Liquidity Services Q2 Earnings Call Highlights

Key Points

• Liquidity Services reported strong Q2 results with a 37% increase in non-GAAP adjusted EBITDA, consolidated segment direct profit up 18% YoY, GMV of $389.9 million and revenue of $120.7 million, ending the quarter with $204 million in cash and zero financial debt.
• Operational momentum was broad: Retail GMV rose 10% and direct profit 29% as Retail Rush more than doubled sequentially, GovDeals saw weather‑impacted GMV growth but set records for new accounts and bidders, and CAG has a backlog of “several hundred million” of GMV while Machinio is approaching ~$20 million ARR with 90%+ direct profit margins.
• Management guided fiscal Q3 to GMV of $425–465 million and adjusted EBITDA of $17–20 million, expects a higher effective tax rate near the mid‑30s, and plans to deploy capital to internal growth, complementary acquisitions and targeted share repurchases (about $50 million remaining authorization).

Liquidity Services NASDAQ: LQDT reported fiscal second-quarter 2026 results that management said reflected market share gains and improved operating leverage despite what CEO Bill Angrick described as “a backdrop of global tariffs, weather disruptions, and geopolitical tensions.” The company posted an 18% year-over-year increase in consolidated segment direct profit and a 37% increase in consolidated adjusted EBITDA for the March quarter.

Angrick said the company’s “asset-light business model continued to generate strong operating cash flow in excess of adjusted EBITDA,” and the quarter ended with $204 million in cash and “zero financial debt.” He added that Liquidity Services expects to allocate capital to internal growth initiatives, complementary acquisitions, and targeted share repurchases.

Quarterly results and profitability metrics

CFO Jorge Celaya said Liquidity Services generated GMV (gross merchandise volume) of $389.9 million, up 6% year over year, and revenue of $120.7 million, up 4%. GAAP diluted earnings per share were $0.23, up 5%, while non-GAAP adjusted EPS was $0.35, up 13%. Non-GAAP adjusted EBITDA was $16.7 million, up 37%.

Celaya attributed the gap between GAAP EPS growth and non-GAAP adjusted EPS growth primarily to higher performance-based stock compensation expense. He also said both GAAP and non-GAAP EPS grew more slowly than adjusted EBITDA due to higher income tax expense, including “the lower tax benefit from stock compensation,” with the effective tax rate “slightly up” in the quarter.

Celaya also highlighted Liquidity Services’ “Rule of 40” framework, which he said is calculated as the growth in the sum of segment direct profits plus adjusted EBITDA as a percent of segment direct profits. He said the company’s Rule of 40 was 48% in fiscal Q2 2026, compared with 46% in fiscal Q1 2026 and 42% for fiscal year 2025.

On liquidity, Celaya said the company ended the quarter with $204 million in cash equivalents and short-term investments, no debt, and $26 million of remaining borrowing capacity under its credit facility. Liquidity Services also had $50 million remaining under its share repurchase authorization.

Segment performance: retail strength, weather impact at GovDeals

Angrick said the company’s retail segment benefited from increased product flows following the peak holiday return season. He said retail segment GMV rose 10% year over year and direct profit increased 29%, driven by “higher consignment flows” from several top-20 retail accounts.

Angrick also pointed to rapid growth in the company’s direct-to-consumer marketplace, Retail Rush, saying GMV “more than doubled sequentially during Q2” and continued to set new monthly records. He said Liquidity Services has been expanding its retail buyer and seller base in Canada, Mexico, and Brazil, which he expects will be “fertile ground” for the company’s retail supply chain group marketplace.

In the GovDeals segment, Angrick said “significant winter weather events resulted in lower than expected GMV growth of 5%,” while direct profit still grew 12% year over year. He said the quarter included several GovDeals records, including:

• A record number of new accounts signed, up 30% year over year
• A record number of unique sellers in a single quarter
• A record number of unique bidders in a single month

Celaya reported GovDeals revenue increased 11% year over year, and said the results reflected growth in sellers and buyers, higher vehicle volumes, expanded service offerings, and operational efficiencies that increased the revenue-to-GMV ratio.

