Q2 2025 Climb Global Solutions Inc Earnings Call
CEO, Mr. Dale Foster the company's CFO, Mr. Matthew Sullivan on the company's Investor Relations adviser, Mr. Shawn Mansouri with elevate I R.
By now everyone should have access to the second quarter 2025 earnings press release, which was issued yesterday afternoon at approximately 405 P M Eastern time.
The release is available in the Investor Relations section of climate Global solutions website at Www Dot climate Global solutions Dotcom.
This call will also be available for webcast replay on the company's website.
Following management's remarks, we will open the call for your questions.
I would now like to turn the call over to Mr. Mansouri for introductory comments.
Thank you 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 Securities Litigation Reform Act of 1995.
These forward 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 forward looking statements.
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.
Except as required by law the company undertakes no obligation to revise or publicly release the results of any revision to any forward looking statements.
Our presentation also includes certain key operational metrics and non-GAAP financial measures.
Including gross billings and adjusted EBITDA, adjusted net income and EPS and effective margin as supplemental measures of performance of our business.
All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules.
You'll find reconciliation charts and other important information in the earnings press release and form 8-K, we furnished to the SEC yesterday.
I'll now turn the call over to climb CEO Dale Foster.
Thank you Sean and good morning, everyone. As you can see we had another strong quarter with material increases across all of our key financial metrics during the quarter, we generated double digit organic growth by strengthening relationships with customers growing our line card with new innovative vendors and expanding market share in both the U S and euro.
We also benefited this quarter from the incremental contribution and seasonal strength of our acquisition of Douglas Stewart software DSS.
Which typically sees higher demand for education customers as they ramp up ahead. The next school year.
Our client team continues to identify and align with the most innovative technologies in the market not only strengthened our vendor ecosystem, but also address the increasing increasingly complex challenges our customers face in Q2 alone we evaluated 50 potential vendor partnerships and move forward with just four of them. This disciplined approach reflects our commitment to quit.
Holiday over quantity and our focus on delivering differentiated high impact solutions that drive long term value across our platform let.
Let me take a moment to highlight a few of these wins first we announced the partnership with ignite a leader in secure content collaboration intelligence and governance. This partnership enables us to offer ignite cloud native platform to our partners their customers across the us reinforcing our commitment to the expanding access of transformative technologies.
By adding ignite to our line card we are equipped to equipping resellers with a trusted scalable platform that fits seamlessly into both SMB and enterprise environments. This partnership underscores our mission to deliver part of the first technologies that moves with speed of the modern business.
Q2, we also.
Our U K and Ireland team secured a exclusive distribution agreement with Igl, a global leader in secure endpoint or solutions for UK and Ireland. This milestone builds on the partnership that we began in 2016 with data solutions out of Ireland, which we acquired in 2023, our ability to drive lead.
<unk>.
Generation and expanded <unk> addressable market in the region led to the sole distribution agreement further validating our strength of our channel reach execution and commitment to Europe.
We look forward to continuing our partnership with <unk> as we scale together in these key markets in.
In June we brought on Vishal pushback.
Climbs Chief Information Officer, Vishal is a dynamic executive with more than two decades of strategic leadership across high Tech manufacturing logistics distribution services.
In services Vishal has led large scale ERP CRM, CRM and HCM transformations and has overseen complex M&A integrations and driven in deployment of cutting edge cloud solutions.
And automation and enhanced security infrastructure. He brings a visionary approach to innovation and has a strong track record of fostering global calibration and anticipating future technology trends. We are pleased to have him join declined family and look forward to his invaluable contributions.
In addition to Vishal appointment in May we announced the promotion of Carlos Rodriguez <unk> President of North America, Carlos has been a key leader at climb since 2020, and bringing more than 20 years of experience and value added distribution and a proven track record of driving growth across North America.
Since joining climb he has played a pivotal role in expanding market share building high performance sales teams and strengthening strategic vendor relationships in his prior role as vice President of sales Carlos led the development of coins dedicated vendor management team and is also consistently delivered impactful results through alignment and par.
