WSTG - Earnings call transcript Q3 2021 | 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 Third Quarter Ended September 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. have which the at was p.m. should earnings quarter approximately everyone release, press issued now, access third to XXXX X:XX By yesterday afternoon Time. Eastern The section Investor Web release at in Technology site Wayside Group's Relations waysidetechnology.com. is available of the webcast also company's for on the This call available replay will be website.

I'd to remarks, for Mr. we'll questions. introductory call turn to comments. for the management like the Mansouri Following your open now call over

Sean Mansouri

Thank you.

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

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

Form Wayside's press furnished important the Dale earnings X-K the to Foster. yesterday. over turn the and information charts SEC CEO, other release reconciliation now find I'll we You'll call to in and

Dale Foster

Thank you, good morning, and Sean, everyone.

release, the a quarter. see you in can results our we As earnings had from strong very

which an with Enable quarter. partners with integrations, this new in digital August. to several also powerful cloud an monitor, spent the time U.K. We've who Mirantisis vendors. a of we flexibility our encouraging. cloud manage products. onboard month brands, navigate and this continues signed seen with color solutions. quarter and team incrementally With Climb more and to edge computing are significant software in secure that a led container new with helps global company our has Mirantis more the emerging Enable it more open distribute them for who to -- will call. We I evolution. management new well, complete performing in past CDF is while that including the software the teams and agreement entered environment. makes us add to notable into include The Enable leading strategic number companies MSP are selective our be to earlier marketing approaching increase of All the solutions, in their vendors potential in we our of drive distribute emerging and source platform agreement This continue technology us easy line teams provider sales their during partnerships with be of sales their to MSPs produces later

significant growth sales will that forward. these believe partnerships we Our of teams new move both be as drivers

our choice the U.K., the that traveled marketplace this in month we Following their sharing offerings. focus businesses. both and Matter our vendors, Climb along prospective right innovations, entire team The CDF to and CDF. acquiring coming have we Overall, X-year customers, I we of year, the are past systems in the and mirror it teams our meet up vendors on transaction. their acquisition on the in on made and the energy now was teams commitment anniversary cloud of U.K., Grey up clear last and both to growing with seen

key CDF to direct indirect. is both sell the and vendors with of agreements Microsoft has One

up Microsoft Our in of is in XXXX. business [CSG] QX QX XX% XXXX versus

As multiple as in and opportunities evaluate targets, with active parties prospective are U.S. the discussions in we M&A for abroad. we

we will focusing reminder, on solutions. are fit service targeting reach, potential a more The strategic fit be As our perspective, and to and defined targets categories, accretive that geographic companies vendor will X or into direction. for our earnings of

that The X We Arrow Synnex. distribution sheet acquisitions quarter of seen with execute and and mergers being broadline and systems and with the by more provides customer completed debt potential have integrating a business positive by to relationship, billion. $XXX last our plays. a including of acquisitions will and leaves this into We have over on and Large distributors and with their which value-added teams impact room think established vendors and targets are just major large Data more Tech capacity will revenues competitors third This with on X tuck-ins as looking has Micro additional our landscape our distribution internally vendors Ingram balance be consolidation these worldwide, as ample Partners both by go-to-market base. their us on to fits distribution focused Platinum over have to size. combined more corporate disruptions

Marketplace. our quarter, Cloud we third Climb During unveiled new the Expedition

different part their has and vendors X launched to With have more pipeline are to into excellent reached transact our MSPs in of explore preparing are The and delivery. be new in and with As vendors that our of to model August, Marketplace date, subscription-based is XX cloud out for we hybrid debut. the designed received VARs feedback of of marketplace a moving initial make vendors software to it. at launch briefly discussed Expedition stages, the

momentum highlights they our remains With marketplace technologies, building to commitment focused on a many transact we As ability are emerging and highs, the enabling so their towards unique partners and sell market distribution to future Overall, that would we while data continue cloud from customers. the will plan channel to cloud to in Spending a all-time our this a Climb's transact. our to security, actively strategy. look play model, partners on channel call results. future, is role at you moving the like products partners. to of providing to marketplace financial turn for to continue that, capitalizing to our through customers vendors structure and sales licensing over key will the to I product by perpetual subscription-based on Drew? take center streamlined and -- effective our a recognize the however Drew and market lines With

