LIQUIDITY SERVICES INC (LQDT) FY 2024 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our consolidated financial statements and related notes contained elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could vary materially from those indicated, implied, or suggested by these forward-looking statements as a result of many factors, including those discussed under "Risk Factors" and elsewhere in this Annual Report on Form 10-K.
Overview
About us. Liquidity Services 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 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. During the past three fiscal years, we have conducted over 2.9 million online transactions generating $3.7 billion in gross merchandise volume or GMV. GMV is the total sales value of all transactions for which we earned compensation upon their completion through our marketplaces or other channels during a given period of time.
During the year ended September 30, 2024, the number of registered buyers grew from 5.1 million to 5.5 million. We believe the continuous flow of goods in our marketplaces attracts a growing buyer base which creates a self-sustaining cycle for our buyers and sellers. We generated GMV of $1.4 billion and revenue of $363.3 million through multiple sources, including transaction fees from sellers and buyers, proceeds from the sale of products we purchased from sellers, and value-added service charges during the year ended September 30, 2024. Over the prior 5 years, our GMV has grown at a compound annual growth rate of 16.4%.
On January 1, 2024, the Company acquired Sierra Auction Management, Inc. (Sierra), an Arizona corporation based in Phoenix, AZ. Sierra is a full-service auction company specializing in the sale of vehicles, equipment and surplus assets for government agencies, commercial businesses, and charities. See Note 4 – Sierra Acquisition for more information regarding this transaction.
On November 1, 2021, our GovDeals segment acquired Bid4Assets, Inc. (Bid4Assets), a Maryland corporation based in Silver Spring, MD. Bid4Assets is a leading online marketplace focused on conducting foreclosed real estate auctions. See Note 3 - Bid4Assets Acquisition for more information regarding this transaction.
Reportable Segments
The Company has four operating and reportable segments under which we conduct business: GovDeals, Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), and Machinio. Further information and operating results of our reportable segments can be found in Note 17 - Segment Information.
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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 our GovDeals, Bid4Assets and Sierra marketplaces; see Note 3 - Bid4Assets Acquisition and Note 4 - Sierra Acquisition, respectively.
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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.
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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.
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Machinio. The Machinio reportable segment operates a global search engine platform for listing equipment for sale in the construction, machine tool, processing, transportation, printing, agriculture and laboratory/medical sectors. Machinio also offers the Machinio System service that provides equipment sellers with a suite of software tools that includes website hosting, email marketing, and inventory management, to support and enable equipment sellers’ online business.
Macroeconomic Conditions
Supply chain challenges and consumer sentiment. The supply of used vehicles available for sale on our marketplaces may be impacted by proposed tariffs in the U.S., as well as the slowing adoption of electric vehicles as a replacement to internal combustion vehicle fleets. Further, used car market price indices continue to experience heightened volatility. In addition, general consumer behavior can be turbulent, and changes in consumer sentiment can cause fluctuation in the mix, volumes, and demand for the products we receive. Change in these conditions or other challenges that may emerge in other key asset categories can impact our financial performance.
Effects of inflation and heightened interest rates. 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, which has impacted buyer qualification and transaction timelines.
Currently, the Company is unable to predict the likelihood, magnitude, and timing of inflationary risk to our business, if any. 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, the impacts of which may vary across each of our individual asset classes.
International armed and geopolitical conflicts. The global financial markets have experienced volatility subsequent to the invasion of Ukraine by Russia in February 2022, a conflict which remains ongoing, as well as the ongoing conflict in and adjacent to Israel. The Russia-Ukraine conflict specifically resulted in numerous countries, including the United States, imposing significant new sanctions and export controls against Russia, Russian banks, and certain Russian individuals. These sanctions and export controls and international responses to the ongoing conflict in and adjacent to Israel, have further heightened global supply chain disruptions and impacted the international trade markets. For the years ended September 30, 2024 and 2023, the Company's total revenues directly associated with Russia, Ukraine, and Israel were not material to our consolidated financial results. We will continue monitoring these armed and geopolitical conflicts around the world and any potential future impacts on our business.
See Part I, Item 1A, Risk Factors, for an additional discussion of risks related to global economic conditions including those discussed above.
Industry Trends
We believe there are several industry trends positively impacting the long-term growth of our business including:
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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;
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the increase in government regulations and the need for corporations to have sustainability solutions with verifiable recycling and remarketing of surplus assets;
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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;
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an increase in buyer demand for surplus merchandise as consumers aspire to make more environmentally conscious decisions, while also seeking greater value through purchasing less expensive goods, both of which could impact our long-term growth;
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the increase in demand from sellers and buyers to transact in an online solution ensuring assets are sold for fair market value; and
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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.
Revenues
Substantially all of our revenue is earned through the following transaction models:
Purchase model. Under our purchase transaction model, we recognize revenue within the Purchase revenues line-item on the Consolidated Statements of Operations from the resale of inventory that we purchased from sellers. We consider these sellers to be our vendors. We pay our sellers either a fixed amount or a portion of the net or gross proceeds received from our completed sales based on the value we receive from the sale, in some cases, after deducting a required return to us that we have negotiated with the seller. Because we are the principal in purchase transaction model sales, we recognize as revenue the sale price paid by the buyer upon completion of a transaction. The proceeds paid by buyers also include transaction fees, referred to as buyer premiums.
Consignment model—fee revenue. Under our consignment transaction model, we enable our sellers to sell goods they own in our marketplaces, and we charge them a commission fee based on the gross or net proceeds received from such sales. 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 Consignment and other fee revenues line-item on the 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. We vary the percentage amount of the seller commission depending on the various value-added services we provide to the seller to facilitate the transaction. For example, we generally increase the percentage amount of the commission if we take possession, handle, ship, or provide enhanced product information for the merchandise. In most cases we collect the seller commission by deducting the appropriate amount from the sales proceeds prior to the distribution to the seller after completion of the transaction. In addition to seller commissions, we also collect buyer premiums.
