Climb Solutions(CLMB) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements of Climb Global Solutions, Inc. and its subsidiaries for the quarter and six months ended June 30, 2025, including balance sheets, statements of earnings, comprehensive income, stockholders' equity, and cash flows, along with detailed notes on accounting policies and financial performance Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total assets | $420,691 | $469,179 | $(48,488) | -10.33% | | Total liabilities | $315,514 | $378,591 | $(63,077) | -16.66% | | Total stockholders' equity | $105,177 | $90,588 | $14,589 | 16.10% | | Accounts receivable, net | $289,083 | $341,597 | $(52,514) | -15.37% | | Accounts payable and accrued expenses | $307,715 | $370,397 | $(62,682) | -16.92% | Condensed Consolidated Statements of Earnings This section details the company's financial performance, including net sales, gross profit, and net income over specific periods | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Net sales | $159,284 | $92,076 | $67,208 | 73.00% | | Gross profit | $26,308 | $18,558 | $7,750 | 41.76% | | Income from operations | $7,956 | $4,250 | $3,706 | 87.20% | | Net income | $5,968 | $3,430 | $2,538 | 73.99% | | Income per common share-Diluted | $1.30 | $0.75 | $0.55 | 73.33% | | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :------- | | Net sales | $297,328 | $184,498 | $112,830 | 61.16% | | Gross profit | $49,704 | $35,577 | $14,127 | 39.71% | | Income from operations | $12,733 | $7,753 | $4,980 | 64.23% | | Net income | $9,650 | $6,161 | $3,489 | 56.63% | | Income per common share-Diluted | $2.11 | $1.35 | $0.76 | 56.30% | Condensed Consolidated Statements of Comprehensive Income This section outlines the company's comprehensive income, including net income and other comprehensive income items | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | | Net income | $5,968 | $3,430 | $2,538 | | Foreign currency translation adjustments | $3,782 | $(121) | $3,903 | | Comprehensive income | $9,750 | $3,309 | $6,441 | | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | | Net income | $9,650 | $6,161 | $3,489 | | Foreign currency translation adjustments | $5,335 | $(839) | $6,174 | | Comprehensive income | $14,985 | $5,322 | $9,663 | Condensed Consolidated Statements of Stockholders' Equity This section presents changes in stockholders' equity, including additional paid-in capital, retained earnings, and accumulated other comprehensive income | Metric | January 1, 2025 (in thousands) | June 30, 2025 (in thousands) | Change (in thousands) | | :--------------------------------- | :----------------------------- | :--------------------------- | :-------------------- | | Additional paid-in capital | $37,977 | $40,043 | $2,066 | | Treasury stock | $(13,337) | $(14,266) | $(929) | | Retained earnings | $68,787 | $76,904 | $8,117 | | Accumulated other comprehensive income (loss) | $(2,892) | $2,443 | $5,335 | | Total stockholders' equity | $90,588 | $105,177 | $14,589 | - Dividends paid were $0.17 per common share for both the three and six months ended June 30, 2025 and 2024[22] Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | | Net cash from operating activities | $6,262 | $21,338 | $(15,076) | | Net cash used in investing activities | $(1,401) | $(2,361) | $960 | | Net cash used in financing activities | $(6,793) | $(6,865) | $72 | | Net increase (decrease) in cash and cash equivalents | $(1,191) | $12,068 | $(13,259) | | Cash and cash equivalents at end of period | $28,587 | $48,363 | $(19,776) | - Key financing activities for the six months ended June 30, 2025, included payments of contingent considerations ($3,559 thousand), purchases of treasury stock ($1,423 thousand), and dividends paid ($1,533 thousand)[24] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Basis of Presentation This note describes the accounting principles and basis used in preparing the unaudited condensed consolidated financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules, requiring management estimates and judgments[26][27] - The statements include Climb Global Solutions, Inc. and its wholly-owned subsidiaries, with all intercompany transactions eliminated[28] 2. Recently Issued Accounting Standards This note discusses recently issued accounting pronouncements and their potential impact on the company's financial statements - FASB ASU No. 2024-03, 'Expense Disaggregation Disclosures,' is effective for annual periods after December 15, 2026, and interim periods after December 15, 2027. The Company is currently evaluating its impact[30] - FASB ASU No. 2023-09, 'Improvements to Income Tax Disclosures,' will be applied prospectively in the Company's annual report on Form 10-K for the fiscal year ending December 31, 2025[31] 3. Foreign Currency Translation This note