RBC Investor Conference

Transcription

1 RBC Investor Conference

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 do not intend 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 our filings with the Securities and Exchange Commission from time to time. You should be aware that the occurrence of the events described in the Risk Factors section and elsewhere in our periodic reports could harm our business, prospects, operating results, and financial condition. 2

3 Bill Angrick Chief Executive Officer

4 Company Vision The Leading Online Wholesale Marketplace 4

5 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 5

6 A Leading Online Wholesale Platform Powerful Buyer Liquidity for Wholesale Lots 649K professional buyers in 116 countries 1,067K auction participants (LTM) High auction conversion rates Online Auction Marketplaces Complete Solution for Business Market Exclusive Relationships with Important Sellers Superior Merchandising Expertise 893K online B2B auctions since inception 500 individual product categories Deep product marketing experience Strong understanding of buyer needs Advertising Portal Strong Financial Results and Momentum $187MM Revenue & $18.6MM Adj. EBITDA (LTM) 126% YOY growth in commercial business in Q307 Except as noted, all figures as of June 30, See Financial Section for reconciliation of EBITDA to Net Income. 6

7 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 7

8 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 8

9 LSI Solution A Unique Online Auction Marketplace Customer Returns and Shelf Pulls Government Surplus Property Salvage & Scrap Assets 9

10 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 10

11 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 11

12 Strong Commercial Seller Relationships Commercial Sellers Big Box Retailers Leading E-Tailers Department Store Chains Service Companies Distributors and VARs Manufacturers and OEMs Key Growth Drivers Upside sharing/aligned interests Data transparency End-to-end solution Value added services Knowledge and focus Network effects LSI s Serves a Growing Pipeline of Major Commercial Sellers 12

13 Differentiated Competitive Position ecommerce Players Consumer Focus Single units/small lots New or like-new vintage merchandise Online Amazon ebay Overstock GSI ubid Commerce Commodity/low margin products 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 13

14 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 14

15 Jim Rallo Chief Financial Officer

16 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 19 Consecutive Quarters of Profitability Diversified Product Mix Debt Free Significant Barriers to Exit as Critical Mass Builds Minimal Capital Expenditures 16

17 Key Operating Metrics Total Registered Buyers 649K 66% CAGR 264K 386K 524K 489K 69K 150K '02 '03 '04 '05 '06 Q3 '06 Q3 '07 FY Ended 9/30 3 Mos Ended 6/30 Total Auction Participants Completed Transactions 404K 25% CAGR 552K 671K 848K 993K 747K 821K 92K 21% CAGR 123K 141K 173K 194K 146K 155K '02 '03 '04 '05 '06 '06 '07 FY Ended 9/30 9 Mos Ended 6/30 '02 '03 '04 '05 '06 '06 '07 FY Ended 9/30 9 Mos Ended 6/30 17

18 Healthy and Liquid Buyer Marketplace Average Auction Participants Per Completed Transaction Internal 3.0 Goal Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY 2006 FY

19 Financial Highlights Gross Merchandise Volume Revenue 37% CAGR $173M 38% $127M $176M 35% CAGR $148M 36% $108M $147M $49M $72M $102M $89M 34% $62M $47M $44M $61M $89M $76M $39M 36% $53M '02 '03 '04 '05 '06 '06 '07 Q3 '06 Q3 '07 '02 '03 '04 '05 '06 '06 '07 Q3 '06 Q3 '07 FY Ended 9/30 9 Mos Ended 6/30 3 Mos Ended 6/30 FY Ended 9/30 9 Mos Ended 6/30 3 Mos Ended 6/30 Multiple, Synergistic Revenue Streams Profit Sharing Model Consignment Model Buyer Premium Fees Pay-Per-Click Fees 19

20 Commercial Business Growth- Last 21 months Commercial Gross Merchandise Volume 270% Growth 24% Average Sequential Quarterly Growth $20.1M $28.5M $29.0M $7.9M $11.0M $12.8M $11.7M Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY 2006 FY 2007 Seven consecutive quarters of 100%+ YOY growth 20

21 Scrap Business Growth Last 21 Months Scrap Gross Merchandise Volume 120% Growth $13.8M 14% Avg. Sequential Quarterly Growth $12.5M $13.7M $15.3M $7.0M $8.5M $9.9M Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY 2006 FY

