Q4 2024 Climb Global Solutions Inc Earnings Call
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Speaker Change: Good morning, everyone. And thank you for participating in today's conference call to discuss Climb Global Solutions financial results for the fourth quarter and full year ended December 31,
Aaron D'Souza: Joining us today are Climb's CEO , Mr. Dale Foster, the company's CFO , Mr. Matthew Sullivan, and the company's investor relations advisor, Mr. Aaron D'Souza, with Elevate IR.
Aaron D'Souza: By now, everyone should have access to the fourth quarter and full year 2024 earnings press release, which was issued yesterday afternoon at approximately 405 p.m. Eastern time.
Aaron D'Souza: The release is available in the Investor Relations section of Climb Global Solutions website at www.climbglobalsolutions.com. This call will also be available for webcast replay on the company's website. Following management from Marks, we'll be open the call for your questions.
Aaron D'Souza: I'd now like to turn the call over to Mr. D'Souza for introductory comments.
Speaker Change: Thank you, operator. Before I introduce Dale, I'd like to remind listeners that certain comments made on this conference call and webcast are considered forward-looking statements under the Private Security's Litigation Reform Act of 1995.
Aaron D'Souza: These four-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these four-looking statements.
Aaron D'Souza: These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call.
Aaron D'Souza: Acceptors required by law, the company undertakes no obligation to revise or publicly release the results of any revision to any four-looking statements.
Aaron D'Souza: Our presentation also includes certain key operational metrics and non-GAAP financial measures, including gross billings, adjusted EBITDA, nested net income and EPS, and effective margin, as supplemental measures of performance of our business.
Aaron D'Souza: All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules.
Aaron D'Souza: You'll find reconciliation charts and other important information in the earnings press release in Form 8K we furnished with the SEC yesterday.
Aaron D'Souza: So now let's turn the call over to Climb CEO , Dale Foster.
Dale Foster: Thank you, Aaron, and good morning, everyone. Our fourth quarter performance capped off in exceptional 2024, marking another year of record results across all key financial metrics.
Dale Foster: These achievements underscore teams' execution of our core initiatives. We continue to focus on organic growth by deepening relationships with existing vendors and customers, while sending new emerging vendors to our line card and delivering in our acquisition goals.
Dale Foster: Throughout the year, we evaluated over 120 vendors and signed agreements with only 13 of them focusing on the most innovative technologies in our market segments. In Q4, we evaluated 34 brands of the only apartment with two of them. I'd like to quickly highlight a couple of these wins.
Dale Foster: First, we launched a partnership with Scalony, a global leader in cyber resilience towards software and for AI environments.
Dale Foster: Next, we signed an agreement with SmartShe, a dynamic work management platform that empowers teams to collaborate, automate workflows, and drive innovation in scale with flexibility and security.
Dale Foster: We are excited to collaborate with each of these vendors and bring the products to market building a mutually beneficial relationship along the way.
Dale Foster: We continue to make progress with the implementation of our new ERP system, a critical step in streamlining processes, and enhancing real-time data accessibility across the global operations. While we still are on their own stages, we are already seeing improvements in transactional efficiency.
Dale Foster: As we continue optimizing our systems, we anticipate unlocking additional benefits, driving greater agility, visibility, and operational effectiveness across the organization.
Speaker Change: In January , we announced several changes to our executive leadership team. To start, we appointed Matt Sullivan, our chief financial officer following the retirement of Drew Clark.
Speaker Change: I'd like to thank Drew for his invaluable contributions to Climb over the years and congratulate Matt on his well-earned promotion to see a vote.
Speaker Change: Since joining us in 2019 as Vice President Corporate Controller, Matt has risen internally to the most recent role as Chief Accounting Officer. Overseeing our global accounting functions, including external internal reporting.
Speaker Change: Compliance and Planning. He has also played a pivotal role in advancing Climb's growth strategy in helping drive our financial due diligence for five appreciated acquisitions since 2020.
Speaker Change: Certainly after mass appointment, we announced the promotion of two leaders who have played a pivotal role also in driving Climb's growth and success. First, Kim Stevens has been pointed to a chief marketing officer.
Speaker Change: Kim's proven track record of his excessive commitment to excellence is a testament to our talent and dedication as we nurture, nurture within Climb. Next, Charles Bass was promoted to a newly created role of chief alliance officer for Climb Global Solutions.
Speaker Change: Charles has taken on the global responsibility in identifying, vetting, and onboarding our most innovative technologies in the marketplace.
