What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2022-02-03 · 133 added, 61 removed, 296 unchanged (40% of the section changed)

30 unchanged sentences

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.

However, COVID-19 and its variants continue to impact the global economy, supply chains, and the ability to conduct commerce due to ongoing travel restrictions in various countries, and lockdowns reintroduced within regions of China.

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.

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

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.

During fiscal 2021 and during the three and six months ended March 31, 2022, the Company determined that its liquidity position and working capital were more than sufficient to meet its projected needs.

As discussed in Note 10 - Stockholders' Equity , on December 6, 2021, the Company's Board of Directors authorized the repurchase 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.

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.

The Company repurchased 1,011,881 shares for $17.0 million, and 1,159,066 shares for $20.0 million, during the three and six months ended March 31, 2022, respectively.

As of March 31, 2022, the Company had no remaining authorization to repurchase shares.

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 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.

During the twelve months ended March 31, 2022, the approximate number of registered buyers increased from 3,888,000 to 4,785,000, or 23%.

Of the increase, approximately 16% is attributable to the Bid4Assets registered buyer base acquired during the three months ended December 31, 2021.

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

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

For the three 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.

For the three and six months ended March 31, 2022, our purchase transaction model accounted for 13.5% and 14.0% of our Gross Merchandise Volume (GMV), respectively, and 54.8% and 54.5% of our total revenues, respectively.

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

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

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

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.

For the three and six months ended March 31, 2022, our consignment model accounted for 86.5% and 86.0% of our GMV, respectively, and 37.7% and 38.0% of our total revenues, respectively.

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

Other — fee revenue .

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.

Other revenues accounted for 7.6% and 7.4% of our total revenues for the three and six months ended March 31, 2022, respectively, and 7.4% and 7.5% of our total revenues for the three and six months ended March 31, 2021 , respectively

Industry trends.

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

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

represented 51.7% and 61.2% of consolidated Cost of goods sold for the three months ended March 31, 2022 and 2021, respectively, and 56.0% and 60.6% of consolidated Cost of goods sold for the six months ended March 31, 2022 and 2021, respectively.

These contracts are included within our RSCG reportable segment.

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In addition, if we become aware of registered buyers that are no longer in business, we remove them from our database.

As of 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.

As of March 31, 2022, and 2021, we had approximately 4,785,000 and 3,888,000 registered buyers, respectively.

Of the increase, approximately 16% is attributable to the Bid4Assets registered buyer base acquired during the three months ended December 31, 2021.

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 December 31, 2021 and 2020, appr oximately 642,000 and 517,000, respectively, total auction participants participated in auctions on our marketplaces.

During the three months ended March 31, 2022, and 2021, approximately 829,000 and 561,000, respectively, total auction participants participated in auctions on our marketplaces.

During the six months ended March 31, 2022, and 2021, approximately 1,471,000 and 1,078,000, 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 December 31, 2021 and 2020, we completed approximately 211,000 and 152,000 transactions, respectively.

During the three months ended March 31, 2022, and 2021, we completed approximately 245,000 and 174,000 transactions, respectively.

During the six months ended March 31, 2022, and 2021, we completed approximately 456,000 and 326,000 transactions, respectively.

Non-GAAP Financial Measures

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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 December 31,

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

2022 2021 2022 2021

(in thousands) (Unaudited)

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Interest and other income, net 1

51 69 18 (34)

Provision for income taxes 1,059 407 2,071 704

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Stock compensation expense

1,992 1,761 4,272 3,990

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

40 203 252 203

Business realignment expenses 2, 3

Fair value adjustments to acquisition earn-outs

(8,500) — (8,500) —

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 (income) expenses on the Statements of Operations.

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.

2 Acquisition costs, impairment of long-lived assets and other assets, and business realignment expenses are components of Other operating expenses (income) on the Statements of Operations.

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

Critical Accounting Policies and Estimates

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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 earn-out consideration was preliminarily fair valued at approximately $28.0 million as of the acquisition date and $19.5 million as of March 31, 2022.

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, a high level of volatility of gross profit and operating expenses given the nature of the business model and its economic environment create a wider range of potential outcomes over the earn-out period, and the discount rate.

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

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See Note 3 - Bid4Assets Acquisition for further information.

As discussed in Note 11 – Fair Value Measurements , the fair value of the Bid4Assets earn-out liability declined by $8.5 million during the three months ended March 31, 2022 due to timing changes impacting the level of auction events and transactions that are expected to occur during the earn-out period ending December 31, 2022.

