Climb Global Solutions, Inc.
Q2 2021 Earnings Call Transcript

Published: 7 Aug 2021

[Operator:]

Good morning, everyone, and thank you for participating in today's Conference Call to discuss Wayside Technology Group's Financial Results for the Second Quarter ended June 30, 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 second quarter 2021 earnings press release, which was issued yesterday afternoon at approximately 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 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 measures 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. With that, I'll turn the call over to Wayside's CEO, Dale Foster.

[Dale Foster:]

Thank you, Sean, and good morning, everyone. Our strong second quarter results reflect the continued focus and execution of both organic and inorganic growth initiatives. We generated exceptional growth across all of key operating and financial metrics during the quarter, along with our two acquisitions from the past year that are driving meaningful improvements in the respective geographies and vendor lines. As we've stated before, we have three core initiatives that drive everything we do

[Drew Clark:]

Dale, thank you for the warm introduction, and I'm absolutely thrilled to be joining the team at such a pivotal time in the Company's history. So let's jump right into our results. I'd like to note that all comparisons and variance commentary referred to the year ago quarter unless otherwise specified. Net sales in the second quarter of 2021 increased 33% to $75.4 million compared to $56.6 million in the prior period. This reflects both the strong organic growth and the benefit from the acquisition of CDF as well as one month of incremental contribution from Interwork, which was acquired in May 2020. Excluding these acquisitions, we increased net sales by $9.8 million or 17% year-over-year, with CDF and Interwork contributing an estimated 6.9 and $2 million, respectively. Adjusted gross billings, a non-GAAP measure, increased 48% to $235.1 million compared to $158.7 million in the prior quarter. Again, we experienced strong organic growth of 28% or $45.2 million, with an estimated contribution of $20.9 million from CDF and $10.3 million from Interwork, which reinforces Dale's earlier comments regarding our continued execution of both organic and inorganic growth strategies. Gross profit in the second quarter of 2021 increased to a record 54% or $11 million compared to $7.1 million in the prior period. Again, the increase was driven by organic growth and the benefit of the CDF and Interwork acquisitions. SG&A expenses in the second quarter were $8.5 million compared to $6.4 million, with the increase primarily related to incremental cost from the operations of CDF and Interwork, as well as costs related to investments in our business that we expect will drive continued growth in the quarters and years ahead. These expenses include $2 million from CDF operations and $300,000 related to increased amortization expense, primarily attributable to our acquisition of CDF in November of 2020. $200,000 employee separation expenses were also part of this increase and core selling expenses associated with the organic growth delivered to the gross profit increases, all of which were offset by last year's non-recurring approximately $500,000 of various expenses, with the defense of the unsolicited bid and $200,000 of acquisition-related costs. As a percentage of net sales, SG&A was 11.3% compared to 11.2%. Net income in the second quarter of 2021 increased approximately 4x to $2.1 million or $0.49 per diluted share compared to $600,000 or $0.13 per diluted share. Adjusted EBITDA in the second quarter increased 68% to $3.5 million compared to $2.1 million. The increase was driven by the aforementioned organic growth and acquisition benefits as well as a strong operating leverage. Effective margin, defined as adjusted EBITDA as a percentage of gross profit increased 270 basis points to 32% in the second quarter of 2021 compared to 29.3% in the prior quarter. Cash and cash equivalents were $23.8 million as of June 30, 2021, compared to $29.3 million as of December 31, 2020. The expected decrease was primarily driven by timing of cash flows, and it's not an indication of any business or operating trend. The Company remains debt-free with no borrowings outstanding under either our USD20 million or GBP8 million U.K. credit facilities, both with Citibank. On August 3rd, our Board of Directors declared a quarterly dividend of $0.17 per share of common stock, payable on August 20th to shareholders of record on August 16, 2021. Looking towards the balance of 2021, our strong liquidity position and our operating cash flow continues to provide us with the flexibility to execute on both our organic and acquisition growth strategies. Despite the strong results of our second quarter, we, as a company, still have work to do to achieve our desired levels of growth and profitability. As we look at the balance of 2021, we see ample growth opportunities to capture and look forward to achieving both our short term and long-term goals, while continuing to build meaningful long term relationships with our customers and vendor network. This concludes our prepared remarks, so we'll now open it up for questions.

[Operator:]

[Operator Instructions] And we have a question from Ed Woo.

[Operator:]

[Operator Instructions] Out next question comes from [Howard Ro].

[Operator:]

And our next question comes from Walter Ramsley.

[Operator:]

We have no further questions at this time. I will turn it over to Dale Foster for final remarks.

[Dale Foster:]

Thanks, operator, and thanks to all the shareholders. Appreciate your support. Thanks for the question there that you put in. We'll definitely reach out to the investor community and just keep updating on what we're doing. And if you have any requests for me hook up with Sean. Thanks to the Board of Directors. Our Boards just got a different look to it, great meetings this week with our Board. And thanks to the employees, everybody's back and charging strong, so appreciate it. And thank you, everybody, again. Appreciate it.

[Operator:]

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.