Other — fee revenue. We also earn non-consignment fee revenue from Machinio's subscription services, auction listing service fees for foreclosed real estate at our GovDeals segment (payable regardless of whether or not an auction is completed), as well as other services including asset valuation, product handling, and storage fees. Non-consignment fee revenue is recorded within the Consignment and other fee revenues line-item on the Consolidated Statements of Operations.
Transaction Model Mix. Most of our transactions are conducted under the consignment model, which represented 85.1%, 85.8%, and 86.3% of our consolidated GMV for the years ended September 30, 2024, 2023, and 2022, respectively; however, only the consignment fee, representing a small portion of the consignment GMV, is recognized as revenue, causing consignment revenues to account for 34.9%, 37.7%, and 38.4% of our total revenues for the years ended September 30, 2024, 2023, and 2022, respectively.
Purchase model transactions are a smaller proportion of our consolidated GMV, representing 14.9%, 14.2%, and 13.7% of our consolidated GMV for the years ended September 30, 2024, 2023, and 2022, respectively. However, all of the GMV associated with the purchase model transaction is generally able to be recognized as revenue, causing purchase revenues to account for 57.7%, 54.7%, and 54.0% of our total revenues for the years ended September 30, 2024, 2023, and 2022, respectively.
Other fee revenues accounted for 7.3%, 7.5%, and 7.6% of our total revenues for the years ended September 30, 2024, 2023, and 2022, respectively
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Our Vendor Agreements
Commercial agreements. We have multiple vendor contracts with Amazon.com, Inc. under which we acquire and sell 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. $12.2 million and $5.8 million of inventory purchased under such contracts with Amazon.com, Inc. is included in our Inventory balances on our Consolidated Balance Sheets as of September 30, 2024 and 2023, respectively. Our vendor contracts with respect to sourcing or consigning merchandise for our RSCG segment generally reflect the concentration dynamics inherent to the retail industry.
Key Business Metrics
Our management periodically reviews certain key business metrics for operational planning purposes and to evaluate the effectiveness of our operational strategies, allocation of resources, and our capacity to fund capital expenditures and expand our business. These key business metrics include:
Gross merchandise volume (GMV). GMV is the total sales value of all transactions for which we earned compensation upon their completion through our marketplaces or other channels during a given period of time. We review GMV because it provides a measure of the volume of goods being sold in our marketplaces and thus the activity of those marketplaces. GMV also provides a means to evaluate the effectiveness of investments that we have made and continue to make, including in the areas of buyer and seller support, value-added services, product development, sales and marketing, and operations. Our GMV for the year ended September 30, 2024, was $1.4 billion.
Total registered buyers. We grow our buyer base through a combination of marketing and promotional efforts. A person becomes a registered buyer by completing an online registration process on one of our marketplaces. As part of this process, we collect business and personal information, including name, title, company name, business address, and contact information, and information on how the person intends to use our marketplaces. Each prospective buyer must also accept our terms and conditions of use. Following the completion of the online registration process, we verify each prospective buyer’s e-mail address and confirm that the person is not listed on any banned persons list maintained internally or by the U.S. federal government. After the verification process, which is completed generally within 24 hours, the registration is approved and activated, and the prospective buyer is added to our registered buyer list.
Total registered buyers, as of a given date, represent the aggregate number of persons or entities who have registered on one of our marketplaces. We use this metric to evaluate how well our marketing and promotional efforts are performing. Total registered buyers exclude duplicate registrations, buyers who are suspended from utilizing our marketplaces and buyers who have voluntarily removed themselves from our registration database. In addition, if we become aware of registered buyers that are no longer in business, we remove them from our database. As of September 30, 2024, 2023, and 2022, we had 5.5 million, 5.1 million, and 4.9 million, registered buyers, respectively. None of our buyers represented more than 10% of our revenue during the year ended September 30, 2024.
Total auction participants. For each auction we manage, the number of auction participants represents the total number of registered buyers who have bid one or more times in that auction. As a result, a registered buyer who bids, or participates, in more than one auction is counted as an auction participant in each auction in which he or she participates. Thus, total auction participants for a given period is the sum of the auction participants in each auction conducted during that period. We use this metric to allow us to compare our online auction marketplaces to our competitors, including other online auction sites and traditional on-site auctioneers. 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 years ended September 30, 2024, 2023, and 2022, 4.0 million, 3.3 million, and 3.1 million participants participated in auctions on our marketplaces, respectively.
Completed transactions. Completed transactions represents the number of auctions in a given period from which we have recorded revenue. 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 years ended September 30, 2024, 2023, and 2022, we completed 1,081,000, 925,000 and 933,000 transactions, respectively.
Critical Accounting Policies and Estimates
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The Company's consolidated financial statements, included in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K with their accompanying notes, have been prepared in accordance with GAAP, which requires management of the Company to make assumptions, judgments and estimates that affect amounts reported in its consolidated financial statements. Accounting policies and estimates are considered to be "critical" when the nature of the estimate includes subjective or sensitive assumptions or judgments that can have a material impact on the financial condition or operating performance of the Company. Actual results may differ from these estimates.
We consider the following accounting policies to be critical: revenue recognition, business combinations, valuation of goodwill and intangible assets, and income taxes. Refer to Note 2 - Summary of Significant Accounting Policies to the Company's consolidated financial statements for further details on these accounting policies.
We consider the following accounting estimates to be critical: business combinations (Note 4), and income taxes (Note 11). Refer to these individually referenced notes and Note 2 - Summary of Significant Accounting Policies to the Company's consolidated financial statements for further details on these accounting estimates. The following discussion is a supplement to the disclosures referenced.
