What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-03 compared with 2021-08-05 · 137 added, 156 removed, 220 unchanged (57% of the section changed)

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Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances occurring after the date of this document or to reflect the occurrence of unanticipated events.

The following discussion should be read in conjunction with our consolidated financial statements and related notes and the information contained elsewhere in this document.

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

reducing waste, carbon emissions and transportation costs;

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

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

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

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

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, fleet and transportation equipment and specialty equipment.

The Company’s marketplaces are:

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

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

The Company has over 15,000 sellers, including Fortune 1000 and Global 500 organizations as well as federal, state, and local government agencies.

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and the information contained elsewhere in this document.

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.

Our business delivers value to shareholders through its ability to unleash the intrinsic value of surplus from our marketplace platforms.

These platforms ignite and enable a self-reinforcing cycle of value creation where buyers and sellers attract one another in ever-increasing numbers.

The result is a continuous flow of goods that becomes increasingly valuable as more participants join the platform, thereby creating positive network effects that benefit sellers, buyers, and shareholders.

Results from our operations are organized into four reportable segments:

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

See Note 13 - Segment Information to the Condensed Consolidated Financial Statements for more information regarding our reportable segments.

On November 1, 2021, the Company purchased all of the issued and outstanding shares of stock of 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 3 - Bid4Assets Acquisition for more information regarding this transaction.

Impacts of the COVID-19 Pandemic

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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 has continued throughout fiscal 2021.

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.

Since May 2020, we have seen subsequent increases in GMV and revenues as businesses and governments re-opened from government ordered closures which, combined with cost control measures, generated positive net income since the third quarter of fiscal 2020.

However, COVID-19 and its variants continue to impact the global economy and the ability to conduct cross-border commerce due to ongoing travel restrictions in various countries.

At this time, the likelihood, magnitude and timing of business developments across our reportable 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.

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.

During fiscal 2021 and during the three months ended December 31, 2021, the Company determined that its liquidity position and working capital were more than sufficient to meet its projected needs.

As discussed in Note 9 - Stockholders' Equity , on December 6, 2021, the Company's Board of Directors authorized the repurchase of up to $20.0 million of the Company's outstanding shares of common stock through December 31, 2023.

During the three months ended December 31, 2021, the Company repurchased a total of 147,185 shares for $3.0 million under this program.

Future 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.

As e-commerce penetration continues to grow substantially for both consumers and business-to-business (B2B), we believe that our online platform and cloud-based solutions should become even more relevant and necessary for the evolving global economy.

Our Marketplace Transactions

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

During the twelve months end ed December 31, 2021, the approximate number of registered buyers increased from 3,839,000 to 4,713,000, or 23%.

Of the increase, approximately 16% is attributable to the Bid4Assets registered buyer base acquired in Q1-FY22.

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

Purchase model.

Under our purchase transaction model, we recognize revenue within the Revenue line item on the Consolidated Statements of Operations from the resale of inventory that we purchased from sellers.

Under our purchase transaction model, we recognize revenue within the Revenue line item on the Condensed Consolidated Statements of Operations from the resale of inventory that we purchased from sellers.

We consider these sellers to be our vendors.

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

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.

For the three months ended December 31, 2021 and 2020, our purchase transaction model accounted for 14.5% and 16.2% of our Gross Merchandise Volume (GMV), and 54.3% and 55.7% of our total revenues, respectively.

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

by our RSCG segment.

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

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.

by our RSCG reportable segment.

See further discussion regarding our Amazon.com, Inc.

contracts at Note 2 - Summary of Significant Accounting Policies .

Consignment model — fee revenue.

Under our consignment transaction model, we enable our sellers to sell goods they own in our marketplaces and we charge them a commission fee based on the gross or net proceeds received from such sales.

The revenue from our consignment transaction model is recognized within the Fee revenue line item on the Consolidated Statements of Operations.

The revenue from our consignment transaction model is recognized upon auction close or upon collection of auction proceeds, depending upon the settlement service level selected by the seller.

Revenue under the consignment model is recorded within the Fee revenue line item on the Condensed Consolidated Statements of Operations.

Because we are the agent in consignment model sales, our commission fee revenue, which we refer to as seller commissions, represents a percentage of the sales price the buyer pays upon completion of a transaction.

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

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

For the three months ended December 31, 2021 and 2020 , our consignment model accounted for 85.5% and 83.8% of our GMV, and 38.4% and 36.7% 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 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.

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

Other revenues accounted for 7.3% and 7.6% of our total revenues for the three months ended December 31, 2021 and 2020, respectively.

Industry trends.

