Initial Public Offering

Transcription

1 Initial Public Offering

2 Safe-Harbor Statement FORWARD-LOOKING INFORMATION This presentation contains forward-looking statements. All forward-looking statements speak only as of the date of this presentation. Except as required by applicable law, we are under no obligation to publicly update or revise any forward-looking statements. These forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management s beliefs and assumptions, which in turn are based on currently available information. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Many of these factors are beyond our ability to control or predict. You can identify forward-looking statements by terminology such as "may," "will," "should," "could," "would," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continues" or the negative of these terms or other comparable terminology. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement the strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financial plans, budgets, working capital needs and sources of liquidity. Potential investors should carefully review in its entirety the Registration Statement on Form S-1 relating to this offering, including the prospectus provided to you in connection with this presentation. You should be aware that the occurrence of the events described in the Risk Factors section of the Registration Statement and elsewhere in the Registration Statement relating to this offering could harm our business, prospects, operating results, and financial condition. 2

3 Offering Summary Company Security Offered Nasdaq Listing Shares Offered Liquidity Services, Inc. ( LSI ) Common Stock LQDT 5,000,000 (Primary) 2,687,362 (Secondary) 7,687,362 Filing Range $ $11.00 Expected Pricing Week of February 20 th Use of Proceeds Repayment of debt, general corporate purposes, acquisitions Underwriters Friedman Billings Ramsey (Co Lead / Joint Bookrunner) RBC Capital Markets (Co Lead / Joint Bookrunner) CIBC World Markets Pacific Crest Securities 3

4 Bill Angrick Chief Executive Officer

5 Company Vision The Leading Online Wholesale Marketplace 5

6 Why LSI? Innovative B2B Internet Auction Leader Large and Growing Market Opportunity Compelling Customer Value Proposition Extensive Base of Buyers and Sellers with a Network Effect Proven Track Record of Growth and Profitability Strong Growth Prospects with Key Competitive Advantages Committed Team; Board with Strong Public Company Experience 6

7 Reverse Supply Chain Market Overview THE TRADITIONAL SUPPLY CHAIN Supplier Manufacturer Distributor Retailer End User Macro Drivers Overstock Damaged Customer Returns Market Size Return Polices Discontinued Recycled Product Innovation Regulatory Policies End of Life Warranty Replacement Refurbished $38.5B $63.1B Supply Chain Inefficiencies Shelf Pull Scrap North American Reverse Supply Chain Source: D.F. Blumberg Associates THE REVERSE SUPPLY CHAIN Wholesale, Surplus and Salvage Goods Inefficient and Fragmented Marketplace Has Led to Historically Low Recovery Values 7

8 A Leading Online Wholesale Platform Powerful Buyer Liquidity for Wholesale Lots 415K registered buyers in 116 countries 876K auction participants Initial auction conversion rate of ~90% Online Auction Marketplaces Complete Solution for Business Market Exclusive Relationships with Important Sellers Superior Merchandising Expertise 500K online B2B auctions since inception 500 individual product categories Deep product marketing experience Strong understanding of buyer needs Advertising Portals Strong Financial Results and momentum FY 2005 Revenue of $89.4 MM and EBITDA of $6.7 MM 3 Months Ended 12/31/05 Revenue of $32.2 MM and EBITDA of $3.2 MM Except as noted, all figures as of or for the calendar year ending December 31, See slide 29 for reconciliation of EBITDA to Net Income. 8

9 Attractive Business Model Multiple Profit Streams % Share of Net Proceeds Seller Commissions Buyer Premium Fees Advertising Fees Compounding Growth Model Multiple Growth Drivers Improved Auction Results Increased Penetration Add New Sellers Time Client A Client B Client C Client D LSI s Business Model Enjoys Multiple Growth Drivers 9

10 The LSI Network Effect New & Expanded Seller Relationships Network Broader Product & Service Offering Effect Increased Buyer Demand Effect Increased Rate of Return Network LSI Delivers Significant Value to Buyers and Sellers Creating a Network Effect 10

11 LSI Solution A Unique Online Auction Marketplace Customer Returns and Shelf Pulls Government Surplus Property Salvage & Scrap Assets 11

12 A Large and Growing Professional Buyer Base Our Professional Buyers Online Power Sellers Discount Retailers Surplus Wholesalers VARS / Refurbishers Import / Export Firms Flea Market Resellers Scrap Recyclers Our Buyer Services Intelligent Alerts Search Tools My Account Tool Online Shipping Quotes Delivery and Shipping Secure Settlement Customer Support LSI Provides the Right Services to Gain Buyer Trust and Satisfaction 12