These timing changes have not reflected substantive changes to the long-term outlook for real estate sales within the GovDeals segment and were not considered a triggering event for testing goodwill or long-lived assets for impairment as of March 31, 2022.

The Company will continue to monitor for changes that could impact the recoverability of its goodwill.

Components of Revenue and Expenses

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However, where we determine that the useful life of the internally developed software will be greater than one year, we capitalize development costs in accordance with ASC 350-40, Internal-use software .

As such, we are capitalizing certain development costs associated with our e-commerce platform, as well as other software development activities.

As such, we are capitalizing certain development costs associated with our e-commerce platforms, as well as other software development activities.

Operations expenses consist primarily of operating costs, including buyer relations, shipping logistics and distribution center operating costs.

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Interest and other income, net.

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.

Interest and other income, net consists of interest income on interest bearing checking accounts, money market funds, and the prior promissory note issued to JTC, interest and unused commitment fees in connection with the Company's Credit Agreement, 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 after discrete items was 21.3% for the three months ended December 31, 2021.

Our effective income tax rate after discrete items was 11.7% for the six months ended March 31, 2022.

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.

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

Three Months Ended December 31,

(dollars in thousands) 2021 2020 $ Change % Change

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

(dollars in thousands) 2022 2021 $ Change % Change 2022 2021 $ Change % Change

Revenue $ 37,384 $ 35,968 $ 1,416 3.9 % $ 73,602 $ 67,040 $ 6,562 9.8 %

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Depreciation and amortization 2,603 1,670 933 55.9 4,906 3,541 1,365 38.5

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

Fair value adjustment of acquisition earn-outs (8,500) — (8,500) NM (8,500) — (8,500) NM

Other operating expenses (income) 23 206 (183) (88.8) (10) 210 (220) NM

Total costs and expenses 55,292 56,148 (856) (1.5) 117,517 107,273 10,244 9.5

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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,

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

(dollars in thousands) 2022 2021 2022 2021

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Gross profit margin 67.7 % 73.6 % 73.3 % 76.7 %

GMV $ — $ — $ — $ —

Total revenue $ 2,899 $ 2,240 $ 5,731 $ 4,354

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Gross profit margin 57.6 % 57.3 % 58.0 % 58.3 %

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

Three Months Ended March 31, 2022, Compared to the Three Months Ended March 31, 2021

Segment Results

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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.

Gross profit increased by 4.3% , or $0.7 million, due to an increase in volumes, offset by an unfavorable change in the mix of inventory handled by the RSCG segment during the current quarter, causing gross profit margin to decrease by 1.1%.

Revenue from the CAG reportable segment decreased by 5.3%, or $0.5 million , due to lower volume of principal deals and our continued use of partner organizations.

GMV decreased by 0.6%, or $0.2 million, a lesser rate than the decrease in Revenue, due to strong consignment sales in the biopharmaceutical and heavy equipment categories.

A s a result of the decrease in revenues, gross profit decreased 12.9%, or $0.9 million.

Gross profit margin decreased 5.9% due to inherent variations in the mix of assets sourced and sold by the CAG segment in any given period.

Further, challenged global supply chains are experiencing heightened disruptions from the Russian invasion of Ukraine and its impacts on international trade and energy markets, and the recent COVID-19 lockdowns in regions of China, which could limit the volume of assets made available for sale in any quarterly period.

Revenue from our Machinio reportable segment increased 29.4%, or $0.7 million, due to an increase in subscription activity through a greater number of subscribers and increased pricing.

As a result of the increase in revenues, gross profit increased 30.7%, or $0.6 million.

Consolidated Results

Revenue - Total consolidated revenue increased $6.5 million, or 10.5%.

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 $2.6 million, or 9.8%, largely due to an increase in purchased inventory principal transactions at our RSCG reportable segment.

Technology and operations expenses.

Technology and operations expenses increased $1.8 million, or 14.8%, 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 $2.4 million, or 26.5%, as we are investing in our sales and marketing functions to continue our growth, including promotional efforts to expand our market share in key verticals, and to promote new business initiatives including our AllSurplus Deals consumer marketplace.

General and administrative expenses.

General and administrative expenses increased $0.2 million, or 2.3%, 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 $0.9 million, or 55.9%, primarily due to the increase in intangible assets following our acquisition of Bid4Assets on November 1, 2021.

