WSTG - Earnings call transcript Q4 2019 | Climb Global Solutions, Inc.

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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, 2019.

Joining us today are Wayside's CEO, Mr. Dale Foster; the company's CFO, Mr. Michael Vesey; the company's Vice President of Alliances for Lifeboat Distribution, Charles Bass; and the company's outside Investor Relations Adviser, Sean Mansouri, with Gateway Investor Relations. By now, everyone should have access to the fourth quarter and full year 2019 earnings release, which went out this morning at approximately 8:30 a.m. Time. Eastern available at Relations waysidetechnology.com. is Technology of the website Group's in release section Investor Wayside The This webcast company's replay is on call also the website. available for a

for Following questions. the we'll management call remarks, open your

to turn introductory some I would now the over Mansouri comments. to call for Mr. like

Sean Mansouri

you, Gene. Thank

date and from made unknown assumptions and to considered from Reform introduce risks statements. with I forward-looking known speak are forward-looking also the reliance company's Securities undertakes place and Litigation revision comments in statements by forward-looking call. filings the of which are uncertainties any to actual of like Except to uncertainties time of as to certain statements conference statements this SEC. release XXXX. the results subject any subject required forward-looking well publicly obligation or call listeners risks that that to time no statements. under Do Before as results of the this not as remind and on only the as Act to are These I'd undue other certain Dale, described in webcast company in are these any forward-looking These statements, that the to those law, cause could differ forward-looking generally materially revise reflected Private

measures measures excluding rules. Our been directly comparable of presentation performance have income, non-GAAP with the billings; in expenses; most separation also non-GAAP as of accordance SEC net includes All certain EBITDA; and supplemental non-GAAP per financial to gross measures, including GAAP our adjusted adjusted reconciled measures earnings business. share

to SEC Form in information X-K this other morning. You'll we find charts and the earnings reconciliation release and the furnished important

shareholders certain are their executive and strongly definitive they intends company, Shareholders. important proxies. connection file in encouraged any advised all become in with filed The of carefully proxy its are Further, as company's proxy company they statement with proxies information. of directors solicitation the when participants and documents please to from in SEC other in XXXX the the statement such entirety Meeting such of contain SEC with read the that Shareholders Annual its will of and the available connection solicitation the with to officers be a

regarding the obtained their security the by filed with forth interests in be statement company's holdings the company's website of SEC the information the XXXX, the filed Information the definitive the for or material free SEC's materials found or other the identity indirect and Invest otherwise the direct SEC. and set XX, will participants can updated on in or section, soliciting by materials and January in can be with proxy through be company's These website. through company

turn that, Dale? call the Dale I'll And over Wayside's with CEO, Foster. to

Dale Foster

new our customers. programs better of alliance a year our our we XXXX in vendor structure execution restructure history. good our refined Thank and began to deepening the align everyone. we our from team double-digit our build-out you, banner the strongest that customers. vendors highly growth incentive and Wayside, by economics across profit to top and strategy. our Sean, This by winning and the team This our profit, vendor of execution the gross and These use of our highlighted also sales line with interests strong was in metric while market to adding new new core approach and sales strategy segments made relationships technology with recruitment, benefited for reflect simple, net which We primary generating year in current is of has XXXX levels emerging our performance. since offerings this the -- net sales, new company first continued both results team our track is of yet XXXX income partners focused gross with morning, for and investments

the I the shift to been strategy the our to a our in sales-driven business. has XXXX, central Lifeboat element company Distribution Since joined organization through

last to and years bottom enabled over consistent X us has both Our to top return on execution of growth line. pivot this the

year as But like then goals come Bass and call before the and discussing to key financials. through the objectives discuss From the and Charles technology quarter further, and for the to will to walk beyond. marketing us highlights. highlights discuss to back for well and the over as I quarter I'd pass year-end our XXXX Mike vendor And there,

will I that, call With the turn Charles Bass. to over

Charles Bass

Thanks, Dale.

the a we strong vendor right ratings onboard to partnership emerging current new targeting offerings. that Scorecard. by our emphasis our provider. complement continue assess Security cybersecurity product to on suite. and with products partners our That's They're brands on Speaking a technology development, broaden effectively reflected our placed We with

As offerings we their excellent security that began Scorecard our many to are to products resell. to introduce partners, found have that they Security complement other

is their Scorecard Security outstanding of products continue current the our we'll cross-selling and recruit of brands that we security So onboard. for just great with see an vendor type to example potential offerings.

