Climb Solutions(CLMB) - 2023 Q4 - Annual Results

Executive Summary Q4 2023 Performance Highlights Climb Global Solutions achieved record financial results in Q4 2023 across key metrics, driven by core initiatives and the accretive acquisition of DataSolutions, alongside organic growth in the U.S. and Europe Q4 2023 Key Financial Metrics (YoY Growth) | Metric | Q4 2023 Value | YoY Change | Source | | :------------------- | :------------ | :--------- | :----- | | Net Sales | $106.8 million | +20% | [2, 8] | | Adjusted Gross Billings | $397.0 million | +24% | [2, 8] | | Net Income | $5.2 million | +10% | [2, 8] | | Diluted EPS | $1.15 | +8.5% | [2, 8] | | Adjusted EBITDA | $9.2 million | +24% | [2, 8] | FY 2023 Performance Highlights For the full year 2023, Climb Global Solutions reported record net sales and significant growth in adjusted EBITDA, with net income showing a slight decrease but an increase when excluding a one-time CEO stock grant FY 2023 Key Financial Metrics (YoY Growth) | Metric | FY 2023 Value | YoY Change | Source | | :-------------------------------- | :-------------- | :--------- | :----- | | Net Sales | $352.0 million | +16% | [3] | | Adjusted Gross Billings | $1.3 billion | +18% | [3] | | Net Income | $12.3 million | -1.6% | [3] | | Net Income (Excl. CEO Stock Grant) | $14.1 million | +13% | [3] | | Diluted EPS | $2.72 | -3.2% | [3] | | Diluted EPS (Excl. CEO Stock Grant) | $3.13 | +11.4% | [3] | | Adjusted EBITDA | $24.6 million | +16% | [3] | Management Commentary and Strategy Management emphasized a consistent strategy focused on leveraging global infrastructure for organic growth and executing M&A initiatives, with a strong balance sheet supporting future expansion and shareholder value creation - The company's strategy remains unchanged: leverage global infrastructure for organic growth and execute M&A initiatives[5] - Future plans include evaluating opportunities to expand geographic footprint and service/solution offerings[6] - Q4 performance was driven by core initiatives and the immediately accretive acquisition of DataSolutions in October 2023, alongside organic growth in the U.S. and Europe[8] Company Information About Climb Global Solutions Climb Global Solutions is a value-added global IT channel company specializing in innovative technologies, operating across the US, Canada, and Europe, providing distribution and solutions in various IT sectors - Climb Global Solutions is a value-added global IT channel company providing unique sales and distribution solutions for innovative technology vendors[7] - The company operates across the US, Canada, and Europe through business units including Climb Channel Solutions, Grey Matter, and Climb Global Services[17] - Climb provides IT distribution and solutions for companies in Security, Data Management, Connectivity, Storage & HCI, Virtualization & Cloud, and Software & ALM industries[17] Detailed Financial Results Fourth Quarter 2023 Financial Performance The fourth quarter of 2023 saw significant financial growth, with increases across net sales, gross profit, net income, and adjusted EBITDA, driven by organic growth and the DataSolutions acquisition, despite some negative impacts from FX and acquisition fees Net Sales and Adjusted Gross Billings (Q4) Q4 2023 Net Sales and Adjusted Gross Billings | Metric | Q4 2023 | Q4 2022 | YoY Change | | :---------------------- | :---------- | :---------- | :--------- | | Net Sales | $106.8 million | $88.9 million | +20% | | Adjusted Gross Billings | $397.0 million | $319.8 million | +24% | - The increase in net sales and adjusted gross billings was due to organic growth from new and existing vendors, and contribution from the DataSolutions acquisition[9] Gross Profit (Q4) Q4 2023 Gross Profit | Metric | Q4 2023 | Q4 2022 | YoY Change | | :----------- | :---------- | :---------- | :--------- | | Gross Profit | $21.1 million | $16.1 million | +31% | - The increase in gross profit was driven by organic growth from new and top 20 vendors in North America and Europe, as well as DataSolutions' contribution[12] Selling, General, and Administrative (SG&A) Expenses (Q4) Q4 2023 