Fair value adjustment of acquisition earn-outs .

Fair value adjustment of acquisition earn-outs reflects an $8.5 million non-cash gain due to a reduction in the fair value of the Bid4Assets earn-out liability during the three months ended March 31, 2022.

See Note 11 - Fair Value Measurement for further information.

Other operating expenses (income) .

Other operating expenses (income) was consistent between the three months ended March 31, 2022 and 2021.

Interest and other income, net.

Interest and other income, net was consistent between the three months ended March 31, 2022 and 2021.

Provision for income taxes .

Provision for income taxes increased $0.7 million primarily due to the increase in our effective tax rate following the release of our valuation allowance on US deferred tax assets during the fiscal year ended September 30, 2021.

Six Months Ended March 31, 2022, Compared to the Six Months Ended March 31, 2021

Revenue from our GovDeals reportable segment increased 31.0%, or $6.8 million, due to a 54.3%, or $118.6 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 8.5% from 10.0% last year.

As a result of the increase in revenues, gross profit increased 31.9%, or $6.6 million.

Gross profit margin remained relatively consistent between the periods.

Revenue from our RSCG reportable segment increased 8.8%, or $6.5 million, due to a 1.9%, or $2.1 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 increased by 1.0%, or $0.3 million, due to an increase in volumes, offset by an unfavorable change in the mix of inventory handled by the RSCG segment during the quarter, causing gross profit margin to decrease by 2.9%.

Revenue from the CAG reportable segment increased by 16.1%, or $2.8 million, due to a 26.9%, or $18.5 million , increase in GMV driven by increasing opportunities to obtain and sell inventory under our purchase model, and strong consignment sales in the biopharmaceutical 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 10.9%, or $1.5 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.

Gross profit margin decreased 3.4% 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 31.6%, or $1.4 million, due to an increase in subscription activity through a greater number of subscribers and increased pricing.

As a result of the increase in revenues, gross profit increased 32.5%, or $1.3 million.

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Sales and marketing expenses.

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.

Sales and marketing expenses increased $3.3 million, or 18.3%, as we are investing in our sales and marketing functions to continue our growth, including promotional efforts to expand our market share in key verticals, and to promote new business initiatives including our AllSurplus Deals consumer marketplace.

General and administrative expenses.

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Depreciation and amortization expense increased $1.4 million, or 38.5%, 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.

Fair value adjustment of acquisition earn-outs .

See Note 11 - Fair Value Measurement for further information.

Other operating expenses (income) .

Other operating expenses (income) was consistent between the six months ended March 31, 2022 and 2021.

Interest and other income, net.

Interest and other income, net was consistent between the three months ended December 31, 2021 and 2020.

Interest and other income, net was consistent between the six months ended March 31, 2022 and 2021.

Provision for income taxes .

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.

Provision for income taxes increased $1.4 million primarily due to the increase in our effective tax rate following the release of our valuation allowance on US deferred tax assets during the fiscal year ended September 30, 2021.

Liquidity and Capital Resources

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From time to time, we may use our capital resources for other activities, such as contract start-up costs, joint ventures, share repurchases and acquisitions.

As of December 31, 2021, we had $91.3 million in cash and cash equivalents.

As of March 31, 2022, we had $84.3 million in cash and cash equivalents.

The Company maintains a $25.0 million Credit Agreement due March 31, 2024 (Credit Agreement).

The Company may draw upon the Credit Agreement for general corporate purposes.

Repayments of any borrowings under the Credit Agreement shall become available for redraw at any time by the Company.

The interest rate on borrowings under the Credit Agreement is a variable rate per annum equal to the Daily Simple Secured Overnight Financing Rate (SOFR) in effect plus a margin ranging from 1.25% to 1.75%.

Interest is payable monthly.

During the three and six months ended March 31, 2022, the Company did not make any draws under the Credit Agreement.

As of March 31, 2022, the Company had no outstanding indebtedness under the Credit Agreement and our borrowing availability was $25.0 million.

The obligations under the Credit Agreement are unconditionally guaranteed by us and each of our existing and subsequently acquired or organized domestic subsidiaries and secured on a first priority basis by a security interest (subject to permitted liens) in substantially all assets owned by us, and each of our other domestic subsidiaries, subject to limited exceptions.

The Credit Agreement contains certain financial and non-financial restrictive covenants including, among others, the requirement to maintain a minimum level of earnings before interest, income taxes, depreciation and amortization (EBITDA).

