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Why Liquidity Services Stock Plunged Today

By Steve Symington - Updated Dec 6, 2017 at 2:08PM

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Shares of the surplus-marketplace company fell after a disappointing quarterly report. Here's what investors need to know.

What happened

Shares of Liquidity Services (LQDT) were down 16.5% as of 12:15 p.m. EST Wednesday after the surplus-marketplace specialist announced weaker-than-expected fiscal fourth-quarter 2017 results.

Liquidity Services' revenue fell 22% year over year to $61.4 million, while gross merchandise volume declined 8.9% to $145 million. That translated to an adjusted net loss of $10.3 million, or $0.33 per diluted share. By contrast, investors were looking for a narrower net loss of $0.24 per share on a more modest high-teens percent decline in revenue. 

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So what

That's not to say there weren't bright spots. Liquidity Services' GovDeals and retail supply chain group businesses each saw double-digit growth in gross merchandise volume (GMV). But that growth was offset by weaker volume and sales from the capital assets group segment due to delayed plant closings, the impact of Hurricane Harvey in the energy vertical, and an expected decline in GMV under Department of Defense contracts.

Meanwhile, Liquidity Services continues to invest in its LiquidityOne transformation initiative, and is beginning to see the early benefits from system improvements, including the ability to more effectively adapt marketing and operations to match seller and buyer demand. But the company also elaborated that the fruits of those improvements "have been muted by recent economic headwinds in the energy vertical." 

Now what

For the current fiscal first quarter of 2018, Liquidity Services expects GMV to be in the range of $140 million to $160 million, which should result in an adjusted loss per diluted share of $0.34 to $0.25. That's roughly in line with consensus estimates, which predicted a loss of $0.29 per share.

To be clear, Liquidity Services elaborated that its near-term guidance "remains cautious." But it also anticipates broad-based improvement as the new fiscal year progresses. Given its relative top- and bottom-line shortfalls to end fiscal 2017, however, it's no surprise to see shares dropping today.

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