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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-51813

LIQUIDITY SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware	52-2209244
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

6931 Arlington Road, Suite 460, Bethesda, MD	20814
(Address of Principal Executive Offices)	(Zip Code)

(202) 467-6868

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Securities registered to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	LQDT	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐			Accelerated filer ☒

Non-accelerated filer ☐			Smaller reporting company ☐

			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the issuer’s common stock, par value $0.001 per share, as of August 4, 2025, was 31,236,939.


INDEX

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations	4

	Condensed Consolidated Statements of Comprehensive Income	5

	Condensed Consolidated Statement of Stockholders' Equity	6

	Condensed Consolidated Statements of Cash Flows	7

	Notes to the Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 5.	Other Information	34

Item 6.	Exhibits	35

SIGNATURES		36

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Liquidity Services, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Dollars in Thousands, Except Par Value)


	June 30, 2025			September 30, 2024
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	155,605		$	153,226
Short-term investments		11,353			2,310
Accounts receivable, net of allowance for doubtful accounts of $720 and $1,680		20,158			11,467
Inventory, net		16,853			17,099
Prepaid taxes and tax refund receivable		3,401			1,519
Prepaid expenses and other current assets		12,637			13,614
Total current assets		220,007			199,235
Property and equipment, net		18,187			17,961
Operating lease assets		11,864			12,005
Intangible assets, net		14,096			13,912
Goodwill		103,007			97,792
Deferred tax assets		577			1,728
Other assets		4,697			4,255
Total assets	$	372,435		$	346,888
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	58,797		$	58,693
Accrued expenses and other current liabilities		25,363			28,261
Current portion of operating lease liabilities		5,237			5,185
Deferred revenue		5,233			4,788
Payables to sellers		59,265			58,226
Total current liabilities		153,895			155,153
Operating lease liabilities		8,921			9,060
Other long-term liabilities		969			115
Total liabilities		163,785			164,328
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value; 120,000,000 shares authorized; 37,248,277 shares issued and outstanding at June 30, 2025; 36,707,840 shares issued and outstanding at September 30, 2024		37			37
Additional paid-in capital		281,370			275,771
Treasury stock, at cost; 6,016,893 shares at June 30, 2025, and 6,015,496 shares at September 30, 2024		(93,901	)		(93,854	)
Accumulated other comprehensive loss		(9,160	)		(9,427	)
Retained earnings		30,304			10,033
Total stockholders’ equity		208,650			182,560
Total liabilities and stockholders’ equity	$	372,435		$	346,888

See accompanying notes to the unaudited condensed consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Dollars in Thousands, Except Per Share Data)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2025			2024			2025			2024
Purchase revenues	$	76,517		$	53,396		$	237,159		$	142,726
Consignment and other fee revenues		43,358			40,217		$	121,422			113,665
Total revenue		119,875			93,613			358,581			256,391
Costs and expenses from operations:
Cost of goods sold (excludes depreciation and amortization)		65,110			44,212			206,220			119,960
Technology and operations		17,275			15,372			51,565			45,136
Sales and marketing		15,694			13,759			44,278			40,934
General and administrative		8,221			8,603			23,596			23,846
Depreciation and amortization		2,657			3,199			7,741			9,297
Other operating expenses		700			573			1,073			1,080
Total costs and expenses		109,657			85,718			334,473			240,253
Income from operations		10,218			7,895			24,108			16,138
Interest and other income, net		(1,077	)		(807	)		(3,083	)		(2,549	)
Income before provision for income taxes		11,295			8,702			27,191			18,687
Provision for income taxes		3,885			2,702			6,920			5,071
Net income	$	7,410		$	6,000		$	20,271		$	13,616
Basic income per common share	$	0.24		$	0.20		$	0.66		$	0.45
Diluted income per common share	$	0.23		$	0.19		$	0.63		$	0.43
Basic weighted average shares outstanding		31,157,183			30,388,675			30,935,882			30,497,820
Diluted weighted average shares outstanding		32,497,238			31,464,461			32,404,183			31,617,578

See accompanying notes to the unaudited condensed consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Dollars in Thousands)


	Three Months Ended June 30,					Nine Months Ended June 30,
	2025		2024			2025		2024
Net income	$	7,410	$	6,000		$	20,271	$	13,616
Other comprehensive income (loss):
Foreign currency translation	$	1,669		(110	)	$	267		391
Other comprehensive income (loss), net of taxes		1,669		(110	)		267		391
Comprehensive income	$	9,079	$	5,890		$	20,538	$	14,007

See accompanying notes to the unaudited condensed consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders’ Equity