explains the company's policies and impact of foreign currency translation on its financial results - Net sales from foreign operations increased to $73.7 million for the six months ended June 30, 2025, from $51.1 million in the prior year[33] - The Company uses foreign exchange contracts, typically forward purchase agreements with terms of no more than three months, to hedge foreign currency exposures, not for trading purposes[34] 4. Comprehensive Income This note provides details on the components of comprehensive income, including foreign currency translation adjustments - Cumulative translation adjustments are classified within accumulated other comprehensive loss, a separate component of stockholders' equity[36] 5. Revenue Recognition This note outlines the company's policies for recognizing revenue from the sale of products and services - Revenue is primarily from the sale of third-party technology products and services, recognized when control is transferred to customers, typically at shipment or fulfillment[36] - For arrangements where the Company acts as an agent, revenue is recognized as the net fee associated with serving as an agent[37] - The Company disaggregates operating revenue by segment, geography, and timing of revenue recognition (principal vs. agent)[40][41] 6. Acquisition This note details the company's recent acquisition, including purchase price and contingent consideration - On July 31, 2024, the Company acquired Douglas Stewart Software & Services, LLC (DSS) for approximately $20.3 million, plus a potential post-closing earnout payment[46] - The fair value of the earn-out liability was reassessed to approximately $2.4 million as of June 30, 2025, an increase from the initial $1.7 million, with adjustments recognized in earnings[47] 7. Goodwill and Other Intangible Assets This note provides information on the company's goodwill and other intangible assets, including changes and amortization | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | Change (in thousands) | | :--------------------------------- | :----------------------------- | :--------------------------- | :-------------------- | | Goodwill | $34,924 | $37,270 | $2,346 | | Other intangibles, net | $36,550 | $35,718 | $(832) | - Total amortization expense for other intangibles, net, was $2.9 million for the six months ended June 30, 2025, compared to $1.4 million for the same period in 2024[49] 8. Right-of-use Asset and Lease Liability This note describes the company's right-of-use assets and lease liabilities, including lease terms and discount rates - The weighted-average remaining lease term for operating leases is 3.1 years as of June 30, 2025, with a weighted-average discount rate of 5.5%[53] | Year | Lease Liabilities (in thousands) | | :--- | :----------------------------- | | 2025 (excluding six months ended June 30, 2025) | $431 | | 2026 | $890 | | 2027 | $465 | | 2028 | $245 | | 2029 | $223 | | 2030 | $32 | | Total Lease Liabilities | $1,843 | 9. Fair Value This note discusses the fair value measurements of the company's financial instruments - The carrying amounts of financial instruments like cash, short-term accounts receivable, accounts payable, and term loan approximate fair value due to their short maturity[54] 10. Balance Sheet Detail This note provides additional detail on specific balance sheet accounts, such as equipment and accounts receivable | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Equipment and leasehold improvements, net | $13,626 | $12,853 | | Accounts receivable long-term, net | $1,209 | $1,174 | | Trade accounts payable | $280,556 | $331,654 | 11. Credit Facility This note outlines the company's credit facilities and outstanding loan balances - The Company has a $50.0 million revolving credit facility with JPMorgan Chase Bank, N.A., due May 18, 2028, with no amounts outstanding as of June 30, 2025[58][59] - A $2.1 million term loan with First American Commercial Bancorp, Inc. has $0.5 million outstanding as of June 30, 2025, with repayments continuing through April 2026[62][63] 12. Earnings Per Share This note details the calculation of basic and diluted earnings per share - Basic and diluted earnings per share are computed using the two-class method, with diluted and basic EPS being the same as restricted shares are the only potentially dilutive security[64] | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Basic net income per share | $1.30 | $0.75 | | Diluted net income per share | $1.30 | $0.75 | | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Basic net income per share | $2.11 | $1.35 | | Diluted net income per share | $2.11 | $1.35 | 13. Major Customers and Vendors This note identifies major customers and vendors that account for a significant portion of the company's sales or purchases - The Company had no major