UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.   )

Filed by the Registrant ☒

Filed by a Party other than the Registrant  o

Check the appropriate box:

Fellow Stockholders:

We are pleased to invite you to attend the 2019 Annual Meeting of Stockholders of Liquidity Services, Inc. to be held on Thursday, February 21, 2019, at 3:00 p.m., Eastern Time, at the offices of Liquidity Services, Inc. at 6931 Arlington Road, Suite 200, Bethesda, MD 20814.

Details regarding admission to the Annual Meeting and the business to be conducted are more fully described in the accompanying Notice of Annual Meeting of Stockholders and proxy statement.

Your vote is important. Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote over the Internet, by telephone or by mailing a proxy or voting instruction card. Voting over the Internet, by phone or by written proxy will ensure your representation at the Annual Meeting regardless of whether you attend in person. Please review the instructions on the proxy or voting instruction card regarding each voting option.

Thank you for your ongoing support and continued interest in Liquidity Services, Inc.

Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be Held
on February 21, 2019: This Notice of Annual Meeting of Stockholders and Proxy Statement, Annual
Report and Other Proxy Materials are Available at www.envisionreports.com/LQDT.

This Notice of Annual Meeting of Stockholders, proxy statement, proxy card and voting instructions and our 2018 Annual Report are first being mailed on or about January 22, 2019.

LIQUIDITY SERVICES, INC.
6931 ARLINGTON ROAD, SUITE 200, BETHESDA, MD 20814

PROXY STATEMENT

	Why did I receive these proxy materials?
	We are sending you this proxy statement as part of a solicitation by the board of directors of Liquidity Services, Inc. for use at our 2019 Annual Meeting of Stockholders (the “Annual Meeting”) and at any adjournment or postponement that may take place. Unless the context otherwise requires, the terms “us,” “we,” “our” and the “Company” include Liquidity Services, Inc. and its consolidated subsidiaries. The terms “Board of Directors” and “Board” mean the board of directors of the Company.
	You are invited to attend our Annual Meeting on Thursday, February 21, 2019, beginning at 3:00 p.m., Eastern Time. The Annual Meeting will be held at the offices of Liquidity Services, Inc. at 6931 Arlington Road, Suite 200, Bethesda, MD 20814.
	This Notice of Annual Meeting of Stockholders, proxy statement, proxy card and voting instructions and our 2018 Annual Report are first being mailed on or about January 22, 2019.
	Do I need a ticket to attend the Annual Meeting?
	You will need an admission ticket or proof of ownership to enter the Annual Meeting. If you plan to attend the Annual Meeting, please vote your proxy prior to the Annual Meeting but keep the admission ticket and bring it with you to the Annual Meeting.
	If your shares are held beneficially in the name of a broker, bank or other nominee and you plan to attend the Annual Meeting, you must present proof of your ownership of Company common stock as of the close of business on January 8, 2019, such as a bank or brokerage account statement, to be admitted to the Annual Meeting. If you would rather have an admission ticket, you may obtain one in advance by mailing a written request, along with proof of your ownership of Company stock, to:
Liquidity Services, Inc. Attn: Jaclyn Kushman 6931 Arlington Road, Suite 200 Bethesda, MD 20814
	All stockholders also must present a form of personal identification to be admitted to the Annual Meeting.
	No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Annual Meeting.
	Who may vote at the Annual Meeting?
	Holders of Company common stock at the close of business on January 8, 2019 (the “Record Date”) are entitled to receive this Notice and to vote their shares at the Annual Meeting. As of the Record Date, there were 33,193,688 shares of common stock outstanding and entitled to vote. All holders of common stock shall vote together as a single class on each matter properly brought before the Annual Meeting.

The Board is committed to sound and effective corporate governance practices and has adopted a set of guidelines describing the corporate governance principles and procedures by which it functions (the “Corporate Governance Guidelines”). The Corporate Governance and Nominating Committee reviews the Corporate Governance Guidelines periodically, or more frequently as necessary, and recommends changes to the Board as appropriate. Our Corporate Governance Guidelines, and the charter of each of the Audit Committee, Corporate Governance and Nominating Committee and Compensation Committee, are available on our website, www.liquidityservices.com, at “Investors—Corporate Governance—Governance Documents.” Stockholders may request a free copy of these documents by sending a written request to our Corporate Secretary at Liquidity Services, Inc., 6931 Arlington Road, Suite 200, Bethesda, MD 20814.

Among other matters, the Corporate Governance Guidelines address board selection, composition and evaluation, engagement of outside advisors, succession planning and stockholder communication with the Board.

The Board believes it is important to retain the flexibility to select its leadership structure. The Board regularly reviews the Board leadership structure as part of the succession planning process. The Board presently believes that combining the role of Chairman and CEO is in the best interests of the Company and our stockholders and has selected Mr. Angrick for these roles. Mr. Angrick, a co-founder of the Company, has extensive industry experience and knowledge gained through 19 years of hands-on management and engagement with the Company’s senior leaders, employees and business partners, as well as industry influencers. Mr. Angrick has a history of outstanding leadership through both strong and challenging periods as our Chairman and CEO since 2000.

The Board believes that strong, independent Board leadership and oversight is critical to effective corporate governance. The Board has established the position of Lead Director to provide an appropriate balance of leadership among directors in light of the combination of the roles of Chairman and CEO. The Lead Director is an independent director elected for a period of at least one year by the independent directors and whose responsibilities include:

Patrick W. Gross has served as the Lead Director since August 2013.

The Board makes an affirmative determination regarding the independence of each director annually, based upon the recommendation of the Corporate Governance and Nominating Committee. Under the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards, an independent director is a person other than an executive officer or employee of the Company that the Board determines meets the objective standards for “director independence” set forth in the listing standards and is free of any relationship with the Company that, in the Board’s opinion, would interfere with exercising such person’s independent judgment in carrying out the responsibilities of a director. The Board has not established categorical standards or guidelines to use in making these independence determinations but considers all relevant facts and circumstances. In addition, the directors who serve on the Audit Committee each must satisfy SEC standards providing that Audit Committee members may not accept, directly or indirectly, any consulting, advisory or other compensatory fee from the Company other than their director compensation or fixed payments under a retirement plan for prior service. Similarly, in determining whether the directors who serve on the Compensation Committee satisfy independence standards established by Nasdaq for service on that committee, the Board must consider the source of compensation of the member, including any consulting, advisory or other compensatory fee from the Company other than their director compensation or fixed payments under a retirement plan for prior service, as well as whether the member is affiliated with the Company, any of its subsidiaries or any affiliate of its subsidiaries.

The Board has determined that 71.4% of our directors qualify as “independent” under Nasdaq listing standards. Each of Phillip A. Clough, George H. Ellis, Patrick W. Gross, Beatriz V. Infante and Edward J. Kolodzieski qualify as independent directors. Mr. Angrick, our Chairman and CEO, and Mr. Mateus-Tique, our former President and Chief Operating Officer, do not qualify as independent directors under Nasdaq listing standards.

