What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 140 added, 123 removed, 306 unchanged (46% of the section changed)

31 unchanged sentences

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.

Additionally, the COVID-19 pandemic in combination with various macroeconomic factors, has impacted the supply chain of new vehicles, and construction and heavy equipment production, which in turn negatively affected the supply of used vehicles and construction and heavy equipment being sold in North America.

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 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.

During fiscal 2021 and during the three and nine months ended June 30, 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.

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.

Effects of Inflation

Rising inflation in both the U.S.

and internationally has weighed on the global economy, increasing prices for energy, shipping, and labor, among other areas of the macroeconomic environment.

These events have caused a rise in borrowing costs as well, partly driven by actions taken by central banks to curb rising inflation.

Currently, the Company is unable to predict the likelihood, magnitude and timing of inflationary risk to our business, if any.

However, the Company does not believe inflation has had a material effect on our operating expenses.

As a marketplace operator, the GMV, revenues and costs of revenues that result from our primarily auction-based sales may be influenced by macroeconomic factors, including but not limited to inflation, whose impacts may vary across each of our individual asset classes.

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

During the twelve months ended June 30, 2022, the approximate number of registered buyers increased from 3,970,000 to 4,844,000, or 22%.

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

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Purchase model.

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.

Under our purchase transaction model, we recognize revenue within the Purchase revenues 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 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.

For the three and nine months ended June 30, 2022, our purchase transaction model accounted for 10.8% and 12.8% of our Gross Merchandise Volume (GMV), respectively, and 50.8% and 53.3% of our total revenues, respectively.

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

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

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The 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.

Revenue under the consignment model is recorded within the Consignment and other fee revenues 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 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.

For the three and nine months ended June 30, 2022, our consignment model accounted for 89.2% and 87.2% of our GMV, respectively, and 40.9% and 39.0% of our total revenues, respectively.

For the three and nine months ended June 30, 2021 , our consignment model accounted for 85.2% and 83.7% of our GMV, respectively, and 37.4% and 36.2% 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 7.6% 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

Non-consignment fee revenue is recorded within the Consignment and other fee revenues line item on the Condensed Consolidated Statements of Operations.

Other revenues accounted for 8.3% and 7.7% of our total revenues for the three and nine months ended June 30, 2022, respectively, a nd 8.2% and 7.8% of our total revenues for the three and nine months ended June 30, 2021, respectively

Industry trends.

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;

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

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

(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;

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

• the increase in government regulations and the need for corporations to have sustainability solutions with verifiable recycling and remarketing of surplus assets;

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

• 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 could impact our long term growth;

• 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;

and (6) the increase in demand from sellers and buyers to transact in a low touch, online solution as compared to live, in-person auctions or public sale events.

• the increase in demand from sellers and buyers to transact in a low touch, online solution as compared to live, in-person auctions or public sale events.

Our Vendor Agreements

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under which the Company acquires and sells commercial merchandise.

While purchase model transactions account for less than 20% of our total GMV, the cost of inventory for purchase model transactions is the most significant component of our consolidated Costs of goods sold.

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

As of June 30, 2022, and 2021, we had approximately 4,844,000 and 3,970,000 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.

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In addition, we measure total auction participants on a periodic basis to evaluate the activity level of our base of registered buyers and to measure the performance of our marketing and promotional efforts.

During the three months ended March 31, 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.

During the three months ended June 30, 2022, and 2021, approximately 884,000 and 617,000, respectively, total auction participants participated in auctions on our marketplaces.

During the nine months ended June 30, 2022, and 2021, approximately 2,355,000 and 1,695,000, respectively, total auction participants participated in auctions on our marketplaces.

Completed transactions.

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Similar to GMV, we believe that completed transactions is a key business metric because it provides an additional measurement of the volume of activity flowing through our marketplaces.

During the three months ended March 31, 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.

During the three months ended June 30, 2022, and 2021, we completed approximately 253,000 and 185,000 transactions, respectively.

During the nine months ended June 30, 2022, and 2021, we completed approximately 709,000 and 511,000 transactions, respectively.

Non-GAAP Financial Measures

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

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

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

The table below reconciles Net income to Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA for the periods presented.

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

2022 2021 2022 2021

1 unchanged sentence

Net income $ 16,408 $ 8,419 $ 31,979 $ 18,193

Interest and other income, net 1

Interest and other expenses (income), net 1

196 (157) 214 (191)

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$ 11,855 $ 13,335 $ 30,444 $ 31,517

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, and business realignment expenses are components of Other operating expenses (income) on the Statements of Operations.

1 Represents Interest and other expenses (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, and business realignment expenses are components of Other operating expenses, net 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.