Intangible assets. The fair valuation of intangible assets acquired in a business combination consists of customer and supplier relationships, technology, trade names, and other intangibles (comprised of patents and related assets). Intangible assets are amortized using the straight-line method over their estimated useful lives. The preliminary fair value of acquired intangible assets, excluding goodwill, arising from the Sierra acquisition was $5.4 million. This balance consisted of the following identified intangible assets, each with their own significant assumptions used, as follows:
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Customer and Supplier Relationships - We valued the customer and supplier relationships intangibles using the multi-period excess earnings method, an income approach valuation model. The significant assumptions used in the income approach includes estimates about future expected cash flows from supplier contracts, the attrition rate, and the discount rate.
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Trade Name - We valued the trade name acquired using a relief-from-royalty method. 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.
Goodwill. Goodwill represents the costs in excess of the fair value of net assets acquired through acquisitions by the Company. Pursuant to our preliminary purchase price allocation, goodwill arising from the acquisition of Sierra was determined to be $7.9 million; see Note 4 - Sierra Acquisition, for further information.
Components of Revenue and Expenses
Revenue. Refer to the discussion in the Our revenue section above, and to Note 2 - Summary of Significant Accounting Policies to the Company's consolidated financial statements in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K for discussion of the Company's related accounting policies.
Cost of goods sold. Refer to Note 2 - Summary of Significant Accounting Policies, to the Company's consolidated financial statements in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K for discussion of the Company's Costs of goods sold and related accounting policies.
Technology and operations. 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 Condensed Consolidated Statements of Operations. Technology expenses are presented separately from Costs of goods sold (excluding depreciation and amortization) in the Condensed 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. As a result, we expense those costs as incurred.
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However, where we determine that the useful life of the internally developed software will be greater than one year, we capitalize development costs in accordance with ASC 350-40, Internal-use software. As such, we are capitalizing certain development costs associated with our marketplaces and support systems, as well as other software development activities.
Operations expenses consist primarily of costs to operate our network of warehouses, including shipping logistics, inventory management, refurbishment, and administrative functions; costs to enhance our online auctions listings and provide customer support; and costs associated with field support and preparation and transfer of goods from sellers to buyers. Operations expenses include both internal and external labor costs, as well as other third-party charges. These costs are expensed as incurred.
Sales and marketing. Sales and marketing expenses include the cost of our sales and marketing personnel as well as the cost of lead generation, marketing and promotional activities, including buyer and seller acquisition, as well as general brand marketing. These activities include online marketing campaigns, such as paid search advertising and geofencing campaigns, as well as offline marketing efforts, trade shows, and marketing analytics.
General and administrative. General and administrative expenses include all corporate and administrative functions that support our operations and provide an infrastructure to facilitate our future growth. These expenses are generally more fixed in nature than our other operating expenses and do not vary as significantly in response to the volume of merchandise sold through our marketplaces.
Depreciation and amortization. Depreciation and amortization consist of depreciation of property and equipment, amortization of internally developed software, and amortization of intangible assets.
Fair value adjustment of acquisition earn-outs. Fair value adjustment of acquisition earn-outs consists of the change in fair value of earn-out consideration following a business combination.
Other operating expenses, net. Other operating expenses, net includes acquisition-related costs, impairment of long-lived and other assets, 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. Interest and other income, net consists of interest income on interest-bearing checking accounts, money market funds, interest and unused commitment fees in connection with the Company's Credit Agreement, the components of net periodic pension cost (benefit) other than the service component and impacts of foreign currency fluctuations.
Income taxes. Income taxes include current and deferred income tax expense for the U.S. federal, state, and foreign jurisdictions. During the years ended September 30, 2024, 2023 and 2022, the Company had an effective income tax rate of 26.7%, 27.7% and 15.4%, respectively, which included federal, state, and foreign income taxes.
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Results of Operations
The following table presents reportable segment GMV, revenue, segment direct profit (which is calculated as total revenue less cost of goods sold (exclusive of depreciation and amortization)), and segment direct profit as a percentage of total revenue for the periods indicated ($ in thousands):
| Year Ended September 30, | ||||||||||||
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| (dollars in thousands | 2024 | 2023 | 2022 | |||||||||
| GovDeals: | ||||||||||||
| GMV | $ | 836,288 | $ | 726,124 | $ | 720,323 | ||||||
| Total revenue | $ | 76,557 | $ | 62,010 | $ | 59,352 | ||||||
| Segment direct profit | $ | 71,727 | $ | 58,810 | $ | 56,408 | ||||||
| Segment direct profit as a percentage of total revenue | 93.7 | % | 94.8 | % | 95.0 | % | ||||||
| RSCG: | ||||||||||||
| GMV | $ | 320,683 | $ | 285,574 | $ | 236,236 | ||||||
| Total revenue | $ | 233,003 | $ | 200,218 | $ | 166,100 | ||||||
| Segment direct profit | $ | 66,873 | $ | 68,068 | $ | 63,704 | ||||||
| Segment direct profit as a percentage of total revenue | 28.7 | % | 34.0 | % | 38.4 | % | ||||||
| CAG: | ||||||||||||
| GMV | $ | 209,661 | $ | 191,333 | $ | 188,813 | ||||||
| Total revenue | $ | 37,668 | $ | 38,476 | $ | 42,575 | ||||||
| Segment direct profit | $ | 31,268 | $ | 32,215 | $ | 29,120 | ||||||
| Segment direct profit as a percentage of total revenue | 83.0 | % | 83.7 | % | 68.4 | % | ||||||
| Machinio: | ||||||||||||
| GMV | — | — | — | |||||||||
| Total revenue | $ | 16,157 | $ | 13,821 | $ | 12,083 | ||||||
| Segment direct profit | $ | 15,364 | $ | 13,110 | $ | 11,471 | ||||||
| Segment direct profit as a percentage of total revenue | 95.1 | % | 94.9 | % | 94.9 | % | ||||||
| Consolidated: | ||||||||||||
| GMV | $ | 1,366,632 | $ | 1,203,031 | $ | 1,145,372 | ||||||
| Total revenue | $ | 363,318 | $ | 314,462 | $ | 280,050 |
NM = not meaningful
Year Ended September 30, 2024 Compared to Year Ended September 30, 2023
Segment Results
GovDeals. Total revenues from our GovDeals reportable segment increased $14.5 million, or 23.5%, due to a $110.2 million, or 15.2%, increase in GMV driven by increased personal property sales, particularly in the vehicle and heavy equipment categories, and continued growth in our seller base. Revenue grew at a higher rate than GMV due to the expansion of service offerings to new, higher-volume sellers, including through the acquisition of Sierra. Segment direct profit increased by $12.9 million, or 22.0%, consistent with the increase in revenues. Segment direct profit as a percentage of revenue declined slightly due to the previously noted expansion in service offerings.