vendors (accounting for 10% or more of total purchases) for the three and six months ended June 30, 2025, a change from the prior year[66] - Three major customers accounted for 24%, 20%, and 13% of net sales for the three months ended June 30, 2025, and 25%, 13%, and 13% for the six months ended June 30, 2025[67] 14. Income Taxes This note provides information on the company's income tax provision and effective tax rates | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Provision for income taxes | $1.8 million | $1.0 million | | Effective tax rate | 22.9% | 22.8% | | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $2.3 million | $1.9 million | | Effective tax rate | 19.5% | 23.6% | - The change in effective tax rate for both periods was primarily impacted by a discrete item for the recognition of excess tax benefits related to share-based compensation[69] 15. Stockholders' Equity and Stock Based Compensation This note details changes in stockholders' equity and information on stock-based compensation arrangements - As of June 30, 2025, 155,991 shares of Common Stock were available for future award grants under the 2021 Omnibus Incentive Plan[70] - During the six months ended June 30, 2025, 43,736 Restricted Stock Units (RSUs) were granted, and 15,471 RSUs were forfeited[71] - Total unrecognized compensation costs related to nonvested share-based compensation arrangements were approximately $5.5 million as of June 30, 2025, expected to be recognized over a weighted-average period of 2.1 years[73] | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Share-based compensation expense | $1,200 | $1,100 | | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :--------------------------------- | :---------------------------------- | :---------------------------------- | | Share-based compensation expense | $2,500 | $1,900 | 16. Commitments and Contingencies This note describes the company's commitments and potential contingent liabilities - The Executive Severance and Change in Control Plan provides tiered severance benefits to executive officers upon qualifying termination[75] - As of June 30, 2025, the Company has no standby letters of credit, repurchase obligations, or other commercial commitments, apart from its credit facility[76] 17. Segment Information This note provides financial information disaggregated by the company's operating segments - The Company operates in two reportable segments: 'Distribution' (technical software to resellers) and 'Solutions' (cloud solutions, software/hardware reseller, technical services to end users)[79][99] | Segment | Net Sales (Q2 2025, in thousands) | Net Sales (Q2 2024, in thousands) | Change (in thousands) | % Change | | :-------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Distribution | $153,010 | $87,842 | $65,168 | 74.19% | | Solutions | $6,274 | $4,234 | $2,040 | 48.18% | | Segment | Segment Income (Q2 2025, in thousands) | Segment Income (Q2 2024, in thousands) | Change (in thousands) | % Change | | :-------- | :----------------------------------- | :----------------------------------- | :-------------------- | :------- | | Distribution | $12,942 | $8,148 | $4,794 | 58.84% | | Solutions | $1,647 | $1,573 | $74 | 4.70% | 18. Fair Value Measurements This note details the company's fair value measurements, categorized into a three-level hierarchy - The Company's fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs for similar instruments), and Level 3 (unobservable inputs, management estimates)[89][90][91] | Liability | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------- | :----------------------------- | :------------------------------- | | Contingent earn-out | $2,856 | $5,896 | - During the six months ended June 30, 2025, the Company made a $3.6 million cash payment for contingent consideration related to the Spinnakar Limited acquisition[95] 19. Subsequent Events This note discloses significant events that occurred after the balance sheet date - The One, Big, Beautiful Bill Act ('OBBBA') was enacted on July 4, 2025, and the Company is evaluating its impact, but it is not currently expected to materially affect the effective tax rate or cash flows in the current fiscal year[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance and condition for the three and six months ended June 30, 2025, compared to the prior year. It covers an overview of the business, factors influencing financial results, critical accounting policies, detailed results of operations by segment, and an analysis of liquidity and capital resources Overview This section provides a general description of the company's business model and operational segments - Climb Global Solutions, Inc. is a value-added IT distribution and solutions company, primarily selling software and other third-party IT products and services[99] - The