The Board has overall responsibility for oversight of the risks facing the Company. The Board implements its risk oversight function both directly and indirectly through delegation to committees that report back to the Board. For example, the Company is dedicated to managing cyber security risk across all its marketplaces and, accordingly, management of cyber security risk is the responsibility of the Board. Oversight of other risks, such as risks related to accounting and compensation, is delegated to Board committees such as the Audit and Compensation Committees. Overseeing risk is a continuous process.

Risk Considerations in Our Compensation Program. The Company’s management assessed the risk associated with the Company’s compensation programs covering its employees, including executives. Management’s risk assessment considered:

Our bylaws provide that our Board shall consist of at least three members and the exact number of directors will be determined from time to time by resolution of our Board. Our Board currently is composed of seven directors, divided into three classes: Class I, Class II and Class III. The term for each class of directors expires at successive annual meetings. The Class I directors are William P. Angrick, III and Edward J. Kolodzieski, the Class II directors are Phillip A. Clough, George H. Ellis and Jaime Mateus-Tique, and the Class III directors are Patrick W. Gross and Beatriz V. Infante.

The Board met 12 times during fiscal 2018. Each director attended 75% or more of the aggregate of the total number of meetings of the Board held while he or she was a director and of each standing committee on which he or she served while he or she was a member of that committee. Our directors are encouraged to attend each Annual Meeting of Stockholders. All members of our Board attended the 2018 Annual Meeting.

The table below provides membership information for the Board and each standing committee of the Board as of the date of this proxy statement.

Under its Charter, the Audit Committee meets at least four times per fiscal year, including periodic meetings in executive session with the Company’s management and independent registered public accounting firm, and reports regularly to the full Board on its activities. Specifically, the Audit Committee is responsible for:

The Audit Committee met 5 times during fiscal 2018.

The members of the Audit Committee as of the date of this proxy statement are Mr. Ellis (Chair), Mr. Gross and Ms. Infante. The Board has determined that each is independent, as defined by the Company’s director independence standards and Nasdaq and SEC rules, and that Mr. Ellis is an “audit committee financial expert” for purposes of SEC rules.

Under its Charter, the Corporate Governance and Nominating Committee is responsible for:

The Corporate Governance and Nominating Committee is also responsible for overseeing enterprise risk management at the Company throughout the year to focus the Board and management on identifying and managing the risks across the entire Company.

The Corporate Governance and Nominating Committee met 5 times during fiscal 2018.

The members of the Corporate Governance and Nominating Committee as of the date of this proxy statement are Messrs. Clough (Chair), Gross and Kolodzieski. The Board has determined that each of the members of the Corporate Governance and Nominating Committee is independent, as defined by the Company’s director independence standards and Nasdaq rules.

The Corporate Governance and Nominating Committee believes that candidates for director should have certain minimum qualifications, including the highest level of personal and professional ethics and integrity, sound judgment, the ability to make independent analytical inquiries, the willingness to devote adequate time and resources to diligently perform Board duties and appropriate and relevant business experience and acumen. The Corporate Governance and Nominating Committee evaluates candidates for the Board based on these qualifications, and seeks to diversify strengths and backgrounds on the Board, including members with specific industry experience and familiarity with general issues affecting our business, as discussed in more detail under “Item 1—Election of Directors” below. The Corporate Governance and Nominating Committee also considers the number of other boards of public companies on which the candidate serves.

The Corporate Governance and Nominating Committee uses a variety of methods to identify and evaluate candidates for director. Candidates may come to the attention of the Corporate Governance and Nominating Committee through current Board members, the CEO, professional search firms (to whom we pay a fee), stockholders or other persons. The Company has also sought to identify potential candidates through professional associations such as the National Association of Corporate Directors (“NACD”) and The Boston Club, initiatives such as George Washington University’s On the Board and Stanford Women on Boards, and executive education programs such as Stanford’s Directors’ College. The Corporate Governance and Nominating Committee did not use a professional search firm in fiscal 2018.

The Company’s Corporate Governance Guidelines provide that the Corporate Governance and Nominating Committee will consider candidates for director suggested by our stockholders, provided that the recommendations are made in accordance with the procedures required under our bylaws and described in this proxy statement under the heading “Requirements, Including Deadlines, for Submission of Proxy Proposals, Nomination of Directors and Other Business of Stockholders.” Director candidates recommended by stockholders in accordance with these procedures and who meet the criteria outlined above, in the Corporate Governance and Nominating Committee’s Charter and in our Corporate Governance Guidelines will be evaluated by the Corporate Governance and Nominating Committee in the same manner as other director candidates.

Under its Charter, the Compensation Committee is responsible for:

The Compensation Committee met 6 times in fiscal 2018.

The members of the Compensation Committee as of the date of this proxy statement are Mr. Clough, Ms. Infante (Chair) and Mr. Kolodzieski. The Board has determined that each member of the Compensation Committee is independent, as defined by the Company’s director independence standards and Nasdaq rules.

Our Board has adopted a Code of Conduct applicable to all of our directors, officers and employees in order to protect and promote organization-wide integrity and to enhance the Company’s ability to achieve its mission.

The Code of Conduct embodies general principles such as compliance with laws, acting with honesty and integrity, avoidance of conflicts of interest, maintenance of accurate and timely financial and business records, use of the Company’s assets for legitimate business purposes only, provision and acceptance of gifts to or from customers, suppliers and governments in compliance with law, protecting the Company’s information and dealing fairly with other companies.

All directors, officers, and employees must report violations and suspected violations of the Code of Conduct and any concerns they may have pertaining to non-compliance with the Code of Conduct by following certain procedures described in the Code of Conduct. All reports of suspected Code of Conduct violations will be forwarded to the General Counsel, except for complaints and concerns involving accounting or auditing matters, which will be handled in accordance with procedures established by the Audit Committee.

The Code of Conduct is available on our website, www.liquidityservices.com, at “Investors—Corporate Governance—Governance Documents.” A free printed copy is available to any stockholder who requests it by writing to us at Liquidity Services, Inc., 6931 Arlington Road, Suite 200, Bethesda, MD 20814. We intend to disclose future amendments to certain provisions of the Code of Conduct, or waivers of such provisions granted to executive officers and directors, on our website within four business days following the date of such amendment or waiver.

Stockholders and other interested parties may communicate with the Board by writing c/o the Corporate Secretary, Liquidity Services, Inc., 6931 Arlington Road, Suite 200, Bethesda, MD 20814. Communications intended for a specific director or directors should be addressed to the attention of the relevant individual(s) c/o the Corporate Secretary at the same address.