RSCG. Revenue from our RSCG reportable segment increased by $32.8 million, or 16.4%, due to a $35.1 million, or 12.3%, increase in GMV due to expansion in our purchase programs and sell-in place consignment solutions. Segment direct profit decreased by $1.2 million, or 1.8%, and Segment direct profit as a percentage of total revenue decreased from 34.0% to 28.7%, due to increased volumes from expanded purchase programs, driven by general merchandise categories that are lower-touch and did not have a significant impact on RSCG’s operating expenses, and a lower blended take-rate on our consignment sales. These increased purchase volumes and their effect of lowering Segment direct profit as a percentage of total revenue are expected to continue into fiscal 2025.
CAG. Revenue from the CAG reportable segment decreased by $0.8 million, or 2.1%, while GMV increased by $18.3 million, or 9.6%. The increase in GMV was driven by consignment sales in our industrial and heavy equipment categories, while Revenue declined slightly due to lower availability of large spot purchase transactions with international clients as well as an increase in consignment sales. Despite inherent variations in the mix of assets sourced and sold by the CAG segment in any given period, Segment direct profit as a percentage of total revenue remained relatively consistent between the periods. As a result of the decline in revenues, Segment direct profit decreased by $0.9 million, or 2.9%. Global supply chains may experience heightened disruptions due to international tensions and other factors, which could limit the volume of assets made available for sale in any period.
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Machinio. Revenue from our Machinio reportable segment increased 16.9%, or $2.3 million, due to price increases and continued growth in subscribers. As a result of the increase in revenues, Segment direct profit increased 17.2%, or $2.3 million. Segment direct profit as a percentage of total revenue remained relatively consistent between the period.
Consolidated Results
The following table sets forth, for the periods indicated, our operating results (dollars in thousands):
| Year Ended September 30, | Change | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2024 | 2023 | $ | % | ||||||||||||
| Purchase revenues | $ | 209,800 | $ | 172,089 | $ | 37,711 | 21.9 | % | ||||||||
| Consignment and other fee revenues | 153,518 | 142,373 | 11,145 | 7.8 | % | |||||||||||
| Total revenue | 363,318 | 314,462 | 48,856 | 15.5 | % | |||||||||||
| Costs and expenses from operations: | ||||||||||||||||
| Cost of goods sold (excludes depreciation and amortization) | 178,152 | 142,322 | 35,830 | 25.2 | % | |||||||||||
| Technology and operations | 61,377 | 57,078 | 4,299 | 7.5 | % | |||||||||||
| Sales and marketing | 54,832 | 49,443 | 5,389 | 10.9 | % | |||||||||||
| General and administrative | 31,962 | 28,074 | 3,888 | 13.8 | % | |||||||||||
| Depreciation and amortization | 12,120 | 11,255 | 865 | 7.7 | % | |||||||||||
| Other operating expenses, net | 1,471 | 186 | 1,285 | 692.8 | % | |||||||||||
| Total costs and expenses | 339,914 | 288,358 | 51,556 | 17.9 | % | |||||||||||
| Income from operations | 23,404 | 26,105 | (2,701 | ) | (10.3 | )% | ||||||||||
| Interest and other income, net | (3,854 | ) | (2,912 | ) | (943 | ) | 32.4 | % | ||||||||
| Income before provision for income taxes | 27,260 | 29,016 | (1,757 | ) | (6.1 | )% | ||||||||||
| Provision for income taxes | 7,269 | 8,039 | (770 | ) | (9.6 | )% | ||||||||||
| Net income | $ | 19,991 | $ | 20,978 | $ | (986 | ) | (4.7 | )% |
NM = not meaningful
Total revenues. Total consolidated revenue increased $48.9 million, or 15.5%. 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 $35.8 million, or 25.2%, which changed at a higher rate than Revenue primarily due to increased volumes from expanded purchase programs at our RSCG segment, driven by lower-touch general merchandise categories.
Technology and operations expenses. Technology and operations expenses increased $4.3 million, or 7.5%, primarily in support of the increased transaction volumes across our segments, including operating costs associated with expanded full-service consignment solutions in our GovDeals segment through our acquisition of Sierra, and a $0.5 million increase in stock compensation.
Sales and marketing expenses. Sales and marketing expenses increased $5.4 million, or 11.0%, due to our market share expansion and client diversification efforts, and a $0.6 million increase in stock compensation. Furthermore, the year ended September 30, 2023, included a $0.9 million non-recurring benefit from a concluded client program.
General and administrative expenses. General and administrative expenses increased by $3.9 million, or 13.8%, due to a $1.8 million increase in stock compensation primarily from variable stock awards tied to financial performance targets, $0.5 million in litigation settlement expense incurred during the year ended September 30, 2024 (see Note 16 - Legal Proceedings for further information), and other costs in support of our growth.
Depreciation and amortization. Depreciation and amortization expense increased $0.9 million, or 7.7%, in connection with our acquisition of Sierra; see Note 4 - Sierra Acquisition.
Interest and other income, net. Interest and other income, net increased $0.9 million, or 32.4%, due to higher balances held in cash equivalent and short-term investments and the effect of rising interest rates.