13 LSI Solution - Integrated Value Added Services Sales Planning and Execution Marketing Intelligence and Merchandising Services Customer Settlement and Transaction Settlement Turn-Key Logistics and Transportation Services LSI s Online Marketplace Solves the Needs of Large Sellers 13

14 LSI Case Study Before After Manual sales methods Online auctions 200 Geographically Dispersed Sales Locations Central marketplace People intensive Automated Processes Narrow Buyer Base Global Buyer Reach Burdensome Reporting Real-time Centralized Reporting 14

15 LSI Case Study Before After Manual sales methods Online auctions Complex Logistics Centralized returns facility Incomplete product information Detailed manifest Narrow Buyer Base Global Buyer Reach Burdensome Reporting Real-time Centralized Reporting 15

16 LSI Solution - Compelling Value Proposition Market Pain Point LSI Solution Client Results Low sales values Access to broad buyer base Enhanced competition Higher Net Returns Insufficient liquidity Logistics constraints Right buyers Informed buying decisions Optimal lot sizes Integrated logistics Inventory management Strong Sell-Through Channel Protection Full Transparency Brand and distribution channel conflicts Limited financial transparency Seller anonymity De-labeling Channel selection Incentive aligned pricing Automated reporting Real-time Aligned Interests Regulatory Compliance 16

17 Strong Seller Relationships Commercial Big Box Retailers Leading E-Tailers Department Store Chains Service Companies Distributors and VARs Manufacturers and OEMs Public Sector Federal Agencies State & Local Agencies International Agencies LSI s Platform Served Over 280 Key Sellers in CY

18 Differentiated Competitive Position ecommerce Players Consumer Focus Single units/small lots New or like-new vintage merchandise Commodity/low margin products Online Amazon ebay Overstock GSI ubid Commerce Yahoo Auctions Competition with brick & mortar Traditional Offline Players Geographically limited customer reach Outdated sales methods Limited tracking and compliance capabilities Misaligned incentives Not scalable solution Offline Consumer Traditional Local Auctioneers Traditional Liquidators Ritchie Brothers Wholesale LSI s Wholesale Focused Online Auction Platform is Highly Differentiated 18

19 Growth Strategy External Acquire Acquire Complementary Complementary Businesses Businesses Innovation Develop Develop and and Enhance Enhance Features Features and and Services Services Expand Expand Advertising Advertising and and Portal Portal Business Business Organic Grow Grow Buyer Buyer Base Base and and Increase Increase Participation Participation Increase Increase Penetration Penetration of of Existing Existing Sellers Sellers Develop Develop New New Seller Seller Relationships Relationships 19

20 Experienced and Committed Management Team Name Position Experience Previous Background Bill Angrick Co-Founder, Chairman & CEO 15 Deutsche Bank Alex Brown Jones Lang LaSalle Jaime Mateus-Tique Co-Founder, President & COO 14 McKinsey & Company Mercer Management Consulting Ben Brown Co-Founder, CTO Government Liquidation 13 Hewlett Packard IBM Jim Rallo CFO and Treasurer 16 Deloitte & Touche Deutsche Bank Alex Brown SSA Grant Thornton Thomas Burton President & COO, Government Liquidation 20 EG&G a division of URS Asad Haroon General Manager, Advertising Solutions 20 Hewlett Packard General Motors Holger Schwarz EVP, General Manager, LSI (UK Surplus) 20 Philips James Williams VP, General Counsel and Corporate Secretary 14 Kirkland & Ellis Wilson Sonsini Goodrich & Rosati LSI Management Will Own Over 50% Following the IPO 20

21 Board of Directors Name Position Experience Background Bill Angrick Co-Founder, Chairman & CEO 15 Deutsche Bank Alex Brown Jones Lang LaSalle Jaime Mateus-Tique Co-Founder, President & COO 14 McKinsey & Company Mercer Management Consulting Phil Clough* Director 23 ABS Capital Partners Sitel Corporation Patrick Gross* Director 39 Capital One AMS Mobius Franklin D. Kramer* Director 37 US DoD Shea & Gardner Changing World Technologies David Fowler* (1) Director 45 KPMG MicroStrategy * Independent Directors. (1) Board Nominee An Independent Board with Significant Public Company Experience 21

