What happened Shares of Liquidity Services (NASDAQ: LQDT) closed 13.4% lower on Thursday following Wednesday evening's release of solid second-quarter results with a side of weak third-quarter earnings guidance. So what In the second quarter, Liquidity Services saw top-line sales fall 17% lower year over year, to $60.1 million. The company serviced a 7% lower gross merchandise volume. Adjusted net losses shrank from $0.21 to $0.12 per diluted share. The analyst consensus had called for a net loss of $0.14 per share on revenues near $60.2 million, so it was technically a mixed quarter but nearly in line with Street expectations. Looking ahead, the liquidator of surplus inventories and equipment expects non-GAAP third-quarter losses of approximately $0.26 per share. Therein lies the rub, since your average Wall Street analyst was looking for a smaller $0.09 loss per share in the next reporting period. Image source: Liquidity Services. Now what The modest third-quarter estimates assume stronger sales in the government segment. Commercial orders should be roughly in line with the same period of 2017. The recent wind down of an expired surplus contract with the U.S. Department of Defense (DoD) is weighing on Liquidity Services' top line, while the company continues to incur costs related to DoD warehouse closures. In the long run, the company is integrating its marketplaces into a single service and the lost DoD contract was a low-margin deal that will leave room for more profitable operations in its place. The stock had gained 31% year to date before this plunge, thanks to a strong first-quarter report, and investors remain in the black for 2018 so far. Volatility is a fact of life when you're investing in small-cap businesses with unpredictable order flows. 10 stocks we like better than Liquidity ServicesWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.* David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Liquidity Services wasn't one of them! That's right -- they think these 10 stocks are even better buys. Click here to learn about these picks! *Stock Advisor returns as of April 2, 2018Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Liquidity Services. The Motley Fool has a disclosure policy.