While we continue to review and assess the COVID-19 pandemic's impact on our customers, our suppliers, and our business, we believe there are several industry trends positively impacting the long-term growth of our Company including:

We believe there are several industry trends positively impacting the long-term growth of our business including:

(1) the increase in the volume of returned merchandise handled both online and in stores as online and omni-channel retail grow as a percentage of overall retail sales;

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(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;

(4) an 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;

(5) in the long-term we expect innovation in the retail supply chain will increase the pace of product obsolescence and, therefore, increase the supply of surplus assets;

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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.

represented 60.5% and 60.0% of consolidated Cost of goods sold for the three months ended December 31, 2021 and 2020, respectively.

These contracts are included within our RSCG reportable segment.

Our agreements with our other sellers are generally terminable at will by either party.

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

As of December 31, 2021 and 2020, we had approximately 4,713,000 and 3,839,000 registered buyers, respectively.

Of the increase, approximately 16% is attributable to the Bid4Assets registered buyer base acquired in Q1-FY22.

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 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.

During the three months ended December 31, 2021 and 2020, appr oximately 642,000 and 517,000, 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 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.

During the three months ended December 31, 2021 and 2020, we completed approximately 211,000 and 152,000 transactions, respectively.

Non-GAAP Financial Measures

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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 Consolidated 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 Condensed 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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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

Three Months Ended December 31,

(in thousands) (Unaudited)

Net income (loss) $ 8,419 $ 213 $ 18,193 $ (9,221)

Net income $ 3,602 $ 4,514

Interest and other income, net 1

(157) (156) (191) (489)

Provision for income taxes 1,012 297

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Stock compensation expense

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

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

1,136 — 1,338 5

Business realignment expenses 2, 3

Fair value adjustments to acquisition earn-outs 2

Deferred revenue purchase accounting adjustment — — — 3

Non-GAAP Adjusted EBITDA

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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 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 nine months ended June 30, 2021 and 2020.

3 Business realignment expense includes the amounts accounted for as exit costs under ASC 420, and the related impacts of business realignment actions subject to other accounting guidance.

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.

The Company's critical accounting policies and estimates are described in our Annual Report on Form 10-K for the year ended September 30, 2021, and in Note 2 — Summary of Significant Accounting Policies to the condensed consolidated financial statements.

The following discussion is a supplement to the disclosures referenced in connection with accounting estimates made in preparing the preliminary purchase accounting for the acquisition Bid4Assets as of November 1, 2021.

Business combinations .

The Company recognizes all of the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date.

Acquisition-related costs are recognized separately from the acquisition and expensed as incurred.

Restructuring costs incurred in periods subsequent to the acquisition date are expensed when incurred.

Subsequent changes to the purchase price (i.e., working capital adjustments) or other fair value adjustments determined during the measurement period are recorded as an adjustment to goodwill, with the exception of contingent consideration, which is recognized in the statement of operations in the period it is modified.

Intangible assets .

Intangible assets consist of contract intangibles, brand and technology, and patent and trademarks.

Intangible assets are amortized using the straight-line method over their estimated useful lives.

The preliminary fair value of acquired intangible assets, excluding goodwill, arising from the Bid4Assets acquisition was $16.5 million .

This balance consisted of the following identified intangible assets, each with their own significant assumptions used, as follows:

• Contract Intangibles - We valued the contract intangibles using the multi-period excess earnings method, an income approach valuation model.

The significant assumptions used in the income approach includes estimates about future expected cash flows from supplier contracts, the attrition rate, and the discount rate.

• Developed Software - We valued the developed software by applying the relief-from-royalty method, an income approach valuation model.

The significant assumptions used in the relief-from-royalty method include estimates about future expected cash flows from the developed software, the royalty rate, the obsolescence factor and the discount rate.

• Trade Name - We valued the trade name acquired using a relief-from-royalty method.

The significant assumptions used in the relief-from-royalty method include future expected cash flows from the trade name, the royalty rate, and the discount rate.

Earnout Liability .

Shareholders of Bid4Assets are eligible to receive up to $37.5 million in cash, payable based on Bid4Assets' achievement of trailing twelve-month EBITDA targets measured at the end of each calendar quarter until the quarter ended December 31, 2022.

The earn-out consideration was preliminarily fair valued at approximately $26.9 million as of the acquisition date.

The significant unobservable inputs used in the fair value measurement categorized within Level 3 of the fair value hierarchy included estimated results of operations over the earn-out period, volatility of gross profit and operating expenses, and the discount rate.

Goodwill represents the costs in excess of the fair value of net assets acquired through acquisitions by the Company.

Pursuant to our preliminary purchase price allocation, goodwill arising from the acquisition was determined to be $28.8 million .

See Note 3 - Bid4Assets Acquisition for further information.

Components of Revenue and Expenses

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Depreciation and amortization expenses consist of depreciation of property and equipment, amortization of internally developed software, and amortization of intangible assets.

Other operating expenses (income).

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.

Other operating (income) expense.

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

Interest and other income, net.

