What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 144 added, 128 removed, 596 unchanged (31% of the section changed)

4 unchanged sentences

(Dollars in Thousands, Except Par Value)

March 31, 2022 September 30, 2021

June 30, 2022 September 30, 2021

Current assets:

28 unchanged sentences

120,000,000 shares authorized;

35,563,988 shares issued and outstanding at March 31, 2022;

35,576,454 shares issued and outstanding at June 30, 2022;

35,457,095 shares issued and outstanding at September 30, 2021

1 unchanged sentence

Treasury stock, at cost;

3,385,827 shares at March 31, 2022 and 2,222,083 shares at September 30, 2021

3,794,038 shares at June 30, 2022 and 2,222,083 shares at September 30, 2021

( 62,176 ) ( 36,628 )

8 unchanged sentences

(Dollars in Thousands, Except Per Share Data)

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

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

2022 2021 2022 2021

Revenue $ 37,384 $ 35,968 $ 73,602 $ 67,040

Fee revenue 30,891 25,818 61,381 50,498

Total revenue 68,275 61,786 134,983 117,538

Purchase revenues $ 35,507 $ 37,862 $ 109,109 $ 104,902

Consignment and other fee revenues 34,359 31,804 95,739 82,302

Total revenues 69,866 69,666 204,848 187,204

Costs and expenses from operations:

5 unchanged sentences

Fair value adjustments of acquisition earn-outs ( 11,500 ) — ( 20,000 ) —

Other operating expenses (income) 23 206 ( 10 ) 210

Other operating expenses, net 27 1,180 18 1,390

Total costs and expenses 51,171 61,072 168,688 168,346

Income from operations 18,695 8,594 36,160 18,858

Interest and other income, net ( 46 ) ( 29 ) ( 177 ) ( 214 )

Interest and other expenses (income), net 104 ( 254 ) ( 73 ) ( 468 )

Income before provision for income taxes 18,591 8,848 36,233 19,326

10 unchanged sentences

(Dollars in Thousands)

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

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

2022 2021 2022 2021

30 unchanged sentences

Common stock repurchased — — — ( 1,011,881 ) ( 17,035 ) — — ( 17,035 )

Common stock surrendered in the exercise of stock options — — — — — — — —

Stock compensation expense — — 2,102 — — — — 2,102

1 unchanged sentence

Balance at March 31, 2022 35,563,988 $ 36 $ 254,680 ( 3,385,827 ) $ ( 56,726 ) $ ( 9,311 ) $ ( 55,690 ) $ 132,989

Net income — — — — — — 16,408 16,408

Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units 18,373 — — — — — — —

Taxes paid associated with net settlement of stock compensation awards ( 5,907 ) — ( 92 ) — — — — ( 92 )

Common stock repurchased — — — ( 408,211 ) ( 5,450 ) — — ( 5,450 )

Stock compensation expense — — 1,984 — — — — 1,984

Foreign currency translation and other — — — — — ( 1,170 ) — ( 1,170 )

Balance at June 30, 2022 35,576,454 $ 36 $ 256,572 ( 3,794,038 ) $ ( 62,176 ) $ ( 10,481 ) $ ( 39,282 ) $ 144,669

See accompanying notes to the unaudited condensed consolidated financial statements.

3 unchanged sentences

(Dollars In Thousands)

Six Months Ended March 31,

Nine Months Ended June 30,

Operating activities

6 unchanged sentences

Deferred tax provision 3,410 96

Gain on disposal of property and equipment ( 13 ) 44

(Gain) loss on disposal of property and equipment ( 29 ) 87

Gain on termination of lease ( 240 ) —

19 unchanged sentences

Proceeds from promissory note — 4,343

Net cash used by investing activities ( 14,727 ) ( 1,580 )

Net cash (used in) provided by investing activities ( 17,433 ) 900

Financing activities

3 unchanged sentences

Proceeds from exercise of stock options — 353

Payment of earnout liability related to business acquisition ( 3,500 ) —

Common stock repurchased ( 25,447 ) ( 16,143 )

Net cash used by financing activities ( 21,949 ) ( 19,011 )

Net cash used in financing activities ( 31,014 ) ( 19,370 )

Effect of exchange rate differences on cash and cash equivalents ( 739 ) 829

25 unchanged sentences

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

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

the effect of general business and economic trends including any future economic impact from the COVID-19 pandemic, inflationary pressures, and impacts from interest rate changes;

the Company's susceptibility to rapid technological change;

8 unchanged sentences

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

Operating results for the three and six months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending September 30, 2022, or for any future period.