(Dollars In Thousands)


						Additional									Accumulated Other
	Common Stock					Paid-in			Treasury Stock						Comprehensive			Retained
	Shares			Amount		Capital			Shares			Amount			Loss			Earnings		Total
Balance at September 30, 2024		36,707,840		$	37	$	275,771			(6,015,496	)	$	(93,854	)	$	(9,427	)	$	10,033	$	182,560
Net Income		—			—		—			—			—			—			5,810		5,810
Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units		138,838			—		114			—			—			—			—		114
Taxes paid associated with net settlement of stock compensation awards		(30,575	)		—		(883	)		—			—			—			—		(883	)
Forfeitures of restricted stock awards		(22,500	)		—		—			—			—			—			—		—
Shares swapped to exercise stock options		—			—		19			(582	)		(19	)		—			—		—
Stock compensation expense		—			—		3,431			—			—			—			—		3,431
Foreign currency translation		—			—		—			—			—			(1,871	)		—		(1,871	)
Balance at December 31, 2024		36,793,603		$	37	$	278,452			(6,016,078	)	$	(93,873	)	$	(11,298	)	$	15,843	$	189,161
Net income		—			—		—			—			—			—			7,051		7,051
Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units		522,121			—		78			—			—			—			—		78
Taxes paid associated with net settlement of stock compensation awards		(119,819	)		—		(3,957	)		—			—			—			—		(3,957	)
Acquisition consideration paid in common stock (Note 3)		27,260			—		945			—			—			—			—		945
Shares swapped to exercise stock options		—			—		28			(815	)		(28	)		—			—		—
Stock compensation expense		—			—		2,578			—			—			—			—		2,578
Foreign currency translation		—			—		—			—			—			469			—		469
Balance at March 31, 2025		37,223,165		$	37	$	278,124			(6,016,893	)	$	(93,901	)	$	(10,829	)	$	22,894	$	196,325
Net income		—			—		—			—			—			—			7,410		7,410
Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units		34,554			—		—			—			—			—			—		—
Taxes paid associated with net settlement of stock compensation awards		(9,442	)		—		(266	)		—			—			—			—		(266	)
Stock compensation expense		—			—		3,512			—			—			—			—		3,512
Foreign currency translation		—			—		—			—			—			1,669			—		1,669
Balance at June 30, 2025		37,248,277		$	37	$	281,370			(6,016,893	)	$	(93,901	)	$	(9,160	)	$	30,304	$	208,650

See accompanying notes to the unaudited condensed consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars In Thousands)


	Nine Months Ended June 30,
	2025			2024
Operating activities
Net income	$	20,271		$	13,616
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,741			9,297
Stock compensation expense		9,522			7,208
Inventory adjustment to net realizable value		32			163
Provision for doubtful accounts		199			733
Deferred tax expense		1,872			4,318
Impairment of long-lived and other non-current assets		459			—
Gain on disposal of property and equipment		(19	)		(30	)
Changes in operating assets and liabilities:
Accounts receivable		(8,599	)		(1,599	)
Inventory		2,124			(2,286	)
Prepaid taxes and tax refund receivable		(1,881	)		134
Prepaid expenses and other assets		885			(5,521	)
Operating lease assets and liabilities		(283	)		1,353
Accounts payable		(1,787	)		1,549
Accrued expenses and other current liabilities		(2,733	)		3,795
Deferred revenue		(62	)		204
Payables to sellers		1,027			15,281
Net cash provided by operating activities		28,768			48,215
Investing activities
Cash paid for business acquisitions, net of cash acquired		(6,500	)		(13,265	)
Purchases of property and equipment, including capitalized software		(5,784	)		(6,065	)
Purchase of short-term investments		(16,217	)		(2,264	)
Maturities of short-term investments		7,417			3,888
Other investing activities, net		203			60
Net cash used in investing activities		(20,881	)		(17,646	)
Financing activities
Common stock repurchases		(79	)		(9,426	)
Taxes paid associated with net settlement of stock compensation awards		(5,106	)		(1,455	)
Payments of the principal portion of finance lease liabilities		(75	)		(72	)
Proceeds from exercise of stock options, net of tax		192			128
Net cash used in financing activities		(5,068	)		(10,825	)
Effect of exchange rate differences on cash and cash equivalents		(440	)		287
Net decrease in cash and cash equivalents		2,379			20,031
Cash and cash equivalents at beginning of period		153,226			110,281
Cash and cash equivalents at end of period	$	155,605		$	130,312
Supplemental disclosure of cash flow information
Cash paid for income taxes, net	$	6,960		$	810
Non-cash: Common stock surrendered in the exercise of stock options		47			—
Non-cash: Acquisition consideration paid in common stock		945			—