Interest and other income, net consists of interest income on money market funds and the promissory note issued to JTC, the components of net periodic pension (benefit) other than the service component and impacts of foreign currency fluctuations.

Interest and other income, net consists of interest income on money market funds and the prior promissory note issued to JTC, the components of net periodic pension (benefit) other than the service component and impacts of foreign currency fluctuations.

Income taxes.

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 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.

Our effective income tax rate after discrete items was 21.3% for the three months ended December 31, 2021.

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

Results of Operations

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

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

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

Three Months Ended December 31,

(dollars in thousands) 2021 2020 $ Change % Change

Revenue $ 36,217 $ 31,071 $ 5,146 16.6 %

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Depreciation and amortization 2,302 1,871 431 23.0

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

Other operating (income) expenses (32) 4 (36) NM

Total costs and expenses 62,224 51,125 11,099 21.7

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

Income from operations 4,483 4,626 (143) (3.1)

Interest and other income, net (131) (185) 54 29.2

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

Income before provision for income taxes 4,614 4,811 (197) (4.1)

Provision for income taxes 1,012 297 715 240.7

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

Net income $ 3,602 $ 4,514 $ (912) (20.2)%

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 June 30, Nine Months Ended June 30,

The following table presents reportable 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 December 31,

(dollars in thousands) 2021 2020

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Gross profit margin 77.8 % 80.3 %

GMV $ — $ — $ — $ —

Total revenue $ 2,832 $ 2,114

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Gross profit margin 58.4 % 59.5 %

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

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

Segment Results

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.

Revenue from our GovDeals reportable segment increased 29.3%, or $3.2 million, due to a 45.8%, or $49.3 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate.

In addition, increased recovery rates on assets sold were driven by our growing buyer base, automated asset promotion tools, and favorable macroeconomic factors in certain asset categories, such as transportation assets.

As GovDeals real estate sales increase through the integration with Bid4Assets, GovDeals revenue as a percent of GMV is expected to decline, as these higher value real estate sales are generally conducted at a lower take-rate than our traditional GovDeals asset categories.

For that reason, revenue as a percentage of GMV decreased to 8.9% from 10.1% last year.

As a result of the increase in revenues, gross profit increased 30.3%, or $3.1 million.

Gross profit margin remained relatively consistent between the periods.

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 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.

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

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.

Revenue from our RSCG reportable segment increased 10.8%, or $3.8 million, due to a 3.2%, or $1.7 million, increase in GMV as it continues to diversify its seller product flows by launching new programs with large and mid-sized retailers, expanding its distribution network into the northeast, launching AllSurplus Deals as a new marketplace offering consumers deals for curbside pickup, and an increase in the mix of transactions conducted under the purchase model.

The prior year included higher volumes magnified by selected seller capacity constraints.

Gross profit decreased by 2.5%, or $0.4 million, as increased volumes were offset by an unfavorable change in the mix of inventory handled by the RSCG segment during the quarter, which also caused gross profit margin to decrease by 5.0%.

Revenue from the CAG reportable segment increased by 41.6%, or $3.3 million , due to a 60.4%, or $18.8 million, increase in GMV driven by increasing opportunities to obtain and sell inventory under our purchase model, and strong consignment sales in the energy and heavy equipment categories.

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

A s a result of the increase in revenues, gross profit increased 37.1%, or $2.4 million.

Gross profit margin increased 2.5% due to inherent variations in the mix of assets sourced and sold by the CAG segment in any given period.

Revenue from our Machinio reportable segment increased 34.0%, or $0.7 million, due to an increase in subscription activity.

As a result of the increase in revenues, gross profit increased 34.3%, or $0.7 million.

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Cost of goods sold (excludes depreciation and amortization).

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.

Technology and operations expenses increased $2.8 million, or 29.3%, to support the increased transaction volumes in the RSCG and CAG segments.

Sales and marketing expenses.

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

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, 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 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 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 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 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.

As a result of the increase in revenues, gross profit increased 26.7%, or $1.3 million.

Consolidated Results

Total consolidated revenue increased $37.2 million, or 24.8%.

Refer to the discussion of Segment Results above for discuss ion of the increase in revenue.

Cost of goods sold (excludes depreciation and amortization).

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.

Cost of goods sold increased $5.2 million, or 23.0%, which changed at a higher rate than Revenue primarily due to an increase in principal transactions at our RSCG and CAG reportable segments.

Technology and operations expenses.

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

Technology and operations expenses increased $3.3 million, or 31.6%, as we are investing in technology and operations to continue our growth, including RSCG's expansion of its distribution network into the northeast, and launching AllSurplus Deals as a new marketplace offering consumers deals for curbside pickup.

Sales and marketing expenses.

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.

Sales and marketing expenses increased $0.9 million, or 10.3%, as we are investing in our sales and marketing functions to continue our growth, including promotional efforts around our marketplaces to expand our market share in key verticals, and to promote new business initiatives including our new AllSurplus Deals consumer marketplace.