last which evaluating been then onboarding high-potential and this diligent on executing in our tech emerging centers marketing our organization with over same begun the strategy. developing We've align new identifying, two and We to partners. years have alliance now strategy,

we marketing believe taken marketing Ultimately, our partners we marketing of sales-enablement Over competitors, services team offering the apart our and and Lifeboat and the commitment a cost-effective approach, when our to from that past win, alliance sets win, our larger it's our goals. this core year, partners. broad, has

like turn Mike? the details Mike Now more over financial provide results. call I'd our to Vesey to to on

Michael Vesey

in to sales fourth compared to Jumping everyone. compared the of to were quarter for in fourth Thanks, TechXtend XX% in fourth Charles, and the $X.X the million million million for $XX.X sales net our fourth the XX% increased same $XX.X segment million. sales compared $XX.X increased period Distribution XXXX Lifeboat morning, million quarter $XX.X net segment XXXX. to Net quarter right $X.X million. to into results. quarter good

a period last measure, same the million fourth to to billings, year. increased the quarter $XXX.X in million XX% for gross compared non-GAAP Adjusted $XXX.X

$X.X in given have that we to revenue unique driven of increase in $X.X business drive in technology new million gauge and to to by our appropriate same said, to for the many million to gross the relationships continuing which The gross growth growth. past, our compared our accounting most adding execution XXXX. X% Lifeboat shareholders was from the in fourth primary in continued profit the current industry. stated With Distribution, our segment, profit, with organic period increased is quarter metric treatments to clients our benefited our vendors As deepen

ago the million in $X.X quarter Total to in quarter. $X.X were SG&A compared million expenses the fourth year

points in a XX.X% in net of increased increase gross compared and SG&A scalability in sales as to by demonstrating profit our field of the proportionate the G&A. presence, to has in XXX business basis to As continue X.X% investments decreased vendor revenue, recruitment expanding made XXXX we percentage we without turn leverage XXXX, a our which

income increased million Net of diluted $X.XX quarter XXXX. share in for diluted the fourth per in XX% the compared period million to same $X to $X.X XXXX per or or share $X.XX

metric our management $X.X driven fourth and organic company adjusted This as to additions, compared operating EBITDA in existing a clients with by increase quarter, EBITDA useful growth quarter, we supplemental and and In prudent million was assess we it vendor efficiencies. million coupled $X.X have adjusted XXXX. new cost to The increased as introduced in the a profitability believe XX% metric, EBITDA adjusted is to value. non-GAAP with

per shareholders is dividend percentage adjusted company profit, to the on which compared basis margin, the period. which share gross payable XXXX, to X, on of record EBITDA increased X of XX, Effective March as points to a declared in XXXX. $X.XX, is defined as February prior XX.X% March XX XX.X% a On of

compared to running to to XX% in segment XXXX segment to in Lifeboat increased results. sales $XXX.X Now sales profit prior total increased to XXXX XXXX. $XX million through to million SG&A net compared X% XX% XX% gross Total our $XXX.X $XX.X million down million $XXX XXXX Gross XX% and to to increased year. Adjusted quickly million. declined net in $XX.X increased and $XX.X full million. the year in billings million, compared million Distribution to sales TechXtend was $XXX

decreased revenue, points of percentage to basis a XXX As SG&A XX.X%.

adjusted in nearly to in income million $X.X profit. excluding gross XXXX income income, million net million net or share of expenses, XX% reflecting million of Non-GAAP compared separation last related departure. increased executive's XXXX -- our separation that $XX.X in $X.X the XX% included increased separation flow-through XXXX expenses million to in taxes from million year. to compared Note $X.XX to and to EBITDA net diluted growth $X.X Net $X.X a $X.X XXXX, per to XX% XX% increased

to $X.XX, declared consistent in to Effective compared the year, in our is business. also prior XX.X% XX was of increased prior further basis the the with year. margin which reflecting Dividend per share points scalability XXXX XX.X%

million compared at December Cash position. liquidity December and sheet were at balance XXXX, strong million XXXX, we cash XXXX. a both and XXXX, maintain $XX.X $XX XX, December XX, debt-free remain at to continue December XX, and We and equivalents XX, to

Also demonstrating we invested of return of business the model. capital a note that year, capital the earned for software XX.X% our on distribution efficiency

and remarks, back I'll Dale. call the turn prepared my to concludes This over

Dale Foster

led some the this X of what highlights for and have in years, Wayside last approximately years. key that strongest Thanks, Mike. as the of has I'd like levels to growth to initiatives we is continued profitability discuss execute and back its many to

incentivize enhancements allows and And previously strategies. have to that sales-focused made sales compensation and positioned we our Wayside changes to customers us go-to-market simulate in closely this the structure better as made XXXX change This our to teams we country. in across organization. fundamental discussed, As further a model our we year, team vendor

