Climb Global Solutions, Inc.
Q4 2021 Earnings Call Transcript

Published: 3 Mar 2022

[Operator:]

Good morning, everyone, and thank you for participating in today's conference call to discuss Wayside Technology Group's financial results for the fourth quarter and full year ended December 31, 2021. Joining us today are Wayside's CEO, Mr. Dale Foster; the company's CFO, Mr. Drew Clark; and the company's Investor Relations adviser, Mr. Sean Mansouri with Elevate IR. By now, everyone should have access to the fourth quarter and full year 2021 earnings press release, which was issued yesterday afternoon approximately at 4

[Sean Mansouri:]

Thank you. Before I introduce Dale, I'd like to remind listeners that certain comments made on this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause our actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements. Our presentation also includes certain non-GAAP financial measures, including adjusted gross billings and adjusted EBITDA as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measure in accordance with SEC rules. You'll find reconciliation charts and other important information in the earnings press release and Form 8-K we furnished to the SEC yesterday. I'll now turn the call over to Wayside's CEO, Dale Foster.

[Dale Foster:]

Thank you, Sean, and good morning, everyone. 2021 was a record year for Wayside as we generated record financial results across all of our key financial metrics, including adjusted gross billings, net sales, gross profit, EPS and adjusted EBITDA. The same applies to our fourth quarter results as we closed out the year on a very strong note. As we introduced last year, our growth initiatives fall into 3 buckets

[Drew Clark:]

Thank you, Dale, and good morning, everyone. As Dale just noted, we're excited to have Greg join our Board and look forward to working with him and the entire board as we continue to grow Wayside through our organic growth and acquisition strategies. As we review our operating results, I want to remind everyone that all the comparisons and variance commentary refer to the prior year quarter unless otherwise specified. As reported in our earnings press release, adjusted gross billings, a non-GAAP measure, increased 16% to $262.1 million compared to $226.4 million in the year ago quarter. We generated strong organic growth of 12% or $25.1 million, with incremental contributions of $10.6 million from CDF. Net sales in the fourth quarter of 2021 increased 6% to $75.5 million compared to $71.4 million. This reflects both continued organic growth and the benefit from the acquisition of CDF. Excluding the acquisition, we increased net sales by $2.8 million year-over-year, with CDF contributing an estimated $1.3 million. As we've noted before, the ASC 606 adjustment to calculate net sales from adjusted gross billings is impacted by our vendor and product mix. CDF has a larger portion of vendors, including the Microsoft CSP Solution for which our role as agent represents a higher component of the economic transaction. In addition, several of our more recent vendors and those with higher growth rates have a larger portion of the billing related to maintenance and support, which is ultimately provided by the vendor and thus not recognized in net sales. Gross profit in the fourth quarter of 2021 increased 20% to a record $12.6 million compared to $10.5 million. Our GP as a percentage of adjusted gross billings increased to 4.8% versus 4.6%, which represented 16.7% of net sales compared to 14.7% in the prior quarter. Again, the increase was driven by organic growth and the addition of $1.2 million from our CDF acquisition. SG&A expenses in the fourth quarter were $8.2 million compared to $7.7 million. SG&A as a percentage of adjusted gross billings declined to 3.1% during the fourth quarter compared to 3.4% in Q4 2020. This trend reinforces Dale's comments on our ability to leverage and scale our investments in the business, including the integration of our acquisitions. Another record for the company was net income generated in the fourth quarter of 2021, which increased 36% to $3.4 million or $0.78 per diluted share compared to $2.5 million or $0.58 per diluted share in the prior year quarter. Adjusted EBITDA in the fourth quarter increased 17% to $5.1 million compared to $4.4 million. The increase was driven by the organic growth, improved operating leverage and CDF acquisition benefits. Effective margin, defined as adjusted EBITDA as a percentage of gross profit, was 40.7% in the fourth quarter of 2021 compared to 41.4% in the year ago quarter. However, I would like to point out the quarterly trend in 2021 continued to improve as we increased our effective margin from 37.4% in Q3 and 32.0% in Q2. This is an excellent barometer of our ability to grow and deliver an increasing amount of the incremental GP to earnings. With regard to our balance sheet, cash and cash equivalents held flat at $29.3 million as of December 31, 2021 compared to the same period in the prior year. While working capital increased by $8.6 million during this period, we continue to remain debt free with no outstanding borrowings under either our USD 20 million or GBP 8 million credit facilities. As Dale previously noted, we are actively pursuing M&A opportunities and our cash position, working capital and leverage free balance sheet puts us in a position of strength as we move forward. On March 1, our Board of Directors declared a quarterly dividend of $0.17 per share of common stock. The dividend is payable on March 18 to shareholders of record as of March 14. As we look ahead into 2022, our strong liquidity position continues to provide us with the flexibility to execute on both our organic and inorganic growth strategies, as I just noted a moment ago in addition to allowing us to expand our relationships with new vendor networks and customers across the globe. This concludes our prepared remarks, and we'll now open it up for questions from those participating in the call. Operator, I'll turn the meeting back over to you. Thank you.

[Operator:]

[Operator Instructions] And our first question comes from the line of Howard Roop [ph], he's a private investor.

[Operator:]

And our next question comes from the line of Bob Sales with LMK Capital Management.

[Operator:]

And I'm showing no further questions at this time. And I would like to hand the conference back over to Dale Foster for any further remarks.

[Dale Foster:]

Thank you, operator, and thanks again for everyone that's watching us, the Wayside family. I'd like to give everybody a little insights, what's going on in the company. We had our sales kick-off last week. We had everybody in-person, over 100 people. I think we had over 40 vendor reps in person, so it was great to see everybody. And the energy is there. I think some of it's from getting out of your houses and moving around a little bit more. So just a great energy, setting up plans for 2022. We see just some great growth opportunities that we're going to capitalize on. And I talked to my Wayside family that works every day that we have shareholders, we have employees, customers and vendors, all considered stakeholders. So I appreciate the stakeholders in the company and watching us. And with that, we can finish the call. Thank you.

[Operator:]

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.