Our Corporate Secretary will review all correspondence intended for the Board and forward to the Board a summary of such correspondence and a copy of correspondence that, in the opinion of the Corporate Secretary requires the Board’s attention. Directors may at any time review a log, and receive copies, of all correspondence received by the Corporate Secretary that is intended for the Board.

In addition, the Audit Committee has established a procedure for parties to submit concerns regarding what they believe to be questionable accounting, internal accounting controls and auditing matters. Concerns may be reported through our Compliance Hotline at (888) 475-8376. Concerns may be submitted anonymously and confidentially.

Our non-employee directors receive a combination of equity and cash compensation for service as directors. Directors who are employed by the Company (including Mr. Angrick) receive no compensation for their service as directors. The Compensation Committee, in consultation with its independent compensation consultant, periodically reviews non-employee director compensation and recommends changes based on competitive market data.

Non-employee director compensation for fiscal 2018 was the same as fiscal 2017. Each non-employee director received an annual cash retainer of $45,000. Committee chairs received an additional annual cash retainer as follows: $15,000 for the Audit Committee and $7,500 for each of the Compensation Committee and the Corporate Governance and Nominating Committee. The Lead Director received an additional cash retainer of $7,500. All amounts paid to our non-employee directors are paid quarterly in advance. Our non-employee directors may receive payment of their cash retainers in the form of grants of stock options or restricted stock by making an irrevocable one-time annual election. Mr. Gross was the only director to elect to receive payment of his annual cash retainer in the form of restricted stock in fiscal 2018, and no director elected to receive payment of their annual cash retainer in the form of stock options in fiscal 2018. On February 1, 2018, Mr. Gross received 22,692 shares of restricted stock with a grant date fair value of $52,500. All restrictions applicable to the restricted shares received pursuant to this election lapse on February 1, 2019.

Besides a cash retainer, non-employee directors also receive equity-based compensation in the form of stock options and/or restricted stock, as elected by the director and described in further detail below. Annual non-employee director equity awards are generally granted in February and generally vest on the one-year anniversary of the grant date, subject to the director’s continued service with the Company through that date. Stock options granted to non-employee directors expire ten years from the date of grant. Annual cash retainers and equity compensation for new non-employee directors are pro-rated based on when they join the Board during the fiscal year.

For fiscal 2018, each non-employee director received an annual equity award with an aggregate value of $95,000 granted under the Company’s Second Amended and Restated 2006 Omnibus Long-Term Incentive Plan (the “Second A&R Plan”). Such awards vest on February 1, 2019 subject to continued service with the Company through such date. The number of stock options to be granted was determined using the Black-Scholes model. The number of shares of restricted stock to be granted was determined by dividing the value of the award by the closing price of our common stock on the grant date.

Non-employee directors are required to hold a number of shares of our common stock equal to five times the value of his or her annual cash retainer. Each non-employee director has either five years from the implementation of this policy in 2014 or five years after a non-employee director’s appointment to the Board (whichever is later) to satisfy this requirement. Each of our non-employee directors has satisfied or is on track to satisfy this requirement within the applicable timeframe. Directors may not purchase any financial instrument or enter into any transaction that hedges or offsets any decrease in the market value of our common stock (including, but not limited to, prepaid variable forward contracts, equity swaps, collars, or exchange funds).

The non-employee director compensation described above is summarized in the following table:

Non-employee directors are also reimbursed for expenses they incur in attending meetings of the Board or Board committees. As described in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018, in fiscal 2018, the Board formed a special committee to evaluate a shareholder demand letter (the “Special Committee”). Members of the Special Committee also received $1,000 per meeting of the Special Committee.

The following table sets forth the total cash and equity compensation paid to our non-employee directors for their service on the Board and committees of the Board during fiscal 2018:

The following table sets forth information regarding ownership of our common stock as of January 8, 2019, other than as set forth below, by each of our directors and named executive officers, all of our directors and executive officers as a group and the holders of 5% or more of our common stock known to us. The information in this table is based on our records, information filed with the SEC and information provided to us. To our knowledge, except as disclosed in the table below, none of our stockholders hold 5% or more of our common stock. Except as otherwise indicated, (1) each person has sole voting and investment power (or shares such powers with his or her spouse) with respect to the shares set forth in the following table and (2) the business address of each person shown below is 6931 Arlington Road, Suite 200, Bethesda, MD 20814, other than for BlackRock, Inc., Staley Capital Advisers, Inc. and Renaissance Technologies LLC.

Named executive officers must hold a number of shares of our common stock equal to 150% of the executive’s annual base salary except the Chairman and CEO, who must hold common stock equal to 600% of his annual base salary. Each executive officer has either five years from the implementation of this policy in 2014 or five years after his or her date of hire (whichever is later) to satisfy this requirement. Executive officers may not purchase any financial instrument or enter into any transaction that hedges or offsets any decrease in the market value of our common stock (including, but not limited to, prepaid variable forward contracts, equity swaps, collars, or exchange funds).

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors, executive officers and beneficial owners of greater than ten percent of our common stock to file reports of holdings and transactions in the Company’s common stock with the SEC. Based solely on these records, we believe that in fiscal 2018 all persons satisfied these filing requirements on a timely basis.

The Company did not participate in or review any potential related party transactions during fiscal 2018 and there currently are no proposed related party transactions. To be considered a related party transaction under current SEC rules, a transaction must include the Company as a participant, and one of our officers, directors or greater than 5% stockholders or a family member of such person must have a direct or indirect material interest in the transaction. To date, we have not participated in any related party transactions requiring disclosure as such under the SEC disclosure requirements. Should we consider participating in a related party transaction in the future, such transaction would be reviewed and subject to approval by the Audit Committee, in accordance with our written Audit Committee Charter. We have not adopted specific standards that would govern such review.

As a general matter, our written Code of Conduct prohibits conflicts of interest. We consider a conflict of interest to exist when a person’s private interest interferes in any way with the interests of our Company, including: (i) a conflict that makes it difficult for an employee, officer or director to perform his or her work objectively and effectively; (ii) when an employee, officer or director, or any member of his or her family, receives improper personal benefits because of his or her position in or with our Company; or (iii) when an employee, officer or director is engaged in a business or business activity in competition with or injurious to us. The Code of Conduct requires that the General Counsel be consulted with questions about conflicts of interest in addition to requiring that our directors and officers consult with the General Counsel before engaging in any potential conflict of interest transactions.

Our Class I directors, elected at the Annual Meeting of Stockholders in 2016, are William P. Angrick, III and Edward Kolodzieski, and their terms end at this Annual Meeting of Stockholders. Each Class I nominee for director will, if elected, continue in office until our Annual Meeting of Stockholders in 2022 or until the director’s successor has been duly elected and qualified, or until the earlier of the director’s death, resignation or retirement.

