Climb Global Solutions, Inc.
Q4 2020 Earnings Call Transcript

Published: 2 Mar 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 Fourth Quarter and Full Year Ended December 31, 2020. Joining us today are Wayside CEO, Mr. Dale Foster; and company's CFO, Mr. Michael Vesey; and the company's outside Investor Relations Advisor, Sean Mansouri with Gateway Investor Relations. And by now, everyone should have an access to the fourth quarter of the full-year of 2020 earnings release, which went out yesterday afternoon at approximately 4

[Sean Mansouri:]

Thank you. Before I introduce Dale, I'd like to remind listeners that certain comments made in 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 generally to other risks and uncertainties that are described from time to time and the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which speaks 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, adjusted EBITDAA, net income excluding separation expenses and non-GAAP earnings per share 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 and the earnings released and Form 8-K that we furnished to the SEC yesterday. I'll now turn the call over to wayside CEO Dale Foster. Dale?

[Dale Foster:]

Thank you, Sean, and good morning, everyone. We ended 2020 in a very strong note delivering growth across all our key financial metrics for the fourth quarter. Gross Billings, net sales and gross profit increased to record-levels during the quarter as we maintained our focus on adding new emerging vendors to our line card, integrating CDF and driving additional synergies from our acquisition of Interwork. Both acquisitions are contributing to our top and bottom line and our businesses organically recover from the lows of the pandemic in the second quarter, and we are back on track and executing our growth strategy. And our ability to navigate through the pandemic would not have been possible if were not for the resilience and exceptional support from our employees or customers and vendors across the globe. And we genuinely thank you. Our growth strategy can be broken down into three key initiatives

[Michael Vesey:]

Thanks, Dale, and good morning, everyone. Before we kick things off, I'd like to remind everyone that our financial results include eight months of operating results from Interwork, as well as approximately two months of contribution from the acquisition of CDF, which closed on November 6, 2020. Net sales in the fourth quarter of 2020 increased 17% to $71.4 million compared to the year-ago quarter. The strong quarter reflects the impact of the two acquisitions completed this year, as well as growth within our existing vendor network during this period of seasonal strength in our business. Adjusted gross billings and non-GAAP measure increased 35% to $226.4 million in the fourth quarter of 2020, compared to the year ago quarter. Gross profit in the fourth quarter of 2020 increased 34% to $10.5 million compared to $7.9 million in the year-ago quarter. The increase was primarily attributable to the aforementioned strong net sales growth generated during the quarter. With Interwork fully integrated and CDF already generating meaningful contribution, we expect our acquisitions to continue contributing to our profitability improvements. SG&A expenses in the fourth quarter of 2020 were $7.7 million compared to $5.3 million in the year-ago quarter. As a percentage of net sales, SG&A was 10.8% compared to 8.8% in the year-ago quarter. The increase was primarily driven by acquisition related costs associated with the CDF transaction, the additive expenses of the acquired businesses and increased sales costs as we continue to invest in more personnel to drive future growth. As we grow, we expect SG&A margins to improve as we leverage the resources of our combined organizations. Net income in the fourth quarter of 2020, increased 25% to $2.5 million, or $0.58 cents per diluted share, compared to $2 million or $0.45 cents per diluted share in the year-ago quarter. Adjusted net income, which excludes non-recurring costs related to the unsolicited bid, and the Interwork and CDF acquisitions increased 37% to $2.9 million or $0.69 cents per share, compared to $2.1 million or $0.48 cents per share in the year-ago quarter. In the fourth quarter of 2020, adjusted EBITDA increased 44% to $4.4 million compared to $3 million for the same period in 2019. The increase was primarily driven by the aforementioned growth and gross profit during the quarter resulting from the impact of the businesses we acquired during the year. Effective margin, which is defined as adjusted EBITDA as a percentage of gross profit increased 280 basis points to 41.4%, compared to 38.6% in the year-ago quarter. Cash and cash equivalents increased $29.3 million at December 31, 2020, compared to $15 million at December 31, 2019. We remain debt-free as well. During the fourth quarter, we paid the full $17.4 million net cash purchase price, which excludes working capital and other adjustments for CDF. Even after this payout, our higher cash balance relative to the end of 2019 reflects sustained improvements in working capital resulting from the liquidity benefits of an early paid discount program implemented with one of our large customers during the second quarter. On February 23, 2021, the Board of Directors declared a quarterly dividend of $0.17 cents per share of common stock, payable on March 19, 2021 to shareholders of record on March 12, 2021. As we look ahead through 2021, our continued strong liquidity position provides us with flexibility to execute on our organic and acquisitive growth initiatives. This concludes my prepared remarks. Now, we'll open it up for questions.

[Operator:]

Thank you. [Operator Instructions] And our first question is from the line of [indiscernible], an investor. Your line is now open. Thank you.

[Operator:]

And there are no questions at this time, sir. Turning it back to you, Mr. Foster. Thank you.

[Dale Foster:]

Yes, again, thanks for everybody on the call today and keeping track of us as a company. I'm going to refer back to it's about the team that we're building as the engine of the company going forward. You'll see continued news from us as we go out throughout this year and I'd like to thank all the employees, our Board of Directors, super supportive, and just the teams for during a challenging time, making it work. The biggest thing we're all facing is productivity right now and we got up and down throughout the summer and I think now we've got the optimism that we can soon get to traveling again and really start seeing people, because the relationships should be face-to-face. But with that, again, thank you for the support of the company. I appreciate and I'll turn it back to the operator.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. You may disconnect your line at this time. Thank you for your participation.