Company operates through two reportable segments: 'Distribution' (selling to corporate resellers, VARs, consultants, and systems integrators) and 'Solutions' (cloud solutions provider and value-added reseller to end-user customers)[99] Factors Influencing Our Financial Results This section discusses key internal and external factors that impact the company's financial performance - Net sales are primarily derived from third-party software licenses, maintenance, and service agreements[101] - Sales in the Distribution segment are influenced by product lines, reseller channel penetration, product lifecycle, competition, and demand, while Solutions segment sales are driven by sales force effectiveness, customer service, competitive pricing, and flexible payment solutions[101] - Gross product margins have historically declined due to competition and shifts in product mix, necessitating cost efficiencies like drop shipments and electronic digital interchange[102] Dividend Policy and Share Repurchase Program This section outlines the company's strategies for returning value to shareholders through dividends and share repurchases - The Company aims to return value to investors through quarterly dividends and share repurchases[106] | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Total dividends paid | $0.8 | $0.8 | | Shares repurchased (dollar value) | $0.5 | $0.3 | Stock Volatility This section addresses the potential for significant fluctuations in the company's stock market price - The Company's stock market price is subject to substantial volatility due to conditions impacting the technology, distribution, and services sectors, as well as company-specific factors[107] Inflation This section analyzes the historical and potential future impact of inflation on the company's operations and financial results - Historically, the Company has not been adversely affected by inflation due to declining IT product prices driven by rapid technological changes and short product life cycles[108] - While most price increases could be passed on to customers, competitive pressure may limit this or reduce customer spending[108] Financial Overview This section provides a high-level summary of the company's key financial performance metrics | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :------------------------------------ | :------------------------------------ | :------------------- | :------- | | Net sales | $159.3 | $92.1 | $67.2 | 73% | | Gross profit | $26.3 | $18.6 | $7.7 | 42% | | Selling, general, and administrative expenses | $16.4 | $13.0 | $3.4 | 26% | | Depreciation and amortization expense | $2.0 | $0.9 | $1.1 | 129% | | Net income | $5.9 | $3.4 | $2.5 | 74% | | Diluted income per share | $1.30 | $0.75 | $0.55 | 73% | Critical Accounting Policies and Estimates This section outlines the significant judgments and estimates made by management in preparing the consolidated financial statements, including those related to revenue recognition, credit losses, business combinations, goodwill, intangible assets, income taxes, and foreign exchange Revenue This section details the critical accounting policies and judgments related to revenue recognition - Management exercises significant judgment in determining performance obligations, whether maintenance obligations are distinct from software licenses, and allocating sales prices among distinct performance obligations based on standalone selling prices or market pricing[115] Allowances for Expected Credit Losses This section explains the methodology and estimates used for determining allowances for expected credit losses - Estimates for expected credit losses are based on historical experience, accounts receivable aging, current market conditions, and future forecasts of customer payment ability[116] Business Combinations This section describes the accounting treatment for business combinations, including valuation of acquired assets and liabilities - Acquisitions are accounted for under ASC 805, requiring fair value recognition of acquired assets and assumed liabilities, with goodwill measured as the excess of consideration transferred[117] - Valuation of intangible assets and contingent consideration involves significant estimates, including discount rates, projected cash flows, and expected volatility, often assisted by third-party specialists[118][119] - Contingent consideration is remeasured each reporting period using Level 3 inputs, with changes in fair value recognized in the consolidated statement of earnings[121] Goodwill This section outlines the company's policy for testing goodwill for impairment and related assumptions - Goodwill is tested annually for impairment (as of October 1) or when events indicate a potential reduction in fair value, using either a qualitative or quantitative assessment