Financial Data and Key Metrics Changes - Net sales in Q2 2021 increased 33% to $75.4 million compared to $56.6 million in the prior period, reflecting strong organic growth and acquisitions [16] - Adjusted gross billings rose 48% to $235.1 million from $158.7 million in the prior quarter, with organic growth contributing 28% [17] - Gross profit increased to a record 54% or $11 million compared to $7.1 million in the prior period, driven by organic growth and acquisitions [18] - Net income increased approximately 4x to $2.1 million or $0.49 per diluted share compared to $600,000 or $0.13 per diluted share [20] - Cash and cash equivalents were $23.8 million as of June 30, 2021, down from $29.3 million as of December 31, 2020, but the company remains debt-free [21] Business Line Data and Key Metrics Changes - The company generated over $156 million of annualized gross sales with its top 20 vendors, a 50% increase from $102 million in 2020 [8] - The number of customers generating over $1 million in net sales increased from about 30 to more than 42 [10] Market Data and Key Metrics Changes - Spending on security and data center and cloud product lines remains at all-time highs, indicating strong market momentum [8] - The company is focusing on Western Europe for potential acquisition targets due to consolidation in the U.S. market [25] Company Strategy and Development Direction - The company has three core initiatives: generate organic growth, enhance the vendor line card, and execute on acquisition strategy [7] - The rebranding of CDF's Sigma software distribution business to Climb Channel Solutions aims to drive growth and efficiencies [11] - The launch of Climb Expedition, a new cloud marketplace, is designed to enhance interactions with vendors and customers [11] Management's Comments on Operating Environment and Future Outlook - Management noted optimism in the marketplace from enterprise customers and a filling pipeline, indicating a positive business environment [24] - The company is actively seeking strategic acquisition opportunities and is financially positioned to pursue them [25] - Management acknowledged that while growth rates may not be sustainable at 48%, there are ample opportunities for expansion within the vendor network [32] Other Important Information - The company declared a quarterly dividend of $0.17 per share, payable on August 20, 2021 [22] - The effective tax rate is expected to be around 22.1% to 22.2% for the balance of the year due to the CDF acquisition [38] Q&A Session Summary Question: What are you hearing from your enterprise customers regarding the business environment? - Management noted optimism in the marketplace and a filling pipeline, indicating positive sentiment among enterprise customers [24] Question: Are there many M&A opportunities available and what are the valuations like? - Management confirmed readiness for acquisitions and mentioned a focus on Western Europe for potential targets, emphasizing strategic fit [25] Question: What is the status of the cloud distribution project? - Management stated that the project is ongoing with the recent launch of Climb Expedition, which aims to capture new revenue streams as vendors shift to subscription models [28][29] Question: How sustainable is the current growth rate? - Management indicated that while 48% growth may not be sustainable, there are significant opportunities for expansion within the vendor network [32] Question: What is the outlook for gross profit as a percentage of adjusted gross billings? - Management emphasized the importance of tracking gross profit growth relative to adjusted gross billings, aiming to maintain a competitive edge [35] Question: What is the expected tax rate for the second half of the year? - Management projected an effective tax rate of approximately 22.1% to 22.2% for the remainder of the year [38] Question: Has SolarWinds' issues affected the company? - Management confirmed a strong partnership with SolarWinds and noted recovery in Q2, with plans for future collaboration [39]
Climb Solutions(CLMB) - 2021 Q2 - Earnings Call Transcript