22 Jim Rallo Chief Financial Officer

23 Financial Highlights Compelling Business Model Strong Financial Results High Customer Value Multiple, Recurring Revenue Streams Large Average Transaction Values Strong Revenue Growth and Earnings Momentum Expanding Operating and Net Margins 13 Consecutive Quarters of Profitability Diversified Product Mix No Debt Post-Transaction Significant Barriers to Exit as Critical Mass Builds Minimal Capital Expenditures 23

24 Key Operating Metrics Total Register Buyers 386K 415K 69K 78% CAGR 150K 264K 292K '02 '03 '04 '05 Q1 '05 Q1 '06 Total Auction Participants FY Ended 9/30 3 Mos Ended 12/31 Completed Transactions 848K 173K 28% CAGR 552K 671K 24% CAGR 123K 141K 404K 92K 197K 225K 38K 47K '02 '03 '04 '05 Q1 '05 Q1 '06 FY Ended 9/30 3 Mos Ended 12/31 '02 '03 '04 '05 Q1 '05 Q1 '06 FY Ended 9/30 3 Mos Ended 12/31 24

25 Financial Highlights Gross Merchandise Volume Revenue 28% CAGR $72M $89M $102M 26% CAGR $61M $76M $89M $49M $22M 68% $44M $20M 60% $37M $32M '02 '03 '04 '05 Q1 '05 Q1 '06 '02 '03 '04 '05 Q1 '05 Q1 '06 FY Ended 9/30 3 Mos Ended 12/31 FY Ended 9/30 3 Mos Ended 12/31 Multiple, Synergistic Revenue Streams Profit Sharing Model Consignment Model Buyer Premium Fees Pay-Per-Click Fees Pay-Per-Call Fees Display Advertising 25

26 Accelerating Profitability Adjusted EBITDA (1) Adjusted Net Income (2) 39% CAGR $6.1M $6.7M $4.3M $4.1M $2.5M $3.8M 146% $3.2M $0.7M $0.6M 138% $1.5M $1.3M '02 '03 '04 '05 Q1 '05 Q1 '06 $(0.6)M '02 '03 '04 '05 Q1 '05 Q1 '06 FY Ended 9/30 3 Mos Ended 12/31 FY Ended 9/30 3 Mos Ended 12/31 (1) Fiscal years EBITDA includes adjustments for stock-based compensation and a portion of certain acquisition payments. See slide #29 for a reconciliation to Net Income. (2) Fiscal years 2002, 2003 and 2004 Net Income includes adjustments to eliminate the impact of certain acquisition payments. See slide #29 for a reconciliation to Net Income. 26

27 Strong Balance Sheet Proforma As of December 31, 2005 Actual As Adjusted Cash, cash equivalents and shortterm investments $15,196 $55,196 Working capital 5,613 46,253 Total assets 31,854 71,854 Total liabilities 18,740 14,439 Series C preferred stock 3 - Common stock Total stockholders' equity $12,406 $57,415 27

28 Operating Model FY 2005 Q1 FY2006 Revenue 100% 100% Cost of Goods Sold 6% 7% Profit-Sharing Distributions 55% 56% Technology and Operations 17% 13% Sales and Marketing 6% 6% General and Administration 8% 8% Depreciation and Amortization 1% 1% Operating Margin 7% 9% Net Margin 5% 5% EBITDA Margin 7% 10% See slide #29 for a reconciliation to Net Income 28

29 Reconciliation of Financial Data ($000 s) Three months ended Year ended September 30, December 31, Net income $2,776 $5,269 $4,122 $618 $1,468 Interest expense and other income, net Provision for income taxes , Amortization of contract intangibles 1, Depreciation and amortization EBITDA $5,845 $6,962 $6,579 $1,222 $3,166 Stock compensation expense Adjustment (2,095) (932) Adjusted EBITDA $3,750 $6,115 $6,666 $1,288 $3,167 Three months ended Year ended September 30, December 31, Profit-sharing distributions $30,427 $39,718 $48,952 $10,985 $18,170 Adjustment 2, Adjusted profit-sharing distributions $32,522 $40,650 $48,952 $10,985 $18,170 Net income $2,776 $5,269 $4,122 $618 $1,468 Adjustment (2,095) (932) Adjusted net income $681 $4,337 $4,122 $618 $1,468 29

30 Investment Highlights Innovative B2B Internet Auction Leader Large and Growing Market Opportunity Compelling Customer Value Proposition Extensive Base of Buyers and Sellers with a Network Effect Proven Track Record of Growth and Profitability Strong Growth Prospects with Key Competitive Advantages Committed Team; Board with Strong Public Company Experience 30