Climb Global Solutions, Inc. (NASDAQ:CLMB) (“Climb”, the “Company”,
“we”, or “our”), a value-added global IT channel company providing
unique sales and distribution solutions for innovative technology
vendors, is reporting results for the third quarter ended September
30, 2023.
Third Quarter 2023 Summary vs. Same Year-Ago
Quarter
- Net sales increased 3% to $78.5 million.
- Adjusted gross billings (a non-GAAP financial measure defined
below) increased 7% to $281.9 million.
- Net income increased 6% to $2.4 million or $0.52 per diluted
share.
- Adjusted EBITDA (a non-GAAP financial measure defined below)
increased 2% to $5.1 million.
Management Commentary
“We continue to make steady progress on our core
initiatives, as reflected by another period of organic growth and
profitability in the third quarter, along with our recent
acquisition of DataSolutions,” said CEO Dale Foster. “Throughout
Q3, we added 3 innovative vendors to our line card while growing
our market share in Europe. Despite broader challenges in the
macroenvironment and global uncertainty, our vendor pipeline
remains strong and we believe that customer sentiment for 2024
continues to be positive. We are monitoring the evolving
macroeconomic landscape and believe we are well-positioned to drive
growth for our customers and vendors as we scale our global
presence.
“Subsequent to quarter end, we acquired
Ireland-based IT distributor DataSolutions, adding complimentary
scale and depth to our European operations alongside 14 blue-chip
vendor partnerships. DataSolutions brings cutting-edge technology
vendors under the Climb umbrella as well as a robust recurring
revenue base, as more than 90% of its fiscal 2023 revenue came from
existing partners. We look forward to unlocking additional
synergies and cross-selling opportunities as we integrate
DataSolutions into our financial and operating systems in the
months ahead. We intend to continue identifying acquisition
opportunities that are immediately accretive to our line card and
financial profile, both in the U.S. and abroad.”
Dividend
Subsequent to quarter end, on October 31, 2023,
Climb’s Board of Directors declared a quarterly dividend of $0.17
per share of its common stock payable on November 17, 2023, to
shareholders of record on November 13, 2023.
Third Quarter 2023 Financial Results
Net sales in the third quarter of 2023 increased
3% to $78.5 million compared to $76.3 million for the same period
in 2022. This reflects organic growth from new and existing
vendors. In addition, adjusted gross billings in the third quarter
of 2023 increased 7% to $281.9 million compared to $264.3 million
in the year-ago period.
Gross profit in the third quarter of 2023
increased 6% to $14.3 million compared to $13.5 million for the
same period in 2022. The increase was primarily driven by organic
growth from new vendors and the Company’s top 20 vendors in both
North America and Europe. This was partly offset by several
customers taking advantage of early-pay discounts compared to the
year-ago period.
Selling, general, and administrative
(“SG&A”) expenses in the third quarter of 2023 were $10.1
million compared to $8.9 million in the year-ago period. SG&A
as a percentage of net sales was 12.9% compared to 11.7% in the
same period in 2022. SG&A as a percentage of adjusted gross
billings was 3.6% for the third quarter of 2023 compared to 3.4% in
the year-ago period. The increase was primarily attributed to
investments in the Company’s infrastructure to drive future growth,
including new personnel, costs related to its new ERP system, and
employee training and development. In addition, SG&A was
impacted by increased professional service fees and other costs
that are non-recurring related to the Company’s acquisition of
DataSolutions Holdings Limited in October 2023.
Net income in the third quarter of 2023
increased 6% to $2.4 million or $0.52 per diluted share, compared
to $2.2 million or $0.50 per diluted share for the same period in
2022. The Company’s earnings per diluted share in the third quarter
of 2023 was negatively impacted by $0.02 in FX and $0.06 in fees
associated with the acquisition of DataSolutions Holdings
Limited.
Adjusted EBITDA in the third quarter of 2023
increased 2% to $5.1 million compared to $4.9 million for the same
period in 2022. The increase was driven by the aforementioned
organic growth. This was partly offset by investments in the
Company’s infrastructure and costs associated with the acquisition
of DataSolutions Holdings Limited. Effective margin, which is
defined as adjusted EBITDA as a percentage of gross profit, was
35.5% compared to 36.6% for the same period in 2022.
On September 30, 2023, cash and cash equivalents
were $49.8 million compared to $20.2 million on December 31, 2022,
while working capital increased by $5.2 million during this period.
The increase in cash was primarily attributed to the timing of
receivable collections and payables, particularly as more customers
have utilized early-pay discounts. Climb had $1.4 million of
outstanding debt on September 30, 2023, with no borrowings
outstanding under its $50 million revolving credit facility.
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 2, 2023, at 8:30 a.m. Eastern time to discuss
its results for the third quarter ended September 30, 2023.
Climb management will host the conference call,
followed by a question-and-answer period.
Date: Thursday, November 2, 2023Time: 8:30 a.m. Eastern
timeDial-in registration link: hereLive 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 innovative technologies. Climb
operates across the US, Canada and Europe through multiple business
units, including Climb Channel Solutions, Grey Matter and Cloud
Know How. The Company provides IT distribution and solutions for
companies in the Security, Data Management, Connectivity, Storage
& HCI, Virtualization & Cloud, and Software & ALM
industries.
