PART I FINANCIAL INFORMATION Financial Statements (unaudited) Presents the unaudited condensed consolidated financial statements for Q1 2025, including key balance sheet and income statement data Condensed Consolidated Balance Sheets Total assets decreased to $370.1 million while stockholders' equity rose to $95.6 million at the end of Q1 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $32,461 | $29,778 | | Accounts receivable, net | $240,230 | $341,597 | | Total current assets | $281,163 | $380,696 | | Goodwill | $35,675 | $34,924 | | Total assets | $370,053 | $469,179 | | Liabilities & Equity | | | | Accounts payable and accrued expenses | $266,452 | $370,397 | | Total liabilities | $274,499 | $378,591 | | Total stockholders' equity | $95,554 | $90,588 | Condensed Consolidated Statements of Earnings Net sales for Q1 2025 grew 49.4% to $138.0 million, with net income increasing 34.9% to $3.7 million year-over-year Statement of Earnings Summary (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $138,044 | $92,422 | 49.4% | | Gross profit | $23,396 | $17,020 | 37.5% | | Income from operations | $4,778 | $3,503 | 36.4% | | Net income | $3,684 | $2,731 | 34.9% | | Diluted EPS | $0.81 | $0.60 | 35.0% | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for Q1 2025 was $5.2 million, driven by net income and positive foreign currency translation adjustments Comprehensive Income (in thousands) | Component | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $3,684 | $2,731 | | Foreign currency translation adjustments | $1,553 | $(718) | | Comprehensive income | $5,237 | $2,013 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $95.6 million in Q1 2025, driven by net income and positive translation adjustments - Key changes in stockholders' equity for Q1 2025 include: net income of $3.7M, dividends of $0.8M, share-based compensation of $1.4M, and treasury stock repurchases of $0.9M22 Condensed Consolidated Statements of Cash Flows Net cash from operations was $8.5 million, and the company's cash balance increased by $2.7 million to $32.5 million in Q1 2025 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $8,457 | $14,047 | | Net cash used in investing activities | $(729) | $(1,180) | | Net cash used in financing activities | $(5,346) | $(5,550) | | Net increase in cash | $2,683 | $7,277 | Notes to Condensed Consolidated Financial Statements Provides details on accounting policies, segment performance, and customer concentrations, noting two customers make up 39% of sales - The company's revenue is primarily from the sale of third-party technology products and services, recognized when control is transferred3637 - In Q1 2025, two major customers accounted for 26% and 13% of net sales, respectively, and one major vendor accounted for 13% of total purchases6766 Segment Net Sales (in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Distribution | $132,162 | $86,822 | | Solutions | $5,882 | $5,600 | | Total | $138,044 | $92,422 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, highlighting significant sales and profit growth driven by organic expansion and acquisitions - Net sales increased 49% to $138.0 million and net income increased 35% to $3.7 million for Q1 2025 compared to Q1 2024107 - Adjusted EBITDA, a non-GAAP measure, increased to $7.6 million in Q1 2025 from $5.5 million in Q1 2024, with a stable effective margin of 32.7%133136 - The acquisition of Douglas Stewart Software & Services, LLC ("DSS") on July 31, 2024, contributed to growth in the Distribution segment138 Overview The company operates as a value-added IT distributor through its 'Distribution' and 'Solutions' segments - The company has two reportable operating segments: 'Distribution' (selling to resellers like VARs) and 'Solutions' (selling directly to end-users)97 - Product offerings include virtualization/cloud computing, security, networking, storage, infrastructure management, and application lifecycle management tools97 Results of Operations Q1 2025 saw a 49% rise in net sales and a 37% increase in gross profit, driven by organic growth and the DSS acquisition - Net sales increased 49% and gross billings increased 34% in Q1 2025, driven by organic growth and the DSS acquisition139 - Distribution segment net sales grew 52% to $132.2 million, while Solutions segment sales grew 5% to $5.9 million141142 - SG&A expenses increased 34% to $16.8 million, primarily due to the DSS acquisition and higher personnel costs to support growth149 - The effective tax rate for Q1 2025 was 13.3%, down from 24.6% in Q1 2024, mainly due to a discrete tax benefit related to share-based compensation152 Liquidity and Capital Resources The company holds $32.5 million in cash and has an undrawn $50.0 million credit facility, ensuring sufficient liquidity - Cash and cash equivalents increased by $2.7 million during Q1 2025 to a total of $32.5 million153 - Financing activities used $5.3 million, including $3.6 million for contingent consideration payments, $0.9 million for treasury stock purchases, and $0.8 million for dividends155 - The company has access to a $50.0 million revolving credit facility, with no amounts outstanding as of March 31, 2025156 Critical Accounting Policies and Estimates Key accounting policies involve significant management judgment, particularly in revenue recognition and business combinations - Key critical accounting policies involve significant management judgment and include: Revenue Recognition, Allowances for Expected Credit Losses, Business Combinations, Goodwill, Intangible Assets, and Income Taxes111113114115 - For business combinations, the company uses estimates for valuing acquired assets and liabilities, particularly intangible assets and contingent consideration116 - Goodwill is tested for impairment annually or when trigger events occur, using either a qualitative assessment or a quantitative test120 Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk exposure relates to foreign currency exchange rate fluctuations from its international operations - The principal market risk is from changes in foreign currency exchange rates, specifically the Canadian Dollar, Euro, and British Pound against the U.S. Dollar163160 - The company is exposed to both foreign currency transaction risk and currency translation risk due to its international operations164 Controls and Procedures Management concluded that disclosure controls and procedures were effective, excluding the recently acquired and integrating DSS - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter166 - The assessment of internal controls excluded the recently acquired DSS, which is currently being integrated into the company's control structure167 PART II OTHER INFORMATION Legal Proceedings The company is not currently subject to any material litigation outside of the ordinary course of business - Other than routine litigation arising out of the ordinary course of business, the Company is not presently subject to any material litigation169 Risk Factors No material changes have been made to the risk factors disclosed in the company's 2024 Annual Report on Form 10-K - No material changes have occurred to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024170 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares under its public plan in Q1 2025, though some shares were surrendered for tax purposes Issuer Purchase of Equity Securities (Q1 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Number of Shares That May Yet Be Purchased Under the Plans | | :--- | :--- | :--- | :--- | | Jan 2025 | — | $ — | 545,786 | | Feb 2025 | — | $ — | 545,786 | | Mar 2025 | — | $ — | 545,786 | | Total | — | $ — | 545,786 | - The share repurchase program does not have an expiration date175 Other Information No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2025 - During Q1 2025, none of the company's directors or officers adopted or terminated a Rule 10b5-1 trading plan174 Exhibits This section lists all exhibits filed with the Form 10-Q, including officer certifications and financial statements in Inline XBRL - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and a Separation Agreement with a former executive (10.1)176
Climb Solutions(CLMB) - 2025 Q1 - Quarterly Report