General and administrative expenses.

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

General and administrative expenses increased $1.2 million, or 17.6%, primarily due to increased corporate support costs to support the anticipated growth resulting from the investments in our technology, operations, sales and marketing functions.

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 .

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 .

Depreciation and amortization expense increased $0.4 million, or 23.0%, primarily due to the increase in intangible assets following our acquisition of Bid4Assets on November 1, 2021.

Other operating (income) expenses .

Other operating (income) expenses was consistent between the three months ended December 31, 2021 and 2020.

Interest and other income, net.

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

Interest and other income, net was consistent between the three months ended December 31, 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, as well as the increase in our Income from operations.

Provision for income taxes increased $0.7 million primarily due to the increase in effective tax rate following the release of our valuation allowance on US deferred tax assets in Q4-FY21.

Liquidity and Capital Resources

Our operational cash needs primarily relate to working capital, including staffing costs, technology expenses and capital used for inventory purchases, which we have funded through existing cash balances and cash generated from operations.

Our operational cash needs primarily relate to working capital, including staffing costs, technology expenses, leases of real estate and equipment used in our operations, and capital used for inventory purchases, which we have funded through existing cash balances and cash generated from operations.

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

As of December 31, 2021, we had $91.3 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.

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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 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 RSCG segment.

As a result of our actions taken, the Company’s cash and cash equivalents balance is $91.3 million as of December 31, 2021, which we believe is sufficient to meet the Company’s anticipated cash needs one year from issuance of these financial statements.

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, expanded analytics, and buyer/seller payment optimization.

On November 1, 2021, the Company purchased all of the issued and outstanding shares of stock of Bid4Assets.

Bid4Assets is a leading online marketplace focused on conducting real property auctions for the government, including tax foreclosure sales and sheriff's sales.

Our investment through the acquisition of Bid4Assets will support continued growth in the GovDeals reportable segment, particularly in our real estate vertical.

The preliminary acquisition date fair value of the consideratio n transferred to the Shareholders of Bid4Assets was approximately $41.6 million consisting of $14.7 million in cash (net of working capital adjustments totaling $0.3 million) and earn-out consideration with a preliminary fair value of approximately $26.9 million.

As part of the acquisition of Bid4Assets, Shareholders of Bid4Assets are eligible to receive earn-out consideration of up to $37.5 million in cash.

The earn-out consideration was preliminarily fair valued at $26.9 million as of December 31, 2021, of which $14.5 million is included in Accrued expenses and other current liabilities and $12.4 million is included in Other long-term liabilities within the Condensed Consolidated Balance Sheets.

See Note 3 - Bid4Assets Acquisition for further information.

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 $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.

The amount of such undistributed foreign earnings was $7.3 million as of December 31, 2021.

As of December 31, 2021 and September 30, 2021, $25.5 million and $22.4 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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The repurchase program may be discontinued or suspended at any time and will be funded using our available cash.

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

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

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.

The Company had no remaining share repurchase authorization as of September 30, 2021.

On December 6, 2021, the Company's Board of Directors authorized a new stock repurchase plan (the "December 6 Stock Repurchase Plan") of up to $20 million of the Company's outstanding shares of common stock through December 31, 2023.

During the three months ended December 31, 2021, the Company repurchased a total of 147,185 shares for $3.0 million under this program.

As of December 31, 2021, the company may repurchase an additional $17.0 million of shares under this program.

Changes in Cash Flows:

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;

changes in payables to sellers, driven by increasing transactions volumes;

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

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

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

Net cash provided by operating activities was $1.9 million and $6.0 million for the three months ended December 31, 2021 and 2020, respectively.

The $4.2 million decrease in cash provided by operations between periods was attributable to a $2.3 million decrease in accounts receivable;

a $12.1 million decrease to accounts payable, $3.2 million decrease to accrued expenses and a $0.6 million decrease in other liabilities all as driven by the management of working capital.

These decreases were offset by $0.3 million of higher Net income as adjusted for non-cash items;

a $10.1 million increase in payables to sellers, driven by increasing transactions volumes;

and a $3.5 million decrease in inventory purchases.

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 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.

Net cash used by investing activities was $13.0 million for the three months ended December 31, 2021, and $0.8 million for the three months ended December 31, 2020.

The $12.2 million decrease in cash provided by investing activities was primarily driven by $11.1 million cash paid at closing to acquire Bid4Assets on November 1, 2021, net of cash acquired.

See Note 3 - Bid4Assets Acquisition for further information.

Net cash used by financing activities was $3.8 million for the three months ended December 31, 2021, and $4.0 million for the three months ended December 31, 2020, a slight decrease across the periods.

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 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 capital expenditures for the three months ended December 31, 2021 were $2.0 million.

As of December 31, 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