Operating results for the three and nine months ended June 30, 2022, are not necessarily indicative of the results that may be expected for the year ending September 30, 2022, or for any future period.

Use of Estimates

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

For the three and six months ended March 31, 2022, these estimates required the Company to make assumptions about the extent and duration of restrictions on cross-border transactions and the impact of the COVID-19 pandemic on macroeconomic conditions and, in turn, the Company's results of operations.

For the three and nine months ended June 30, 2022, these estimates required the Company to make assumptions about the extent and duration of restrictions on cross-border transactions and the impact of the COVID-19 pandemic on macroeconomic conditions and, in turn, the Company's results of operations.

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

2 unchanged sentences

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

The contract asset balance was $ 0.8 million as of March 31, 2022, and $ 0.6 million as of September 30, 2021, and is included in the line item Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

The contract asset balance was $ 0.9 million as of June 30, 2022, and $ 0.6 million as of September 30, 2021, and is included in the line item Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

Liquidity Services, Inc.

2 unchanged sentences

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

The contract liability balance was $ 5.1 million as of March 31, 2022, and $ 4.6 million as of September 30, 2021, and is included in the line item Deferred revenue on the Condensed Consolidated Balance Sheets.

Of the September 30, 2021, contract liability balance, $ 3.4 million was earned as Fee revenue during the six months ended March 31, 2022.

The contract liability balance was $ 4.9 million as of June 30, 2022, and $ 4.6 million as of September 30, 2021, and is included in the line item Consignment and other fee revenue on the Condensed Consolidated Balance Sheets.

Of the September 30, 2021, contract liability balance, $ 4.3 million was earned as Other fee revenue during the nine months ended June 30, 2022.

Performance obligations for Machinio's subscription services are satisfied over time as the Company provides the services over the term of the subscription.

As of March 31, 2022, the Company has a remaining performance obligation of $ 5.1 million for these subscription services, and the Company expects to recognize the substantial majority of that amount as Fee revenue over the next 12 months.

As of June 30, 2022, the Company has a remaining performance obligation of $ 4.9 million for these subscription services, and the Company expects to recognize the substantial majority of that amount as Other fee revenue over the next 12 months.

Contract Costs

1 unchanged sentence

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

The contract cost balance w as $ 1.8 million a s of March 31, 2022, and $ 1.6 million as of September 30, 2021, and is included in the line items Prepaid expenses and other current assets and Other assets on the Condensed Consolidated Balance Sheets.

Amortization expense was $ 0.3 million and $ 0.5 million during the three and six months ended March 31, 2022, and $ 0.2 million and $ 0.3 million during the three and six months ended March 31, 2021.

The contract cost balance was $ 1.8 million as of June 30, 2022, and $ 1.6 million as of September 30, 2021, and is included in the line items Prepaid expenses and other current assets and Other assets on the Condensed Consolidated Balance Sheets.

Amortization expense was $ 0.3 million and $ 0.8 million during the three and nine months ended June 30, 2022, respectively, and $ 0.2 million and $ 0.5 million during the three and nine months ended June 30, 2021, respectively.

Other Assets - Promissory Note

7 unchanged sentences

On May 13, 2021, the Company entered into the First Amendment to the Forbearance Agreement with JTC, providing JTC with full satisfaction and discharge from its indebtedness upon receipt of a $ 3.5 million payment made on May 17, 2021.

As a result, the Company recorded a $ 1.1 million loss as a component of Other operating expenses in its Condensed Consolidated Statement of Operations during the three months ended June 30, 2021, representing the difference between the $ 4.6 million outstanding balance of principal and accrued interest and the $ 3.5 million payment received.

There was no impact on the unaudited financial statements from this transaction as of and for the three and six months ended March 31, 2022, and March 31, 2021 .

As a result, the Company recorded a $ 1.1 million loss as a component of Other operating expenses, net in its Condensed Consolidated Statement of Operations during the three months ended June 30, 2021, representing the difference between the $ 4.6 million outstanding balance of principal and accrued interest and the $ 3.5 million payment received.

There was no impact on the unaudited financial statements from this transaction as of and for the three and nine months ended June 30, 2022.

Risk Associated with Certain Concentrations

4 unchanged sentences

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

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash in banks within interest bearing and earnings allowance checking accounts which may at times exceed federally insured limits (FDIC and/or SIPC), and Accounts receivable.