Additional information can be found by visiting
www.climbglobalsolutions.com.
Non-GAAP Financial Measures
Climb Global Solutions uses non-GAAP financial
measures, including adjusted gross billings, adjusted net income
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 ”look forward,”
“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, our ability to recognize the anticipated
benefits of the acquisition of DataSolutions, 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. 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, 2022, and from time to
time in the Company’s filings with the Securities and Exchange
Commission.
Company Contact
Drew ClarkChief Financial Officer(732)
389-0932Drew@ClimbGS.com
Investor Relations Contact
Sean Mansouri, CFAElevate IR(720)
330-2829CLMB@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, 2023 |
|
December 31, 2022 |
|
|
|
|
ASSETS |
|
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
49,778 |
|
|
$ |
20,245 |
|
Accounts receivable, net of allowance for doubtful accounts of $740
and $842, respectively |
|
126,331 |
|
|
|
154,596 |
|
Inventory, net |
|
2,518 |
|
|
|
4,766 |
|
Vendor prepayments and advances |
|
— |
|
|
|
890 |
|
Prepaid expenses and other current assets |
|
5,399 |
|
|
|
4,141 |
|
Total current assets |
|
184,026 |
|
|
|
184,638 |
|
|
|
|
|
Equipment and leasehold
improvements, net |
|
7,307 |
|
|
|
3,515 |
|
Goodwill |
|
19,010 |
|
|
|
18,963 |
|
Other intangibles, net |
|
18,309 |
|
|
|
19,693 |
|
Right-of-use assets, net |
|
933 |
|
|
|
1,235 |
|
Accounts receivable long-term,
net |
|
1,172 |
|
|
|
3,114 |
|
Other assets |
|
1,160 |
|
|
|
350 |
|
Deferred income tax
assets |
|
448 |
|
|
|
348 |
|
|
|
|
|
Total assets |
$ |
232,365 |
|
|
$ |
231,856 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued expenses |
$ |
154,895 |
|
|
$ |
160,650 |
|
Lease liability, current portion |
|
442 |
|
|
|
521 |
|
Term loan, current portion |
|
535 |
|
|
|
520 |
|
Total current liabilities |
|
155,872 |
|
|
|
161,691 |
|
|
|
|
|
Lease liability, net of current portion |
|
977 |
|
|
|
1,296 |
|
Deferred income tax liabilities |
|
4,135 |
|
|
|
4,137 |
|
Term loan, net of current portion |
|
889 |
|
|
|
1,292 |
|
Non-current liabilities |
|
2,870 |
|
|
|
2,866 |
|
|
|
|
|
Total liabilities |
|
164,743 |
|
|
|
171,282 |
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
Common stock, $.01 par value; 10,000,000 shares authorized,
5,284,500 shares issued, and 4,579,628 and 4,478,432 shares
outstanding , respectively |
|
53 |
|
|
|
53 |
|
Additional paid-in capital |
|
33,895 |
|
|
|
32,715 |
|
Treasury stock, at cost, 704,872 and 806,068 shares,
respectively |
|
(12,357 |
) |
|
|
(13,230 |
) |
Retained earnings |
|
48,724 |
|
|
|
43,904 |
|
Accumulated other comprehensive loss |
|
(2,693 |
) |
|
|
(2,868 |
) |
Total stockholders'
equity |
|
67,622 |
|
|
|
60,574 |
|
Total liabilities and
stockholders' equity |
$ |
232,365 |
|
|
$ |
231,856 |
|
|
|
|
|
|
|
|
|
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, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Net Sales |
$ |
245,229 |
|
|
$ |
215,443 |
|
|
$ |
78,457 |
|
|
$ |
76,261 |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
202,053 |
|
|
|
177,459 |
|
|
|
64,183 |
|
|
|
62,744 |
|
|
|
|
|
|
|
|
|
Gross profit |
|
43,176 |
|
|
|
37,984 |
|
|
|
14,274 |
|
|
|
13,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
31,930 |
|
|
|
25,026 |
|
|
|
10,122 |
|
|
|
8,922 |
|
Depreciation &
amortization expense |
|
1,934 |
|
|
|
1,357 |
|
|
|
617 |
|
|
|
555 |
|
Acquisition related costs |
|
277 |
|
|
|
445 |
|
|
|
246 |
|
|
|
365 |
|
Total selling, general and
administrative expenses |
|
34,141 |
|
|
|
26,828 |
|
|
|
10,985 |
|
|
|
9,842 |
|
|
|
|
|
|
|
|
|
Income from operations |
|
9,035 |
|
|
|
11,156 |
|
|
|
3,289 |
|
|
|
3,675 |
|
|
|
|
|
|
|
|
|
Interest, net |
|
760 |
|
|
|
40 |
|
|
|
318 |
|
|
|
58 |
|
Foreign currency transaction
gain (loss) |
|
(100 |
) |
|
|
(799 |
) |
|
|
(140 |
) |
|
|
(500 |
) |
Income before provision for
income taxes |
|
9,695 |
|
|
|
10,397 |
|
|
|
3,467 |
|
|
|
3,233 |
|
Provision for income
taxes |
|
2,618 |
|
|
|
2,662 |
|
|
|
1,095 |
|
|
|