SG&A Expenses | Metric | Q4 2023 | Q4 2022 | YoY Change | | :-------------------------------- | :---------- | :---------- | :--------- | | SG&A Expenses | $12.4 million | $9.1 million | +36.3% | | SG&A as % of Adjusted Gross Billings | 3.1% | 2.9% | +0.2 pp | Net Income and EPS (Q4) Q4 2023 Net Income and EPS | Metric | Q4 2023 | Q4 2022 | YoY Change | | :---------------- | :---------- | :---------- | :--------- | | Net Income | $5.2 million | $4.8 million | +10% | | Diluted EPS | $1.15 | $1.06 | +8.5% | - Diluted EPS was negatively impacted by $0.09 from FX and $0.06 from DataSolutions acquisition fees[13] Adjusted EBITDA (Q4) Q4 2023 Adjusted EBITDA | Metric | Q4 2023 | Q4 2022 | YoY Change | | :--------------- | :---------- | :---------- | :--------- | | Adjusted EBITDA | $9.2 million | $7.4 million | +24% | | Effective Margin | 43.7% | 45.9% | -2.2 pp | - The increase in Adjusted EBITDA was driven by organic growth and DataSolutions' contribution[14] Full Year 2023 Financial Performance Full year 2023 results show robust growth in net sales and gross profit, with net income slightly down but significantly higher when adjusted for a one-time CEO stock grant, reflecting strong underlying profitability Net Sales (FY) FY 2023 Net Sales | Metric | FY 2023 | FY 2022 | YoY Change | | :--------- | :---------- | :---------- | :--------- | | Net Sales | $352.0 million | $304.3 million | +15.7% | Gross Profit (FY) FY 2023 Gross Profit | Metric | FY 2023 | FY 2022 | YoY Change | | :----------- | :---------- | :---------- | :--------- | | Gross Profit | $64.2 million | $54.1 million | +18.7% | Net Income and EPS (FY) FY 2023 Net Income and EPS | Metric | FY 2023 | FY 2022 | YoY Change | | :---------------- | :---------- | :---------- | :--------- | | Net Income | $12.3 million | $12.5 million | -1.4% | | Diluted EPS | $2.72 | $2.81 | -3.2% | Adjusted Net Income and EPS (FY) FY 2023 Adjusted Net Income and EPS (Excl. One-Time CEO Stock Grant) | Metric | FY 2023 | FY 2022 | YoY Change | | :-------------------------------- | :---------- | :---------- | :--------- | | Net Income (Excl. CEO Stock Grant) | $14.1 million | $12.5 million | +12.8% | | Diluted EPS (Excl. CEO Stock Grant) | $3.13 | $2.81 | +11.4% | Adjusted EBITDA (FY) FY 2023 Adjusted EBITDA | Metric | FY 2023 | FY 2022 | YoY Change | | :--------------- | :---------- | :---------- | :--------- | | Adjusted EBITDA | $24.6 million | $21.1 million | +16.5% | Balance Sheet Highlights Climb Global Solutions significantly increased its cash and cash equivalents by year-end 2023, primarily due to receivable collections and payables timing, while maintaining a low debt profile with no borrowings on its revolving credit facility Balance Sheet Key Figures (as of December 31) | Metric | 2023 | 2022 | Change | | :---------------------- | :---------- | :---------- | :--------- | | Cash and Cash Equivalents | $36.3 million | $20.2 million | +$16.1 million | | Working Capital | N/A | N/A | -$4.5 million | | Outstanding Debt | $1.3 million | N/A | N/A | | Revolving Credit Facility | $0 borrowings | $0 borrowings | No change | - The increase in cash was primarily attributed to the timing of receivable collections and payables, partially offset by $12.7 million cash paid for the DataSolutions acquisition (net of cash acquired)[18] Dividend Information Quarterly Dividend Declaration Climb's Board of Directors declared a quarterly dividend of $0.17 per share, payable in March 2024 - On February 27, 2024, Climb's Board of Directors declared a quarterly dividend of $0.17 per share of common stock[11] - The dividend is payable on March 15, 2024, to shareholders of record on March 11, 2024[11] Non-GAAP Financial Measures Overview and Definitions Climb Global Solutions utilizes non-GAAP financial measures such as adjusted gross billings, adjusted net income, and adjusted EBITDA to supplement GAAP results, providing additional insights into performance while acknowledging their inherent limitations - Climb Global Solutions uses adjusted gross billings, adjusted net income, and adjusted EBITDA as supplemental measures of performance[23] - These non-GAAP measures