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Provision for income taxes. Provision for income taxes decreased $0.7 million to an expense of $7.3 million from an expense of $8.0 million due to the decrease in state and deferred income taxes resulting from lower income in the current year compared to prior year. The Company's effective tax rate was 26.7% for the twelve months ended September 30, 2024. The 2024 effective tax rate differed from the statutory federal rate of 21.0% primarily as a result of the impact of foreign, state, and local income taxes and permanent adjustments.
Year Ended September 30, 2023 Compared to Year Ended September 30, 2022
Segment Results
GovDeals. Total revenues from our GovDeals reportable segment increased $2.7 million, or 4.5%, due to a $5.8 million, or 0.8%, increase in GMV driven by increased marketplace activity for its surplus property categories, including the number of sellers and assets sold; however, supply chain challenges reduced the volume of used vehicles available to be sold during the first quarter of the current fiscal year and market prices for used vehicles remain volatile. Revenue grew at a greater rate than GMV due to marketplace pricing increases and a decline in the mix of lower take-rate foreclosed real estate properties available for auction. In periods where GovDeals real estate sales increase, GovDeals revenue as a percent of GMV would be expected to decline, as these higher value real estate sales are generally conducted at a lower take-rate than our traditional GovDeals asset categories. Segment direct profit increased by $2.4 million, or 4.3%, consistent with the increase in revenues. Segment direct profit as a percentage of total revenue remained consistent between the periods.
RSCG. Revenue from our RSCG reportable segment increased $34.1 million, or 20.5%, due to a $49.3 million, or 20.9%, rise in GMV due to access to recurring product flows from new and expanded client programs and network of warehouses, including expansion of our AllSurplus Deals direct-to-consumer storefront locations, a stronger holiday return and liquidations season, and favorable recovery rates at the points in the year where less inventory was available to buyers in the broader spot market. Segment direct profit increased by $4.4 million, or 6.8%, due to increased volumes. Segment direct profit as a percentage of total revenue decreased from 38.4% to 34.0%, due to changes in the product mix available as certain client programs made a higher volume of lower value products available for sale in the current year, in addition to $1.0 million in inventory provisions.
CAG. Revenue from the CAG reportable segment decreased by $4.1 million, or 9.6%. GMV increased by $2.5 million, or 1.3%, driven by increased consignment sales in our industrial and heavy equipment categories. Revenue declined despite the increase in GMV due to a lower mix of large spot purchase transactions with international clients. The increase in transactions conducted under the consignment model contributed to Segment direct profit increasing by $3.1 million, or 10.6%. Segment direct profit as a percentage of total revenue increased 15.3%, which may fluctuate due to inherent variations in the mix of assets sourced and sold by the CAG segment in any given period, due to a higher mix of consignment transactions conducted during the current year. Challenged global supply chains are experiencing heightened disruptions due to international tensions and other factors, which could limit the volume of assets made available for sale in any period.
Machinio. Revenue from our Machinio reportable segment increased 14.4%, or $1.7 million, due to price increases and continued growth in subscribers. As a result of the increase in revenues, Segment direct profit increased 14.3%, or $1.6 million. Segment direct profit as a percentage of total revenue remained relatively consistent between the periods.
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Consolidated Results
The following table sets forth, for the periods indicated, our operating results (dollars in thousands):
| Year Ended September 30, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | $ Change | % Change | |||||||||||||
| Purchase revenues | $ | 172,089 | $ | 151,271 | $ | 20,818 | 13.8 | % | ||||||||
| Consignment and other fee revenues | 142,373 | 128,779 | 13,594 | 10.6 | % | |||||||||||
| Total revenues | 314,462 | 280,050 | 34,412 | 12.3 | % | |||||||||||
| Costs and expenses from operations: | ||||||||||||||||
| Cost of goods sold (excludes depreciation and amortization) | 142,322 | 119,407 | 22,916 | 19.2 | % | |||||||||||
| Technology and operations | 57,078 | 55,522 | 1,556 | 2.8 | % | |||||||||||
| Sales and marketing | 49,443 | 43,224 | 6,219 | 14.4 | % | |||||||||||
| General and administrative | 28,074 | 28,282 | (208 | ) | (0.7 | )% | ||||||||||
| Depreciation and amortization | 11,255 | 10,322 | 933 | 9.0 | % | |||||||||||
| Fair value adjustment of acquisition earn-outs | — | (24,500 | ) | 24,500 | NM | |||||||||||
| Other operating expenses, net | 186 | 388 | (202 | ) | (52.1 | )% | ||||||||||
| Total costs and expenses | 288,358 | 232,645 | 55,713 | 23.9 | % | |||||||||||
| Income from operations | 26,105 | 47,405 | (21,300 | ) | (44.9 | )% | ||||||||||
| Interest and other income, net | (2,912 | ) | (248 | ) | (2,664 | ) | NM | |||||||||
| Income before provision for income taxes | 29,016 | 47,653 | (18,636 | ) | (39.1 | )% | ||||||||||
| Provision for income taxes | 8,039 | 7,329 | 710 | 9.7 | % | |||||||||||
| Net income | $ | 20,978 | $ | 40,324 | $ | (19,346 | ) | (48.0 | )% |
NM = not meaningful
Total revenues. Total consolidated revenue increased $34.4 million, or 12.3%. 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 $22.9 million, or 19.2%, which changed at a higher rate than Revenue primarily due to our RSCG segment where changes in the product mix available as certain client programs made a higher volume of lower value products available for sale in the current year.
Technology and operations expenses. Technology and operations expenses increased $1.6 million, or 2.8%, primarily due to higher technology labor costs supporting our continued marketplace modernization efforts, greater operations labor associated with the timing of transactions at our CAG segment, and a $1.0 million increase in other variable compensation.
Sales and marketing expenses. Sales and marketing expenses increased $6.2 million, or 14.4%, due to the impact of our market share expansion and client diversification efforts, as well as a $1.3 million increase in stock compensation expense and other variable compensation, a $1.2 million increase in bad debt expense, and the impact of other inflationary cost increases.