The Credit Agreement contains a number of affirmative and restrictive covenants including limitations on mergers, consolidations and dissolutions, investments and acquisitions, indebtedness and liens, and dividends and other restricted payments.

As of March 31, 2022, the Company was in full compliance with the terms and conditions of the Credit Agreement.

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.

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.

As a result of our actions taken, the Company’s cash and cash equivalents balance is $84.3 million as of March 31, 2022, 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.

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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.

The preliminary acquisition date fair value of the consideratio n transferred to the former shareholders of Bid4Assets was approximately $42.7 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 $28.0 million.

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

See Note 3 - Bid4Assets Acquisition for further information.

During the three months ended March 31, 2022, the fair value of the earn-out liability was reduced by $8.5 million to $19.5 million, due to a decline in the auction events and transactions that are expected to be completed during the earn-out period ending December 31, 2022.

This change resulted from developments occurring subsequent to the November 1, 2021 acquisition date and includes extended timelines to advance legislation that allows for online auctions of foreclosed real estate in certain target markets, and other client specific delays in bringing foreclosed real estate to auction.

The $19.5 million in earn-out liability as of March 31, 2022, is recorded within Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

This amount, should Bid4Assets achieve certain trailing twelve-month EBITDA targets, would be payable within the next 12 months.

The Company believes it maintains sufficient liquidity to pay the earn-out should such trailing twelve-month EBITDA targets be achieved by means of our current cash on hand as of March 31, 2022, and if needed, access to our existing Credit Agreement.

During the three and six months ended March 31, 2022, Bid4Assets achieved certain of the trailing twelve-month EBITDA targets such that payout totaling $3.5 million to Bid4Assets shareholders is expected to be made by the Company during the third quarter of fiscal 2022.

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 $7.3 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.

The amount of such undistributed foreign earnings was $7.8 million as of March 31, 2022.

As of March 31, 2022 and September 30, 2021, $24.3 million and $22.4 million, respectively, of Cash and cash equivalents was held outside of the U.S.

From time to time, 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.

Share repurchases may be made through open market purchases, privately negotiated transactions or otherwise, at times and in such amounts as management deems appropriate.

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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.

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 ou tstanding shares of common stock through December 31, 2023.

The Company repurchased 1,011,881 shares for $17.0 million, and 1,159,066 shares for $20.0 million during the three and six months ended March 31, 2022, respectively.

As of March 31, 2022, the Company had no remaining authorization to repurchase shares.

Changes in Cash Flows:

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.

Six Months Ended March 31, 2022 Compared to the Six Months Ended March 31, 2021

Net cash provided by operating activities was $14.6 million and $31.3 million for the six months ended March 31, 2022, and 2021, respectively.

The $16.7 million decrease in cash provided by operating activities between periods was attributable to cash flows associated with accounts payable and payables to sellers which had a net decrease of $12.8 million due to reduced rates of change in the underlying transaction volumes during the current period.

Our working capital accounts are subject to natural variations depending on the rate of change of our transaction volumes, the timing of cash receipts and payments, and variations in our transaction volumes related to settlements between our buyers and sellers.

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

Net cash used 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.

As GovDeals real estate sales with settlement services increase through the integration with Bid4Assets, operating cash flow fluctuations from accounts payable and payables to sellers are expected to become more variable.

The amount of cash received and settled will be substantially higher than our take rate on such transactions, and the timing of auction events, cash collection period, and payment of settlements relative to period end dates can potentially drive substantial cash movements to the extent the timing of such activities cross fiscal periods.

There have been no other significant changes to the working capital requirements for the Company.

Net cash used in investing activities was $14.7 million and $1.6 million for the six months ended March 31, 2022, and March 31, 2021, respectively.

The $13.1 million increase in cash used in investing activities was primarily driven by $11.2 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.

Net cash used by financing activities was $21.9 million and $19.0 million for the six months ended March 31, 2022, and March 31, 2021, respectively.

The $2.9 million increase in cash used in financing activities was primarily driven by a $3.9 million increase in share repurchases, offset by $1.4 million in lower taxes paid in connection with the net settlement of stock compensation awards.

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 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 capital expenditures for the six months ended March 31, 2022, and March 31, 2021, were $3.6 million and $2.4 million, respectively.

As of March 31, 2022, 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.

2 unchanged sentences

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