Drew Clark

Jumping all comparisons specified. quarter, Dale. results, Thank morning, good to unless year you, the otherwise into And ago right everyone. refer variance commentary our and

quarter to $XX.X million increased sales reflects This from $XX.X our XX% third compared acquisition of XXXX in in to both reported and continued As earnings of growth release, press impact net the CDF. the the million. organic

by increased net an $X.X $X.X CDF million. million year-over-year we estimated Excluding with contributing the acquisition, sales

of or million million A However, gross increased increased of $XXX.X the million number our quarter strong with the profit incremental $X.X growth in Gross million $XX.X measure, period. year CDF. a XX% to more indicative compared generated the in contributions $XX.X of growth to billings. from to $XX.X XX% million record in XXXX organic XX% non-GAAP course, prior We ago the of million which $XXX.X sales third adjusted to compared is, of quarter.

investments no facilities as compared $X.X XX our in defined significantly GBP X.X% the to increased in quarter Net growth share our we of great adjusted sales borrowings $X.XX increase XX.X% expect driven by of credit in a percentage Group. Citi million or Again, shareholders to and dividend $XX.X a and million QX acquisition increased as XXXX the to expenses Our with were our our compared September to Adjusted growth quarter in third during Board operating third of the compared and compared million will percentage Effective XXXX. the to per acquisition. per equivalents GP acquisitions. as of X.X%. XXX% to either of net the by common indication $X.X of leverage quarter remain integrate driven the $XX.X debt-free the under third our XX.X% of organic gross diluted billings as leverage business to in a third on XX.X% We compared with to This cash as million $X.X share. quarter. CDF XX, $X.X $X.X November to was compared the adjusted and and to per organic in Xx well X.X% of our of million the and On was to margin, the EBITDA quarter December or as to SG&A in $X.XX to X, balance to to XXXX. increase the increased than were income as million drive stock payable XX. year-end $X.X primarily billings, continued quarters XX, ahead. profit, Cash on quarterly of This On X.X% third million increase million, to diluted of from successfully CDF outstanding gross EBITDA related share increase million of prior XX.X% incremental the related to grew million or costs addition X costs the to USD compared growth November expense as gross versus quarter of is $X.XX declared the ability core of XX benefits. from SG&A decreased aforementioned million. years record with more XXXX, operations percentage our adjusted $X.X of that sheet. was the a operations November of a U.K. Directors in XXXX year

strong to into This prepared organic continues growth it cash for Looking acquisition next questions. up on us and and We'll year, our both to to provide liquidity end operating flexibility the our with the our XXXX concludes remarks. position of strategies. and open execute now flow

Operator

or Ed Instructions] Capital. Ascendiant first [Operator the question from Woo line comment comes Our from of

Ed Woo

next as the into XXXX the on outlook is your customers year? question for do enterprise the about feel year. business of My end How heading our we're

Dale Foster

think We don't have back, experienced well. business And seeing and actually building we you in just that whole up like it COVID the that of feeling, canceled far pretty the it's just projects give said as When as guidance, of underlying we and actual optimistic. But they in I I pushed those that some during lot quarter. a were before, as as times, we got the just thought we're we know. feel come third

vendors, as As I optimism. to as out fast there sales they team. They're same build up can their the before, hiring mentioned

this see downside in XXXX month So going as X a focused we're into I right quarter already with don't us. behind

Ed Woo

you sales still are little Or return cycles they normal? bit a seen back to Have extended?

Dale Foster

overseas, see product yes, chain going it's If from to a is to dealing We that, coming all the about hear of out. licensing. of depends it's issues. It center, XXXX. if we're supply going a we So with pushed we mix, couple QX longer But other QX on that data than hardware, something anything something those that's software to solutions we're the XX% we're see that's right? playing take business and out the coming that waiting going delivery our is it in is business be our of for into

So we disruption any don't see there.

Ed Woo

question between And America business is, in my North any is both or real are and the differences strong? there Europe they last environment pretty

Dale Foster

I here like the Everybody say all countries that we at of traveling, up the they're there but thing in up us in being just not Europe of ahead over areas the has are certain opened -- kind us been our just that recovery, is and like of wide same that's the there. think want as coast open. feel least just to far the of I have tight a in week. they've XX% between Europe, is the opening for there, our EU ahead in business in as energy U.K. -- Yes,

hit, ahead through. maybe already what think I So they it as when the they far we is pandemic see just us of what like as were went

opposite the side. on we're So

Operator

next or LMK Sales] from of line comes question the comment Capital Our Management. from [Bob

Unidentified Analyst

on focused to of Can Congrats in see it? maybe that about terms little to a what expand of X marketplace facets on maybe percentage other understand? this the sort on more the you other like fiscal relative how X the just quarter. revenue in metric no And you is are offering players a And just you could of bit as we that do is, expectations or have? positioning achieve 'XX guide hope you our exclusively some two,