at the reporting unit level[122][123][124] - Determining the fair value of a reporting unit is judgmental, relying on significant estimates and assumptions such as net sales growth rates, gross profit margins, operating margins, and discount rates[126] Intangible Assets This section details the accounting for intangible assets with determinable lives, including amortization and impairment review - Intangible assets with determinable lives are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment when circumstances indicate the carrying amount may not be recoverable[127] Income Taxes This section explains the company's accounting policies and estimates related to income taxes and deferred tax assets - The Company assesses the need for a valuation allowance related to deferred tax assets by considering future taxable income and feasible tax planning strategies[128] Foreign Exchange This section discusses the company's exposure to foreign currency risks and hedging strategies - Foreign currency exposure primarily arises from international transactions where the currency collected differs from the currency used for product purchases[129] - The Company uses short-term foreign exchange contracts (forward purchase agreements) to mitigate currency risks, not for trading purposes, and recognized an unrealized loss of less than $0.1 million as of June 30, 2025[129] Recently Issued Accounting Pronouncements This section provides an update on recently issued accounting standards and their potential impact - The Company is evaluating the impact of recently issued FASB ASUs, including ASU No. 2024-03 on expense disaggregation and ASU No. 2023-09 on income tax disclosures[130][131] Results of Operations This section provides a detailed analysis of the Company's financial performance for the three and six months ended June 30, 2025, compared to the prior year, covering net sales, gross profit, and various expenses, broken down by segment and highlighting key business metrics Key Business Metrics This section presents key financial and operational metrics used by management to assess performance - Management monitors GAAP measures (net sales, gross profit, net income) and non-GAAP measures like adjusted EBITDA and effective margin (adjusted EBITDA as a percentage of gross profit)[133][134] | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Adjusted EBITDA (Non-GAAP) | $11,379 thousand | $6,920 thousand | | Effective margin % | 43.3% | 37.3% | | Gross billings | $500,553 thousand | $359,841 thousand | | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Adjusted EBITDA (Non-GAAP) | $19,017 thousand | $12,459 thousand | | Effective margin % | 38.3% | 35.0% | | Gross billings | $975,150 thousand | $715,110 thousand | Acquisitions This section discusses the impact of recent acquisitions on the company's operating results - The operating results of DSS, acquired on July 31, 2024, are included in the Company's operating results within the Distribution segment from the acquisition date[138] Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 This section provides a comparative analysis of the company's financial performance for the three-month periods Net Sales and Gross Billings This section analyzes changes in net sales and gross billings, including contributing factors | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :-------------------- | :-------------------- | :------------------- | :------- | | Net sales | $159.3 | $92.1 | $67.2 | 73% | | Gross billings | $500.6 | $359.8 | $140.8 | 39% | - Net sales and gross billings increased due to organic growth and the DSS acquisition, with net sales growing faster due to a higher percentage of gross-basis hardware and software products in the current period's mix[139] | Segment | Net Sales (Q2 2025, in millions) | Net Sales (Q2 2024, in millions) | % Change | | :-------- | :------------------------------- | :------------------------------- | :------- | | Distribution | $153.0 | $87.8 | 74% | | Solutions | $6.3 | $4.2 | 48% | Gross Profit This section examines the drivers of changes in gross profit and segment-wise contributions - Gross profit increased 42% to $26.3 million, driven by organic growth and a $2.4 million contribution from the DSS acquisition[144] | Segment | Gross Profit (Q2 2025, in millions) | Gross Profit (Q2 2024, in millions) | % Change | | :-------- | :---------------------------------- | :---------------------------------- | :------- | | Distribution | $23.0 | $15.7 | 47% | | Solutions | $3.3 | $2.9 | 13% | | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | | :--------------------------------- | :-------------------- | :-------------------- | | Customer rebates and discounts | $6.3 | $3.2 | | Vendor rebates and discounts | $5.5 | $1.6 | Selling, General and Administrative Expenses This section