a with to company strong mind to in, fourth and Mike is and and vendors. this and core vendor supplement In Keeping cross-sell without new new goal December, in we food. during largest is As continue growth overlay which fast mentioned, verticals. core the our experiencing vendors new existing favorite we healthy a the of generate both naming From existing names, in franchise and believe our we are in both booking we quarter. history Mexican to partners growth perspective, brought onboard

core connectivity, process for deliver of the our in insight in ability gained quality to the place growth today. speaks to like volumes expertise new Our and first time leverage the verticals to in the team our and areas

success our customer customers relationships our with base. has Our overall and significantly our vendors efforts verticals and with added grow current aided new to efforts new -- deepen

of our is this all X these XXXX of results With investments last and clear years. for validity scalability that underscores said, the our it improved

into briefly last N&W get I year. XXXX, I'd received we for discuss key Before proposal to the like unsolicited from Group objectives

Krochuk On a to subject certain acquire Kaplan Webster conditions. from $XX.XX at XXXX, unsolicited North & proposal company share, received preliminary per to XX, December Shepherd we and the

Stifel, expired N&W extensive financial a engaged as with members their to adviser the inbound communicated XX, discuss serve XXXX, This took and engaging best and our Group the of their Group's occasions for February bid. offer management, on the Board Board discussed Although thorough of including the measures or as to not did was the inquiry N&W on and principles was on diligence bid review -- to XXXX. determined Board to proposal, advisers, multiple After Wayside act N&W in the the not Corporation evaluate XX, further of basis of expired Stifel Group the and shareholders discussion. to a expired December interest the with a Financial Directors Board. consultation

The in receiving increasing receiving management months shareholder the constructive input open long-term our goal our the always as for their value. prior dialogue with has Board to several team of Board engaged are toward to constructive and N&W proposal

XXXX. in to Group of Additionally, regular our Relations Gateway Board program. and at an the shareholder the engagement fourth robust further ongoing commitment quarter engaged Investor building This team demonstrates

as mentioned, X As month. I the of last just innings next CEO years ago growth. of team is over early Wayside and in joined the over took its I stage

pretax our for to income. past. are accelerate this opportunities of many from the results, bottom to on see not evaluated company double-digit towards growth significant inflection can portion has us has with in in business gross also our the profit There are flowing You line, top our M&A, we us generating an both that moving which growth growth through and through the in

get last to X to I our this for declining years, to even their at want work the growth. embark off times. flat their the I'd on shareholders continue performance as and evolution for the thank I point. while at Wayside over we to of thank dedication believe also patience next this will company pay us had your to like to teams hard patience

and a been to very like of for the my strategic We Directors our them. go-forward day I'd knowledge board I a have company. running M&A, lockstep entrusting me been took now with with and pleasure in of has It over. Lastly, have the from expertise They thank in Board compliance, to industry-specific planning. supportive finance, deep plans work

XXXX, and our verticals this the our Lifeboat our As to sustainable, newer carry through we delivering we business. product Distribution growth growth will while year verticals, strong a momentum connectivity. presence in through and perspective, drive From continue profitable in deepen look like cloud to we to plan core

for through We income. growth will we in our gross profit model, scalability a of significant capital also to M&A and believe terms remain and we to with strategic allocation can flow opportunistic in in continue that pretax our opportunities of portion business

We look our forward delivering the all to Wayside to further in XXXX many strategy value executing shareholders on and years and ahead.

this open we'll up for Operator, you. Thank questions. now

Operator

our And Ed from Instructions]. first question Capital. come Woo [Operator Ascendiant will from

Edward Woo

or Was particular next do in particular quarter. you any had is strong Congratulations. the any any to of particular it momentum year? vertical continue into very think segment? guys growth or to Obviously, kind you going fourth it product What drive

Dale Foster

for we need partners want new doing technology to that say instead just do out of sell day, to that question. our get look deeper Ed, and we are that -- customers. Thanks, X not every can with multiple is what customers. product products It's add, to multiple customer continuing X always then vendors, We there to and the it's at software we

on going distributor, we we stop, a as we to company. have. continuing And specialty we're doing what just as deeper So the this keep with that right? going as executing grow to want just it's We're not and a doing strategy keep customers

Edward Woo

into been that next a Will consider opportunities in the of business in you're it, M&A Has will areas you the And question you past? now? an consider? kind if strategy mentioned are Great. opportunities. expansion considering have And that the pretty you is, then or what you areas I new much

Dale Foster

company we last, only really, XX don't something I they for into of over years at. lot to years. If rolled plate two a to Yes. back market. were an look the the can space. targets, on XX if think look at been the for years. to distribution it's have the A you talk targets look the adjacent over been that's would I fit the XX definitely last strategy up our It's last in

to look at that's continue in it's at market, look lines. way at would and something something business. something close we're we everybody that go in talks in. So won't adjacent software the alignment about an outside cloud in market we're But or market looking We the in those going we're at look The of to because we're as well.

