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News Breaks
July 10, 2014
11:58 EDTLQDTLiquidity Services tumbles after guidance cut for defense agency change
Shares of surplus and salvage asset auction marketplace Liquidity Services (LQDT) are tumbling after the company lowered its third quarter adjusted earnings per share and EBITDA guidance. WHAT'S NEW: Liquidity Services now sees its Q3 adjusted EPS to be below 28c-34c and sees its Q3 adjusted EBITDA to be below its guidance range of $18M-$21M. Liquidity Services announced that its sales of selected rolling stock and other assets under its Surplus Contract with the U.S. Defense Logistics Agency have ceased at the request of DLA pending further review of the impact of regulatory rules. This action has resulted in the cancellation of selected sales during the June quarter as well as future sales of selected assets. The company noted that the DLA action was unrelated to the company’s performance or conduct and that it expects its Q3 total gross merchandise volume to be within its guidance range of $225M-$250M. WHAT'S NOTABLE: During the company's conference call explaining the DLA surplus property items and its preliminary Q3 results, the company said that the DLA's recent decision to cease the sale of a majority of the rolling stock items is unexpected as it has sold these items for many years. Liquidity Services currently handle the affected rolling stock items under the terms of its DoD surplus contract, which extends through February 2015 including all renewal options. In April, Liquidity Services announced that it withdrew from the live auction bidding for the new DLA rolling stock contract. The company said that bidding reached a level that it determined would be economically unsustainable under the terms of the new contract jeopardizing the high level of service it had historically provided the DLA. Liquidity Services said that it feels the material reduction to the rolling stock property flow caused by DLA's recent actions will require further analysis regarding the viability of a standalone rolling stock program beyond February 2015. At this time, the DLA has not announced the details of a final policy regarding cessation of rolling stock sales covered under its existing DoD surplus contract, or the impact on the future of the rolling stock program. The company said it will continue to work closely with DLA. PRICE ACTION: During late morning trading, shares of Liquidity Services fell $2.18, or 14.8%, to $12.51.
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