The Company deposits its cash in interest bearing checking accounts with financial institutions that the Company considers to be of high credit quality.

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

The Company deposits its cash in interest bearing checking accounts, or acquires cash equivalent money market funds, each with financial institutions that the Company considers to be of high credit quality.

Liquidity Services, Inc.

4 unchanged sentences

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

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.

represented 61.1 % and 63.5 % of consolidated Cost of goods sold for the three months ended June 30, 2022, and 2021, respectively, and 57.7 % and 61.7 % of consolidated Cost of goods sold for the nine months ended June 30, 2022, and 2021, respectively.

These contracts are included within the RSCG reportable segment.

17 unchanged sentences

The results of Bid4Assets' operations are included within our GovDeals reportable segment and reporting unit.

As of March 31, 2022 , the Company's purchase price allocation related to this acquisition is preliminary and subject to revisions as additional information is obtained about the facts and circumstances that existed as of the acquisition date.

As of June 30, 2022 , the Company's purchase price allocation related to this acquisition is preliminary and subject to revisions as additional information is obtained about the facts and circumstances that existed as of the acquisition date.

The revisions may have a significant impact on our condensed consolidated financial statements.

The allocation of the purchase price will be finalized once all the information that was known and knowable as of the acquisition date is obtained and analyzed, but not to exceed one year from the acquisition date.

The primary areas of the purchase price allocation that are not yet finalized relate to income and non-income taxes, and the residual goodwill.

The allocation of the purchase price will be finalized once all information that was known and knowable as of the acquisition date is obtained and analyzed, but not to exceed one year from the acquisition date.

The primary areas of the purchase price allocation that are not yet finalized relate to income and non-income taxes, the valuation of intangible assets acquired and earn-out liability, and the residual goodwill.

The preliminary amounts assigned to intangible assets by type for this acquisition were based upon our valuation model and historical experiences with entities with similar business characteristics.

46 unchanged sentences

Contingent Consideration

During the six months ended March 31, 2022, and as a result of the acquisition of Bid4Assets, the Company recorded preliminary contingent consideration in the amount of $ 28.0 million on its Condensed Consolidated Balance Sheets.

During the nine months ended June 30, 2022, and as a result of the acquisition of Bid4Assets, the Company recorded preliminary contingent consideration in the amount of $ 28.0 million on its Condensed Consolidated Balance Sheets.

See further discussion of this matter within Note 11 - Fair Value Measurement .

Other Information

Revenue, net income (loss), and pro forma information related to the Bid4Assets acquisition was immaterial to the condensed consolidated financial statements and its related notes for the three and six months ended March 31, 2022.

Earnings per Share

3 unchanged sentences

The computation of Basic and Diluted net income per share is as follows:

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

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

2022 2021 2022 2021

18 unchanged sentences

The components of lease expense are:

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

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

(in thousands) 2022 2021 2022 2021

11 unchanged sentences

Maturities of lease liabilities are:

March 31, 2022

June 30, 2022

(in thousands) Operating Leases Finance Leases

10 unchanged sentences

Total lease liabilities $ 15,480 $ 351

(1) The weighted average remaini ng lease term is 3.8 years for operating leases and 4.0 years for finance leases.

(1 ) The weighted average remaining lease term is 3.5 years for operating leases and 3.8 years for finance leases.

(2) The weighted average discount rate is 6.2 % for operating leases and 5.5 % for finance leases.

Supplemental disclosures of cash flow information related to leases are:

Six Months Ended March 31,

Nine Months Ended June 30,

(in thousands) 2022 2021

18 unchanged sentences

Translation adjustments ( 585 ) — — ( 585 )

Balance at March 31, 2022

Balance at June 30, 2022

$ 20,998 $ 53,691 $ 14,558 $ 89,247

The increase in the goodwill balance of approximately $ 30.0 million at the GovDeals reportable segment and reporting unit during the six months ended March 31, 2022, is due to the Bid4Assets acquisition.

The increase in the goodwill balance of approximately $ 30.0 million at the GovDeals reportable segment and reporting unit during the nine months ended June 30, 2022, is due to the Bid4Assets acquisition.

See Note 3 - Bid4Assets Acquisition for further information.

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

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.

As discussed in Note 11 – Fair Value Measurement , the fair value of the Bid4Assets earn-out liability declined by $ 11.5 million during the three months ended June 30, 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.

The Company has also continued to evaluate the impact of the COVID-19 pandemic and other ongoing macroeconomic disruptions on the recoverability of its goodwill.