details the changes in selling, general, and administrative expenses and their impact on profitability - SG&A expenses increased 26% to $16.4 million, primarily due to a $0.9 million impact from the DSS acquisition and higher employee-related expenses[149] - SG&A expenses as a percentage of gross billings decreased to 3.3% in Q2 2025 from 3.6% in Q2 2024[149] Depreciation and Amortization Expense This section explains the changes in depreciation and amortization expenses, including acquisition-related impacts - Depreciation and amortization expense increased 129% to $2.0 million, mainly due to amortization of DSS acquired intangible assets, capitalized ERP costs, and increased amortization for a vendor relationship with a shortened life[150] Acquisition Related Costs This section outlines the costs incurred in relation to business acquisitions - Acquisition related costs were less than $0.1 million in Q2 2025, down from $0.5 million in Q2 2024, primarily associated with the DSS acquisition[151] Income Taxes This section analyzes the provision for income taxes and factors influencing the effective tax rate - The provision for income taxes was $1.8 million in Q2 2025 (effective tax rate of 22.9%) compared to $1.0 million in Q2 2024 (effective tax rate of 22.8%)[152] - The effective tax rate was impacted by changes in the mix of taxable income jurisdictions and a discrete item for excess tax benefits related to share-based compensation[152] Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 This section provides a comparative analysis of the company's financial performance for the six-month periods Net Sales and Gross Billings This section analyzes changes in net sales and gross billings, including contributing factors | Metric | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :----------------------------------- | :----------------------------------- | :------------------- | :------- | | Net sales | $297.3 | $184.5 | $112.8 | 61% | | Gross billings | $975.1 | $715.1 | $260.0 | 36% | - Net sales and gross billings increased due to organic growth and the DSS acquisition, with net sales growing faster due to a higher percentage of gross-basis hardware and software products in the current period's mix[153] | Segment | Net Sales (6 months 2025, in millions) | Net Sales (6 months 2024, in millions) | % Change | | :-------- | :----------------------------------- | :----------------------------------- | :------- | | Distribution | $285.2 | $174.7 | 63% | | Solutions | $12.1 | $9.8 | 24% | Gross Profit This section examines the drivers of changes in gross profit and segment-wise contributions - Gross profit increased 40% to $49.7 million, driven by organic growth and a $4.4 million contribution from the DSS acquisition[158] | Segment | Gross Profit (6 months 2025, in millions) | Gross Profit (6 months 2024, in millions) | % Change | | :-------- | :------------------------------------ | :------------------------------------ | :------- | | Distribution | $43.4 | $29.9 | 45% | | Solutions | $6.3 | $5.7 | 10% | | Metric | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Customer rebates and discounts | $10.9 | $6.6 | | Vendor rebates and discounts | $10.3 | $3.6 | Selling, General and Administrative Expenses This section details the changes in selling, general, and administrative expenses and their impact on profitability - SG&A expenses increased 30% to $33.1 million, primarily due to a $2.0 million impact from the DSS acquisition and higher employee-related expenses[163] - SG&A expenses as a percentage of gross billings decreased to 3.4% in the six months ended June 30, 2025, from 3.6% in the prior year[163] Depreciation and Amortization Expense This section explains the changes in depreciation and amortization expenses, including acquisition-related impacts - Depreciation and amortization expense increased 114% to $3.7 million, mainly due to amortization of DSS acquired intangible assets, capitalized ERP costs, and increased amortization for a vendor relationship with a shortened life[164] Acquisition Related Costs This section outlines the costs incurred in relation to business acquisitions - Acquisition related costs were $0.1 million in the six months ended June 30, 2025, down from $0.6 million in the prior year, primarily associated with the DSS acquisition[165] Income Taxes This section analyzes the provision for income taxes and factors influencing the effective tax rate - The provision for income taxes was $2.3 million in the six months ended June 30, 2025 (effective tax rate of 19.5%) compared to $1.9 million in the prior year (effective tax rate of 23.6%)[166] - The change in effective tax rate was impacted by a discrete item for excess tax benefits related to share-based compensation and changes in the mix of taxable income