22 Diversification and Growth GMV Mix D.O.D. Surplus 46.4% Commercial 46.6% D.O.D. Surplus 27.5% 25.3% D.O.D. Scrap 21.3% D.O.D. Scrap 24.6% International 4.8% International 3.5% Q3 06 Q3 07 Commercial Business is LSI s Largest and Fastest Growing Segment 22

23 Accelerating Profitability Adjusted EBITDA (1) $15.0M 33% $14.6M 57% CAGR $11.0M $6.1M $6.7M 46% $5.8M $2.5M $3.8M $4.0M '02 '03 '04 '05 '06 '06 '07 Q3 '06 Q3 '07 FY Ended 9/30 9 Mos Ended 6/30 3 Mos Ended 6/30 (1) Adjusted EBITDA shown for fiscal years and the interim periods includes adjustments for stock-based compensation and a portion of certain acquisition payments. For the fiscal years ended September 30, 2002, 2003, 2004, 2005 and 2006, Net Income was $1.3M, $2.8M, $5.3M, $4.1M and $8.0M, respectively. For the nine months ended June 30, 2006 and 2007, Net Income was $5.8M and $7.8M, respectively. For the three months ended June 30, 2006, and 2007, Net Income was $2.4M and $3.1M, respectively. See slide #27 for a reconciliation to Net Income. 23

24 Accelerating Profitability Adjusted Net Income (2) $8.4M 46% $8.7M $5.9M $4.4M $4.2M 34% $3.4M $2.5M $(0.6)M $0.7M '02 '03 '04 '05 '06 '06 '07 Q3 '06 Q3 '07 FY Ended 9/30 9 Mos Ended 6/30 3 Mos Ended 6/30 (2) Adjusted EBITDA shown for fiscal years and the interim periods includes adjustments for stock-based compensation and a portion of certain acquisition payments. For the fiscal years ended September 30, 2002, 2003, 2004, 2005 and 2006, Net Income was $1.3M, $2.8M, $5.3M, $4.1M and $8.0M, respectively. For the nine months ended June 30, 2006 and 2007, Net Income was $5.8M and $7.8M, respectively. For the three months ended June 30, 2006, and 2007, Net Income was $2.4M and $3.1M, respectively. See slide #27 for a reconciliation to Net Income. 24

25 Strong Balance Sheet As of June 30, 2007 In Thousands Cash, cash equivalents and shortterm investments $56,091 Working capital 56,794 Total assets 100,434 Total liabilities 22,655 Total stockholders' equity 77,779 25

26 Operating Model Nine Months Ended June 30, Revenue 100.0% 100.0% Cost of Goods Sold 7.8% 22.9% Profit-Sharing Distributions 55.0% 36.7% Technology and Operations 13.1% 16.6% Sales and Marketing 5.9% 6.6% General and Administration 8.4% 8.3% Depreciation and Amortization 1.0% 1.0% Operating Margin 8.8% 7.9% Adjusted Net Margin 5.5% 5.9% Adjusted EBITDA Margin 10.1% 9.9% See slide #27 for a reconciliation to Adjusted EBITDA and Adjusted Net Income 26

27 Reconciliation of Financial Data In Thousands Year ended September 30, Nine Months Ended June 30, Three Months Ended June 30, Net Income $1,324 $2,776 $5,269 $4,122 $7,981 $5,751 $7,840 $2,355 $3,053 Interest (income) expense and other income, n (431) 120 (1,624) (454) (475) Provision for income taxes ,166 5,295 3,654 5,422 1,416 2,134 Amortization of contract intangibles 2,483 1, Depreciation and amortization EBITDA $4,384 $5,845 $6,962 $6,579 $14,385 $10,636 $13,183 $3,699 $5,270 Stock compensation expense Adjustment (1,899) (2,095) (932) Adjusted EBITDA $2,485 $3,750 $6,115 $6,666 $15,008 $10,960 $14,592 $3,962 $5,796 Year ended September 30, Nine Months Ended June 30, Three Months Ended June 30, Profit Sharing distributions $17,717 $30,427 $39,718 $48,952 $80,253 $59,423 $53,869 $20,534 $17,409 Adjustment 1,899 2, Adjusted profit-sharing distributions $19,616 $32,522 $40,650 $48,952 $80,253 $59,423 $53,869 $20,534 $17,409 Net income $1,324 $2,776 $5,269 $4,122 $7,981 $5,751 $7,840 $2,355 $3,053 Stock compensation expense (net of tax) Adjustment (1,899) (2,095) (932) Adjusted net income ($575) $681 $4,422 $4,190 $8,355 $5,945 $8,671 $2,513 $3,363 27

28 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 28