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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 .

Earn-out 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 $28.0 million as of the acquisition date and $19.5 million as of March 31, 2022.

The earn-out consideration was preliminarily fair valued at approximately $28.0 million as of the acquisition date, with fair value subsequently measured to be $4.5 million as of June 30, 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.

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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.

As discussed in Note 11 – Fair Value Measurement , the fair value of the Bid4Assets earn-out liability declined by $20.0 million during the nine 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 will continue to monitor for changes that could impact the recoverability of its goodwill.

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Technology and operations.

Technology expenses consist primarily of the cost of technical staff who develop, deploy, and maintain our marketplaces and corporate infrastructure.

These personnel also develop and upgrade the software systems that support our operations, such as sales processing.

Technology expenses also includes certain costs associated with our e-commerce platform.

Technology expenses primarily consist of the cost of technical staff (including stock compensation), third party services, licenses, and infrastructure, all as required to develop, configure , deploy, maintain, and secure our marketplace platforms, business operational systems, and facilities.

Technology expenses are net of the required capitalization of costs associated with enhancing our marketplace platforms and other software development activities.

Depreciation and amortization of capitalized software development costs, purchased software, acquired developed software intangible assets, and computer hardware are included within Depreciation and amortization in the accompanying Consolidated Statements of Operations.

Technology expenses are presented separately from Costs of goods sold (excluding depreciation and amortization) in the Consolidated Statements of Operations, as these expenses provide for the general availability of our marketplace platforms and other business operational systems and are not attributable to specific revenue generating transaction activity occurring on our marketplaces.

Because our marketplaces and support systems require frequent upgrades and enhancements to maintain viability, we have determined that the useful life for certain internally developed software is less than one year.

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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 (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.

Other operating expenses (income).

Other operating expenses (income) 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.

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For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income (loss).

Our effective income tax rate 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.

Our effective income tax rate after discrete items was 11.7% for the nine months ended June 30, 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, 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..

Results of Operations

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

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

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

(dollars in thousands) 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 %

Fee revenue 30,891 25,818 5,073 19.6 61,381 50,498 10,883 21.6

Total revenue 68,275 61,786 6,489 10.5 134,983 117,538 17,445 14.8

Purchase revenues $ 35,507 $ 37,862 $ (2,355) (6.2) % $ 109,109 $ 104,902 $ 4,207 4.0 %

Consignment and other fee revenues 34,359 31,804 2,555 8.0 95,739 82,302 13,437 16.3

Total revenues 69,866 69,666 200 0.3 204,848 187,204 17,644 9.4

Costs and expenses from operations:

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

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

Other operating expenses, net 27 1,180 (1,153) (97.7) 18 1,390 (1,372) (98.7)

Total costs and expenses 51,171 61,072 (9,901) (16.2) 168,688 168,346 342 0.2

Income from operations 18,695 8,594 10,101 117.5 36,160 18,858 17,302 91.7

Interest and other income, net (46) (29) (17) (58.6) (177) (214) 37 17.3

Interest and other expenses (income), net 104 (254) 358 140.9 (73) (468) 395 84.4

Income before provision for income taxes 18,591 8,848 9,743 110.1 36,233 19,326 16,907 87.5

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NM = not meaningful

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 March 31, Six Months Ended March 31,

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

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

(dollars in thousands) 2022 2021 2022 2021

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

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

Gross profit margin 95.2 % 94.6 % 95.1 % 94.4 %

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

Segment gross profit as a percentage of total revenue 95.0 % 95.3 % 95.1 % 94.8 %

GMV $ 60,476 $ 61,231 $ 172,930 $ 171,557

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

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

Gross profit margin 39.7 % 40.8 % 38.4 % 41.3 %

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

Segment gross profit as a percentage of total revenue 37.6 % 40.3 % 38.1 % 40.9 %

GMV $ 42,292 $ 37,379 $ 129,674 $ 106,222

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

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

Gross profit margin 67.7 % 73.6 % 73.3 % 76.7 %

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

Segment gross profit as a percentage of total revenue 80.4 % 83.8 % 75.3 % 79.0 %

GMV $ — $ — $ — $ —

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

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

Gross profit margin 94.9 % 93.9 % 94.6 % 94.1 %

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

Segment gross profit as a percentage of total revenue 95.1 % 94.2 % 94.8 % 94.1 %

Consolidated:

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

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

Gross profit margin 57.6 % 57.3 % 58.0 % 58.3 %

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

Three Months Ended June 30, 2022, Compared to the Three Months Ended June 30, 2021

Segment Results

Revenue from our GovDeals reportable segment increased 32.7%, or $3.6 million, due to a 62.5%, or $69.3 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate.

