Climb Global Solutions Reports Third Quarter 2022 Results

Q3 Net Sales Up 11% YoY to $76.3 Million

Sixth Consecutive Quarter of Double-Digit Profitability Improvements

EATONTOWN, N.J., Nov. 02, 2022 (GLOBE NEWSWIRE) -- Climb Global Solutions, Inc. (NASDAQ:CLMB) (“Climb” or the “Company”), a value-added global IT channel company providing innovative sales and distribution solutions for emerging technology vendors, is reporting results for the third quarter ended September 30, 2022.

Third Quarter 2022 Summary vs. Same Year-Ago Quarter

Net sales increased 11% to $76.3 million.
Adjusted gross billings (a non-GAAP financial measure defined below) increased 17% to $264.3 million.
Gross profit increased 19% to $13.5 million.
Net income was $2.2 million or $0.50 per diluted share, compared to $2.4 million or $0.55 per diluted share. Excluding the negative impact of foreign exchange (FX), net income increased 6% to $2.6 million or $0.59 per diluted share.
Adjusted EBITDA (a non-GAAP financial measure defined below) increased 17% to $4.9 million.

Management Commentary

“We continued to execute on our core initiatives during the third quarter, as reflected by the addition of several new marquee vendors to our line card while generating more than 30% organic growth with our top 20 vendors,” said CEO Dale Foster. “The depth of our partnership with our strongest clients continues to serve as a backbone for our business, enabling double-digit growth in adjusted EBITDA for the sixth consecutive quarter.

“In August, we announced the acquisition of EMEA channel distributor, Spinnakar, adding significant scale and expertise to our European operations along with 15 new vendor partners. The Spinnakar team headed by Gerard Brophy is a welcome addition to our Climb family as we continue to enhance our team and capabilities in the EMEA marketplace. As of October, Spinnakar has been fully integrated with our operations and revenue reporting. We remain active in identifying acquisition opportunities that present operating synergies and can immediately grow the depth and breadth of our Company, both here in the U.S. and abroad.

“Earlier this week, we completed our rebrand from Wayside Technology Group to Climb Global Solutions. This new branding will enable us to market the Company more effectively under one unified banner and will simplify our operating matrix, as most vendors and customers already know us as Climb. The change marks another milestone in the lifecycle of our business as we push toward the next chapter of growth and profitability.”

Foster continued: “As we approach the end of 2022, we remain on pace for another record year of performance and look forward to carrying this momentum into 2023, now as Climb Global Solutions.”

Dividend

Subsequent to quarter end, on November 1, 2022, Climb’s board of directors declared a quarterly dividend of $0.17 per share of its common stock payable on November 18, 2022, to shareholders of record on November 14, 2022.

Third Quarter 2022 Financial Results

Net sales in the third quarter of 2022 increased 11% to $76.3 million compared to $68.9 million for the same period in 2021. Excluding the negative impact of FX, net sales increased 12% to $77.5 million. In addition, adjusted gross billings in the third quarter of 2022 increased 17% to $264.3 million compared to $226.9 million for the same period in 2021. This reflects continued organic growth from new and existing vendors, with limited contribution from the Company’s acquisition of Spinnaker in August 2022.

Gross profit in the third quarter of 2022 increased 19% to $13.5 million compared to $11.3 million for the same period in 2021. The increase was primarily driven by organic growth from the Company’s top 20 vendors in both North America and Europe, in addition to the onboarding of new vendors.

Total selling, general, and administrative (“SG&A”) expenses in the third quarter of 2022 were $9.8 million compared to $8.1 million for the same period in 2021. SG&A as a percentage of net sales was 12.9% for the third quarter of 2022 compared to 11.8% in the same period in 2021. SG&A as a percentage of adjusted gross billings was 3.7% for the third quarter of 2022 compared to 3.6%.

Net income in the third quarter of 2022 was $2.2 million or $0.50 per diluted share, compared to $2.4 million or $0.55 per diluted share for the same period in 2021. Excluding the negative impact of FX, net income increased 6% to $2.6 million or $0.59 per diluted share, compared to $2.4 million or $0.55 per diluted share in the year-ago period.

Adjusted EBITDA in the third quarter of 2022 increased 17% to $4.9 million compared to $4.2 million for the same period in 2021. The increase was driven by organic growth from both new and existing vendors.

Net income as a percentage of gross profit for the third quarter of 2022 was 16.5% compared to 21.6% in the year ago quarter. Effective margin, which is defined as adjusted EBITDA as a percentage of gross profit, was 36.6% in the third quarter of 2022 compared to 37.4% for the same period in 2021. All were negatively impacted by the $0.5 million increase in foreign currency transaction loss.

On September 30, 2022, cash and cash equivalents were $24.1 million compared to $29.3 million on December 31, 2021, while working capital decreased by $5.7 million during this period. The Company had $1.9 million of debt on September 30, 2022, with no borrowings outstanding under either its $20 million or £8 million credit facilities.