The Company did not identify any indicators of impairment that required an interim goodwill impairment test during the six months ended March 31, 2022.

The Company did not identify any indicators of impairment that required an interim goodwill impairment test during the nine months ended June 30, 2022.

Intangible Assets

Intangible assets consist of the following:

March 31, 2022 September 30, 2021

June 30, 2022 September 30, 2021

(in thousands) Useful

11 unchanged sentences

Total intangible assets $ 24,679 $ ( 7,443 ) $ 17,236 $ 8,160 $ ( 4,707 ) $ 3,453

The gross carrying amount of total intangible assets increased by $ 16.5 million during the six months ended March 31, 2022 due to the Bid4Assets acquisition.

The gross carrying amount of total intangible assets increased by $ 16.5 million during the nine months ended June 30, 2022, primarily due to the Bid4Assets acquisition.

The acquired developed software and trade name are included in the above line items of Technology and Patent and trademarks, respectively.

See Note 3 - Bid4Assets Acquisition for further information.

Future expected amortization of intangible assets at March 31, 2022, is as follows:

Future expected amortization of intangible assets at June 30, 2022, is as follows:

(in thousands) Expected Amortization Expense

3 unchanged sentences

Total $ 17,236

Intangible asset amortization expense was $ 1.0 million and $ 0.3 million for the three months ended March 31, 2022 and 2021, respectively, and $ 1.8 million and $ 0.7 million for the six months ended March 31, 2022 and 2021, respectively.

Liquidity Services, Inc.

1 unchanged sentence

Notes to the Unaudited Condensed Consolidated Financial Statements - (Continued)

Intangible asset amortization expense was $ 1.0 million and $ 0.3 million for the three months ended June 30, 2022 and 2021, respectively, and $ 2.7 million and $ 1.0 million for the nine months ended June 30, 2022 and 2021, respectively.

The increase in intangible amortization expense was primarily due to the Bid4Assets acquisition.

The Company has continued to evaluate the impact of the COVID-19 pandemic, ongoing macroeconomic disruptions, and the subsequent financial performance of Bid4Assets, on the recoverability of its long-lived assets.

The Company did not identify any indicators of impairment requiring an interim impairment test on material long-lived assets during the three and six months ended March 31, 2022.

The Company did not identify any indicators of impairment requiring an interim impairment test on material long-lived assets during the three and nine months ended June 30, 2022.

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

The Company recorded pre-tax income in the first six months of fiscal year 2022 and its corresponding effective tax rate is 11.7 % compared to 6.7 % for the first six months of fiscal year 2021.

The change in the effective tax rate for the six months ended March 31, 2022, as compared to the same period in the prior year was primarily due to state and foreign taxes, and the utilization of net operating losses.

The Company recorded pre-tax income in the first nine months of fiscal year 2022 and its corresponding effective tax rate is 11.7 % compared to 5.9 % for the first nine months of fiscal year 2021.

The change in the effective tax rate for the nine months ended June 30, 2022, as compared to the same period in the prior year was primarily due to state and foreign taxes, and the utilization of net operating losses.

The effective tax rate differed from the U.S.

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

statutory federal rate of 21% primarily as a result of the impact of foreign, state, and local income taxes and permanent tax adjustments, the most significant of which was the exclusion of the $ 20.0 million non-cash gain from the fair market value adjustment of the Bid4Assets acquisition earn-out liability.

The Company applies the authoritative guidance related to uncertainty in income taxes.

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

The Company identified no new uncertain tax positions during the six months ended March 31, 2022.

The Company identified no new uncertain tax positions during the nine months ended June 30, 2022.

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

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

As of March 31, 2022, the Company has no open income tax examinations in the U.S.

As of June 30, 2022, the Company has no open income tax examinations in the U.S.

and the statute of limitations for years prior to 2018 is now closed.

7 unchanged sentences

The Company also pays a Letter of Credit Fee, on a quarterly basis, equal to 1.25 % on the daily amount available to be drawn for standby letters of credit.

Interest incurred on any draws under the Line of Credit, as well as the Unused Commitment Fee and Letter of Credit Fee, are included within Interest and other income, net in the Condensed Consolidated Statements of Operations.

Interest incurred on any draws under the Line of Credit, as well as the Unused Commitment Fee and Letter of Credit Fee, are included within Interest and other expenses (income), net in the Condensed Consolidated Statements of Operations.

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

2 unchanged sentences

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.

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 borrowings under the Credit Agreement.