team something So management board and has that yes, it's the about definitely looked at, it we talk all here, almost in meetings. the the

Operator

Your next Zenith from of Josh from the Sterling. Peters comes question line

Joshua Peters

you should my to from progress of Wanted dollars a better is profit be the gross say, sales I of talk also in than I gross kind to here. I Quite we basis versus that terms business perspective offer trajectory analytical decline to are gross or profit agree the more want margin -- going to definitely business in of revenue. a or turnaround time? about an that, the the evaluate rather profit. traditional congratulations. to it's assuming continue over on But assuming billings should that of

Michael Vesey

answer Josh, it are in higher we is Mike. of this may. the nature. products percentage distribute The is, now A that digital

are products, products. there network licenses management subscriptions more software of and a for those security, So renewals lot of products,

bottom delivering some license renewing is, extra we the And of an healthy those line bring and that us of are to segments to fact evolving in of the cost So can a of and way software each it incremental industry. growth products. comparatively a percentage of segments look really the And profitably, low grow our dollar is at growth positive. is new to the the the license we and legacy these or participate the growth

really why the in may past. sure hardware-based than be the make trying people to a margins the market advantage grow opportunity to at legacy that's lower we're make percentage of along look products So ability while money of with the our some take to vibrant and

Joshua Peters

extent, in receivables, last here number really return mean, business few line, net has helpful. I in more receivables going receivables net that the gross And that the absorbed the a it's stays billings tie The payables investment to investment a a grown time. back obviously, That's that sales or Because is or dollar line And that growing then large is, opposed investment. with up in growth the capital, profit you've the I is to eat to dollars? fear -- that restrain on dollars got Okay. big want as receivables number gross it net number. by offset Can profit lot capital. as pretty significant it current the growth but years, looks in like the to at to operating still over Lifeboat line it's so going least the you here long-term my of into to with of profit

Michael Vesey

Yes.

is a between between So terms customers. and relationship pricing our our suppliers both and there

to that invest we that's and in we based the at And return view EBITDA that, we're we we manage our the that and beauty continually to capital-light, some look is the it need any is And getting then our that. at our of approximate less capital also adequate. interest, we evaluate it taxes point time, business point we'd in the a if from make expect sure have So that business. on free business it cash or flow in of

approximate can level capital long maybe both then earnings the year, and term, not the also the even tax. acceptable So think get that's but we business every flow have in not free we return working manage from Or of to necessarily every over quarter. the less cash our

Joshua Peters

Okay.

here you're grow approximate implies a income, cash for on clear I to that that because I'm working point flow correctly? this even from Am really understanding investing not free forward, think net that going revenue. continuing I pretty forward so point as additional that's that, capital important Just that you're to

Michael Vesey

could some. minimal, it But up in should time, next year. the There It be okay? over be would make you

our be So expect in we it increase income. don't of percentage a the high to net

Joshua Peters

of agree on the of honestly, additional And the too sorts at value can you other or I But this. looked have standpoint low. long-term a in insight the then provide of other techniques. the I for rejection to businesses out to evaluating similar finally, of there communicate I get Okay. shareholder, my of you're multiples or the you little terms you N&W think, how thoughts. offer. I into the comparable was limited may just that about And What business? what offer any know valuation be a may thinking you round insight color valuation into of your could from own want some

Michael Vesey

Yes.

things professionals, So we a would compares get standard investors. it a the mentioned. our we the were did business, look that discounted into we the cash looked it's It's kind also applied hire discussion happened value domain to view in and the it. ways. speaking, than Generally that all at don't of to the multiples at that business flow specifically different how most want it how of -- to our not people and and of market business, it's you it's in more number of the industry the in But our multiples different M&A criteria

different way I the looked do specific, think, at a professionals of consulted So into with number is to metrics, without and getting we anything it.

Joshua Peters

very helpful. That's Okay.

XXXX. here in year forward another to Looking good

Dale Foster

Thanks, Josh.

Operator

this our remarks. question-and-answer I time, like to call closing now over to At the back concludes for would turn Foster session. Mr. this

Dale Foster

to forward about forward. look results. call and joining our going a on everybody, us results and XXXX hear appreciate thanks, good for to XXXX QX the our I Again, just to today shareholders

So I you. it. appreciate Thank

Operator

this conference. does Ladies and conclude today's gentlemen,

your at time. lines this you for your disconnect may Thank You participation.

Climb Global Solutions (CLMB) 19 Feb 202019 Q4 Earnings call transcript