For more information on the non-GAAP financial measures discussed in this press release, please see the section titled, “Non-GAAP Financial Measures,” and the reconciliations of non-GAAP financial measures to their nearest comparable GAAP financial measures at the end of this press release.

Conference Call

The Company will conduct a conference call tomorrow, November 3, 2022, at 8:30 a.m. Eastern time to discuss its results for the third quarter ended September 30, 2022.

Climb management will host the conference call, followed by a question-and-answer period.

Date: Thursday, November 3, 2022
Time: 8:30 a.m. Eastern time
Dial-in registration link: here
Live webcast registration link: here

If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.

The conference call will also be available for replay on the investor relations section of the Company’s website at www.climbglobalsolutions.com.

About Climb Global Solutions

Climb Global Solutions, Inc. (NASDAQ: CLMB) is a value-added global IT distribution and solutions company specializing in emerging and disruptive technologies. Climb operates across the US, Canada and Europe through multiple business units, including Climb Channel Solutions, Grey Matter and CloudKnowHow. The Company provides IT distribution and solutions for emerging companies in the Security, Data Management, Connectivity, Storage & HCI, Virtualization & Cloud, and Software & ALM industries.

Additional information can be found by visiting at www.climbglobalsolutions.com.

Non-GAAP Financial Measures

Climb Global Solutions uses non-GAAP financial measures, including adjusted gross billings and adjusted EBITDA, as supplemental measures of the performance of the Company’s business. Use of these financial measures has limitations, and you should not consider them in isolation or use them as substitutes for analysis of Climb’s financial results under generally accepted accounting principles in the United States of America (“U.S. GAAP”). The attached tables provide definitions of these measures and a reconciliation of each non-GAAP financial measure to the most nearly comparable measure under U.S. GAAP.

Forward-Looking Statements

The statements in this release, other than statements of historical fact, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to come within the safe harbor protection provided by those sections. These forward-looking statements are subject to certain risks and uncertainties. In this press release, many of the forward-looking statements may be identified by words such as “believes,” “expects,” “intends,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “under construction,” “in development,” “opportunity,” “target,” “outlook,” “maintain,” “continue,” “goal,” “aim,” “commit,” or similar expressions, or when we discuss our priorities, strategy, goals, vision, mission, opportunities, projections, intentions or expectations. Factors, among others, that could cause actual results and events to differ materially from those described in any forward-looking statements include, without limitation, the continued acceptance of the Company’s distribution channel by vendors and customers, the timely availability and acceptance of new products, product mix, market conditions, competitive pricing pressures, the successful integration of acquisitions, contribution of key vendor relationships and support programs, inflation, as well as factors that affect the software industry in general and other factors. Currently, one of the most significant factors, however, is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the Company, the global economy, and financial markets. The extent to which COVID-19 impacts the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, including the impact on the Company’s reseller partners and the end customer markets they serve, among others. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described in the section entitled “Risk Factors” contained in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and from time to time in the Company’s filings with the Securities and Exchange Commission.

Company Contact

Drew Clark
Chief Financial Officer
(732) 389-0932
drew@climbgs.com

Investor Relations Contact

Sean Mansouri, CFA
Elevate IR
(720) 330-2829
CLMB@elevate-ir.com

CLIMB GLOBAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except share and per share amounts)

	September 30, 2022			December 31, 2021

ASSETS

Current assets
Cash and cash equivalents	$	24,052		$	29,272
Accounts receivable, net of allowance for doubtful accounts of $889 and $881, respectively		125,020			122,502
Inventory, net		2,116			2,022
Vendor prepayments and advances		1,413			661
Prepaid expenses and other current assets		3,884			4,871
Total current assets		156,485			159,328

Equipment and leasehold improvements, net		2,659			1,932
Goodwill		17,819			17,188
Other intangibles, net		18,712			9,950
Right-of-use assets, net		1,318			1,628
Accounts receivable long-term, net		1,968			78
Other assets		393			459
Deferred income tax assets		268			189

Total assets	$	199,622		$	190,752

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and accrued expenses	$	136,628		$	134,271
Lease liability, current portion		482			475
Term loan, current portion		515			—
Total current liabilities		137,625			134,746

Lease liability, net of current portion		1,411			1,810
Deferred income tax liabilities		3,922			1,780
Term loan, net of current portion		1,424			—
Non-current liabilities		1,829			—

Total liabilities		146,211			138,336


Stockholders' equity
Common stock, $.01 par value; 10,000,000 shares authorized, 5,284,500 shares
issued, and 4,477,753 and 4,424,672 shares outstanding , respectively		53			53
Additional paid-in capital		32,385			32,087
Treasury stock, at cost, 806,747 and 859,828 shares, respectively		(13,183	)		(13,870	)
Retained earnings		39,893			34,396
Accumulated other comprehensive loss		(5,737	)		(250	)
Total stockholders' equity		53,411			52,416
Total liabilities and stockholders' equity	$	199,622		$	190,752