During the three and six months ended March 31, 2022, interest expense incurred by the Company under the Credit Agreement was immaterial to the c ondensed consolidated financial statements.

As of June 30, 2022, the Company was in full compliance with the terms and conditions of the Credit Agreement.

During the three and nine months ended June 30, 2022, the Company did not make any draws under the Credit Agreement.

As of June 30, 2022, the Company had no outstanding borrowings under the Credit Agreement.

During the three and nine months ended June 30, 2022, interest expense incurred by the Company under the Credit Agreement was immaterial to the c ondensed consolidated financial statements.

Liquidity Services, Inc.

2 unchanged sentences

Stockholders’ Equity

The changes in stockholders’ equity for the prior year comparable period is as follows:

The changes in stockholders’ equity for the prior year comparable period are as follows:

Common Stock Treasury Stock

22 unchanged sentences

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

Net income — — — — 8,419 8,419

Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units 318,242 — — — — — — —

Taxes paid associated with net settlement of stock compensation awards ( 15,834 ) — ( 343 ) — — — — ( 343 )

Stock compensation expense — — 1,525 — — — — 1,525

Foreign currency translation and other — — — — — 23 ( 1 ) 22

Balance at June 30, 2021 35,417,715 $ 35 $ 251,048 ( 1,587,199 ) $ ( 21,628 ) $ ( 8,740 ) $ ( 104,154 ) $ 116,561

Liquidity Services, Inc.

3 unchanged sentences

The Company has several incentive plans under which stock options, restricted stock units (RSUs), restricted stock awards (RSAs), and cash-settled stock appreciation rights (SARs) have been issued, including the Third Amended and Restated 2006 Omnibus Long-Term Incentive Plan, as amended (LTIP), and a plan and private placement issuances related to the Company’s acquisition of Machinio and Bid4Assets.

During the three months ended March 31, 2022, the Company's shareholders approved an amendment to the LTIP to increase the number of shares of common stock reserved for issuance from 19,100,000 to 20,300,000 .

Accordingly, as of March 31, 2022, the Company has reserved a total of 20,300,000 shares of its common stock for exercises of stock options, vesting of RSUs, and grants of RSAs under these plans.

During the nine months ended June 30, 2022, the Company's shareholders approved an amendment to the LTIP to increase the number of shares of common stock reserved for issuance from 19,100,000 to 20,300,000 .

Accordingly, as of June 30, 2022, the Company has reserved a total of 20,300,000 shares of its common stock for exercises of stock options, vesting of RSUs, and grants of RSAs under these plans.

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

As of March 31, 2022 , 2,350,615 sh ares of common stock remained available for use under the LTIP.

As of June 30, 2022 , 2,353,049 sh ares of common stock remained available for use under the LTIP.

Stock Compensation Expense

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

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

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

2022 2021 2022 2021

8 unchanged sentences

The table below presents the components of share-based compensation expense by line item within our Condensed Consolidated Statements of Operations (in thousands):

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

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

2022 2021 2022 2021

10 unchanged sentences

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

Six Months Ended

March 31, 2022

Nine Months Ended

June 30, 2022

Stock Options granted:

16 unchanged sentences

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

The range of assumptions used to determine the fair value of stock options containing only service conditions using the Black-Sc holes option-pricing model during the six months ended March 31, 2022, were as follows:

Six Months Ended

March 31, 2022

The range of assumptions used to determine the fair value of stock options containing only service conditions using the Black-Sc holes option-pricing model during the nine months ended June 30, 2022, were as follows:

Nine Months Ended

June 30, 2022

Dividend yield —

2 unchanged sentences

Expected term 4.5 - 7.4 years

The range of assumptions used to determine the fair value of stock options and RSUs & RSAs containing market conditions using Monte Carlo simulations during the six months ended March 31, 2022, were as follows:

Six Months Ended

March 31, 2022

The range of assumptions used to determine the fair value of stock options and RSUs & RSAs containing market conditions using Monte Carlo simulations during the nine months ended June 30, 2022, were as follows:

Nine Months Ended

June 30, 2022

Dividend yield —

5 unchanged sentences

Notes to the Unaudited Condensed Consolidated Financial Statements - (Continued)

During the six months ended March 31, 2022, the Company did no t issue any SARs, 6,725 SARs were exercised requiring the Company to make cash payments of less than $ 0.1 million, and 3,250 SARs were canceled.

As of March 31, 2022 , 32,070 SARs were outstanding.