See accompanying notes to the unaudited condensed consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Organization

Liquidity Services, Inc. (Liquidity Services, the Company) is a leading global commerce company providing trusted online marketplace platforms that power the circular economy. We create a better future for organizations, individuals, and the planet by using technology to capture and unleash the intrinsic value of surplus. We connect millions of buyers and thousands of sellers through our leading e-commerce auction marketplaces, search engines, asset management and auction software, and related services. Our comprehensive solutions enable the transparent, efficient, sustainable recovery of value from excess items owned by business and government sellers.

Our business delivers value to shareholders by unleashing the intrinsic value of surplus through our online marketplace platforms. These platforms ignite and enable a self-reinforcing cycle of value creation where buyers and sellers attract one another in greater numbers. The result of this cycle is a continuous flow of goods that becomes increasingly valuable as more participants join the platforms, thereby creating positive network effects that benefit sellers, buyers, and shareholders.

Liquidity Services was incorporated in Delaware in November 1999 as Liquidation.com, Inc. and commenced operations in early 2000.

Reportable Segments

The Company has five operating segments and three reportable segments under which we conduct business: GovDeals, Retail Supply Chain Group (RSCG), and Capital Assets Group (CAG). Our separate Machinio and Software Solutions operating segments, which do not individually meet the quantitative thresholds to be reportable segments, are combined and presented together as Machinio & Software Solutions for segment reporting purposes. Further information and operating results of our reportable segments can be found in Note 14 - Segment Information.

•

GovDeals. The GovDeals reportable segment provides solutions that enable government entities including city, county, state and federal agencies located in the United States and Canada and related commercial businesses to sell surplus property and real estate assets through its GovDeals, Bid4Assets and Sierra marketplaces; see Note 3 - Acquisitions.

•

RSCG. The RSCG reportable segment consists of marketplaces that enable corporations located in the United States and Canada to sell excess, returned, and overstocked consumer goods. RSCG also offers a suite of services that includes returns management, asset recovery, and e-commerce solutions. This segment uses multiple selling channels across our network of marketplaces and others to optimize the best combination of velocity, volume, and value. This segment primarily conducts its business-to-business sales on its Liquidation.com marketplace and through Direct Sales, and direct-to-consumer sales on its AllSurplus Deals and Secondipity marketplaces and other third-party sales channels.

•

CAG. The CAG reportable segment enables commercial businesses to sell surplus assets on our AllSurplus marketplace. The core verticals in which CAG operates include industrial manufacturing, oil and gas, heavy equipment, biopharma, and electronics. CAG also offers a suite of services that includes surplus management, asset valuation, asset sales and marketing. CAG benefits from a global base of buyers and sellers enabling the sale and redeployment of assets wherever they’re most likely to generate the best value and highest use across the world. This segment primarily uses the AllSurplus and GovDeals marketplaces.

•

Machinio & Software Solutions. The Machinio operating segment operates the Machinio marketplace, a global search engine platform for listing equipment for sale in the construction, machine tool, processing, transportation, printing, agriculture, and laboratory/medical sectors, and the Machinio System platform that provides equipment sellers with a suite of software tools including website hosting, email marketing, and inventory management, to support and enable equipment sellers’ online business. The Software Solutions operating segment separately serves as the Company's private-label and software-as-a-service (SaaS) arm, offering scalable auction platform services to entrepreneurs and businesses.

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 inflationary pressures and impacts from interest rate changes; tariffs and other trade barriers; ongoing international armed and geopolitical conflicts; susceptibility to rapid technological change; actual and potential competition by entities with greater financial and other resources; collectability of payment from our buyers; and the potential for the commercial sellers from which the Company derives a significant portion of its inventory to change the way they conduct their disposition of surplus assets or to otherwise terminate or not renew their contracts with the Company.

Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In management's opinion, all adjustments, consisting of normal, recurring adjustments considered necessary for a fair presentation, have been included, and intercompany transactions and accounts have been eliminated in consolidation.

Liquidity Services, Inc. and Subsidiaries

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

The information disclosed in the notes to the condensed consolidated financial statements for these periods is unaudited. Operating results for the three and nine months ended June 30, 2025, are not necessarily indicative of the results that may be expected for the year ending September 30, 2025, 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 nine months ended June 30, 2025, these estimates required the Company to make assumptions about disruptions to macroeconomic conditions such as the impact of ongoing international armed and geopolitical conflicts, tariffs, global trade, market volatility and uncertainty and, in turn, the Company's results of operations. The Company will continue to update its assumptions as conditions change. Actual results could differ significantly from those estimates.