If you are a stockholder of record, the proxy holders named on the proxy card intend to vote your proxy for the election of each nominee, unless you indicate on the proxy card that your vote should be withheld from any or all of the nominees. Brokers, banks and other nominees may not vote in the election of directors without instructions from the beneficial owner. Therefore, if your shares are held through a broker, bank or other nominee, they will not be voted in the election of directors unless you affirmatively vote your shares.

Each nominee has consented to be named as a nominee in this proxy statement, and we expect each nominee for election as a director to serve if elected. If any nominee cannot serve, proxies will be voted in favor of the other nominees and may be voted for substitute nominees selected by the Board, unless the Board reduces the number of directors serving on the Board.

In evaluating director candidates, and considering incumbent directors for renomination, the Board and the Corporate Governance and Nominating Committee consider a variety of factors as discussed above under “The Corporate Governance and Nominating Committee.” Among other things, the Board has determined that it is important to have individuals with these skills and experiences on the Board:

The specific qualifications and experience of the individual directors and the nominees and certain other information are set forth on the following pages. For more information on the director nomination process, refer to “The Corporate Governance and Nominating Committee” above.

RECOMMENDATION OF THE BOARD
	Your Board of Directors unanimously recommends a vote FOR the election of William P. Angrick, III and Edward Kolodzieski as directors.

BOARD OF DIRECTORS

Below you can find information, including biographical information, about our executive officers (other than Mr. Angrick, whose biographical information appears above):

Jorge A. Celaya has served as our Executive Vice President and Chief Financial Officer since 2015 where he plays a key role in leading the Company’s ongoing transformation and growth initiatives. Mr. Celaya has more than 25 years of experience in capital markets, financial accounting, operations and strategic transformation with global and publicly held companies in diverse industries. Before joining the Company, he co-founded Avanz Capital, an independent investment firm focused on private equity investing across emerging markets. Before that, Mr. Celaya was Executive Vice President and Chief Financial Officer for both FTI Consulting, a global provider of business restructuring, financial consulting, and e-discovery software and services, and Sitel Corporation, a global provider of business process outsourcing services. From 1990 to October 2003, Mr. Celaya also held various corporate and operating group positions with Schlumberger Ltd. where he worked across multiple industries and sectors both domestically and internationally. Mr. Celaya holds a Bachelor of Arts degree and a Master’s in Business degree from the University of Texas at Austin.

Roger Gravley has served as our Chief Information Officer since December 2017 and as President of GovDeals since 2014. Previously, he was VP of Client Services, GovDeals, from 2009 to 2014. Mr. Gravley was the VP of Professional Services at Information Management Specialists from 1994 to 2009, where he also served on its board of directors from 1998 to 2009. He has also held a number of IT management roles for other leading companies, including Unisys, Litton Computer Services, and Harris Data Systems and served ten years in the U.S. Air Force as a linguist and computer programmer before commencing his career in the private sector.

James M. Rallo has served as President of the Retail Supply Chain Group (RSCG) since February 2014 and President of Capital Assets Group (CAG) since October 2017. Previously, Mr. Rallo was our Chief Financial Officer and Treasurer from February 2005 to August 2015. Before joining the Company, Mr. Rallo served as Chief Financial Officer and Treasurer of Sleep Services of America, Inc. from July 1999 to February 2005. Mr. Rallo served as Vice President of Deutsche Banc Alex. Brown’s Healthcare Investment Banking Group from June 1995 to July 1999. Mr. Rallo holds an M.B.A. from the Smith School of Business at the University of Maryland and a B.S. from Washington and Lee University. Mr. Rallo is a Certified Public Accountant.

Mark A. Shaffer has served as our Vice President, General Counsel and Corporate Secretary since July 2016. Before this role, Mr. Shaffer was Senior Associate General Counsel and Assistant General Counsel from September 2012 to July 2016. Before joining the Company, Mr. Shaffer served as Senior Counsel and Global Compliance Officer for Barnes Group, Inc., an international industrial and aerospace manufacturer and service provider, from June 2010 to August 2012. Before that, he served in other roles at Barnes Group and as Senior Counsel at the law firm of Miller Canfield, where he focused on industrial and automotive mergers and acquisitions and commercial negotiations. Mr. Shaffer also served as Senior Counsel for Kmart Corporation and as an associate at the law firms of LeBoeuf, Lamb, Greene & MacRae LLP and Latham & Watkins LLP. Mr. Shaffer holds a Bachelor of Science in Foreign Service and a Juris Doctorate from Georgetown University.

The Audit Committee has selected Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal 2019.

We are asking our stockholders to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm. Although ratification is not required by our bylaws or otherwise, we are submitting the selection of Ernst & Young LLP to our stockholders for ratification because we value our stockholders’ views on the Company’s independent registered public accounting firm and as a matter of good corporate practice. If our stockholders fail to ratify the selection, the Audit Committee will review its future selection of the independent registered public accounting firm. Even if this selection is ratified, pursuant to the Sarbanes-Oxley Act of 2002, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm and may determine to change the firm selected at such time and based on such factors as it determines to be appropriate.

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting to answer appropriate questions. They also will have the opportunity to make a statement if they desire to do so.

RECOMMENDATION OF THE BOARD
	Your Board of Directors unanimously recommends a vote FOR the ratification of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2019.

Audit and Non-Audit Fees

The following table presents fees for professional audit services rendered by Ernst & Young LLP for the audit of the Company’s annual financial statements for the fiscal years ended September 30, 2018, and September 30, 2017, and for fees billed for other services rendered by Ernst & Young LLP during those periods.

Under its Charter, Audit Committee policy and applicable law, the Audit Committee pre-approves all audit and permissible non-audit services to be provided by our independent registered public accounting firm, including audit services, audit-related services, tax services and other services. The Audit Committee has delegated authority to the Chair of the Audit Committee in some cases to pre-approve the provision of services by our independent registered public accounting firm, which pre-approvals the Chair then communicates to the full Audit Committee. To avoid potential conflicts of interest, the law prohibits a publicly traded company from obtaining certain non-audit services from its independent registered public accounting firm. We obtain these services from other service providers as needed.

The Company’s management team is responsible for the Company’s financial statements, internal controls and financial reporting process. The Company’s independent registered public accounting firm, Ernst & Young LLP, is responsible for auditing the financial statements and for expressing an opinion as to whether those audited financial statements fairly present, in all material respects, the financial position, results of operations and cash flows of the Company in conformity with U.S. generally accepted accounting principles. The Audit Committee was established for the purpose of representing and assisting the Board in overseeing the Company’s accounting and financial reporting processes and audits of the Company’s annual financial statements, including the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory authority requirements, the independent registered public accounting firm’s qualifications and independence and the performance of the Company’s independent registered public accounting firm. The members of the Audit Committee are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent registered public accounting firm.

In this context, the Audit Committee has reviewed and discussed the audited financial statements with management. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by PCAOB Ethics and Independence Rule 3526, “Communication with Audit Committees Concerning Independence” and the matters required to be discussed by PCAOB Auditing Standard 1301. The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the audit committee concerning independence, and has discussed with the independent registered public accounting firm its independence.