Speaker Change: into our ecosystem, positioning climb as a trusted partner for growth. I'm proud of the achievements of these two individuals and I look forward to seeing the impact that they will continue to make in their new roles.
Speaker Change: At the end of January , we announced the appointment of John McCarthy as our new chairman of the board. John has over 30 years of experience in the technology sector of leadership. He is also a board member, board director of Climb since 2019 and currently serves as the compensation committee chair.
Speaker Change: We're proud to have John Leaver board and Climb's executive team look forward to working with him to drive our strategic vision forward.
Speaker Change: We're excited about the year ahead. And while we have some host of Phil, do the public exit of Citrix, leaving the channel, we view this as an opportunity to strengthen and our mix and further diversify our offerings.
Speaker Change: Looking ahead, we will continue building on a self-foundation to generate stronger organic growth, while further improving operating leverage.
Speaker Change: We will continue to also evaluate M&A opportunities that will enhance our services and solutions offerings, as well as expand our geographic footprint in the U.S. and overseas.
Speaker Change: This initiative is coupled with our demonstrated track record of execution and robust balance which enable us to deliver on an organic and unorganic
Speaker Change: Initiative in 2025. With that, I will turn the call over to our CFO , Matt Sullivan, to take you through the financial results.
Matt Sullivan: Thank you, Dale, and good morning, everyone. I'm pleased to address you for the first time as Climb's new CFO . A quick reminder is review the financial results for our fourth quarter. All comparisons and variants commentary refer to the prior year quarter, unless otherwise specified.
Matt Sullivan: As reported in our earnings press release, gross billions increased 52% to 605 million compared to 397 million in the year ago quarter.
Matt Sullivan: Distribution Segment Gross Billings increased 57% to 582 million in Solution Segment Gross Billings decreased 9% to 23 million.
Matt Sullivan: That sales in the fourth quarter of 2024 increased 51% to 161.28 million compared to 106.8 million, which primarily reflects organic growth from new and existing vendors as well as contribution from our acquisition of DSS in July of last year.
Matt Sullivan: Gross profit in the fourth quarter increased 48% to 31.2 million compared to 21.1 million. Again, the increase was driven by organic growth from new and existing vendors in both North America and Europe as well as the contributions from DSS.
Matt Sullivan: Gross Profit as a percentage of gross billings was 5.2% compared to 5.3% in the year ago period.
Matt Sullivan: SGNA expenses in the fourth quarter were 17.1 million compared to 12.4 million for the same period in 2023.
SGNA from DSS accounted for $2.2 million of the increase.
Matt Sullivan: SGNA is a percentage of gross billions decreased to 2.8% compared to 3.1% in the year-vill
Matt Sullivan: Net income in the fourth quarter of 2024 increased 33% to $7 million per diluted share compared to $5.2 million or $1.15 per diluted share for the comparable period in 2023.
Matt Sullivan: As referenced in our press release, net income was impacted by a $2.5 million charge related to a change in fair value of acquisition contingent consideration associated with Spinnaker
Matt Sullivan: Adjusted net income increased 87% to 10.3 million or $2.26 per diluted share compared to 5.5 million or $1.21 per diluted share for the year ago period.
Matt Sullivan: Ajusted EBITDA in the fourth quarter increased 75% to 16.1 million, compared to 9.2 million in the prior year quarter. The increase was driven by the aforementioned organic growth from both new and existing vendors as well as contribution from DSS.
Matt Sullivan: Adjusted EBITDA as a percentage of gross profit or effective margin increased 780 basis points to 51.5% compared to 43.7% in the year of their period.
Matt Sullivan: Turning to our balance sheet, Cash and Cash Equivalence were 29.8 million as of December 31, 2024, compared to 36.3 million on December 31, 2023.
Matt Sullivan: While working capital decreased by about 9.3 million during this period.
Matt Sullivan: The decrease in cash was primarily attributed to the cash paid closing for acquisition of the SS of 20.4 million as well as the timing of receivable collections and vendor payments.
Matt Sullivan: As of December 31st, 2024, the 800,000 outstanding debt with no borrowings outstanding under $50 million, revolving credit facility with JP Morgan Chase.
Matt Sullivan: On February 28th, 2025, our Board of Directors declared a quarterly dividend of 17 cents per share of our common stock to shareholders of record as of March 17th, 2025, and payable on March 21st, 2025.
Matt Sullivan: Looking ahead, our strong liquidity position continues to provide us with the flexibility to pursue both organic and inorganic growth opportunities while expanding our relationships with vendors and customers worldwide. We will continue to be active on the M&A front as we evaluate the creative targets in both North America and overseas.