Contract Assets and Liabilities

Contract assets reflect an estimate of expenses that will be reimbursed upon settlement with a seller. The contract asset balance was $1.5 million as of June 30, 2025, and $1.5 million as of September 30, 2024, and is included in the line-item Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

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 our Machinio and Software Solutions subscription services. The contract liability balance was $5.2 million as of June 30, 2025, and $4.8 million as of September 30, 2024, and is included in the line-item Deferred revenue on the Condensed Consolidated Balance Sheets. Of the September 30, 2024 contract liability balance, $4.5 million was earned as other fee revenue during the nine months ended June 30, 2025.

For the Company's Machinio and Software Solutions subscription services, the performance obligation has been identified as the stand ready obligation to provide access to our subscription services, which are satisfied over time and recognized as other fee revenues in the line-item Consignment and other fee revenues on the Condensed Consolidated Statements of Operations. As of June 30, 2025, the Company had a remaining performance obligation of $5.2 million; the Company expects to recognize the substantial majority of that amount as other fee revenues over the next 12 months.

Contract Costs

Contract costs relate to sales commissions paid on subscription contracts that are capitalized within our Machinio and Software Solutions businesses. Contract costs are amortized on a straight-line basis over the expected life of the customer contract. The contract cost balance was $2.3 million as of June 30, 2025, and $2.3 million as of September 30, 2024, and is included in the line-item Prepaid expenses and other current assets, and Other assets on the Condensed Consolidated Balance Sheets. Amortization expense was $0.4 million and $0.4 million during the three months ended June 30, 2025 and 2024, respectively and $1.2 million and $1.1 million during the nine months ended June 30, 2025, and 2024, respectively.

Risk Associated with Certain Concentrations

For the majority of buyers that receive goods before payment to the Company is made, credit evaluations are performed; however, for the remaining buyers, goods are not shipped before payment is made, and as a result the Company is not subject to significant collection risk from those buyers. However, for a limited number of financially qualified buyers, which can include re-sellers, we may from time-to-time extend credit for certain large purchases with negotiated payment periods. Credit terms commonly require payment to be made within 30 days, but where commercial terms or market conditions warrant these payment terms may be extended for up to six months. As a result, our consolidated accounts receivable balances are typically a small component of our overall financial position but may, at times, be concentrated among a limited, small number of such buyers. Collection risk from and credit exposure to these financially qualified buyers is regularly reviewed by management and adjusted as needed.

For consignment sales transactions, funds are typically collected from buyers and are held by the Company on the sellers' behalf. The funds are included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets. 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 non-interest bearing, interest-bearing, and earnings allowance checking accounts, as well as cash equivalent money market funds, all of which exceed the applicable U.S. federal (FDIC and/or SIPC) and local jurisdiction (foreign banking institutions) insurance limits, and Accounts receivable.

The Company deposits its cash in interest bearing checking accounts, acquires cash equivalent money market funds, and holds short-term investments designated as held-to-maturity investment securities, each with financial institutions that the Company considers to be of high credit quality. Management continually monitors the financial institutions with whom we conduct business and responds appropriately, when necessary, to manage potential risk exposure to our cash balances above the insurance limits.

Liquidity Services, Inc. and Subsidiaries

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

The Company has multiple vendor contracts with Amazon.com, Inc. under which it acquires and sell commercial merchandise. While purchase model transactions account for less than 25% of our total Gross Merchandise Volume (GMV), the cost of inventory for purchase model transactions is the most significant component of our consolidated Costs of goods sold. $12.4 million and $12.2 million of inventory purchased under such contracts with Amazon.com, Inc. is included in the line-item Inventory on the Condensed Consolidated Balance Sheets as of June 30, 2025, and September 30, 2024, respectively. The Company's vendor contracts with respect to sourcing or consigning merchandise for its RSCG segment generally reflect the concentration dynamics inherent to the retail industry.