Based upon the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2018 for filing with the Securities and Exchange Commission. The Board of Directors approved including the audited financial statements in the Company’s Annual Report.

The Audit Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate the Audit Committee Report by reference therein.

We are asking stockholders to approve an advisory resolution on the Company’s executive compensation as reported in this proxy statement. As described below in the “Compensation Discussion and Analysis” section of this proxy statement, the Compensation Committee’s goals in setting executive compensation are to support the attainment of our short- and long-term financial and strategic objectives, reward executives for continuous growth in earnings and stockholder value, and align executives’ interests with those of our stockholders. To achieve these goals, our executive compensation structure emphasizes performance-based compensation, including annual incentive compensation and stock-based awards with multi-year vesting schedules.

We urge stockholders to read the “Compensation Discussion and Analysis,” beginning on page 29 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, appearing on page 48 through page 63, which provide detailed information on the compensation of our named executive officers. The Board and the Compensation Committee believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reflects and supports these compensation policies and procedures.

In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, stockholders will be asked at the Annual Meeting to approve the following advisory resolution:

RESOLVED, that the stockholders of Liquidity Services, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers described in the Compensation Discussion and Analysis and disclosed in the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2019 Annual Meeting of Stockholders.

This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.

The Board has adopted a policy of providing for annual “say-on-pay” advisory votes. Unless the Board modifies its policy on the frequency of holding “say-on-pay” advisory votes, the next “say-on-pay” advisory vote will occur in 2020.

RECOMMENDATION OF THE BOARD
	Your Board of Directors unanimously recommends a vote FOR the advisory resolution on executive compensation.

EXECUTIVE COMPENSATION

This section describes our compensation strategy, programs and practices for these executive officers during fiscal 2018:

In this proxy statement, we refer to these individuals as our named executive officers or NEOs.

The Compensation Committee believes in a "pay-for-performance" approach to executive compensation that aligns executive compensation with shareholder interests. This means that a significant portion of an executive's compensation should be at risk and may vary from "targeted" compensation based upon the level of achievement of specified performance objectives. Our pay for performance executive compensation philosophy and the elements of our executive compensation program with regard to fiscal 2018 are summarized below:

long-term incentive awards for the named executive officers other than Mr. Angrick is approximately 21% of the targeted value of their annual incentive awards and for Mr. Angrick is approximately 32% of the targeted value of such awards.

Our fiscal 2018 business and financial performance, combined with several important operational developments, significantly impacted the design of our 2018 executive compensation program and the timing of decisions related to such program. In fiscal 2018, we achieved some notable financial and operational milestones, including:

For fiscal 2018, we achieved consolidated, commercial adjusted EBITDA and gross profit levels that exceeded threshold performance levels under our incentive programs, resulting in payouts to our named executive officers as described in additional detail below. The exception to this is the combined performance of our RSCG and CAG segments, which achieved commercial margin growth levels that fell short of the threshold level, resulting in no payout to Mr. Rallo with respect to the commercial margin growth goal.

Best Practices

Our approach to executive compensation incorporates these best practices:

☑ The Compensation Committee receives objective advice from an independent compensation consultant, Radford, an Aon Hewitt company.

☑ Our Board has adopted a clawback policy applicable to all cash incentive payments and performance-based equity awards granted to our executive officers.

☑ Our named executive officers are not entitled to any “single trigger” equity acceleration with a change in control.

☑ All named executive officers must own Company common stock equal to 150% of their annual base salaries (or, for the CEO, 600%).

☑ We do not provide excise tax gross-ups to any of our executive officers.

“Say-on-Pay” Advisory Vote on Executive Compensation

We asked stockholders to vote on a “say-on-pay” advisory vote on our executive compensation in 2018 at the 2018 Annual Meeting of Stockholders. Stockholders expressed substantial support for the compensation of our named executive officers, with approximately 98% of the votes cast for the “say-on-pay” advisory vote. The Compensation Committee carefully evaluated the results of the 2018 advisory vote at its February 28, 2018 meeting. The Compensation Committee also considers many other factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Compensation Committee’s assessment of total stockholder return, the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer group and survey data, each of which is evaluated in the context of the Compensation Committee’s fiduciary duty to act as the directors determine to be in stockholders’ best interests. While each factor bore on the Compensation Committee’s decisions regarding our named executive officers’ compensation, the Compensation Committee made no changes to our executive compensation program and policies because of the 2018 “say-on-pay” advisory vote.

General Compensation Philosophy

The Company’s executive compensation program is designed to:

To achieve these objectives, the Compensation Committee uses a variety of compensation elements:

Factors Considered When Determining Compensation. The Compensation Committee seeks to set executive compensation at competitive levels that the Compensation Committee considers appropriate for a company of our size and stage of growth. Annually, the Compensation Committee determines and approves the total compensation level of each of our named executive officers based on its evaluation of external market conditions, Company performance and each named executive officer’s individual performance relative to pre-established performance goals and objectives. The Compensation Committee also considers each executive’s level of experience, unique skills and abilities critical to the Company, and the executive’s tenure, position and responsibilities with the Company. The Compensation Committee considers recommendations from the Chairman and CEO regarding levels for base salary, annual incentive awards and long-term incentive awards for named executive officers. The Chairman and CEO annually provides to the Compensation Committee historical and prospective breakdowns of the total direct compensation components for each named executive officer. The Chairman and CEO also recommends financial and non-financial performance goals for each named executive officer under the annual cash incentive compensation plan.

Pay Mix. Because our named executive officers are in a position to directly influence our performance, a significant portion of their compensation is delivered in the form of annual cash incentive award and long-term incentive compensation. We rely on a mix of compensation components intended to reward short-term results (in the form of annual cash incentive awards) and motivate long-term performance (in the form of option and restricted stock unit grants that vest over several years). We do not have a specific allocation target between cash and equity-based compensation or between annual and long-term incentive compensation. Instead, we retain the flexibility when determining the compensation mix to react to our evolving business environment and our specific hiring and retention requirements. In fiscal 2018, approximately 37% or more of each of our named executive officer’s target total direct compensation, including approximately 60% of the target total direct compensation for the Chairman and CEO, was performance-based or tied directly to the performance of our stock (in the form of target annual cash incentive awards, stock options and restricted stock unit awards), consistent with our compensation philosophy to link executive compensation with stockholder returns and achievement of strategic business objectives.

Market Data. The Compensation Committee has engaged on an annual basis a leading industry compensation consultant to assess the market competitiveness of our executive compensation program so our program attracts and retains executive talent essential to achieve our business plans. For fiscal 2018, the Compensation Committee engaged Radford, which is a part of Aon plc, to assess the market competitiveness of our executive compensation program and to evaluate and set fiscal 2018 executive compensation levels. The Compensation Committee considered these six factors regarding Radford:

Based on the foregoing factors, our Compensation Committee has concluded that no conflict of interest exists regarding its engagement of Radford.

