Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. LIQUIDITY SERVICES INC (1235468) 10-Q published on Aug 01, 2019 at 1:23 pm
Reporting Period: Jun 29, 2019
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), or ASC 326. ASC 326, including all amendments and related guidance, was designed to provide financial statement users with more
useful information about the expected credit losses on financial instruments and other commitments to extend credit. ASC 326 will require estimation of expected credit losses using a methodology that takes into consideration a broad range of reasonable and supportable information. The guidance will be effective for the Company beginning on October 1, 2020, and will be applied on a modified-retrospective basis, with any cumulative-effect adjustment recorded to retained earnings on the adoption date. The Company is in the process of evaluating the impact ASC 326 will have on its consolidated financial statements and expects to estimate credit losses on its financial assets such as its Accounts Receivable, Short-term Investments, and Promissory Note. While the Company has not experienced significant credit losses historically, the materiality of the impact of adoption will depend on events and conditions as of the date of adoption, which cannot be determined conclusively at this time.
Consignment model — fee revenue. Under our consignment transaction model, we enable our Sellers to sell goods they own in our marketplaces and we charge them a commission fee based on the gross or net proceeds received from such sales. The revenue from our consignment transaction model is recognized within the Fee revenue line item on the Consolidated Statements of Operations. Our commission fee revenue, which we refer to as Seller commissions, represents a percentage of the sales price the Buyer pays upon completion of a transaction. We vary the percentage amount of the Seller commission depending on the various value-added services we provide to the Seller to facilitate the transaction. For example, we generally increase the percentage amount of the commission if we take possession, handle, ship, or provide enhanced product information for the merchandise. In most cases, we collect the Seller commission by deducting the appropriate amount from the sales proceeds prior to the distribution to the seller after completion of the transaction. In addition to Seller commissions, we also collect Buyer premiums. Fee Revenue from our consignment model accounted for 30.8% and 30.0% of our total revenue for the three and nine months ended June 30, 2019, respectively. The merchandise sold under our consignment model accounted for 78.2% and 77.5% of our total GMV for the three and nine months ended June 30, 2019, respectively.
Technology and operations expenses. Technology and operations expenses decreased $9.6 million, or 20.1%, due to $6.8 million of reduced operations expenses associated with the Surplus and Scrap Contracts, $2.6 million in lower operation expenses in the CAG segment primarily driven by the effects of the prior period business realignment activity (see Note 11 to the accompanying Notes to the Unaudited Consolidated Financial Statements), and reduced stock-based compensation expense driven by reductions in the fair value of cash-settled stock appreciation rights. Technology and operations expenses for the nine months ended June 30, 2019 includes $0.6 million related to an estimated liability from a sales tax audit being performed by the State of California (see Note 12 to the accompanying Notes to the Unaudited Consolidated Financial Statements). The Company continues to capitalize technology costs associated with its LiquidityOne initiative and other development activities, with a total of $2.8 million costs capitalized during the nine months ended June 30, 2019.
As Senior Vice President and Chief Technology Officer, Mr. Weiskircher will lead the Company’s information technology activities. The Company looks forward to leveraging Mr. Weiskircher’s more than 18 years of experience in the information technology industry. Prior to joining the Company, Mr. Weiskircher worked for GameStop as Vice President, Omnichannel, Marketing, and Digital Technology Delivery from July 2018 through July 2019. Prior to that, Mr. Weiskircher worked for ThinkGeek as Chief Information Officer/Acting General Manager from February 2013 through July 2018. Mr. Weiskircher has also been employed as Chief Information Officer at Fanatics, Inc. and as Vice President, Information Technology at Crutchfield Corporation. Mr. Weiskircher served as a Captain in the U.S. Army Signal Corps.
Mr. Weiskircher’s base salary will be $320,000 and his target bonus percentage will be 50% of his base salary. In connection with his appointment, Mr. Weiskircher will receive an award of 150,000 restricted stock units. Half (75,000) of the restricted stock units will vest, if at all, based on the Company’s achievement of total shareholder return (“TSR”) milestones. TSR is calculated based on the change in the Company’s stock price during the performance period. The other half (75,000) of the restricted stock units will vest over time, with 25% vesting on September 1, 2020 and an additional 25% vesting on each of September 1, 2021, 2022 and 2023, subject to Mr. Weiskircher’s continued employment with the Company. In addition to the initial equity award, Mr. Weiskircher will be eligible for a period of three (3) years for annual equity awards with an approximate value of $160,000. In subsequent years, Mr. Weiskircher will be eligible to receive additional long-term incentive compensation each year as approved by the Company’s Board of Directors. The Executive Employment Agreement by and between the Company and Mr. Weiskircher is attached hereto as Exhibit 10.3.