Recent Accounting Pronouncements

Accounting Standards Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. It will require organizations to provide enhanced disclosures primarily regarding significant segment expenses. The guidance will be effective for the Company beginning with its Annual Report on Form 10-K for the fiscal year ending September 30, 2025. The guidance is required to be applied on a retrospective basis, with all such required disclosures to be made with regard to all fiscal years presented in the financial statements. The Company does not expect a material change to the notes to our condensed consolidated financial statements upon adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU will require organizations to disclose specific categories in their tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The guidance will be effective for the Company beginning with its Annual Report on Form 10-K for the fiscal year ending September 30, 2026. The guidance is required to be applied on a prospective basis; however, retrospective application is permitted. The Company is currently evaluating the effect that the adoption of this ASU may have on its condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses. This ASU will require organizations to disaggregate certain expense captions an entity presents on the face of the income statement into specific categories in disclosures within the footnotes to the financial statements. This guidance will be effective for the Company beginning with its Annual Report on Form 10-K for the fiscal year ending September 30, 2028. The guidance is required to be applied on a prospective basis; however, retrospective application is permitted. The Company is currently evaluating the effect that the adoption of this ASU may have on its condensed consolidated financial statements.

Acquisitions

Auction Software

On January 31, 2025, the Company acquired Auction Software, a private-label marketplace and SaaS solutions provider offering scalable auction platform services to entrepreneurs and businesses, for $6.5 million in cash paid and $0.9 million in stock issuance at closing, for a total preliminary purchase price of $7.4 million. As of June 30, 2025, the Company's purchase price allocation related to this acquisition is preliminary and subject to revision as additional information is obtained about the facts and circumstances that existed as of the acquisition date. During the three months ended June 30, 2025, the Company recorded a measurement period adjustment of $0.3 million for the acquired intangible assets’ fair value with a corresponding increase to goodwill. In connection with its acquisition of Auction Software, the Company preliminarily allocated the fair value to acquired intangible assets totaling $2.6 million, and goodwill of $5.1 million. The total goodwill arising from the acquisition is included in the Software Solutions operating segment and is deductible for tax purposes.

Auction Software's financial results are reported within the Software Solutions operating segment. Revenue, net income (loss), and pro forma information related to the Auction Software acquisition was immaterial to the condensed consolidated financial statements and its related notes for the three and nine months ended June 30, 2025.

Sierra Auction Management, Inc.

On January 1, 2024, the Company acquired all the issued and outstanding equity securities associated with Sierra Auction Management, Inc. (Sierra), a full-service auction company specializing in the sale of vehicles, equipment and surplus assets for government agencies, commercial businesses, and charities. Total purchase consideration was approximately $13.7 million, paid in cash.

In connection with its acquisition of Sierra, the Company recorded the fair value of acquired supplier relationships and trade name assets for $5.1 million and $0.3 million, respectively, and goodwill of $7.9 million. The supplier relationships and trade name shall be amortized on a straight-line basis over a useful life of six and three years, respectively. The total goodwill arising from the acquisition is included in the GovDeals reportable segment and is deductible for tax purposes.

Sierra's financial results are reported within the GovDeals reportable segment. Revenue, net income (loss), and pro forma information related to the Sierra acquisition was immaterial to the condensed consolidated financial statements and its related notes for the three and nine months ended June 30, 2025 and 2024.

Liquidity Services, Inc. and Subsidiaries

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

Earnings per Share

The Company calculates basic EPS by dividing net income by the weighted-average number of common shares outstanding during the reporting period, excluding unvested restricted stock awards.

The Company calculates diluted EPS by dividing net income by the weighted-average number of common shares and potentially dilutive common shares outstanding during the reporting period using the treasury stock method.

The Company's potentially dilutive common shares include stock options, restricted stock units, and restricted stock awards. For such awards that have performance- or market-conditions, they are considered dilutive only when those performance- or market-conditions have been satisfied as of the reporting date; however, in periods of a net loss, the Company's diluted EPS will equal its basic EPS, as all its potential common shares are anti-dilutive in that case. In periods of net income, the calculation of diluted net income per share will exclude all anti-dilutive common shares.

The computation of basic and diluted net income per share is as follows:


	Three months ended June 30,				Nine Months Ended June 30,
	2025		2024		2025		2024
Numerator:
Net income	$	7,410	$	6,000	$	20,271	$	13,616
Denominator:
Basic weighted average shares outstanding		31,157,183		30,388,675		30,935,882		30,497,820
Dilutive impact of stock options, RSUs and RSAs		1,340,055		1,075,786		1,468,301		1,119,758
Diluted weighted average shares outstanding		32,497,238		31,464,461		32,404,183		31,617,578
Basic income per common share	$	0.24	$	0.20	$	0.66	$	0.45
Diluted income per common share	$	0.23	$	0.19	$	0.63	$	0.43
Stock options, RSUs and RSAs excluded from income per diluted share because their effect would have been anti-dilutive		864,236		1,676,121		861,596		1,696,121

Leases

The Company has operating leases for its corporate offices, warehouses, vehicles, and equipment.