jurisdictions[166] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations and funding sources - Cash and cash equivalents decreased 4% to $28.6 million as of June 30, 2025, from $29.8 million at December 31, 2024[167] - Net cash provided by operating activities for the six months ended June 30, 2025, was $6.3 million, a decrease from $21.3 million in the prior year[167] - Net cash used in financing activities was $6.8 million, including $3.6 million for contingent considerations, $1.4 million for treasury stock purchases, and $1.5 million for dividends[169] - The Company believes its current cash and unused $50.0 million revolving credit facility are sufficient to fund working capital and cash requirements for at least the next 12 months[170][173] Foreign Exchange This section discusses the company's exposure to foreign currency risks and hedging strategies - The Company's foreign subsidiaries are exposed to fluctuations in the Canadian Dollar, Euro Dollar, and British Pound-to-U.S. Dollar exchange rates[174] Off-Balance Sheet Arrangements This section discloses any material off-balance sheet arrangements that could impact the company's financial position - As of June 30, 2025, the Company did not have any off-balance sheet arrangements[175] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section details the Company's exposure to market risks, primarily focusing on foreign currency exchange rate fluctuations arising from its international operations in Canada, the United Kingdom, and Europe - The Company is exposed to market risk principally from changes in foreign currency exchange rates[177] - International operations in Canada, the UK, and Europe subject the Company to both foreign currency transaction risk and currency translation risk, with significant historical fluctuations in exchange rates[178] Item 4. Controls and Procedures Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025. However, the assessment of internal control over financial reporting for the recently acquired DSS business was excluded due to ongoing integration - The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2025[180] - Management excluded the assessment of internal control over financial reporting for the acquired DSS business for a period not exceeding one year from the acquisition date (July 31, 2024) due to ongoing integration[181] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025, except for the DSS acquisition[182] PART II OTHER INFORMATION Item 1. Legal Proceedings The Company is not currently involved in any material litigation, nor is any material litigation threatened, beyond routine claims arising in the ordinary course of business - The Company is not presently subject to any material litigation, nor is any material litigation threatened against it, other than routine litigation in the normal course of business[183] Item 1A. Risk Factors This section refers readers to the comprehensive risk factors detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and states that no material changes to these risks have occurred - There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024[184] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company did not repurchase any shares of its Common Stock under publicly announced plans during the second quarter of 2025, although some shares were surrendered by employees for tax withholding purposes - The Company did not repurchase any shares of its Common Stock under publicly announced plans during the second quarter of 2025[187][189] - 12,361 shares were surrendered by employees to satisfy individual tax withholding obligations upon vesting of Restricted Stock Units[187] - 545,786 shares remain available for repurchase under the Company's existing share repurchase plans[187] Item 5. Other Information No directors or officers of the Company adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - None of the Company's directors or officers adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2025[188] Item 6. Exhibits, Financial Statement Schedules This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, a separation agreement, various certifications, and the financial information presented in Inline XBRL format - Exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, a Separation Agreement, and certifications pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350[190] - The financial information from the Quarterly Report is formatted in Inline XBRL (Extensible Business Reporting Language)[190] SIGNATURES The Quarterly Report on Form 10-Q was duly signed on July 31, 2025, by Dale Foster, Chief Executive Officer, and Matthew Sullivan, Chief Financial Officer, on behalf of Climb Global Solutions, Inc - The report was signed by Dale Foster, Chief Executive Officer, and Matthew Sullivan, Chief Financial Officer, on July 31, 2025[193]