The scope of Radford’s work included a review of the Company’s executive compensation practices, assistance with development of an appropriate peer group, and presentation to the Compensation Committee of a report regarding executive compensation trends for similarly sized companies and the market competitiveness of our executive compensation program. Radford was engaged directly by the Compensation Committee and provided no services to the Company other than the executive and director compensation consulting services described above.

To assist the Compensation Committee in its market review for fiscal 2018, the Compensation Committee’s compensation consultant prepared an analysis of the market competitiveness of the aggregate value of total direct compensation (base salary, annual incentive bonus and long-term incentives) and the market competitiveness of each element of compensation for each named executive officer. The market review was based upon two different sources of compensation data provided by Radford—the Radford Global Technology Survey and publicly available market data from a selected peer group of e-commerce companies. The Radford Global Technology Survey is a national survey that contains compensation data for high-technology sector companies. The survey data was used as a market reference to assess how the Company’s compensation practices for top executives compare to market practices and to confirm that the overall compensation mix is reasonably aligned with the marketplace.

The peer companies utilized in Radford’s fiscal 2018 review were updated in fiscal 2018 by Radford with input from the Compensation Committee and approved by the Compensation Committee. The peer group was developed using several criteria as a guide (for example, company size, net income, growth, location, internet presence and technology focus) and included 18 companies, with revenues ranging from approximately $112.7 million to $1.125 billion. At the time of the fiscal 2018 review, we were at the 44^th percentile of the peer group for revenue, the 6^th percentile for operating income and the 33^rd percentile for market capitalization. The peer group companies for the fiscal 2018 review were:

Five companies, American Software, Care.com, Leaf Group, Rosetta Stone and The Rubicon Project, were added to the peer group for the fiscal 2018 review based on, among other things, their size, revenues, location and technology focus. Five companies, Angie’s List, WebMD, CoStar Group, DXP Enterprises, and Sotherby’s, were removed from the peer group because they were no longer comparable to the Company.

The Compensation Committee considers the market data in setting compensation levels but does not target or position named executive officer pay levels at a specific percentile level relative to the peer group. Rather, the Compensation Committee reviews total direct compensation and the mix of the compensation components relative to the peer group as one factor in determining if compensation is adequate to attract and retain qualified executive officers. The compensation decisions specific to each component of total direct compensation for the named executive officers are discussed below.

Purpose. Salaries for named executive officers are designed to be competitive when compared with prevailing market rates. The Compensation Committee bases salaries on a variety of factors, including level of responsibility, performance and the recommendations of the Chairman and CEO. The Compensation Committee utilizes a report of market compensation levels prepared by its independent compensation consultant to evaluate the executives’ base salaries. The Compensation Committee considers the base salary levels of similarly situated executives in the peer group, executive experience and other factors, such as tenure, individual performance and responsibilities.

Base salaries are reviewed annually or at the time of promotion or other changes in responsibilities. In determining whether to award base salary increases, the Compensation Committee considers the Company’s overall business outlook, the Company’s budget, the executive’s individual performance, historical compensation, market compensation levels for comparable positions, internal pay equity and other factors, including any retention concerns. Under the employment agreements in place with our named executive officers, the Compensation Committee may not reduce the salary of a named executive officer downward unless the named executive officer consents to a reduction.

Fiscal 2018 Decisions. In fiscal 2018, Mr. Angrick’s base salary level remained unchanged. This base salary level is below the competitive median range of the proxy and survey data to emphasize the role of long-term equity incentives during a period in which the Company is focused on long-term reinvestment of its earnings. The base salary levels for Messrs. Rallo, Celaya and Gravley increased in fiscal 2018 to provide a base salary level competitive with our peers and to reflect each officer’s experience and tenure. Mr. Shaffer’s base salary for fiscal 2018 was $287,000. Historical data for Mr. Shaffer is not provided because he became a named executive officer in fiscal 2018.

For fiscal 2018, the Compensation Committee approved base salaries in the following amounts for our named executive officers:

Fiscal 2019 Decisions. For fiscal 2019, the Compensation Committee approved base salaries in the following amounts for our named executive officers:

The base salary levels for Messrs. Angrick, Celaya, Gravley and Shaffer increased for fiscal 2019 to provide a base salary level competitive with our peers and to reflect each officer’s experience and tenure. Mr. Rallo voluntarily requested that his base salary level remained unchanged for fiscal 2019 as part of a general freeze on salaries implemented by Mr. Rallo with respect to the CAG business for fiscal 2019.

Purpose. Annual incentive compensation is an “at risk” performance-based cash award designed to motivate our named executive officers to achieve pre-established corporate financial and individual performance objectives consistent with the Company’s strategic plan. Awards under the plan are payable if, and only if, these pre-established objectives are achieved. The Compensation Committee retains the discretion to increase or decrease payouts under the annual cash incentive plan in connection with its review of the Company’s and the executive’s performance during the year. Compensation paid under the plan has varied significantly from year to year. For example, over the last several years, the annual cash incentive award of our Chairman and CEO has ranged from 25% to 99% of his base salary. The annual incentive award plan is also designed to attract and retain key employees by providing our named executive officers with a significant opportunity to earn additional annual cash compensation. The target opportunities of our named executive

officers range from 50% to 150% of base salary, with a maximum opportunity of between 82% and 245% of the base salary. The Compensation Committee strives to set the annual incentive plan target opportunity at the median of the peer group with potential for upper quartile pay based on superior performance of the Company and the individual.

Fiscal 2018 Target Annual Cash Incentive Award Opportunities. At the beginning of each fiscal year, the Compensation Committee establishes the performance goals and target and maximum cash incentive awards for each named executive officer. The Compensation Committee sets each target and maximum cash incentive award as a percentage of each named executive officer’s base salary. The cash incentive ultimately awarded depends on the achievement of performance goals. The “Grants of Plan-Based Awards for Fiscal 2018” table below shows the range of possible payments to each of our named executive officers under the annual incentive award plan in fiscal 2018.

For fiscal 2018, the annual incentive cash award target and maximum award of our named executive officers were:

The Compensation Committee established these target and maximum cash incentive award opportunities based on (1) the relative scope and responsibility of the named executive officer’s position and his respective impact on overall Company performance and (2) comparative compensation data based on the Compensation Committee’s review of the competitive market conducted for fiscal 2018. For fiscal 2018, the target award opportunity for Mr. Angrick was increased to 150% of his base salary because the Compensation Committee recognized that Mr. Angrick’s cash compensation was below the peer group twenty-fifth percentile. The target award opportunity for Mr. Celaya and Mr. Rallo remained the same for fiscal 2018. The target award opportunity for Mr. Gravley decreased to 60% of his base salary due to a performance-based supplemental cash bonus granted to Mr. Gravley during fiscal 2018, which is described in greater detail below. For fiscal 2018, Mr. Shaffer’s target award opportunity was 50% of his base salary.