999 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
7,077 |
|
|
$ |
7,735 |
|
|
$ |
2,372 |
|
|
$ |
2,234 |
|
|
|
|
|
|
|
|
|
Income per common share -
Basic |
$ |
1.57 |
|
|
$ |
1.74 |
|
|
$ |
0.52 |
|
|
$ |
0.50 |
|
Income per common share -
Diluted |
$ |
1.57 |
|
|
$ |
1.74 |
|
|
$ |
0.52 |
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding - Basic |
|
4,392 |
|
|
|
4,323 |
|
|
|
4,414 |
|
|
|
4,340 |
|
Weighted average common shares
outstanding - Diluted |
|
4,392 |
|
|
|
4,323 |
|
|
|
4,414 |
|
|
|
4,340 |
|
|
|
|
|
|
|
|
|
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) (1):
|
Nine months ended |
|
Three months ended |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net
sales |
$ |
245,229 |
|
|
$ |
215,443 |
|
|
$ |
78,457 |
|
|
$ |
76,261 |
|
Costs
of sales related to sales where the Company is an agent |
|
618,110 |
|
|
|
529,371 |
|
|
|
203,458 |
|
|
|
188,043 |
|
Adjusted gross billings (Non-GAAP) |
$ |
863,339 |
|
|
$ |
744,814 |
|
|
$ |
281,915 |
|
|
$ |
264,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 (Non-GAAP) (2):
|
Nine months ended |
|
Three months ended |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
7,077 |
|
|
$ |
7,735 |
|
|
$ |
2,372 |
|
|
$ |
2,234 |
|
Provision for income taxes |
|
2,618 |
|
|
|
2,662 |
|
|
|
1,095 |
|
|
|
999 |
|
Depreciation and amortization |
|
1,934 |
|
|
|
1,357 |
|
|
|
617 |
|
|
|
555 |
|
Interest expense |
|
94 |
|
|
|
55 |
|
|
|
45 |
|
|
|
15 |
|
EBITDA |
|
11,723 |
|
|
|
11,809 |
|
|
|
4,129 |
|
|
|
3,803 |
|
Share-based compensation |
|
3,422 |
|
|
|
1,491 |
|
|
|
687 |
|
|
|
777 |
|
Acquisition related costs |
|
277 |
|
|
|
445 |
|
|
|
246 |
|
|
|
365 |
|
Adjusted EBITDA |
$ |
15,422 |
|
|
$ |
13,745 |
|
|
$ |
5,062 |
|
|
$ |
4,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
Three months ended |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
Components of
interest, net |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Amortization of discount on accounts receivable with extended
payment terms |
$ |
(41 |
) |
|
$ |
(42 |
) |
|
$ |
(12 |
) |
|
$ |
(33 |
) |
Interest income |
|
(813 |
) |
|
|
(53 |
) |
|
|
(351 |
) |
|
|
(40 |
) |
Interest expense |
|
94 |
|
|
|
55 |
|
|
|
45 |
|
|
|
15 |
|
Interest, net |
$ |
(760 |
) |
|
$ |
(40 |
) |
|
$ |
(318 |
) |
|
$ |
(58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) We define adjusted EBITDA, as net income,
plus provision for income taxes, depreciation, amortization,
share-based compensation 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.
The table below presents net income reconciled
to net income excluding one-time CEO stock grant (Non-GAAP)
(3):
|
Nine months ended |
|
Three months ended |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
7,077 |
|
|
$ |
7,735 |
|
|
$ |
2,372 |
|
|
$ |
2,234 |
|
One-time CEO stock grant |
|
1,796 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net income excluding one-time
CEO stock grant |
$ |
8,873 |
|
|
$ |
7,735 |
|
|
$ |
2,372 |
|
|
$ |
2,234 |
|
|
|
|
|
|
|
|
|
Net income excluding one-time
CEO stock grant per common share - diluted |
$ |
1.98 |
|
|
$ |
1.74 |
|
|
$ |
0.52 |
|
|
$ |
0.50 |
|
|
|
|
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(3) We define net income excluding one-time CEO
stock grant as net income, plus the stock compensation expense
recognized for the one-time CEO stock grant. We provided a
reconciliation of net income excluding one-time CEO stock grant to
net income, which is the most directly comparable U.S. GAAP
measures. We use net income excluding one-time CEO stock grant as a
supplemental measure of our performance to gain insight into
comparison of our businesses profitability when compared to the
prior year. Our use of net income excluding one-time CEO stock
grant has limitations, and you should not consider it in isolation
or as a substitute for analysis of our financial results as
reported under U.S. GAAP. In addition, other companies, including
companies in our industry, might calculate one-time CEO stock
grant, or similarly titled measures differently, which may reduce
their usefulness as comparative measures.
Climb Global Solutions (NASDAQ:CLMB)
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