General and administrative expenses. General and administrative expenses were consistent between the years ended September 30, 2023, and 2022.
Depreciation and amortization. Depreciation and amortization expense increased $0.9 million, or 9.0%, primarily due to a full year impact of the increase in amortization of intangible assets following our acquisition of Bid4Assets on November 1, 2021.
Fair value adjustment of acquisition earn-outs. Fair value adjustment of acquisition earn-outs decreased by $24.5 million due to the cumulative non-cash gain arising from the reduction in the fair value of the Bid4Assets earn-out liability during the prior year ended September 30, 2022. Through and as of the final measurement period ended December 31, 2022, $3.5 million in earn-out payments were made, with no additional earn-out fair value remaining. See Note 13 - Fair Value Measurement for further information.
Interest and other income, net. Interest and other income, net increased $2.7 million, due to the effect of rising interest rates on our cash equivalent and short-term investment holdings.
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Provision for income taxes. Provision for income taxes increased $0.7 million to an expense of $8.0 million from an expense of $7.3 million due to the increase in state and deferred income taxes resulting from higher income in the current year compared to prior year, exclusive of the $24.5 million non-cash gain from the fair-market value adjustment of the Bid4Assets acquisition earn-out liability. The Company's effective tax was 27.7% for the twelve months ended September 30, 2023. The 2023 effective tax rate differed from the statutory federal rate of 21.0% primarily as a result of the impact of foreign, state, and local income taxes and permanent adjustments.
Non-GAAP Financial Measures
Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA. Non-GAAP EBITDA is a supplemental non-GAAP financial measure and is equal to Net income plus Interest and other (income) expense, net excluding the non-service components of net periodic pension cost (benefit); Provision for income taxes; and Depreciation and amortization. Interest and other (income) expense, net, can include non-operating gains and losses, such as from foreign currency fluctuations. Our definition of Non-GAAP Adjusted EBITDA differs from Non-GAAP EBITDA because we further adjust Non-GAAP EBITDA for stock-based compensation expense, acquisition costs such as transaction expenses and changes in earn out estimates, business realignment expense, deferred revenue purchase accounting adjustments, and goodwill and long-lived asset impairment.
We believe Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA are useful to an investor in evaluating our performance for the following reasons:
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Depreciation and amortization expense primarily relates to property and equipment and the amortization of intangible assets. These expenses are non-cash charges that have fluctuated significantly in the past. As a result, we believe that adding back these non-cash charges is useful in evaluating the operating performance of our business on a consistent basis from year-to-year.
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As a result of varying federal and state income tax rates, we believe that presenting a financial measure that adjusts for provision for income taxes is useful to investors when evaluating the operating performance of our business on a consistent basis from year to year.
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The authoritative guidance for stock-based compensation requires all share-based payments to employees, including grants of employee stock options, restricted stock and stock appreciation rights to be recognized in the income statement based on their estimated fair values over the requisite vesting period. We believe adjusting for this stock-based compensation expense is useful to investors when evaluating the operating performance of our business on a consistent basis from year to year.
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The authoritative guidance related to business combinations requires the initial recognition of contingent consideration at fair value based upon information known or knowable as of the acquisition date, with subsequent changes in fair value recorded through the Consolidated Statements of Operations and disallows the capitalization of transaction costs. We believe adjusting for these acquisition related expenses is useful to investors when evaluating the operating performance of our business on a consistent basis from year-to-year.
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We believe adjusting for litigation settlement expenses that are not expected to reoccur is useful to investors when evaluating the operating performance of our business on a consistent basis from year-to-year.
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We believe adjusting for business realignment expense is useful to investors when evaluating the operating performance of our business on a consistent basis from year-to-year, as these expenses are outside our ordinary course of business.
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We believe isolating other non-cash charges, such as impairment costs or other costs incurred outside our ordinary course of business, provides additional information about our cost structure, and, over time, helps track our performance.
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We believe Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA are important indicators of our operational strength and the performance of our business because they provide a link between profitability and operating cash flow.
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We also believe that analysts and investors use Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry.
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Our management uses Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA:
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as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis as they remove the impact of items not directly resulting from our core operations;
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for planning purposes, including the preparation of our internal annual operating budget;
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to allocate resources to enhance the financial performance of our business;
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to evaluate the effectiveness of our operational strategies; and
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to evaluate our capacity to fund capital expenditures and expand our business.
Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA as calculated by us are not necessarily comparable to similarly titled measures used by other companies. In addition, Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA: (a) do not represent net income or cash flows from operating activities as defined by GAAP; (b) are not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered as alternatives to net income, income from operations, cash provided by (used in) operating activities, or our other financial information as determined under GAAP.
We prepare Non-GAAP Adjusted EBITDA by eliminating from Non-GAAP EBITDA the impact of items that we do not consider indicative of our core operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. As an analytical tool, Non-GAAP Adjusted EBITDA is subject to all of the limitations applicable to Non-GAAP EBITDA. 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 to Non-GAAP EBITDA and Non-GAAP Adjusted EBITDA for the periods presented.
| Year ended September 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2022 | ||||||||||
| Net income | $ | 19,991 | $ | 20,978 | $ | 40,324 | ||||||
| Interest and other (income) expense, net(1) | (4,048 | ) | (2,859 | ) | 126 | |||||||
| Provision for income taxes | 7,269 | 8,039 | 7,329 | |||||||||
| Depreciation and amortization | 12,120 | 11,255 | 10,322 | |||||||||
| Non-GAAP EBITDA | $ | 35,332 | $ | 37,412 | $ | 58,101 | ||||||
| Stock compensation expense | 11,087 | 8,191 | 8,482 | |||||||||
| Acquisition-related costs and litigation settlement expense(2) | 1,830 | 252 | 473 | |||||||||
| Business realignment expenses(3) | 251 | — | 191 | |||||||||
| Fair value adjustments to acquisition earn-outs | — | — | (24,500 | ) | ||||||||
| Non-GAAP Adjusted EBITDA | $ | 48,500 | $ | 45,855 | $ | 42,747 |
1 Interest and other (income) expense, net excludes non-services pension and other postretirement expense (benefit).
2 Acquisition-related costs are included in Other operating expenses (income), net on the Consolidated Statements of Operations. Litigation settlement expense reflects significant legal settlements not expected to reoccur and are included in General and administrative expenses on the Consolidated Statements of Operations. For further information see Note 16 - Legal Proceedings, discussing the litigation settlement that occurred during the fiscal year ended September 30, 2024.