Total revenues from our GovDeals reportable segment increased 13.2%, or $1.9 million, due to a 52.2%, or $76.2 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.

However, this has been partially offset by lower volumes of used vehicles made available for sale, as new vehicle production disruptions impact government agency vehicle fleet retirement timelines.

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 7.5% from 10.0% last year.

As a result of the increase in revenues, gross profit increased 33.5%, or $3.5 million.

Gross profit margin remained relatively consistent between the periods.

Revenue from our RSCG reportable segment increased 7.0%, or $2.7 million, due to a 0.8%, or $0.5 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 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.

As a result of the increase in revenues, segment gross profit increased 12.9%, or $1.8 million.

Segment gross profit as a percentage of total revenue remained relatively consistent between the periods.

Revenue from our RSCG reportable segment decreased 3.9%, or $1.7 million, due to a 1.2%, or $0.8 million, decrease in GMV as expanded diversification in client programs, sales channels, and its distribution network were offset by changes in retail consumer behavior, as some client returns management programs provided fewer higher value products than in the prior year.

Segment gross profit decreased by 10.2% , or $1.8 million, due to that unfavorable change in the mix of inventory handled by the RSCG segment during the current quarter, causing segment gross profit as a percentage of total revenue to decrease by 2.7%.

Revenue from the CAG reportable segment decreased by 7.9%, or $0.7 million , primarily due to the impacts of the COVID-19 lockdowns in China, as GMV increases 13.1%, or $4.9 million were offset by an increase in sales conducted with partner organizations .

A s a result of the decrease in revenues, segment gross profit decreased 11.7%, or $0.8 million.

Segment gross profit as a percentage of total revenues decreased 3.4% 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.

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As a result of the increase in revenues, gross profit increased 28.3%, or $0.7 million.

Segment gross profit as a percentage of total revenue increased 0.9% due to the growth in subscribers and pricing.

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.

Total revenues - Total consolidated revenue increased $0.2 million, or 0.3%.

Refer to the discussion of Segment Results above for discussion 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.

Cost of goods sold increased $0.4 million, or 1.4%, largely consistent with the change in total revenues.

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.

Technology and operations expenses increased $1.5 million, or 12.0%, as we are investing in technology and operations to continue our growth and diversification efforts, including RSCG's expansion of its distribution network and launching AllSurplus Deals as a new marketplace offering consumers deals for curbside pickup.

Sales and marketing expenses.

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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.

General and administrative expenses decreased $1.3 million, or 16.8%, primarily due to changes in expected attainment of certain variable compensation targets, and partially offset by increased corporate support costs to support the anticipated growth resulting from the investments in our technology, operations, sales and marketing functions.

Depreciation and amortization .

1 unchanged sentence

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.

Fair value adjustment of acquisition earn-outs reflects an $11.5 million non-cash gain due to a reduction in the fair value of the Bid4Assets earn-out liability during the three months ended June 30, 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.

Other operating expenses, net .

Other operating expenses, net decreased $1.2 million due to the $1.1 million loss during the three months ended June 30, 2021, 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 expenses (income), net.

Interest and other expenses (income), net increased $0.4 million primarily due to the effect of changes in foreign exchange rates.

Provision for income taxes .

Provision for income taxes increased $1.8 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.

Nine Months Ended June 30, 2022, Compared to the Nine Months Ended June 30, 2021

Total revenues from our GovDeals reportable segment increased 23.8%, or $8.7 million, due to a 53.4%, or $194.8 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate.

However, this has been partially offset by lower volumes of used vehicles made available for sale, as new vehicle production disruptions impact government agency vehicle fleet retirement timelines.

For that reason, revenue as a percentage of GMV decreased to 8.1% 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 decreased 3.4% due to inherent variations in the mix of assets sourced and sold by the CAG segment in any given period.

As a result of the increase in revenues, segment gross profit increased 24.2%, or $8.4 million.

Segment gross profit as a percentage of total revenue remained relatively consistent between the periods.

Revenue from our RSCG reportable segment increased 4.1%, or $4.8 million, due to a 0.8%, or $1.4 million, increase in GMV as it continues to expanded diversification in client programs, sales channels, and its distribution network, as well as an increase in the mix of transactions conducted under the purchase model.

Segment gross profit as a percentage of total revenue decreased by 3.1%, or $1.5 million, and was impacted by changes in retail consumer behavior, as some client returns management programs provided fewer higher value products than in the prior year.

As a result, segment gross profit as a percentage of total revenue decreased by 2.8%.