CAG backlog and Machinio expansion

In the Capital Assets Group (CAG), Angrick said GMV increased 3% and direct profit increased 11% year over year, driven by “growth in high margin consignment flows” and continued strength in heavy equipment categories with recurring sellers. He added that CAG unique bidders grew 36% year over year, and he described the outlook as “quite good” due to a record backlog of new business from existing and new clients, with strength in energy, biopharma, and heavy equipment.

During the Q&A, Angrick said the CAG backlog is “several hundred million of GMV,” and said the company continues to win global mandates from “Fortune 500, even Fortune 50 organizations” seeking multi-year equipment disposition programs. He cited strength in energy, biopharma, healthcare, transportation, and heavy equipment.

Celaya said CAG revenue increased 12% year over year and direct profit rose 12%, describing growth as “broad-based across the key industry verticals in North America” and supported by continued expansion of the recurring heavy equipment seller base.

Angrick said Machinio continued its “strong trajectory” with 8% revenue growth and is approaching $20 million of annual recurring revenue with “90%+ direct profit margins.” He described Machinio as having evolved into a digital commerce solutions provider for equipment dealers, offering lead generation, hosted websites, inventory management, customer management and marketing tools, and service quote pricing and related financing.

Angrick also said Machinio’s expansion into the marine vertical is “going exceptionally well,” with the company more than doubling new marine customers and revenues sequentially in Q2. Celaya added that Machinio and Software Solutions together increased revenue 12% and direct profit 10% year over year, reflecting marine expansion and Software Solutions’ focus on recurring SaaS growth.

Operational focus: tools, AI, and two-sided marketplace growth

Angrick said Liquidity Services continues to invest in technology, software, and data analytics to optimize recoveries and operations, including improved inventory scanning, classification, image quality, and asset descriptions. He added that the company has “leveraged AI tools to improve seller asset management, valuations, and customer service.”

He also highlighted marketplace scale and engagement metrics, saying Liquidity Services now serves 6.3 million registered buyers, up 8% year over year, with 983,000 auction participants in the quarter and 280,000 completed transactions.

In response to an analyst question about supply-side investments, Angrick described a multi-pronged approach: going deeper with existing accounts by expanding disposition coverage (including new-use, salvage, and scrap), converting more prospects to active sellers, expanding geographies, and adding services such as financing, asset valuations, auction software tools, and the Machinio dealer services stack.

Addressing Retail Rush, Angrick described the retail disposition process as a “river of returns” requiring fast, item-level decisions about value and optimal buyer channel, based on historical sales data updated daily. He said Retail Rush routes higher-value items to consumer buyers and reduces fulfillment costs by allowing buyers to pick up items in person using scanned barcodes or QR codes to locate merchandise.

Outlook and fiscal Q3 guidance

Celaya said the company is entering its seasonally high fiscal third quarter and expects year-over-year growth to continue, citing a strong CAG pipeline (including energy), continued high retail volume despite coming off a seasonally strong Q2, and GovDeals growth as it enters its typical seasonally high quarter and onboards new clients.

For fiscal Q3 2026, management guided:

• GMV of $425 million to $465 million
• Non-GAAP adjusted EBITDA of $17 million to $20 million
• GAAP net income of $7 million to $10 million
• GAAP diluted EPS of $0.21 to $0.30
• Non-GAAP adjusted diluted EPS of $0.30 to $0.39

Celaya said both GAAP and non-GAAP EPS are expected to reflect a higher effective tax rate “approaching the mid-30%” in fiscal Q3. He also said capital expenditures are expected to remain consistent with recent levels of about $2 million per quarter.

In the Q&A, Angrick said GovDeals auctions and product flows delayed by winter weather—primarily vehicles and heavy equipment—“didn’t go anywhere” and should move through the system in the current quarter. He also said investments in the GovDeals sales organization, combined with software and AI tools that improve targeting and conversion, have supported the segment’s account growth.

About Liquidity Services NASDAQ: LQDT

Liquidity Services, Inc is a technology-driven provider of online marketplaces for surplus and remarketed assets. Through its wholly owned platforms—such as Liquidation.com, GovDeals, Machinio and GoIndustry DoveBid—the company connects sellers of industrial equipment, commercial inventory, government surplus and transportation assets with a broad base of registered buyers. Its solutions blend auction formats, fixed-price listings and managed-service offerings to support efficient asset disposition across a wide range of industries.

The company's core services include asset valuation, marketing, inspection and logistics coordination.

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