acquired, managed and sold usable surplus personal property of the DoD turned into the DLA.

We paid the DLA 4.35% of the DoD's original acquisition value for the surplus property, which property consisted of items determined by the DoD to be no longer needed and not claimed for reuse by any federal agency, such as electronics, industrial equipment, office supplies, scientific and medical equipment, aircraft parts, clothing and textiles.

We retained 100% of the profits from the resale of the property and bore all of the costs for the merchandising and sale of the property.

The resale transactions for surplus property sourced under this contract followed the purchase model.

Resales of surplus property that we purchased from the DoD under the Surplus Contract, as well as services we provided to the DoD under the Surplus Contract, accounted for 12.4% of our total revenues and 4.1% of our GMV for the year ended September 30, 2018.

Resale of scrap property that we purchased under the Scrap Contract accounted for 7.4% of our total revenues and 2.6% of our GMV for the year ended September 30, 2019.

Government Regulation

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To do so, we strive to make LSI a rewarding place to work and an environment where we promote diversity, equity, and inclusion.

As of September 30, 2020, we had 574 employees worldwide.

As of September 30, 2021, we had 614 employees worldwide, of which 90% were located in North America, 7% in the EMEA region, and 3% in the Asia-Pacific region.

We also utilize temporary workers to augment staffing during peak business cycles and to fill certain open positions on a temporary basis.

Diversity, Equity, and Inclusion

We believe our employees are key to achieving our business goals and growth strategy.

We track and report internally on certain key metrics, such as employee engagement, employee net promoter score, turnover rate, workforce growth and internal mobility.

We embrace diversity, equity and inclusion.

We actively recruit talent with a diversity of experiences, background and ideas.

Our human capital objective is to attract, retain, develop, and motivate talented employees.

We use online search tools, specialized recruiting firms, employee referral programs, job postings in various media platforms, and university recruiting to identify and attract talented candidates.

By doing so, we aim to leverage the variety of skills and perspectives inherent in a diverse workforce, improve our problem-solving abilities, and bring innovative solutions to a wider range of clients and customers.

We believe our management team has the experience, talent and dedication necessary to effectively execute our business goals and growth strategy.

For discussion of the risks relating to the attraction and retention of key employees, see “Item 1A.

Risk Factors.”

Health and Well-Being

We value the health and well-being of our employees and provide generous benefit options to our employees and their families.

Our plans are designed to enhance employee wellness by focusing on health, financial security, life, and learning.

Our health benefits include multiple medical plans, dental and vision coverage.

In the US, we pay a significant portion of the benefit premiums related to our health benefits.

Employees are offered certain benefits at no charge to them or their families, e.g., Life and AD&D insurance, short- and long-term disability insurance, and Health Savings Account contributions.

The financial security benefits program includes a 401(k) plan with discretionary employer match and access to health savings accounts and health and dependent care flexible spending accounts.

Our life program provides a range of insurance products and employee assistance programs.

Internationally, we also offer a variety of benefit plans customized to reflect local conditions.

Our learning and development programs include tuition support for employees and a global training and development program that focuses on leadership development, as well as training in various topics including diversity, anti-harassment, ethics, and regulatory compliance.

COVID-19 Response

In fiscal 2021, our ongoing focus on workplace safety and regulatory compliance has enabled us to maintain business continuity while promoting a safe work environment during the COVID-19 pandemic.

Protecting the health and safety of our employees and their families has been a priority throughout the COVID-19 pandemic.

In March 2020, all employees who could work remotely began working from home.

Many of these employees continue to work remotely.

To help prevent the spread of COVID-19 and protect the safety of our frontline employees, all our facilities are thoroughly cleaned regularly, and we

implemented safety measures, including mask and social distancing requirements, in accordance with the U.S.

Centers for Disease Control and Prevention and the World Health Organization guidelines.

We also educated employees on how they can help keep themselves, their families, and coworkers safe.

Our safety measures have helped us to avoid COVID-19 spread among our employees.

Culture and Community

LSI’s culture is rooted in our core values and aligned to the company’s strategic framework.

We reinforce, monitor, and assess our culture through a variety of programs which include performance management, succession planning, and employee engagement surveys, all of which serve to further our human capital objectives.

Each of our team members is part of our global initiative to make a difference in the communities where we live and work.

We engage with our local communities across the globe.

Supporting community outreach, disaster relief, zero-waste initiatives, youth mentoring, military families and veterans, and access to higher education.

Sustainability Efforts

At our core, LSI strives to benefit businesses, communities, and the environment through our marketplaces which enable the continued use of surplus and salvage assets that may otherwise wind up in landfills.

These efforts extend to our employees as well, where our remote work structure for applicable employees has enabled lower expended energy and emissions from both transportation-related activities and operations across our real estate portfolio.

Available Information

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We use our website as a channel of distribution for material company information.

We post important information, including news releases, analyst presentations, investor presentations, and financial information regarding the Company at www.liquidityservices.com.

We post important information, including news releases, analyst presentations, investor presentations, and financial information regarding the Company at www.liquidityservices.com and www.investors.liquidityservices.com.

Cautionary Note Regarding Forward-Looking Statements

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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-K

Item 1. Business