Revenue from the CAG reportable segment increased by 8.2%, or $2.1 million, due to a 22.1%, or $23.5 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 conducted with partner organizations.

A s a result of the increase in revenues, segment gross profit increased 3.1%, or $0.6 million.

Segment gross profit as a percentage of total revenue decreased 3.7% 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 30.0%, or $2.0 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.

As a result of the increase in revenues, segment gross profit increased 30.9%, or $2.0 million.

Segment gross profit as a percentage of total revenue increased 0.7% due to the growth in subscribers and pricing.

Consolidated Results

Revenue - Total consolidated revenue increased $17.4 million, or 14.8%.

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

Total revenues - Total consolidated revenue increased $17.6 million, or 9.4%.

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

Cost of goods sold (excludes depreciation and amortization).

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Technology and operations expenses.

Technology and operations expenses increased $5.1 million, or 22.7%, 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.

Technology and operations expenses increased $6.6 million, or 18.9%, as we are investing in technology and operations to continue our growth, including RSCG's expansion of its distribution network, and launching AllSurplus Deals as a new marketplace offering consumers deals for curbside pickup.

Sales and marketing expenses.

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General and administrative expenses.

General and administrative expenses increased $1.4 million, or 9.9%, primarily due to increased corporate support costs to support the anticipated growth resulting from the investments in our technology, operations, sales and marketing functions.

General and administrative expenses increased $0.1 million, or 0.4%, primarily due to increased corporate support costs to support the anticipated growth resulting from the investments in our technology, operations, sales and marketing functions, partially offset by changes in expected attainment of certain variable compensation targets.

Depreciation and amortization .

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Fair value adjustment of acquisition earn-outs .

Fair value adjustment of acquisition earn-outs reflects a $20.0 million non-cash gain due to a reduction in the fair value of the Bid4Assets earn-out liability during the nine months ended June 30, 2022.

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 six months ended March 31, 2022 and 2021.

Other operating expenses, net .

Other operating expenses, net decreased $1.4 million primarily related to the $1.1 million loss during the nine months ended June 30, 2021, 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 expenses (income), net.

Interest and other expenses (income), net decreased $0.4 million primarily related to no further interest income associated with the JTC promissory note following the full satisfaction and discharge of JTC's indebtedness to the Company during the nine months ended June 30, 2021.

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

Provision for income taxes .

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

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

As of June 30, 2022, we had $88.3 million in cash and cash equivalents, which we believe is sufficient to meet the Company’s anticipated cash needs one year from issuance of these financial statements.

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

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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.

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 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.

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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 $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.

The Company is prepared to reimplement these measures should it face conditions consistent with the initial phases of the COVID-19 pandemic.

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.

We do not have any transactions, agreements or other contractual arrangements that could be considered material off-balance sheet arrangements.

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

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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.

During the three months ended March 31, 2021, 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, 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, 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 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.

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 $7.8 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.

The amount of such undistributed foreign earnings was $8.1 million as of June 30, 2022.

As of June 30, 2022 and September 30, 2021, $21.1 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.

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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 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.

On December 6, 2021, the Company's Board of Directors authorized a new stock repurchase plan of up to $20.0 million of the Company's ou tstanding shares of common stock through December 31, 2023.

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.

Changes in Cash Flows:

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.

Nine Months Ended June 30, 2022 Compared to the Nine Months Ended June 30, 2021

Net cash provided by operating activities was $31.1 million and $54.3 million for the nine months ended June 30, 2022, and 2021, respectively.

The $23.1 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 $16.2 million due to reduced rates of change in the underlying transaction volumes during the current period.

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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.

Net cash (used in) provided by investing activities was $(17.4) million and $0.9 million for the nine months ended June 30, 2022, and June 30, 2021, respectively.

The $18.3 million increase in cash used in investing activities was driven by an increase of $2.8 million in new property and equipment purchases from expansion of our distribution network, and $11.2 million in 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 $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.

Net cash used in financing activities was $31.0 million and $19.4 million for the nine months ended June 30, 2022, and June 30, 2021, respectively.

The $11.6 million increase in cash used in financing activities was primarily driven by a $9.3 million increase in share repurchases and an earn-out payment of $3.5 million made in connection with the Bid4Assets acquisition, offset by $1.6 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 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 capital expenditures for the nine months ended June 30, 2022, and June 30, 2021, were $6.3 million and $3.5 million, respectively.

This increase was primarily driven by enhancements to our platforms and marketplaces, as well as the expansion of our RSCG distribution network.

As of June 30, 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.

Off-Balance Sheet Arrangements

We do not have any transactions, agreements or other contractual arrangements that could be considered material off-balance sheet arrangements.

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