Supplemental Cash Bonus to Mr. Gravley. In fiscal 2018, the Compensation Committee determined to pay to Mr. Gravley a performance-based supplemental cash bonus in an amount not to exceed $500,000. Fifty percent (50%) of the bonus accrues to Mr. Gravley if he achieves, to the satisfaction of the Chief Executive Officer and the Compensation Committee, the plan to develop and launch into production specific technology solutions relating to the Company’s LiquidityOne Transformation by September 30, 2018 (the “2018 LOT Plan”). The remaining fifty percent of the bonus accrues to Mr. Gravley if he achieves, to the satisfaction of the Chief Executive Officer and the Compensation Committee, the plan to: (i) complete the final remaining elements of the LiquidityOne Transformation; (ii) realize post-LiquidityOne Transformation cost benefits from retiring legacy systems to the extent not already realized; and (iii) develop and launch into production specific additional technology solutions by September 30, 2019 (the “2019 LOT Plan”). The Compensation Committee may waive completion of any portion of the 2018 LOT Plan or the 2019 LOT Plan. The bonus will be paid to Mr. Gravley, to the extent the amount has been approved by the Compensation Committee, by December 31, 2019. If the 2018 LOT Plan or the 2019 LOT Plan changes, the Chief Executive Officer will amend in good faith the schedule and goals on which Mr. Gravley accrues the bonus; however, the Chief Executive Officer may not change the total maximum amount of the bonus or the payment date. If, as of December 31, 2019, Mr. Gravley is no longer employed by the Company or if Mr. Gravley or the Company has given notice to terminate his employment, Mr. Gravley will have no right to the bonus unless such termination is (a) by reason of death or disability, (b) by the Company without cause, or (c) by Mr. Gravley for good reason (as such terms are defined in Mr. Gravley’s employment agreement). In such circumstances, Mr. Gravley will be entitled to the bonus which has already accrued and shall be entitled to such pro rata portion of the unaccrued bonus achieved as reasonably determined by the Chief Executive Officer. As of September 30, 2018, the Compensation Committee determined that Mr. Gravley had achieved 37% of the 2018 LOT Plan.

Fiscal 2018 Performance Goals. At the beginning of the fiscal year, the Compensation Committee established performance goals based on achievement of certain Company financial performance and individual performance objectives. For fiscal 2018, the Compensation Committee determined that awards for our named executive officers would be based on achievement in three areas:

By focusing on these three areas, the Compensation Committee tied annual incentive compensation of our named executive officers to both Company financial performance and individual performance.

For Mr. Angrick, Mr. Celaya and Mr. Shaffer, the gross profit and Consolidated Commercial Adjusted EBITDA goals (the “Company Performance Goals”) are based on results from all marketplaces excluding the Department of Defense surplus and scrap contracts. For Mr. Rallo, the Company Performance Goals are based on gross profit and Contribution Margin Growth results for RSCG and CAG. For Mr. Gravley, the Company Performance Goals are based on results for gross profit and Contribution Margin Growth results of GovDeals. The individual performance goals (the “Individual Performance Goals”) applicable to each of our named executive officers are described in further detail below. Payout for Individual Performance Goals is also subject to minimum financial performance targets. The relative weights assigned to each of the Company Performance Goals (35% to gross profit and 35% to Consolidated Commercial Adjusted EBITDA or Contribution Margin Growth) and to the Individual Performance Goals (30%) for fiscal 2018 are the same for all of our named executive officers.

The gross profit goal focuses on the growth in gross profit from the Company’s marketplaces. The Consolidated Commercial Adjusted EBITDA goal focuses on the growth in EBITDA from the Company’s marketplaces for surplus that does not pertain to the Company’s Department of Defense contracts before allocation of certain expenses. The Compensation Committee selected these metrics as the corporate performance measures because these continue to be key metrics used by management to measure the Company’s business performance.

The gross profit goals for the named executive officers for fiscal 2018 were as set forth in the table below. If the level of achievement was below threshold levels, then no award would be earned with respect to the goal and if maximum levels had been achieved, then the payout for that goal would be capped at 200%.

The Compensation Committee cannot specify the degree of difficulty required to meet the gross profit target goal, but believes that achievement of the target goal would have required substantial and sustained performance by the Company. The target gross profit goal follows the Company’s annual business plan and strategic objectives, and achievement of the target goal required extensive business development efforts, a significant increase in inventory velocity and continued improvement in service levels. As noted below under the heading “Fiscal 2018 Results and Payouts,” the awards were made below target levels in fiscal 2018.

The Consolidated Commercial Adjusted EBITDA goals for Mr. Angrick, Mr. Celaya and Mr. Shaffer for fiscal 2018 were as set forth in the table below. If the level of achievement was below threshold levels, then no award would be earned with respect to the goal and if maximum levels had been achieved, then the payout for that goal would be capped at 180%.

The Compensation Committee cannot specify the degree of difficulty required to meet the Consolidated Commercial Adjusted EBITDA target goal, but believes that achievement of the target goal would have required substantial and sustained performance by the Company. The target Consolidated Commercial Adjusted EBITDA goal is consistent with the Company’s annual business plan and strategic objectives, and achievement of the target goal required extensive business development efforts, a significant increase in inventory velocity and continued improvement in service levels. As noted below under the heading “Fiscal 2018 Results and Payouts,” the awards were made below target levels in fiscal 2018.

With respect to Mr. Rallo, the target Contribution Margin Growth goal with respect to RSCG and CAG for fiscal 2018 was $16 million in year over year growth. If the Company had achieved Contribution Margin Growth with respect to RSCG and CAG of less than $12 million in year-over -year growth, then no award would have been earned with respect to this goal. With respect to Mr. Gravley, the target Contribution Margin Growth goal with respect to GovDeals for fiscal 2018 was 13.2% in year-over-year growth. If the Company had achieved a Contribution Margin Growth with respect to GovDeals of less than 2.4%, then no award would have been earned with respect to this goal. Because we believe disclosure of the exact total contribution margin amounts to which these Contribution Margin Growth targets equate would cause the Company competitive harm by publishing sensitive information that would not otherwise be disclosed, the Company is not disclosing total contribution margin amounts. The Committee cannot specify the degree of difficulty required to meet the Contribution Margin Growth target goal, but believes that achievement of the target goal would have required substantial and sustained performance by the Company. The target Contribution Margin Growth goal is consistent with the Company's annual business plan and strategic objectives, and achievement of the target goal required extensive business development efforts, a significant increase in inventory velocity and continued improvement in service levels.