Dale Foster

different looking two it ways. So at

have that ones competitors that getting basically. born that are traditional in a have offering PaxX that you And system into the or already delivery cloud are Avant We have like cloud that then are they distribution with. that started cloud the

into going in monthly, that fit side. that there's We it. based, the we're So X traditional it's yearly distribution delivery model of whether a the subscription with sides quarterly, on of

we it's because seeing or market. we're going between way are haven't parsed their vendors it's our basically what to to is the the go market want that to capabilities X -- So

perpetual type it's right to a of licenses, want delivery monthly or whether So subscription, a switch some now, if they're all consumption is cloud-based doing that based. they to subscription

internally, to those the we're So then, X of see grow side. business you'll the take perpetual our piece cloud without hope other. from we'll huge shift to see But some see And this we places. just of the not course, both to going in of it slowdown in off

that for. the the waiting ready way that. they're market, to going are We it's that that So want vendors that thought make way were behind. and sure really we we're go we're just to ones just to realized our we it's for We

entry called that We're is our cloud marketplace Expedition. day. every So pushing in first our

Wasabi We vendors once efficient But our with get it's them early just it it platform. a to platforms early that deliver through consumption we of And way. to into the into are it, quickly is and being growing hard able our companies sit based. now just because becomes that a really stage X also monetize right it's together, like are more

Unidentified Analyst

actually have The question be a question-wise. kind I traffic don't second there's think to I more X of questions. going

Can the the both of the broader to leading-edge the you clear that's of maybe Did of signs you or of serve context whether spending a for lighter upside little not slowing have that about any that broader saw through stuff, can space a within leading impact the the whether So I business in was if hoped signs just the give edge IT any talk sort Anything it the a been little of I'll than -- you a in market? you in quarter? bit shoot trickle see okay. there you on sense slowdown? us

Dale Foster

the have the to at -- sell we we look track all broader talk markets if does us. So because actually we it time, emerging. you that and vendors -- don't But some we the trends the it about they're service

that far What's just on as they out their it what tranche startup life series is they're they cycle It coming as the own of right? they're where way. next they're got, of phase. depends their money where So spending, expanding and

overall new at hardware, market digits, the look vendors, software in X% at we goes, low digits one X%, when should growth big we Cisco might go because And against don't. you be So of if high the or Tier emerging single be the as the is to trying it's growing just in Xs. to that IT a something double far as

if and at we about their both has of with predict. we on they hard track of that disruptive, some you just vendor the in So as kind some in they we look they but the commitment We much. talk of of give trends, is it's the to data that channel But as mix our really the Sophos see growth, their So where life the kind SolarWinds to top don't we a releases, recovering are product see focus our and it's is are great. the they SolarWinds, disruptive but been cycle? picked new and how up and X and has key vendors, and indicators lot been those -- Sophos

So when we get them. we can take that

Unidentified Analyst

or what in for about a What And sort the you last motivate me X got you question, look acquisition desire, next can or is where acquisition your with us? think is you share you the X? you then at your next will your of mind in took thinking overseas guess, what the Europe. I in when When what last toehold you

Dale Foster

thinking we about Is Interwork is talked similar So geography? we vendor relationship. have when the far it Micro that we plan a the follow got as as acquired a and strategic we and and it Trend it I is to

as like far at look target. it's X good factors a probably we So as

but The It profit to margins gross and XX services, services. for the swing tough the do technical are everybody has in we services years, much will company? more as other start talked about that to add higher. X be move needle, in is the Can

at looking that we're So well. space as

there's some U.S., And to. but more then in on distribution, targets solutions still the talking for a we're is U.S. capabilities from the and the service not us perfect in So specifically that yes, solutions thing fit into the other the bringing we're side U.K.

team in talking -- to next QX announcing more and So signed probably cultural targets, see with teams. that greater good and to management the and NDAs more some course, sales companies multiple and marketplace announcements some fit it's cloud we're to team got But solutions their marketing the more on you'll side. the we've a be of our management and then, in to

Operator

Instructions] from Root]. next comes comment of line [Operator or question [Howard the Our

Unidentified Analyst

billings incrementally what go be being seeing a off that more And margin and SG&A is based continuation when now? you or X% around to being gross X% going quarters the distribution with of acquisitions, fixed in you SG&A just the outstanding or that I'm do growth progress. have how model? about The X And see really change, gross be growth success getting One a Or in somewhere you Is of X.X%. basically all, the adjusted the building as kind based? billings then shift I'm model going line. on of if more at, subscription And gross the there cloud-based looking it X that margin and on particular, subscription the cloud changing a just of looking gross I up at of and the financial questions. in from first the subscription. the does on have -- your the at adjusted year, expense more

Dale Foster

cloud doesn't model a target, MSP doing manage lift is the Howard, subscriptions. or that a It as efficiency on our actually on side. can you're involve Yes, much log in, heavy of hybrid bar where and their right

to they're pick then in very distributors course, those. that and X vendors, SG&A have costs will waiting, and numbers said, the Wasabi. we Wasabi in charts ARR. I'll I down now they leading base as go vendors, on it's just I like the want off of talk move deliver We're our right we consumption So -- the aren't direction world because about were but the the not

also when margin that won't course, And per at some numbers a our has then they'll there's So is then a that, subscription hardware need good all will be want goal And there. which Sophos Sophos, will and per be just had firewalls, be a to look The is, if the be it's to billing. cloud-based it's bigger you business, they'll and recurring then more your firewalls we're add the the and where to then job and that capabilities it. it it going is they like the noticing download of has revenue to that happens, part and with are consumption, month go firewalls download to done company ship based, has stop. it that. and we smaller And subscriptions driving of a keep a which all to platform

when that's say transact year, get XX% way. on get we'll now. than XX% have probably we there? right is are important our side how So way, we're that less the space can us next really that do that this delivering into I'd efficiency to for that there. it's we dependent touches and fast time vendors I really overall that yes, And number be the to And customers say would want not

Unidentified Analyst

on sense stock is parameters been you question then strategy issues, that's X just cash potential financial the the mean thanks thing financial and I and these have a on you have. overall versus from how of and Wayside? and from it's or make CDF, financial an but of do measure metrics, hit on as integrated. and acquisition And you all Interwork like for a comment side that to out know always marks. But I'd acquisitions, in is on investor acquisitions, you congrats the accretion into the seamlessly wonderful side, laying there's your I acquisitions second My those

Drew Clark

adjusted clearly, I from perspective, we'll that that business standard Howard, it industry our think valuing contributes. financial around a there's measuring metrics EBITDA be the and

starting in and do with There's what are may need honest, just as a have surface a CDF. access of can we then little globe we be just North place to also the across the to We cross-sell instead factoring we product say, factor with Dale of also vendor. we with in, increased a where American opportunities contracts scratched contract type bit opportunities not of global that vendors which referenced, have particular get to

adjusted of we'll based off EBITDA. transactions So value the metrics such traditional multiples as on

business or to those We of will valuation. such If on the aspects premium liquidity increase of that size transactions an balance have the some of working look consummate Interwork, justify and are at as we transactions. capital sheet may our the plenty in CDF

We historically will free funds leverage inexpensive, consider adding relatively leverage because today. the balance are of cost sheet the speaking. and is

perhaps So to the combination piece some in financing debt of terms well. most for again, of those determined. we be some likely, equity But perhaps a and some really larger term we to as -- are cash, would transaction, a look

Dale Foster

to then grow lot targets most takes of they were in quickly the Europe typically of get with the is dollars true thing. new met the space grow in of and PAC. -- Asia be a there. to Western at becomes that It we the real problems I've into acquiring U.S. that greater of U.S. overall while. XX% And The world. successful rest spends kind with this a They XX% of to same play their think want lot that or world then market It overseas, have And the we that, everybody the to that and just especially vendors. where the a emerging the when we're acquisitions, emerging transparent, is looking companies Howard,

Europe. at to good So we're and think them we new Western onboarding vendors moving then

We and cycle U.K. get than ensure deliver to ahead that to our for teams really We competitors that sales with in focus. XX-month systems our our could think the quicker or to while it can product just and a to our down cycle doing a team. regions. that's a much X- quarter them in that of move take a marketing that to we onboard vendor it's So going

Unidentified Analyst

if investor standpoint, acquisitions an acquisitions, from that stock way is soon that, done the stock just in job obviously, the me cash, debt, the thing concerns you that as the And raises a what start the it as but issues. financial wonderful you've with doing

a congrats So on great quarter. again

Operator

questions the back I'm queue to turn any remarks. showing no call additional in at closing this time. the management I'd to for like over

Dale Foster

Thanks, were effort. super A of team over back on operator. our everybody Thanks last everybody back offices, our and to travel lot this been to overall people the employee vendors customers, to and base. things between moving our into supportive just getting has year

appreciate for the call today. it. Thanks I So joining

Operator

participating Ladies concludes program. in conference. and today's you gentlemen, for thank the This

now day. may disconnect. You Everyone, have a wonderful

Climb Global Solutions (CLMB) 6 Nov 212021 Q3 Earnings call transcript