Liquidity Services, Inc. 17th Annual Midwest IDEAS Conference

Hi, everyone. Thank you for being here. We're delighted to welcome Bill Angrick, founder and CEO of Liquidity Services.

Hi, Bill. Thanks. Thank you, Jean, and the Three Part Advisors team.

We've got a really interesting business that is a 27-year overnight success story that we founded in the mercurial times of the late '90s. Liquidity Services is a marketplace platform driving value for a variety of corporate and government sellers and small businesses, end users, and consumers. We do this through our own proprietary software, algorithms which take advantage of the data we generate, and our transactional e-commerce platform. We're very differentiated from traditional e-commerce in that everything that comes through our marketplace has an original owner that no longer needs that asset. So we're selling used equipment. We're selling consumer return goods. We're doing this around the world. We're doing it at scale. We're the leader in this vertical. I think in the era of AI, having a differentiated lane in e-commerce has never been more important.

We sell one of one items. Each item has a sort of a unique provenance, chain of custody, images, and descriptions that make it essential for buyers to be on our platform to do their diligence, to complete the transaction, to do the financial settlement, and that gives us tremendous retention and conversion. On the other side of that, we utilize answer engines and organic traffic to drive a continuous interest in this circular economy platform that we operate. We have a prestigious roster of clients that have been with us for many years, selling everything you'd see in the industrial supply chain, anything you'd see in any municipal setting to maintain and power cities, roads, bridges, first responders, port authorities, power generation and water utilities, publicly funded universities, and retail supply chain.

Any asset that you can imagine has likely been sold in our marketplace, whether it's been in your home, your lawn and garden, your home fitness center, your business, any IT asset. It's all flowing through this supply chain that we handle, and we have tremendous buyer liquidity and rules that eliminate fraud for sellers and buyers. So we're the most compliant, scaled, two-sided marketplace for used equipment and inventory in the world. We're continuing to find significant growth in this market we serve. Of course, we built the business the old-fashioned way. We delivered value to our first customer. They had a good experience, and they came back a second time. Through that process, we were building both sides of the marketplace. As we moved into multiple verticals, we became a marketplace of marketplaces.

We make markets in everything from used vehicles, IT assets, consumer household and lawn and garden goods, industrial factory and production equipment, semiconductor equipment feeding the data center, equipment used to manufacture biopharmaceutical and healthcare products and services. We love the idea that our investment in technology and software can be extended into so many interesting markets, providing, over time, a really strong compounding of knowledge, a compounding of process, compounding of machine learning to grow and benefit both sellers, buyers. Everything we sell a few years ago might have been tagged to be discarded as waste. We are finding ways to increase the GDP of all of these supply chains by keeping items in full production and use, as opposed to being recycled or broken down and put in landfills. We try to keep things simple.

We are a founder-led organization that has some key pillars that have allowed us to grow from $100,000 in seed capital to a business that is approaching $2 billion of gross revenue transacted on the platform annually. The first pillar is recovery maximization. People sell with us because they want to realize more value than selling it in the local auction, on Craigslist, on Facebook. That recovery realization is created through better asset descriptions, better trust, the wider and broader buyer base we bring, and the competitive element of dynamic pricing on the platform. We have been able to consistently improve recovery, and in doing so, we benefit our sellers, and we benefit our shareholders because we are taking a share of that gross sales value as our revenue. Increased volume, we leverage the fixed investment in our software, our marketplace platform, our operational processes with more volume.

As we have continued to grow, we have seen increasing scale benefits of that volume being pushed through the same platform. EBITDA margins are accretive as we grow to where we have been. As I mentioned, we touch a lot of interesting markets, all of which provide the ability to collapse more of what the world is doing in the used equipment and circular economy marketplace onto this transparent digital platform that is faster, more transparent, more compliant, and it has been designed as a multi-currency, multilingual platform. We are really just getting started in our international expansion, in the municipal and industrial supply chains, and in our software solutions, which we can talk about in a moment. Service expansion. We are a service business. We are not Liquidity Services technology or software.

We are Liquidity Services because people hire us to solve a problem for them, and we want to make it easy to do business with us. We have multiple pricing models, multiple value-added services. We allow sellers to configure those services in a manner that helps them solve their supply chain needs, not what is good for us. We keep that open, agnostic view of how you want to do business with us, because that is what allows us to have a very strong, curated experience for our sellers and what has given us a very high net promoter score. For those that I have met one-on-one, we talk about our strongest sales organization is our current client base, who refer us again and again to their peers, solving the same needs in public sector, private sector, supply chain arenas. Expense leverage. We leverage our fixed costs. We leverage our R&D. We leverage our learning curve, our data.

We're 16 billion of completed transactions. All of that is leveraged to make us more efficient over time, and AI is a friend of ours. It's allowed us to automate a lot of very manual tasks related to getting one of one snowflake items that have no other peer, get them described accurately, put online with structured data that feeds the answer engines, feeds organic traffic, makes it easy for us to use our algorithms to find out, "You browsed this item. Well, someone like you bought these five other items. You should be seeing those in your feed." There are lots of ways to leverage these fixed investments in a marketplace business model.

I think the interesting part of our business is all the industries we touch with the same solution, and we have a market-leading reputation based on our past performance track record in these industries. We come into every engagement with a proven performance record. People don't have to take it on faith that they'll get great results. We can show them others who've realized great results. That's one of the benefits of being in business as long as we have. When we started, that wasn't necessarily the case. We're really interestingly leveraging that across multiple verticals. For example, real estate. We started this business, and still largely today are selling personal property, vehicles, equipment, inventory, but many of our clients own a lot of real estate and asked us to solve that need for them. We said, "Sure." It's an asset. It can be described. We can market to a large buyer base.

We can collect the money from the buyer. We can validate that they meet whatever terms and conditions you have as a qualified buyer. As we stand here, we're selling major real estate assets on the platform. In the city of Miami, Florida, we're selling the county courthouse, which is ground zero, one of the best development sites in all of Miami, arguably one of the hottest growth markets in the world. That agency, that government entity, wanted us to handle the sale. If you have a chance to check it out, it's a 1920 Art Deco building. Al Capone's trial was there back in the day for tax evasion. It's got a lot of tremendous history, and we've got a very strong buyer appetite for it.

I think the reserve price on that asset is $30 million. We'll be paid a commission on the sale. It's, as you would imagine, very accretive to our bottom line because there's not much more cost to sell a $30 million office building as there is to sell a $10,000 used pickup truck. A little bit of a different data room, but it's very interestingly similar process. The power of the model and the power of the trust we've built is quite important as we scale. Buyers come to us for a few reasons. One, to save money. Two, to get on-demand access to these assets. These assets aren't in a supply chain somewhere waiting for inputs to be completed and then shipped through our port system and subject to tariffs.

If you want that asset and it is on our marketplace and you are the high bidder, you pay us, we settle, you get the asset. In a lot of periods, that is quite valuable when you need a piece of equipment to maintain whatever your business plan is, and we have been able to do that successfully for a long time. Markets get to set the price. There are not artificial reserve prices. Market forces dictate fair prices. We have a meaningful investment in buyer-facing customer service, so if you need a human being to walk you through how to use the system, you can reach somebody. We handle the financial settlement with our buyers, so they are using our rules and extensions to make payment, whether that is wire, ACH, credit card, we handle all of that. We can close the transaction faster.