The Individual Performance Goals established for each of our named executive officers varied based on his relative job responsibilities and emphasized improvement in metrics or operational objectives within the control of each named executive officer. Each of our named executive officers had four to five individual management objectives designed to further the Company’s strategic initiatives, including growth initiatives, improving sales productivity, improving buyer marketing productivity, simplifying organization and streamlining operations, and consolidating processes and systems. To the extent that an objective was determined to be critical to the Company’s strategy and business plan, it may have served as an individual objective of more than one named executive officer.

Our Chairman and Chief Executive Officer’s individual performance was evaluated based on the following individual objectives (which comprised 30% of his total annual award opportunity):

Mr. Rallo’s individual performance was evaluated based on the following individual objectives (which comprised 30% of his total annual award opportunity):

Mr. Gravley’s individual performance was evaluated based on the following individual objectives (which comprised 30% of his total annual award opportunity):

Mr. Celaya’s individual performance was evaluated based on the following individual objectives (which comprised 30% of his total annual award opportunity):

Mr. Shaffer’s individual performance was evaluated based on the following individual objectives (which comprised 30% of his total annual award opportunity):

Payout based on individual performance was subject to minimum financial performance targets. These targets were met in fiscal 2018.

Fiscal 2018 Results and Payouts. At the end of the performance year, our Chairman and CEO assessed the achievement of the Company Performance Goals and the Individual Performance Goals and made a recommendation to the Compensation Committee regarding the annual incentive award payouts. In determining the fiscal 2018 awards, the Compensation Committee assessed the Company’s and each named executive officer’s performance measured against the previously described Company Performance Goals and Individual Performance Goals.

For fiscal 2018, the Company achieved gross profit that exceeded the threshold level but fell short of the target level, resulting in a payout to Mr. Angrick, Mr. Celaya and Mr. Shaffer of 19% of target for this goal. RSCG and CAG also achieved gross profit growth that exceeded the threshold level but fell short of the target level, resulting in a payout to Mr. Rallo of 15% of target for this goal. GovDeals also achieved gross profit growth that exceeded the threshold level but fell short of the target level, resulting in a payout to Mr. Gravley of 32% of target for this goal.

For fiscal 2018, the Company achieved Consolidated Commercial Adjusted EBITDA that exceeded the threshold level but fell short of the target level, resulting in a payout to Mr. Angrick, Mr. Celaya and Mr. Shaffer of 26% of target for this goal. For fiscal 2018, CAG and RSCG achieved Contribution Margin Growth that fell short of the threshold performance levels, resulting in no payouts. For fiscal 2018, GovDeals achieved Contribution Margin Growth that exceeded the target level resulting in a payout to Mr. Gravley of 49% of target for this goal.

Fiscal 2018 results, including individual performance achievement, appear in the table below.

Fiscal 2019 Incentive Award Plan. At its December 2018 meeting, the Compensation Committee determined that fiscal 2019 executive compensation would focus on two financial metrics. The two financial metrics chosen by the Compensation Committee are gross profit and margin growth, each of which will be weighted equally. For Mr. Angrick, Mr. Celaya and Mr. Shaffer, achievement under the gross profit metric will be based on consolidated commercial gross profit. For Mr. Rallo, achievement under the gross profit metric will be based on combined RSCG and commercial CAG gross profit. For Mr. Gravley, achievement under the gross profit metric will be based on GovDeals gross profit. The margin growth metric for all of the named executive officers will be based on consolidated adjusted EBITDA. The annual incentive compensation award targets as a percentage of base salary remained unchanged for each of our named executive officers for fiscal 2019.

For fiscal 2019, the annual incentive cash award target and maximum award of our named executive officers are:

The Compensation Committee increased maximum award percentages of base salaries to reflect that we have a history of setting rigorous performance goals which results in the company paying below target.

Purpose. We grant equity-based compensation to our named executive officers to attract, retain and reward our executives and strengthen the mutuality of interests between our named executive officers and the Company’s stockholders. The Compensation Committee annually determines whether to grant stock options or other equity-based incentives to executives. In making its determinations, the Compensation Committee considers factors such as market data, the executive’s and the Company’s performance in the last year and the results achieved by the executive, the executive’s base salary and the Compensation Committee’s view regarding the future potential of long-term contributions of the executive. Recommendations of the Chairman and CEO are also considered.

The Compensation Committee historically had granted our named executive officers long-term incentive awards in the form of stock options. As of September 30, 2018, 263,749 outstanding and exercisable stock options were older than six years from their grant date. One reason the Company has traditionally granted stock options is because they contribute to our pay for performance philosophy because grantees only receive value from the stock options if there is an increase in the value of the Company’s shares following the date of grant. If our stock price declines, then the stock options will not be of value and may expire before ever being exercised. Based on a stock price of $6.35, the closing price of our common stock on the last trading day of fiscal 2018, approximately 40% of issued equity is “underwater,” so the exercise price for the stock options exceeds $6.35. This represents approximately 2.5% of the Company’s total common stock. Any options that expire unexercised are returned to the share pool under the Second A&R Plan and provided for future grants. The following chart depicts the portion of the Company’s equity overhang that is underwater and which may be potentially returned to the share pool.

As in fiscal 2017, our long-term incentive compensation program in fiscal 2018 provided grants of stock options and restricted stock units under our Second A&R Plan, which has been approved by our stockholders.

The Compensation Committee has historically granted annual equity awards with respect to each fiscal year after financial results are available for the prior fiscal year at a regularly scheduled meeting. As the Compensation Committee’s meeting schedule is established before the start of each fiscal year, the proximity of any award grants to earnings announcements or other market events is coincidental. For annual awards, the Compensation Committee’s policy is to grant options and restricted stock unit awards on the date it approves them. The option exercise price is determined in accordance with the terms of the plan under which the award is granted (generally, the closing price on the date of grant) and cannot be less than the fair market value of our common stock as of that date. Besides annual option awards, our named executive officers may receive stock options in connection with the commencement of employment or upon promotion. In these cases, the exercise price is typically the closing price of our common stock on the date the Compensation Committee approves the award.

Fiscal 2018 Annual Awards. In fiscal 2018, the Compensation Committee granted a mix of time-based stock options and restricted stock unit awards and performance-based stock options and restricted stock unit awards to each of our named executive officers as part of the annual grant for fiscal 2018. Approximately 80% of the equity award value was in the form of stock options (with 60% subject to performance-based vesting terms and 40% subject to time-based vesting terms over four years), and 20% was in the form of restricted stock units (with 60% subject to performance-based vesting terms and 40% subject to time-based vesting terms over four years).

We granted a portion of our annual equity awards in the form of performance-based stock options and restricted stock unit awards in order to incentivize the named executive officers. The Compensation Committee tied vesting to achievement of total shareholder return (“TSR”) milestones. TSR is calculated as total stock appreciation. Dividends paid during the period are assumed to be reinvested in the stock. Historically, the Company has paid no dividends. The following table explains the TSR milestones and vesting: