Earnings call transcript Q3 2022

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Operator

Good morning, everyone, and thank you for participating in today's conference call to discuss Climb Global Solutions Financial Results for the Third Quarter Ended September 30, 2022.

Joining us today are Climb's CEO, Mr. Dale Foster; the company's CFO, Mr. Drew Clark; and the company's Investor Relations Advisor, Mr. Sean Mansouri for 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 website release www.climbglobalsolutions.com. in Global at Climb Solutions Relations is available of the webcast This company's on website. available the replay call be will also for

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

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

Sean Mansouri

Thank you.

under unknown forward-looking on are like and that introduce subject These remind listeners statements to reflected made Dale, considered are comments webcast to statements and I'd to actual Private forward-looking cause Reform this I as certain Litigation call differ Before certain conference XXXX. Securities Act the assumptions known forward-looking as that these and from those in risks well of materially results uncertainties statements. could

forward-looking only any statements, or required do revise by subject are forward-looking are being company to described the time other as call. results to any uncertainties filings to and the place obligation in not also revision as this of made of undue SEC. from no any risks forward-looking with undertakes that the release which on company's law, Except the publicly are statements. time We statements These to date the of reliance

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

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

CEO, Dale to I'll now Foster. Climb's turn the over call

Dale Foster

everyone. you, Thank and Sean, morning, good

our our growth up reflected of vendors during execute year. several in of to the continued with generating double-digits XX% top as core to initiatives and while the XX vendors. addition profitability, resulted quarter another quarter over card, than This prior growth on strong more by organic new We the line our both

in commitment our with we focused XX including in us a past three, highlight. I I'd to with card the allows partner As to market. agreements past, to new and line brands and quarter, a mentioned like signed only have the innovative This limited brands most prospective few evaluated the

our an Company In protection using security Salt for machine this Security protect agreement APIs. the to API and modern with identify automatically next Salt truly Security finalized prevent offerings that platform and Security, and we August, learning data provides AI view to We center. past as continuously attacks the level

digital devices, solutions. empowering passwords secure identity our partnership creates we includes passwordless with Beyond with offer that the Identity, of will next-generation September, logs secure by along in Beyond trust to the posture Identity and cloud-native which identification. after partnered business information with forward Beyond replacing security an of extended chain partners with is Identity device the Shortly enable SaaS user that look We solution real-time fundamentally an approach believe and a platform, the The efficient more to We of team. certificates. excellent

on and XX XX to most focused adds enhances distribution the distribution distributor Spinnakar, With partners management Spinnakar the UK-based region. the cloud, and across closed in that brings it vendor VAST Climb of Europe. over years new notably experience, umbrella, our Data IT capabilities significantly executive storage, EMEA during of deep significantly acquisition IT we quarter, the a Most bench security channel data a

and realize from Climb the to the team acquisition Climb integrated and Spinnakar operating benefits As Spinnakar while structure. Gerard October, begun impact QX. publicly I to we entire on Spinnakar And a not have has into would been the QX, family. the now the reporting of welcome in fully like did material to Brophy

pipeline with a of to as and targets. evaluate domestically accretive and growing goals. we strategy diligent new be will our that we our and M&A balance strategic continue align be business targets, will both and can be to pursue we with We our culture selective abroad as ahead, sheet Looking acquisitions in strong

Turning CEO; Gerard as is understanding Revenue in in has to Chief over like the seasoned has recent differentiate changes a a we distribution Brophy across former Climb former to in Spinnakar's leadership, Officer for taken marketplace. I how our and IT EMEA. the senior would Gerard of executive deep highlight Climb

taking head Climb for Operating Matt he the Additionally, business to Grey globally. over Officer Whitton, be Matter continues EMEA, while will Chief in Solutions as

to having phase next forward growth We our are spearhead of overseas. Matt Gerard looking and

Finally, noticed, earlier this sure as rebranded effective Global became you've heard and am I Solutions week. we to Climb

Growing CLMB. initiative symbol always a has is been scale business. Our new our brand key at ticker this across

acquisitions company to Given right our over past years, rebrand few expansion global was Climb the to our time and Solutions. Global the

only but will marketing company is not our investors, efforts our a brand our public and our Changing to us promote across the one name, recognizable globe. and our customers, allow branding that to vendors uniform

and global forward Solutions. business way cohesive promoting of efficient our demonstrates chapter our history And Global company's starting switch next Climb commitment simple a as we strategy. The of through the our the further look to to

the With our to that, over for turn call Drew I will Drew? financial results.

Drew Clark

Dale, morning, and good you, Thank everyone.

Stock like reiterate rebranding power as Exchange. the would behind CLMB to to initiative our stock on our change symbol a the I that First, includes NASDAQ

otherwise review comparisons remind to specified. our results, variance unless all to everyone prior refer that year the quarter and we financial As commentary want I

QX of improvements. quarter our sixth profitability double-digit results consecutive marked

As of our which $XXX.X reflects The contribution the continued past quarter. our August. existing press $XXX.X in to increased ago in from this to reported is million growth measure, million with adjusted our and XX% compared acquisition Spinnakar increase limited year release, from a earnings billings, new non-GAAP vendors gross

during in will next be fourth Spinnakar business already to our able further However, call. our noted, previously quarter, positively as highlight the which impacting earnings is we Dale

third increased to $XX.X In addition, quarter the million. to sales net in million $XX.X compared XX% XXXX of

Excluding net impact to increased the foreign exchange, million. negative actually XX% $XX.X sales of

driven both America was organic Europe. from the to XX in again, million Gross $XX.X our in increased growth The primarily profit by quarter million. and $XX.X North top to increase, third XX% compared vendors

the our a as of vendors to versus new XX.X% a large percentage and early quarter. and gross portion of sales several impact of adjusted not the X.X% profit addition a prior customers the was taking to compared gross X.X% onboarding In billings as percentage XX.X% pay was of their in of net discounts,

X.X%. are attributed amortization not expense also expenses. acceleration gross the from the Total on the me which sales but identified in that the $X.X Total QX. expense acquisition-related increased address I UK $X.X the the in ERP costs meaningful our our slight third statement, let separately same SG&A X.X% of percentage our volume, to the adjusted a as billings Now, statement, contribution of was the will compared for in mentioned attributable SG&A specified and million a XXXX. to a increase commission expense following: compared SG&A quarter did have period in was in variable was QX, to on team income have to meaningful previously, The million as Spinnakar income of contribution onboarding SG&A

$X.X in the like prior share. excluding to per income or $X.X million of There to FX, share that negative XXXX I'd compared X% diluted comparable per for in was third FX the quarter. Net $X.XX net XXXX. or diluted actually year impact increased million from point per in million period was $X.XX of the out to no $X.XX diluted quarter material income $X.X impact share or the

share. reduced $XX,XXX reported costs our by EPS per acquisition-related addition, $X.XX of In approximately diluted

quarters or gross margin of EBITDA compares XXXX. third effective growth XX% compared as new in the the vendors. $X.X the driven million EBITDA XXXX. of by sequential existing quarter entirely million to Adjusted increased the This the continues profit both organic for was for first a two in quarter growth same and percentage the XX.X% $X.X to Adjusted third XX.X%, to This which year. was increase period of almost from of

However, foreign currency margin in loss, approximate in XX.X%. $X.X the the excluding was our million transaction effective quarter increase

million sheet. million in to equivalents Turning was by Cash acquisition at working cash approximately decrease due during year-end, to The million $XX.X of our September this XXXX, primarily for to and period. compared decreased cash balance the $XX.X capital XX, Spinnakar. while $X.X were

referred with the customers to working an impacted or In Payments terms, the and payments in beyond position the early of contractual the was deferring window foregoing at previously quarter. earn were still large discount. addition, our pay accordance end but cash by capital

XX, September no $X.X or borrowings had under of million million outstanding our we with either debt of $XX facilities. outstanding XXXX, £X As million credit

Board XXXX, XX, XXXX. to November our X, dividend Subsequent a per share of XXXX, of declared on on That Directors $X.XX November record end common our dividend is stock. quarter November to shareholders of quarterly on of payable XX,

our of to M&A as strategy we As as are XXXX can of and look in the our diligent we constantly that in in targets year, to U.S. geographic our in another service XXXX. to evaluating the and our delivering solution end and growth XXXX remain offerings, footprint and we next executing look strong forward on we addition enhance plan We abroad. year and organic inorganic both closeout into

concludes remarks, This now open Operator, and questions it call. from you. participating the our Thank those in to for everyone. prepared back up you, we'll

Operator

[Operator Instructions].

All right.

your your coming Please Colicchio the ask Vincent now line is our from So have Research. first Barrington of question line we from Vincent, question. open.

Vincent Colicchio

for Dale -- do to yes. Dale, in emerging technology you pipeline QX? of add similar is expect vendors look a vendors And new of your QX? number I'm like curious, what

Dale Foster

basis. just from evaluating a come the to We're I'll us insight Vincent, and they consistent Hey, our team. give on you

I now. can in I see I the right now see coming think for about right what -- I just what on QX. the sure pipeline we're that it as down still one upstream as far But like -- is -- the trying in think, vendors at. to we to far perform said, When before, Vince, can as think those I go slow just trying and high-teens

Vincent Colicchio

Any any about geographic or you, any your question cycles Dale. in the in a change I behavior have of signs in sales backdrop. changes markets? economic of Thank

Dale Foster

We not. have

would canceled. -- you the or we but contracts talked look actually at see it kind about big last that would next any if didn't orders into slip we get year, quarter, So of

go not into good So well. It's systems in that seen pretty some we as had we much for QX all finishing us up actually, rollover strong QX. and have

Vincent Colicchio

for question a Drew. And

adjusted adjusted margins growth expect that and billings, gross As should year-over-year? should improve percentage gross look to gross QX, we we a we trajectory of as similar billings see a year-over-year in

Drew Clark

Dale experiencing base Vince, time, in QX. have I We've confident some we're performance visibility vendors. as either no we'll to the -- our in headwinds at our that in that would say, or increased this continue we're customer that with with point initial mentioned, got very

to without we're really it's to QX. continue or going guidance I much strong in quarter we're another confident to have provide that So direction, think -- trying too

Vincent Colicchio

in last Dale? any I'll one more Are getting changes acquisition go from the multiples one the in attractive? And market Any queue. for back me the and economy,

Dale Foster

one? that to want you Do

Drew Clark

the and take. strengthening Dale GBP. more And Vince, some queue very point, where is negotiation take of with could Yes. your we'll Yes. now. strength some to Euro opportunities diligent be already back to And we'll No, favor. the be now the pipeline. pipeline a and be of getting or has continue negotiations there little in to with the able the be great on may that that's Canadian is I'll may fine. really built dollar pull our process. they advantage be that our But a I flexible enhanced in think, our modeling and the right But

Vincent Colicchio

Thanks, in Okay. queue. I'll the back go gentlemen.

Operator

the question, second from comes your your question. [ph]. Please line of Howard, For open. now Howard line Kroop ask is it

Unidentified Analyst

Great.

I So of nice questions quarter, three like. I which quarter, say boring kind got But Dare, I here. again. another

on on at acquisition. XX. What I see as you The close the August first Spinnakar one

of Spinnakar would adjusted have the quarter? kind contribution for be immaterial over and why gross of would it'd of effect. that the quarter six So you go in. kind I'm an as Can it and billing was expense SG&A not like the what weeks from have confused revenue this to

Dale Foster

in as as VAST is about [Audio bigger QX that more the of Gap] Data. vendors one far called

in at VAST of Data raised, find lot you center really they've they've or space. Crunchbase you They're high-speed raised where data the If look what a can on money.

their considered transactional Wall of are Some for customers space. transactional, high Street

coming last in. Howard, their talking to they're deals years, be So If dollar couple we at we're in history lumpy, going back the that the deals large. because multi-million of very look are are very

So them lumpy. see you'll

their And we they're integrated like that sales full into onboard, team with as were team. our integrated actually brands they're my X. and our November Although they've sales of some now brought of said, teams October,

of detail everybody able talk their really in We'll assignments. QX. the about more So has end be it at to

Unidentified Analyst

But I that give basis? just a That's in on have be understand news a kind coming adjusted you billings year. revenue to Could the added of lumpy. good it's next gross annual it's you of Spinnakar? because an expect you scope from or the do net scope

Drew Clark

Yes.

six-week that between somewhere add range the lower that to than Spinnakar's As going we're is between performance we look just good now, on million to in with Howard, slightly a $XX also into a associated million, $X XX with gross absorbed million somewhere that. and in sub associated QX, right nice over much adjusted $XX you approximately referred cost we GP structure But probably members period the to, then with that. billings team

operating low low costs with overhead very expense, Again, Spinnakar. associated

an they contributor higher and almost almost tuck-in meaningful And will nice. we to out of is with some with vendors, But of So easy mentioned, it's year. Interwork QX a what Canada Dale ago. in as two which into years a did next be much similar margin profile, their

that with have to associated growth also their Dale's lumpiness of because of they'll with is team this There these our think additional as center and be QX cross-pollinate vendors the sales. XXXX. vice-versa, we for But curves in contribution going data some beyond of the our we cycles and to point,

Unidentified Analyst

Spinnakar, the how for quarter Great. of that? you more do the from a increase much QX, full quarter, SG&A Okay. -- And fourth that contribution Spinnakar? in come from see what how was of much will and And from obviously,

Drew Clark

I you of useful you if their an increased We cost at really at then, amortization impact had looked M&A which from looked acquired we on ERP Spinnakar. its SG&A over was was that the expense, CDF net think when implemented. England, expectation about life. they in And investment the in had an they $XXX,XXX and the

with useful implementation, that new we've ERP reduced Now period life down. our

in be increased was that amortized and next the ERP. an with QX SG&A our meaningful increase as have QX And of then implement So amortization fully of growth. year we will you'll but comp see exact a it new also then don't I variable piece the number that expense the on and commission associated expense, of

Unidentified Analyst

Okay. helpful. Very Great. Thanks.

in at QX? foreign that's you line strengthening. foreign quarters Second But it can fairly been expense away that loss materially to understand transaction your -- have by actions. currency go But and hit transaction hedging in do dollar and looking stabilizes I it's where get the a line. and If that is, two offset you has forward is question whipsawed where on dollar Or currency in the row looked -- currency the on that? we so foreign what's don't loss what thought the

Drew Clark

was the suffered as place, settled loss have whipsaw will $XXX,XXX U.S. side. dollar. and and effect the great the the this. question. of results. Canadian have tell you or you're did against only in customer right; I on strategy the Howard, both QX, Sure. contracts of Of in identified sterling And translation against from realized that we hedging dollar unfortunately, full a we the the foreign didn't either $XX,XXX actually a vendor currency dollar We

that got going in you've will not is just that again, So $XXX,XXX already but decrease, is recognized, to and recorded, change QX.

see dollar we'll go But most likely in as a you'll actually what into to QX, deliberate then the dollars. against we're GBP to see continues impact strategy and and happens So of in hesitant and try XXXX. a sort pull back hedging Canadian more positive

Unidentified Analyst

here. finally, last time then quite underlying bit this appetite do you see got about growth more I phenomenal outlook side, much. positive acquisitions about call, mean, time, about What it talk you you a organic talked you've last conference And for. didn't a on rate your talked Great. and future Okay. -- At -- the Dale,

to doing it. are ability you coming your me do like growth about don't producing ones new revenue, vendors it and difference ones to rate acquisitions? between hit several top at it? Your next for acquisitions to accretive is but online. growth you need add and that especially to got inorganic to the acquisitions, years. any for forecast digest And Clearly, you've you're top-line more seems that you organic of do What kind your the What acquisition, your the your think appetite least