3 Business realignment expenses, included as a component of Other operating expenses (income), net on the Consolidated Statements of Operations, 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.
Liquidity and Capital Resources
Our operational cash needs primarily relate to working capital, including staffing costs, technology expenses, leases of real estate, and equipment used in our operations, and capital used for inventory purchases, which we have funded through existing cash balances and cash generated from operations. The Company has not paid a dividend historically, nor do we have any intention to do so in the foreseeable future. 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 September 30, 2024, we had $153.2 million in Cash and cash equivalents and $2.3 million in Short-term investments, which we believe is sufficient to meet the Company’s anticipated cash needs for at least one year from the date of these financial statements.
Capital Expenditures
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Our capital expenditures consist primarily of capitalized software, warehouse equipment, computers and purchased software, office equipment, furniture and fixtures, and leasehold improvements. The timing and volume of such capital expenditures in the future will be affected by the addition of new sellers or buyers or expansion of existing seller or buyer relationships. We intend to fund those expenditures primarily from our existing cash balances and operating cash flows. Our capital expenditures for the year ended September 30, 2024, were $8.9 million. As of September 30, 2024, 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 expand our network of warehouses including our new lease for warehouse space in Brownsburg, Indiana which commenced during the year ended September 30, 2024. We may seek to enter agreements with respect to potential investments in, or acquisitions of, complementary businesses, products or technologies, which could also require us to seek additional equity or debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders. Additional debt would result in increased interest expense and could result in covenants that would restrict our operations. There is no assurance that such financing, if required, will be available in amounts or on terms acceptable to us, if at all.
Credit Agreement
The Company maintains a $25.0 million Credit Agreement with Wells Fargo Bank, National Associated (the Credit Agreement). 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 six months ended March 31, 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.
The Company may draw upon the Credit Agreement for general corporate purposes. Repayments of any borrowings under the Credit Agreement shall become available for redraw at any time by the Company. The interest rate on borrowings under the Credit Agreement is a variable rate per annum equal to the Daily Simple Secured Overnight Financing Rate (SOFR) in effect plus a margin ranging from 1.25% to 1.75%. Interest is payable monthly. During the year ended September 30, 2024, the Company did not make any draws under the Line of Credit and issued $7.5 million of standby letters of credit. As of September 30, 2024, the Company had no outstanding borrowings under the Line of Credit and had $7.5 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 $17.5 million of remaining borrowing capacity under the Line of Credit as of September 30, 2024.
The obligations under the Credit Agreement are unconditionally guaranteed by us and each of our existing and subsequently acquired or organized domestic subsidiaries and secured on a first priority basis by a security interest (subject to permitted liens) in substantially all assets owned by us, and each of our other domestic subsidiaries, subject to limited exceptions. The Credit Agreement contains certain financial and non-financial restrictive covenants including, among others, the requirement to maintain a minimum level of earnings before interest, income taxes, depreciation and amortization (EBITDA). The Credit Agreement contains a number of affirmative and restrictive covenants including limitations on mergers, consolidations and dissolutions, investments and acquisitions, indebtedness and liens, and dividends and other restricted payments. As of September 30, 2024, the Company was in full compliance with the terms and conditions of the Credit Agreement.
Working Capital Management
Most of our sales are recorded subsequent to receipt of payment authorization, utilizing credit cards, wire transfers, and PayPal, an Internet-based payment system, as methods of payments. As a result, we are not subject to significant collection risk, as goods are generally not shipped before payment is received.
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 intend to indefinitely reinvest the earnings of our foreign subsidiaries outside the United States. As a result, we did not record a provision for deferred U.S. tax expense on the $9.8 million of undistributed foreign earnings as of September 30, 2024. As of September 30, 2024 and 2023, $25.7 million and $19.1 million, respectively, of cash and cash equivalents was held outside of the U.S.
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Other Uses of Capital Resources
Sierra Acquisition. 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 in the southwestern U.S. See Note 4 - Sierra Acquisition for more information regarding this transaction.
Bid4Assets, Inc. Acquisition. On November 1, 2021, our GovDeals segment purchased all of the issued and outstanding shares of stock of Bid4Assets. Bid4Assets is a leading online marketplace focused on conducting real property auctions for the government, including tax foreclosure sales and sheriff's sales. Our investment through the acquisition of Bid4Assets will support continued growth in the GovDeals reportable segment, particularly in our real estate vertical.
The acquisition date fair value of the consideration transferred to the former shareholders of Bid4Assets was approximately $42.7 million consisting of $14.7 million in cash (net of working capital adjustments totaling $0.3 million) and earn-out consideration with a fair value of $28.0 million. As part of the acquisition of Bid4Assets, former shareholders of Bid4Assets were eligible to receive earn-out consideration of up to $37.5 million in cash.
Through December 31, 2022, $3.5 million in earn-out payments were made. The remaining earn-out fair value was $0 based upon actual performance through the final earn-out measurement period ended December 31, 2022. Through and as of the final measurement period ended December 31, 2022, $3.5 million in earn-out payments were made. See Note 3 - Bid4Assets Acquisition for further information.
Share Repurchases. From time to time, we may be authorized to repurchase issued and outstanding shares of our common stock under a share repurchase program approved by our Board of Directors. Share repurchases may be made through open market purchases, privately negotiated transactions, or otherwise, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The repurchase program may be discontinued or suspended at any time and will be funded using our available cash.