have limitations and should not be considered in isolation or as substitutes for U.S. GAAP financial results[23][33][36][38] - Adjusted gross billings provide insight into business volume and changes to accounts receivable/payable[33] - Adjusted EBITDA offers insight into business profitability and is a component of financial covenants in the credit facility[36] Reconciliation of Adjusted Gross Billings This section provides a reconciliation of net sales (GAAP) to adjusted gross billings (non-GAAP) for both the fourth quarter and full year 2023 and 2022 Reconciliation of Net Sales to Adjusted Gross Billings (Amounts in thousands) | Metric | FY 2023 | FY 2022 | Q4 2023 | Q4 2022 | | :------------------------------------------------- | :---------- | :---------- | :---------- | :---------- | | Net sales | $352,013 | $304,348 | $106,783 | $88,905 | | Costs of sales related to sales where Company is an agent | $908,369 | $760,310 | $290,260 | $230,939 | | Adjusted gross billings (Non-GAAP) | $1,260,382 | $1,064,658 | $397,043 | $319,844 | Reconciliation of Adjusted EBITDA This section details the reconciliation of net income (GAAP) to adjusted EBITDA (non-GAAP) for the fourth quarter and full year 2023 and 2022, including adjustments for taxes, depreciation, amortization, share-based compensation, and interest Reconciliation of Net Income to Adjusted EBITDA (Amounts in thousands) | Metric | FY 2023 | FY 2022 | Q4 2023 | Q4 2022 | | :-------------------------- | :---------- | :---------- | :---------- | :---------- | | Net income | $12,323 | $12,497 | $5,246 | $4,761 | | Provision for income taxes | $4,458 | $4,035 | $1,840 | $1,372 | | Depreciation and amortization | $2,798 | $2,054 | $864 | $697 | | Interest expense | $264 | $71 | $170 | $16 | | EBITDA | $19,843 | $18,657 | $8,120 | $6,846 | | Share-based compensation | $4,148 | $1,897 | $726 | $406 | | Acquisition related costs | $629 | $582 | $352 | $137 | | Adjusted EBITDA | $24,620 | $21,136 | $9,198 | $7,389 | Reconciliation of Net Income Excluding One-Time CEO Stock Grant This section provides a reconciliation of net income (GAAP) to net income excluding a one-time CEO stock grant (non-GAAP) for the full year 2023 and 2022, offering a clearer comparison of underlying profitability Reconciliation of Net Income to Net Income Excluding One-Time CEO Stock Grant (Amounts in thousands) | Metric | FY 2023 | FY 2022 | Q4 2023 | Q4 2022 | | :------------------------------------------------- | :---------- | :---------- | :---------- | :---------- | | Net income | $12,323 | $12,497 | $5,246 | $4,761 | | One-time CEO stock grant | $1,796 | - | - | - | | Net income excluding one-time CEO stock grant | $14,119 | $12,497 | $5,246 | $4,761 | | Net income excluding one-time CEO stock grant per common share - diluted | $3.13 | $2.81 | $1.15 | $1.06 | Conference Call Details Call Information Climb Global Solutions will host a conference call on February 29, 2024, to discuss its Q4 and full-year 2023 results, with details provided for dial-in and webcast access - A conference call will be held on Thursday, February 29, 2024, at 8:30 a.m. Eastern time[16][17][19] - Dial-in numbers: (877) 407-9716 (toll-free) or (201) 493-6779 (international), Conference ID: 13744515[17] - A webcast of the call will be available on Climb's investor relations website and for replay[17][26] Legal Disclosures Forward-Looking Statements This section contains forward-looking statements subject to risks and uncertainties, including those related to acquisitions, market conditions, and competition, as detailed in the company's SEC filings - Statements in the release, other than historical facts, are 'forward-looking statements' under the Securities Act of 1933 and the Securities Exchange Act of 1934[24] - These statements are subject to certain risks and uncertainties that could cause actual results to differ materially[24][25] - Risk factors include the ability to recognize benefits from the DataSolutions acquisition, continued acceptance of distribution channels, product availability, market conditions, competitive pricing, and successful integration of acquisitions[25]