Matt Sullivan: With a disciplined approach to expansion and a focus on execution, we believe we are well positioned to deliver another year of growth and enhance profitability in 2025.
Matt Sullivan: This concludes our prepared remarks. We will now open it up for questions from those participating in the call. Operator
Speaker Change: Thank you. And at this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star and one to ask a question and we will pause for a moment to allow a question to queue.
Speaker Change: And we will take our first question from Vincent Colicchio with Barrington Research. Please go ahead.
Vincent Calico: Yeah, good morning, Dale. Nice job in the quarter. You're welcome. Did you have any large unexpected deals in the quarter because it was, you know, quite a result?
Vincent Calico: Yeah so you know and we've said this I think it's coming up on a couple years and it goes back quite a ways Vince but you know we acquired Spinnaker you know we acquired the the vast vendor relationship with that.
Vincent Calico: and it's been, you know, if you listen to our strategic plans, you know, as far as technology starting here and taking it to, you know, really Western Europe , that's our plan. This is a vendor that came back to the U.S., so we started with a relationship there and then to the U.S., so we have some good things for 2025, but yeah, we have some lumpy quarters. We had a large vat deal that came in the end of Q4 that helped the numbers.
Vincent Calico: But we also just looking outside of that, just had a great growth across all of our divisions in Q4.
Vincent Calico: and Q4 typically are a larger one. So, you know, if you're selling, you know, software applications and staffs and you keep hammering in that same quarter that's big, you should get that recurring revenue the next year, so we're taking advantage of that as well.
Did a security continue to leave growth in all of your segments?
Vincent Calico: It did. It is still making up between 55 and 65% of our portfolio. A lot of vendors put this word security and now we're seeing new money flowing to our vendors from their vendors to build out AI.
Vincent Calico: Components just to make their products better, so we'll see that really in 2020, we'll talk about that as the announcements come out.
How did DSS perform while versus your expectations?
Vincent Calico: Q4 is not the biggest quarter because they're having the education market, so it's really
Vincent Calico: Q2 and Q3 and then, but they were, you know, up year over year, but nothing, you know, it isn't one of the bigger quarters. They kick off as you're going into the buying seasons of, you know, the state and local governments.
Speaker Change: of the number of vendors, forgetting the number of hand that you added for the year, were all them productive, how would you characterize that?
Speaker Change: Yeah, so, you know, it's like I say, it's kissing a lot of frogs and you know vetting as much as you can up front before you sign a vendor because
Speaker Change: When you think a lot of the hard work is building that relationship, getting the vendor say, hey, this is a good fit for us.
Speaker Change: As soon as we say yes, that's when all the energy gets consumed inside the climb because we have to onboard them, it goes from ops to finance before it goes back to the sales team to start selling. So if I look at the of those 13 that we signed.
Speaker Change: You know they're all up then again where we're still pushing in.
Speaker Change: The ones that, you know, we signed, you know, could be quarters ago or years ago, and we're pushing them to our Climb Elevate teams.
because they didn't perform. We'll still transact with them.
Speaker Change: But, you know, we just have to highlight a couple on Q4 that we've already...
Speaker Change: You know, some of the cheer shift this starts off as they're moving from a direct to an indirect model and I know, you know, just on scalability alone we picked up, you know, probably two or three million dollars.
Speaker Change: as we've launched that brand. So I have to go into individual ones, but we try to get to a fast note and we also try to get to a quick move if they don't launch or run at the rate that we believe that they were when we saw them.
Okay, I'll go back on the queue. Thanks.
Thank you, Vincent.
Vincent Calico: Thank you. And as a reminder, if you would like to ask a question, please press the star and one on your telephone keypad now.
Vincent Calico: And it appears that we have no further questions at this time. I will now turn the program back to Dale for any additional or closing remarks.
Dale Foster: Thank you, operator. And again, thank you to our shareholders supporting us in 2024. You know, just a great year for Climb.
Speaker Change: also, you know, I never want to miss thanking our teams.
Speaker Change: We have our sales kickoffs at the beginning of the year. We did one in North America, which we usually do. We did our first ever one in Europe .
Speaker Change: for our media teams to finally get them together from all the different countries we pulled into Bristol UK and had a great
Speaker Change: Couple days of planning and celebrating, but I want to thank our team members, you know, tremendous job in 2024, will we ever work out for us in 2025, but you know, just we're in a good market space as we've always talked about, so thank you again, thank you
Speaker Change: Thank you. This does conclude today's presentation. Thank you for your participation. You may disconnect at any time.