On December 6, 2021, and May 13, 2022, the Company's Board of Directors authorized new stock repurchase plans of up to $20 million and $12 million, respectively. The Company repurchased 1,567,277 shares for $25.4 million during the year ended September 30, 2022.
On December 6, 2022, March 13, 2023, and September 8, 2023, the Company's Board of Directors authorized new stock repurchase plans of up to $8.4 million, $8.0 million and $15.2 million, respectively. The Company repurchased 1,607,141 shares for $21.2 million during the year ended September 30, 2023. As of September 30, 2023, the Company had $17.0 million of remaining share repurchase authorization through December 31, 2025.
The Company repurchased 564,887 shares for $9.4 million during the year ended September 30, 2024. As of September 30, 2024, the Company had $7.6 million of remaining authorization to repurchase shares through December 31, 2025.
On December 9, 2024, the Company's Board of Directors authorized the repurchase of up to an additional $10.0 million of the Company's outstanding shares of common stock through December 31, 2026.
Off-Balance Sheet Arrangements. We do not have any transactions, agreements or other contractual arrangements that could be considered material off-balance sheet arrangements.
Changes in Cash Flows: 2024 Compared to 2023
Net cash provided by operating activities was $70.2 million and $47.0 million for the years ended September 30, 2024 and 2023, respectively. The $23.2 million increase in cash provided by operating activities between periods was attributable to an $11.3 million increase in cash inflows associated with Accounts Payable and a $5.4 million increase in cash inflows associated with Inventory primarily due to increased purchases of inventory under standard payment terms related to the expansion of purchase programs at our RSCG segment, and a $9.3 million increase in cash inflows associated with Payables to sellers primarily attributable to increased consignment sales volumes at our GovDeals and RSCG segments as well as timing differences in the payment of GovDeals and RSCG seller settlements relative to the period end date. The settlements to the sellers for these sales will occur in the first quarter of fiscal 2025.
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Our working capital accounts are subject to natural variations depending on the rate of change of our transaction volumes, the timing of cash receipts and payments, and variations in our transaction volumes related to settlements between our buyers and sellers. As RSCG's purchase volumes increase in fiscal 2025, operating cash flow fluctuations from Accounts payable and Inventory may increase. As GovDeals real estate sales with settlement services increase, operating cash flow fluctuations from Accounts payable and Payables to sellers may become more variable. The amount of cash received and settled will be substantially higher than our take-rate on such transactions, and the timing of auction events, cash collection period, and payment of settlements relative to period end dates can potentially drive substantial cash movements to the extent the timing of such activities cross fiscal periods. We are also expecting to begin increasing our payments for US federal income taxes in fiscal 2025 as our remaining net operating loss carryforwards are used. There have been no other significant changes to the working capital requirements for the Company.
Net cash used in investing activities was $16.1 million and $11.4 million for the years ended September 30, 2024 and 2023, respectively. The $4.7 million increase in cash used in investing activities was primarily driven by $13.2 million in cash paid, net of cash acquired, for the Sierra acquisition; see Note 4 - Sierra Acquisition for further information. This was partially offset by a $6.2 million increase from the maturation of short-term investments.
Net cash used in financing activities was $11.2 million and $22.1 million for the years ended September 30, 2024 and 2023, respectively. The $10.9 million decrease in cash used in financing activities was primarily driven by an $11.8 million decrease in share repurchases, offset slightly by $1.0 million in higher taxes paid associated with the net settlement of stock compensation awards.
Changes in Cash Flows: 2023 Compared to 2022
Net cash provided by operating activities was $47.0 million and $44.8 million for the years ended September 30, 2023, and 2022, respectively. The $2.2 million increase in cash provided by operating activities between periods was attributable to $8.4 million of higher Net income as adjusted for non-cash items; a $9.0 million increase in cash inflows from Accounts receivable driven by the collection of proceeds from large spot purchase transactions with international clients conducted in the prior year; and a $2.9 million decrease in cash outflows from Accrued expenses and other current liabilities driven by changes in other variable compensation targets. These increases were offset by a combined $18.0 million decrease in cash inflows associated with our Accounts payable and Payables to sellers primarily due to lower volumes of foreclosed real estate property sales and timing differences in the payment of GovDeals seller settlements relative to the period end date.
Our working capital accounts are subject to natural variations depending on the rate of change of our transaction volumes, the timing of cash receipts and payments, and variations in our transaction volumes related to settlements between our buyers and sellers. As GovDeals real estate sales with settlement services increase through the integration with Bid4Assets, operating cash flow fluctuations from accounts payable and payables to sellers are expected to become more variable. The amount of cash received and settled will be substantially higher than our take-rate on such transactions, and the timing of auction events, cash collection period, and payment of settlements relative to period end dates can potentially drive substantial cash movements to the extent the timing of such activities cross fiscal periods. There have been no other significant changes to the working capital requirements for the Company.
Net cash used in investing activities was $11.4 million and $21.1 million for the years ended September 30, 2023, and 2022, respectively. The $9.7 million decrease in cash used in investing activities was driven by the prior year $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), $2.7 million in lower capital expenditures, and $1.9 million from the maturity of short-term investments. These decreases were offset by a $6.2 million increase in the purchase of short-term investments.
Net cash used in financing activities was $22.1 million and $31.9 million for the years ended September 30, 2023, and 2022, respectively. The $9.8 million decrease in cash used by financing activities was primarily driven by $4.2 million of lower common stock repurchases in the current year, a $1.5 million decrease in taxes paid associated with net settlement of stock compensation awards, and the non-recurring earn-out payment of $3.5 million made during the year ended September 30, 2022, in connection with the Bid4Assets acquisition.
New Accounting Pronouncements
Information regarding our adoption of new accounting and reporting standards is discussed in Note 2 - Summary of Significant Accounting Policies, to the consolidated financial statements included in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K.
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