During the nine months ended June 30, 2022, the Company did no t issue any SARs, 7,475 SARs were exercised requiring the Company to make cash payments of $ 0.1 million , and 3,250 SARs were canceled.

As of June 30, 2022 , 31,320 SARs were outstanding.

Share Repurchase Program

5 unchanged sentences

On December 6, 2021, the Company's Board of Directors authorized a new 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.

The Company repurchased 1,159,066 shares for $ 20.0 million during the six months ended March 31, 2022.

On May 13, 2022, the Company's Board of Directors authorized a new stock repurchase plan of up to $ 12 million of our outstanding shares of common stock through June 30, 2024.

The Company repurchased 408,211 shares for $ 5.4 million during the three months ended June 30, 2022.

As of June 30, 2022, the Company may repurchase an additional $ 6.6 million of shares under this program.

Other Share Repurchases

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

During the three months ended March 31, 2022, no shares of common stock were surrendered by participants in the exercise of stock options.

During the three months ended March 31, 2021, participants surrendered 73,228 shares of common stock in the exercise of stock options.

During the six months ended March 31, 2022, and March 31, 2021, participants surrendered 4,678 and 82,612 shares of common stock, respectively, in the exercise of stock options.

During the three months ended June 30, 2022, and June 30, 2021 , no shares of common stock were surrendered by participants in the exercise of stock options.

During the nine months ended June 30, 2022, and June 30, 2021, participants surrendered 4,678 and 82,612 shares of common stock, respectively, in the exercise of stock options.

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

6 unchanged sentences

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

The Company held no money market funds considered cash equivalents at March 31, 2022, while it held $ 40.0 million of money market funds considered cash equivalents at September 30, 2021.

The decrease in money market funds held during the period was a result of the Company's movement of excess cash balances to higher yield product offerings in interest bearing and earnings allowance checking accounts.

There were no money market fund assets to measure at fair value at March 31, 2022.

Money market funds held at September 30, 2021, were measured at fair value and classified as Level 1 assets within the fair value hierarchy.

The Company held $ 20.0 million and $ 40.0 million of money market funds considered cash equivalents at June 30, 2022, and September 30, 2021, respectively.

Money market funds held at June 30, 2022, and September 30, 2021, were measured at fair value and classified as Level 1 assets within the fair value hierarchy.

There were no transfers between levels during the periods presented.

During the three and six months ended March 31, 2022, and as a result of the acquisition of Bid4Assets, the Company recorded preliminary fair value of contingent consideration in the amount of $ 28.0 million on its Condensed Consolidated Balance Sheets.

During the nine months ended June 30, 2022, and as a result of the acquisition of Bid4Assets, the Company recorded preliminary fair value of contingent consideration in the amount of $ 28.0 million on its Condensed Consolidated Balance Sheets as of the acquisition date.

The contingent consideration is 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.

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Notes to the Unaudited Condensed Consolidated Financial Statements - (Continued)

The Company fair valued the earn-out consideration using Monte Carlo valuation method.

The Company's estimate of the fair value of the earn-out consideration was informed by the Monte Carlo valuation method and considered potential outcomes based upon the terms and conditions of the merger agreement.

The fair value measurements utilized were classified as Level 3 assets within the fair value hierarchy under the provisions of ASC 820, Fair Value Measurements , and ASC 805, Business Combinations .

The significant unobservable inputs used in the fair value measurem ent 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.

The earn-out consideration was preliminarily valued at approximately $ 28.0 million at the acquisition date.

The earn-out consideration was preliminarily valued at approximately $ 28.0 million as of the acquisition date.

Fair value of the earn-out consideration will be remeasured at the end of each calendar quarter until December 31, 2022.

The changes in earn-out liability measured at fair value for which the Company has used Level 3 inputs to determine fair value during the three and six months ended March 31, 2022, is as follows (in thousands):

Contingent Consideration

The changes in earn-out liability measured at fair value for which the Company has used Level 3 inputs to determine fair value during the three and nine months ended June 30, 2022, is as follows (in thousands):

Earn-out Liability

Balance at September 30, 2021 $ —

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Balance at March 31, 2022 $ 19,500

During the three months ended March 31, 2022 , we recorded a measurement period adjustment of $ 1.1 million for the earn-out consideration fair value with a corresponding increase to goodwill, based on facts and circumstances in existence as of the effective date of the acquisition related to the discount rates associated with the expected earn-out payments.