Dale Foster

we're So opportunistic. to be going

is everybody to come go thing very year. them on is then quickly we as we about the into systems. appetite acquisitions. middle nice seen very in Our to can as guess will get newer Spinnakar And strong our We of West, able onboarded to selective. selective, ERP the be I system next And be were for one you've us

said pipeline, who that of still like still a the the and Drew we're in statement growing it's talking to. So pipeline strong

those And just Data besides at we team, and their came recruit those piece Spinnakar -- a just located going some over, outside we and lacked But when years five now why with a producing vendors they're of lines were so ago VAST time, to of with what long team. lacked lack entangled of we for have And we vendors back over vendor there, the we they're one is and having getting -- coming really London. great like here the just vendors. that we things

U.S. our the the one have our networks, He for exclusive with We competitors of go-to have. in we the betting vendors one person He ones big comes world of from tech. and also and Gerard. be will recruit

We'll And tail we're you'll into pushed that tail we actually our have down on being push will Climb our really thing long the UK of our the of over top really team. XX% see revenues. a That to we the that long Europe exact we Elevate, same all will Climb XX, vendors and get where focus to in with. don't Elevate those bring which be strategy going and the -- vendors is transact in

said, of be a continue go-forward. lot still targets, as mostly some like the So in we we'll Western and a in to we U.S., good strong appetite, Europe selective

Unidentified Analyst

quarter. on in today's Exactly, Thanks. see to see markets again to wonderful what your another and performance. boring Congratulations outstanding Great. like I'd

Dale Foster

stuff. I thanks. use and And that. to of you kind that don't appreciate anymore have Howard And Wayside

it. appreciate I So

Unidentified Analyst

name the change. love I No,

business a glad to finally great two you and you ago. make the to mentioned importantly. got it think continue I'm progress I with maybe more year, years it over

Dale Foster

You Thanks. it. got

Drew Clark

executive team. from your Thanks, boring favorite Howard,

Unidentified Analyst

guys. Thanks, Great.

Operator

for from Sir, question, again INFY. Olka is your line next of Casey line [ph] Olka open. Casey now ask ask Please question. your your it [ph] from your Olka is [ph] question. your Once Right. the line INFY Casey comes open. now Please from

All on next We're analyst. to moving right.

question So from Vincent, we're ask line is getting your Research. open. Colicchio Barrington from Vincent now question. Please your

Vincent Colicchio

have as about quarter? given an it Dale, relatively in and Solutions acquisitions of a should then your in portion business, pipeline important Solutions Curious mix of to business. expect business of the increase XXXX? small performed the your I And component how we a a question expectations, organic but the

Dale Foster

know-how we weeks, we the meetings is do. a about that this of because and going what to actually talked in expanding first with their some the piece, that support. Matter. are, services cloud last that's second our We Grey to saw also question in I they're our capabilities the couple the team support like in vendors it call include And those and Solution from were and would U.S. And of

all from the margin the look resellers Solutions, like knowing of But at I you our comes business nice profile from we the do -- about the my know is So ISVs, thing double and is Vince, MSPs. what Grey selling we do if almost consider market or they this, team, to MSPs which almost and on XX% would side. they the Matter to distribution sell

got team abroad on we're definitely both see then to invest an coming area to U.S. potential targets enhance as So that you'll and that's that well. that going in we've that team, and

Operator

closing no the now back turn I like are Foster Dale All would moment. remarks. questions there Mr. to at conference for further the right. Presenters, to

Dale Foster

everyone and you. we everybody's XXXX, and for as to Thank our us strong on all appreciate QX, look I finish thanks, joining to Thank you, support. call another go today stakeholders into the for operator, we of also

Operator

This participating. call. concludes conference today's for you Thank

disconnect. now may You

Climb Global Solutions (CLMB) 3 Nov 222022 Q3 Earnings call transcript