The operating leases have remaining terms of up to 5.2 years. Some of the leases have options to extend or terminate the leases. The exercise of such options is generally at the Company’s discretion. The lease agreements do not contain any significant residual value guarantees or restrictive covenants. The Company also subleases excess corporate office space. The Company's finance leases and related balances are not significant.

The components of lease expense are:


	Three Months Ended June 30,						Nine Months Ended June 30,
	2025			2024			2025			2024
Finance lease – lease asset amortization	$	18		$	18		$	50		$	56
Finance lease – interest on lease liabilities		5			4			15			9
Operating lease cost		1,563			1,418			4,494			4,046
Operating lease impairment expense (1)		459			—			459			—
Short-term lease cost		93			90			328			214
Variable lease cost (2)		432			282			964			889
Sublease income		(39	)		(3	)		(39	)		(18	)
Total net lease cost	$	2,531		$	1,809		$	6,271		$	5,196

(1)

During the three months ended June 30, 2025, the Company exited from a RSCG warehouse in an effort to consolidate its warehouse operations and incurred $0.5 million of impairment expense.

(2)

Variable lease costs primarily relate to the Company's election to combine non-lease components such as common area maintenance, insurance and taxes related to its real estate leases. To a lesser extent, the Company's equipment leases have variable costs associated with usage and subsequent changes to costs based upon an index.

Maturities of lease liabilities are:

Liquidity Services, Inc. and Subsidiaries

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


	June 30, 2025
	Operating Leases			Finance Leases
Remainder of 2025	$	1,466		$	32
2026		5,548			123
2027		3,167			73
2028		2,783			51
2029		1,951			47
Thereafter		711			80
Total lease payments (1)	$	15,626		$	406
Less: imputed interest (2)		(1,467	)		(49	)
Total lease liabilities	$	14,159		$	357

(1)

The weighted average remaining lease term is 3.4 years for operating leases and 4.3 years for finance leases.

(2)

The weighted average discount rate is 5.9% for operating leases and 5.8% for finance leases.

Supplemental disclosures of cash flow information related to leases are:


	Nine Months Ended June 30,
	2025		2024
Cash paid for amounts included in operating lease liabilities	$	4,295	$	3,437
Cash paid for amounts included in finance lease liabilities	$	75	$	79
Non-cash: lease liabilities arising from new operating lease assets obtained	$	1,251	$	5,691
Non-cash: lease liabilities arising from new finance lease assets obtained	$	240	$	—
Non-cash: adjustments to lease assets and liabilities(1)	$	2,987	$	360

(1)

These include adjustments due to lease modifications, renewals, and other related adjustments.

The increase in adjustments to lease assets and liabilities during the nine months ended June 30, 2025, is due to execution of renewal of an existing warehouse lease in Brampton, Ontario (Canada) associated with our RSCG reportable segment.

Goodwill

The carrying value and changes in the carrying value of goodwill attributable to each reportable segment were as follows:


(in thousands)	GovDeals		CAG		Machinio & Software Solutions		Total
September 30, 2023	$	53,814	$	21,016	$	14,558	$	89,388
Sierra acquisition (see Note 3)		7,869		—		—		7,869
Translation adjustments		—		535		—		535
September 30, 2024		61,683		21,551		14,558		97,792
Auction Software acquisition (see Note 3)		—		—		5,070		5,070
Translation adjustments		—		145		—		145
June 30, 2025	$	61,683	$	21,696	$	19,628	$	103,007

The increase in the goodwill balance of approximately $5.1 million at the Software Solutions business during the nine months ended June 30, 2025, is due to the Auction Software acquisition; see Note 3 - Acquisitions for further information. Our RSCG reportable segment does not maintain a goodwill balance as of June 30, 2025.

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. The Company did not identify any indicators of impairment that required an interim goodwill impairment test during the three and nine months ended June 30, 2025.

Liquidity Services, Inc. and Subsidiaries

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

Intangible Assets

Intangible assets consist of the following:


		June 30, 2025							September 30, 2024
(in thousands)	Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer and supplier relationships	6 - 8	$	23,600	$	(10,824	)	$	12,776	$	22,100	$	(8,805	)	$	13,295
Technology	3 - 5		5,800		(4,975	)		825		4,900		(4,839	)		61
Trade names	3 - 7		2,412		(2,065	)		347		2,200		(1,803	)		397
Other intangibles	10		922		(774	)		148		897		(738	)		159
Total intangible assets, net		$	32,734	$	(18,638	)	$	14,096	$	30,097	$	(16,185	)	$	13,912

The gross carrying amount of total intangible assets increased by $2.6 million during the nine months ended June 30, 2025, due to the Auction Software acquisition; see Note 3 - Acquisitions for further information.