CLIMB GLOBAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands, except per share data)

	Nine months ended						Three months ended
	September 30,						September 30,
	2022			2021			2022			2021

Net Sales	$	215,443		$	207,074		$	76,261		$	68,911

Cost of sales		177,459			173,934			62,744			57,592

Gross profit		37,984			33,140			13,517			11,319


Selling, general and administrative expenses		25,026			24,312			8,922			7,761
Amortization & depreciation expense		1,357			1,177			555			381
Acquisition related costs		445			-			365			-
Total selling, general and administrative expenses		26,828			25,489			9,842			8,142

Income from operations		11,156			7,651			3,675			3,177

Interest, net		40			362			58			60
Foreign currency transaction loss		(799	)		(107	)		(500	)		(41	)
Income before provision for income taxes		10,397			7,906			3,233			3,196
Provision for income taxes		2,662			2,155			999			756

Net income	$	7,735		$	5,751		$	2,234		$	2,440

Income per common share - Basic	$	1.74		$	1.31		$	0.50		$	0.55
Income per common share - Diluted	$	1.74		$	1.31		$	0.50		$	0.55

Weighted average common shares outstanding - Basic		4,323			4,263			4,340			4,282
Weighted average common shares outstanding - Diluted		4,323			4,263			4,340			4,282

Dividends paid per common share	$	0.51		$	0.51		$	0.17		$	0.17




Reconciliation of GAAP and Non-GAAP Financial Measures (unaudited)
(Amounts in thousands, except per share data)

The table below presents net sales reconciled to adjusted gross billings (Non-GAAP):

	Nine months ended						Three months ended
Adjusted Gross Billings (Non-GAAP) (1)	September 30,			September 30,			September 30,			September 30,
	2022			2021			2022			2021
Net sales	$	215,443		$	207,074		$	76,261		$	68,911
Costs of sales related to sales where the Company is an agent		529,371			465,843			188,043			158,025
Adjusted gross billings (Non-GAAP)	$	744,814		$	672,917		$	264,304		$	226,936

(1) We define adjusted gross billings as net sales in accordance with US GAAP, adjusted for the cost of sales related to sales where the Company is an agent. We provided a reconciliation of adjusted gross billings to net sales, which is the most directly comparable US GAAP measure. We use adjusted gross billings of product and services as a supplemental measure of our performance to gain insight into the volume of business generated by our business, and to analyze the changes to our accounts receivable and accounts payable. Our use of adjusted gross billings of product and services as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under US GAAP. In addition, other companies, including companies in our industry, might calculate adjusted gross billings of product and services or similarly titled measures differently, which may reduce their usefulness as comparative measures.

The table below presents net income reconciled to adjusted EBITDA (2):

	Nine months ended						Three months ended
	September 30,			September 30,			September 30,			September 30,
Net income reconciled to adjusted EBITDA:	2022			2021			2022			2021

Net income	$	7,735		$	5,751		$	2,234		$	2,440
Provision for income taxes		2,662			2,155			999			756
Depreciation and amortization		1,357			1,177			555			381
Interest expense		55			52			15			16
EBITDA		11,809			9,135			3,803			3,593
Share-based compensation		1,491			1,253			777			637
Acquisition related costs		445			-			365			-
Adjusted EBITDA	$	13,745		$	10,388		$	4,945		$	4,230


	Nine months ended						Three months ended
	September 30,			September 30,			September 30,			September 30,
Components of interest, net	2022			2021			2022			2021

Amortization of discount on accounts receivable with extended payment terms	$	(42	)	$	(50	)	$	(33	)	$	(7	)
Interest income		(53	)		(364	)		(40	)		(69	)
Interest expense		55			52			15			16
Interest, net	$	(40	)	$	(362	)	$	(58	)	$	(60	)

(2) We define adjusted EBITDA, as net income, plus provision for income taxes, depreciation, amortization, share-based compensation, acquisition related costs and interest. We define effective margin as adjusted EBITDA as a percentage of gross profit. We provided a reconciliation of adjusted EBITDA to net income, which is the most directly comparable US GAAP measure. We use adjusted EBITDA as a supplemental measure of our performance to gain insight into our businesses profitability when compared to the prior year and our competitors. Adjusted EBITDA is also a component to our financial covenants in our credit facility. Our use of adjusted EBITDA has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under US GAAP. In addition, other companies, including companies in our industry, might calculate adjusted EBITDA, or similarly titled measures differently, which may reduce their usefulness as comparative measures.

Source: Climb Global Solutions, Inc.

Released November 2, 2022

Climb Global Solutions Reports Third Quarter 2022 Results

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