Payment of achieved earn-out threshold ( 3,500 )

Change in fair value ( 11,500 )

Balance at June 30, 2022 $ 4,500

During the three months ended March 31, 2022, the Company recorded a measurement period adjustment of $ 1.1 million for the preliminary earn-out consideration fair value with a corresponding increase to goodwill, based on facts and circumstances in existence as of the effective date of the acquisition related to the discount rates associated with the expected earn-out payments.

See further discussion in Note 3 - Bid4Assets Acquisition .

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 events occurring subsequent to the November 1, 2021, acquisition date and therefore were not known nor knowable at that time.

These events include 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.

This change in fair value was recorded as a gain within Fair value adjustment of acquisition earn-outs in the Condensed Consolidated Statements of Operations.

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.

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 former Bid4Assets shareholders is expected to be made by the Company during the third quarter of fiscal 2022.

In addition, the fair value of the earn-out liability was reduced by $ 8.5 million to $ 19.5 million, primarily 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, which included 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.

During the three months ended June 30, 2022, the fair value of the earn out liability was reduced by $ 11.5 million, primarily due to further client specific delays in bringing foreclosed real estate to auction.

These changes resulted from events occurring subsequent to the November 1, 2021, acquisition date and therefore, were not known nor knowable at that time.

As a result, these changes in fair value were recorded as a gain within Fair value adjustments of acquisition earn-outs in the Condensed Consolidated Statements of Operations.

As of March 31, 2022, Bid4Assets achieved a trailing twelve-month EBITDA threshold resulting in a $ 3.5 million payment made by the Company during the three months ended June 30, 2022.

As of June 30, 2022, Bid4Assets has not achieved any additional trailing twelve-month EBITDA thresholds.

The remaining $ 4.5 million in earn-out liability as of June 30, 2022, is recorded within Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

When valuing its Level 3 liability, management's estimation of fair value is based on the best information available in the circumstances and may incorporate management's own assumptions around market demand which could involve a level of judgment, taking into consideration a combination of internal and external factors.

Changes in the fair value of the Company's Level 3 liability are recorded in Other operating (income) expenses in the Condensed Consolidated Statements of Operations.

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

The Company believes the carrying values of these instruments approximate fair value.

As of March 31, 2022, the Company had no non-financial instruments measured at fair value on a non-recurring basis other than fair value measurements associated with the preliminary purchase accounting for Bid4Assets.

As of June 30, 2022, the Company had no non-financial instruments measured at fair value on a non-recurring basis other than fair value measurements associated with the preliminary purchase accounting for Bid4Assets.

See Note 3 - Bid4Assets Acquisition for more information.

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

The net periodic (benefit) is recognized within Interest and other income, net in the Condensed Consolidated Statements of Operations, and for the three and six months ended March 31, 2022, and 2021 included the following components:

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

The net periodic (benefit) is recognized within Interest and other income, net in the Condensed Consolidated Statements of Operations, and for the three and nine months ended June 30, 2022 and 2021, included the following components:

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

(in thousands) 2022 2021 2022 2021

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Descriptions of our reportable segments are as follows:

• The GovDeals reportable segment provides self-directed service solutions that enable local and state government entities including city, county and state agencies, located in the United States and Canada to sell surplus, salvage and real estate assets through our GovDeals and Bid4Assets marketplaces (see Note 3).

• The GovDeals reportable segment provides self-directed service solutions that enable local and state government entities including city, county and state agencies located in the United States and Canada, to sell surplus, salvage and real estate assets through the GovDeals and Bid4Assets marketplaces (see Note 3 Bid4Assets Acquisition ).

• The RSCG reportable segment consists of marketplaces that enable corporations located in the United States and Canada to sell surplus and salvage consumer goods.

RSCG also offers a suite of services that includes returns management, asset recovery, and e-commerce services.

This segment includes the Company's Liquidation.com, Secondipity and AllSurplus Deals marketplaces.

This segment uses the Liquidation.com, Secondipity and AllSurplus marketplaces.

Through the end of third quarter fiscal 2021, RSCG operated the Liquidation.com DIRECT marketplace for truckload quantities of retail surplus.

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CAG also offers a suite of services that includes surplus management, asset valuation, asset sales and marketing.

Commercial seller assets are located across North America, South America, Europe, Australia, Asia, and Africa.

This segment includes the Company's GoIndustry DoveBid and AllSurplus marketplaces.

Commercial seller assets are located across the Americas, Europe, Australia, Asia, and Africa.