Future expected amortization of intangible assets as of June 30, 2025, is as follows:


(in thousands)
Years ending September 30,	Expected Future Amortization
Remainder of 2025	$	783
2026		3,128
2027		3,045
2028		3,009
2029 and thereafter		4,131
Total	$	14,096

Intangible asset amortization expense was $0.8 million and $1.1 million for the three months ended June 30, 2025 and 2024, respectively and $2.5 million and $3.0 million for the nine months ended June 30, 2025 and 2024, respectively.

The Company did not record impairment charges on any intangible assets during the three and nine months ended June 30, 2025 and 2024. 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, 2025.

Income Taxes

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 nine months of fiscal year 2025 and its corresponding effective tax rate is 25.4% compared to 27.1% for the first nine months of fiscal year 2024. The change in the effective tax rate for the nine months ended June 30, 2025, as compared to the same period in the prior year, was primarily due to an increase in tax benefits from stock compensation vesting activity, state and foreign taxes, and permanent tax adjustments. 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.

On July 4th, 2025 the One Big Beautiful Bill Act was signed into law in the U.S., which contains a broad range of tax reform provisions affecting businesses. We are evaluating the full effects of the legislation on our estimated annual effective tax rate and cash tax position, but we expect that the legislation will likely not have a material impact on our financial statements. As the legislation was signed into law after the close of our third quarter, the impacts are not included in our operating results for the nine months ended June 30, 2025.

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. During the nine months ended June 30, 2025, the Company did not record any unrecognized tax benefits. 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 June 30, 2025, the Company has no open income tax examinations in the U.S. and the statute of limitations for years prior to 2021 is now closed. However, certain tax attribute carryforwards that were generated prior to fiscal year 2021 may be adjusted upon examination by tax authorities if they are utilized.

Debt

On February 10, 2022, the Company entered into a Credit Agreement with Wells Fargo Bank, National Association (the Credit Agreement). Terms of the Credit Agreement provide for revolving loans (the Line of Credit) up to a maximum aggregate principal amount of $25.0 million with a $10.0 million sublimit for standby letters of credit.

Liquidity Services, Inc. and Subsidiaries

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

During the year ended September 30, 2023, the Credit Agreement was amended to extend the maturity date by 12 months to March 31, 2025 (the First Amendment).

During the year ended September 30, 2024, the Credit Agreement was amended to extend the maturity date by an additional 12 months to March 31, 2026 (the Second Amendment). No other changes, including regarding the borrowing terms or capacities, were made to the Credit Agreement as a result of the First Amendment or the Second Amendment.

On May 7, 2025, the Company entered into a Third Amendment to the Credit Agreement (the Third Amendment) that extended the maturity date to March 31, 2027, increased the maximum aggregate principal amount from $25.0 million to $35.0 million, and increased the sublimit for standby letters of credit from $10.0 million to $35.0 million.

The applicable interest rate on any draws under the Line of Credit is a variable rate per annum equal to the Daily Simple Secured Overnight Financing Rate (SOFR) in effect plus a margin ranging from 1.25% to 1.75%. Interest is payable monthly. The Company pays an Unused Commitment Fee (as defined in the Credit Agreement), on a quarterly basis, equal to 0.05% per annum on the daily amount of the available, but unused, balance on the Line of Credit. The Company also pays a Line of Credit Fee (as defined in the Credit Agreement), 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 Line of Credit Fee, are included within Interest and other income, net in the Condensed Consolidated Statements of Operations.

The Company may draw upon the Line of Credit for general corporate purposes. Repayments of any borrowings under the Line of Credit shall become available for redraw at any time by the Company.

The Credit Agreement contains certain financial and non-financial restrictive covenants including, among others, the requirement to maintain a minimum level of earnings before interest, income taxes, depreciation and amortization (EBITDA). The Credit Agreement contains affirmative and restrictive covenants including covenants placing limitations on mergers, consolidations and dissolutions, investments and acquisitions, indebtedness and liens, and dividends and other restricted payments. As of June 30, 2025, the Company was in full compliance with the terms and conditions of the Credit Agreement.

During the three and nine months ended June 30, 2025, the Company did not make any draws under the Line of Credit, had no outstanding borrowings under the Line of Credit and had $9.0 million of standby letters of credit outstanding. The amount of standby letters of credit are reserved against the Line of Credit and are not available for borrowing, resulting in $26.0 million of remaining borrowing capacity under the Line of Credit as of June 30, 2025.

During the three and nine months ended June 30, 2025 and 2024, interest expense incurred by the Company under the Credit Agreement was immaterial to the condensed consolidated financial statements.

Liquidity Services, Inc. and Subsidiaries

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

10.

Stockholders’ Equity

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


						Additional									Accumulated Other
	Common Stock					Paid-in			Treasury Stock						Comprehensive			Retained
	Shares			Amount		Capital			Shares			Amount			Loss			Earnings			Total
Balance at September 30, 2023		36,142,345		$	36	$	265,945			(5,433,045	)	$	(84,031	)	$	(10,458	)	$	(9,958	)	$	161,533
Net income		—			—		—			—			—			—			1,907			1,907
Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units		59,471			—		127			—			—			—			—			127
Taxes paid associated with net settlement of stock compensation awards		(12,058	)		—		(224	)		—			—			—			—			(224	)
Common stock repurchased		—			—		—			(68,692	)		(1,171	)		—			—			(1,171	)
Stock compensation expense		—			—		2,249			—			—			—			—			2,249
Foreign currency translation and other		—			—		—			—			—			958			—			958
Balance at December 31, 2023		36,189,758		$	36	$	268,096			(5,501,737	)	$	(85,202	)	$	(9,500	)	$	(8,051	)	$	165,379
Net income		—			—		—			—			—			—			5,709			5,709
Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units		353,069			—		—			—			—			—			—			—
Taxes paid associated with net settlement of stock compensation awards		(66,464	)		—		(1,142	)		—			—			—			—			(1,142	)
Common stock repurchased		—			—		—			(473,953	)		(7,907	)		—			—			(7,907	)
Stock compensation expense		—			—		2,343			—			—			—			—			2,343
Foreign currency translation		—			—		—			—			—			(457	)		—			(457	)
Balance at March 31, 2024		36,476,363		$	36	$	269,297			(5,975,690	)	$	(93,109	)	$	(9,957	)	$	(2,342	)	$	163,925
Net income		—			—		—			—			—			—			6,000			6,000
Exercise of common stock options, grants of restricted stock awards, and vesting of restricted stock units		53,921			—		—			—			—			—			—			—
Taxes paid associated with net settlement of stock compensation awards		(4,678	)		—		(89	)		—			—			—			—			(89	)
Common stock repurchased		—			—		—			(22,242	)		(373	)		—			—			(373	)
Stock compensation expense		—			—		2,617			—			—			—			—			2,617
Foreign currency translation		—			—		—			—			—			(110	)		—			(110	)
Balance at June 30, 2024		36,525,606		$	36	$	271,825			(5,997,932	)	$	(93,482	)	$	(10,067	)	$	3,658		$	171,970

Stock Compensation Incentive Plans

The Company maintains the Third Amended and Restated 2006 Omnibus Long-Term Incentive Plan (as amended, the LTIP) under which stock options, restricted stock units (RSUs), restricted stock awards (RSAs), and cash-settled stock appreciation rights (SARs) have been issued, and a private placement issuance related to the Company's acquisition of Bid4Assets. During the year ended September 30, 2024, the Company's shareholders approved an amendment to the LTIP to increase the number of shares of common stock from 20,300,000 to 22,800,000, reserved for future issuance of awards under the LTIP. Vesting of RSUs and grants of RSAs count as 1.5x shares against the plan reserves. As of June 30, 2025, 1,289,677 shares of common stock remained available for use.

Stock Compensation Expense

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


	Three Months Ended June 30,				Nine Months Ended June 30,
	2025		2024		2025		2024
Equity-classified awards:
Stock options	$	563	$	550	$	1,595	$	1,574
RSUs & RSAs		2,949		2,067		7,927		5,634
Total Equity-classified awards	$	3,512	$	2,617	$	9,522	$	7,208

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

Liquidity Services, Inc. and Subsidiaries

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


	Three Months Ended June 30,				Nine Months Ended June 30,
	2025		2024		2025		2024
Stock compensation expense by function
Technology and operations	$	581	$	405	$	1,559	$	1,085
Sales and marketing		1,142		692		3,016		1,967
General and administrative		1,789		1,520		4,947		4,156
Total stock compensation expense:	$	3,512	$	2,617	$	9,522	$	7,208

Stock Options and RSUs & RSAs

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


	Nine Months Ended June 30,2025
Stock Options granted:
Options containing only service conditions:		125,000
Weighted average exercise price	$	22.55
Weighted average grant date fair value	$	10.86

Options containing performance conditions:		125,000
Weighted average exercise price	$	22.55

LIQUIDITY SERVICES INC 10-Q