This segment uses the GoIndustry DoveBid and AllSurplus marketplaces.

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

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

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

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

(in thousands) 2022 2021 2022 2021

Revenue $ — $ — $ — $ —

Fee revenue 14,559 10,972 28,543 21,790

Purchase revenues $ — $ — $ — $ —

Consignment and other fee revenues 16,587 14,658 45,130 36,448

Total revenue 16,587 14,658 45,130 36,448

Gross profit $ 13,853 $ 10,376 $ 27,148 $ 20,579

Revenue $ 33,967 $ 31,912 $ 66,050 $ 60,074

Fee revenue 7,858 7,170 14,459 13,915

Segment gross profit $ 15,765 $ 13,965 $ 42,913 $ 34,544

Purchase revenues $ 33,788 $ 35,923 $ 99,838 $ 95,997

Consignment and other fee revenues 8,586 8,172 23,045 22,086

Total revenue 42,374 44,095 122,883 118,083

Gross profit $ 16,619 $ 15,933 $ 30,876 $ 30,560

Revenue $ 3,417 $ 4,056 $ 7,552 $ 6,966

Fee revenue 5,575 5,436 12,648 10,439

Segment gross profit $ 15,942 $ 17,755 $ 46,818 $ 48,315

Purchase revenues $ 1,719 $ 1,939 $ 9,271 $ 8,905

Consignment and other fee revenues 6,077 6,528 18,725 16,967

Total revenue 7,796 8,467 27,996 25,872

Gross profit $ 6,085 $ 6,988 $ 14,805 $ 13,346

Revenue $ — $ — $ — $ —

Fee revenue 2,899 2,240 5,731 4,354

Segment gross profit $ 6,271 $ 7,099 $ 21,076 $ 20,445

Purchase revenues $ — $ — $ — $ —

Consignment and other fee revenues 3,109 2,446 8,839 6,801

Total revenue 3,109 2,446 8,839 6,801

Gross Profit $ 2,750 $ 2,104 $ 5,424 $ 4,095

Segment gross profit $ 2,956 $ 2,304 $ 8,379 $ 6,399

Corporate & Other, including elimination adjustments:

Revenue $ — $ — $ — $ —

Fee revenue — — — —

Purchase revenues $ — $ — $ — $ —

Consignment and other fee revenues — — — —

Total revenue — — — —

Gross profit $ — $ — $ — $ —

Segment gross profit $ — $ — $ — $ —

Consolidated:

Revenue $ 37,384 $ 35,968 $ 73,602 $ 67,040

Fee revenue 30,891 25,818 61,381 50,498

Purchase revenues $ 35,507 $ 37,862 $ 109,109 $ 104,902

Consignment and other fee revenues 34,359 31,804 95,739 82,302

Total revenue 69,866 69,666 204,848 187,204

Gross profit $ 39,307 $ 35,401 $ 78,253 $ 68,580

The following table reconciles gross profit used in the reportable segments to the Company's consolidated results:

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

Segment gross profit $ 40,934 $ 41,123 $ 119,186 $ 109,703

The following table reconciles segment gross profit used in the reportable segments to the Company's consolidated results:

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

(in thousands) 2022 2021 2022 2021

Reconciliation:

Gross profit $ 39,307 $ 35,401 $ 78,253 $ 68,580

Segment gross profit $ 40,934 $ 41,123 $ 119,186 $ 109,703

Total operating expenses 33,739 32,529 103,026 90,845

Fair value adjustment of acquisition earn-outs ( 11,500 ) — ( 20,000 ) —

Interest and other income, net ( 46 ) ( 29 ) ( 177 ) ( 214 )

Interest and other expenses (income), net 104 ( 254 ) ( 73 ) ( 468 )

Income before provision for income taxes $ 18,591 $ 8,848 $ 36,233 $ 19,326

The percent of our revenues that came from transactions conducted outside of the United States for the three months ended March 31, 2022, and 2021 w as 15.4 % and 18.4 %, respectively, and the percent of our revenue s that came from transactions conducted outside of the United States for the six months ended March 31, 2022, and 2021 was 14.5 % and 17.2 %, respectively.

The percent of our rev enues that came from transactions conducted outside of the United States for the three months ended June 30, 2022, and 2021 was 11.9 % and 14.4 %, respectively, and the percent of our revenues that came from transactions conducted outside of the United States for the nine months ended June 30, 2022, and 2021 was 13.6 % and 16.2 %, respectively.

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

What changed 10-Q

Item 1. Financial Statements