Our engagement.
This new role.
As President Carlos will oversee the north American sales with a focus on accelerating growth deepening vendor and partner success and further expanding climbs market presence. We're excited to see Carlos brings his leadership and vision to this new role as we continue to his new role as we continued executing on our growth strategy.
Looking ahead, we're focused on building on the momentum from the first half of the year by continuing to execute against our strategic priorities with our ERP system now fully in place. We are beginning to realize the benefits of improved operational efficiency and scalability.
Positioning us to drive stronger operating leverage as we grow. Additionally, we're actively evaluating strategic M&A opportunities in North America and overseas that align with our long term vision and can expand both our capabilities and geographic reach these initiatives coupled with our robust balance sheet and demonstrated track record of success will enable.
US to deliver on both organic and inorganic objectives in 2025 and beyond with that I will turn the call over to our CFO, Matt Sullivan to take you through our financial results.
Thank you Dale and good morning, everyone. A quick reminder, as we review our second quarter financial results, all comparisons and variance commentary refer to the prior year quarter unless otherwise specified.
As reported in our earnings press release gross billings in Q2, 2025 increased 39% to $500 6 million compared to $359 8 million in the year ago quarter distribution segment gross billings increased 40% to $477 million and solutions segment gross billings increased <unk>.
19% to $23 5 million.
Net sales in the second quarter of 'twenty, five increased 73% to $159 3 million compared to $92 1 million, which primarily reflects double digit organic growth from new and existing vendors as well as contribution from our acquisition of DSS in July of last year.
Gross profit in the second quarter increased 42% to $26 3 million compared to $18 6 million again, the increase was driven by organic growth from new and existing vendors in both North America, and Europe as well as contribution from DSS gross profit as a percentage of gross billings increased to five 3% compared to five.
Five 2% in the year ago period.
SG&A expenses in the second quarter was $16 4 million compared to $13 million for the same period in 2020 for SG&A from DSS accounted for 900000 of the increase.
SG&A as a percentage of gross billings decreased to three 3% in Q2 of 2025 compared to three 6% in the year ago period.
Net income in the second quarter of 2025 increased 74% to $6 million or $1 30 per diluted share compared to $3 4 million or <unk> 75 per diluted share for the comparable period in 2024.
Net income was impacted by a 400000 dollar charge related to the change in fair value of acquisition contingent consideration associated with DSS.
Adjusted net income increased 68% to $6 4 million or $1 39 per diluted share compared to $3 8 million or <unk> 83 per diluted share for the year ago period.
Adjusted EBITDA in the second quarter increased 64% to $11 4 million compared to $6 9 million in the prior year quarter the increase.
It was driven by the aforementioned organic growth from both new and existing vendors as well as contribution from DSS.
Adjusted EBITDA as a percentage of gross profit or effective margin increased 600 basis points to 43, 3% compared to 37, 3% in the year ago period.
Turning to our balance sheet cash and cash equivalents were $28 6 million as of June 32025, compared to $29 8 million on December 31, 2024, while working capital increased by $12 $2 million during this period.
The decrease in cash was primarily attributed to the timing of receivable collections and vendor payments.
As of June 32025, we had 500000 outstanding of outstanding debt with no borrowings outstanding under our $50 million revolving credit facility with Jpmorgan Chase.
On July 29, 2025, our board of directors declared a quarterly dividend of <unk> 17 per share of our common stock payable on August 15th 2025 to shareholders of record on August 11th 2025.
To Echo Dale's earlier comments, we're continuing to explore strategic acquisitions that align with our high performance culture and strengthen our ability to meet evolving customer needs with a robust balance sheet, we are well positioned to pursue opportunities that complement our existing portfolio and accelerate growth in key markets. This momentum is a direct result.
<unk> of our team's hard work and execution and we're excited to carry that forward as we advanced both our organic and inorganic growth initiatives throughout 2025.
This concludes our prepared remarks, we will now open it up for questions from those participating in the call operator back to you.
Thank you and at this time, if you would like to ask a question. Please press the star and one on your telephone keypad.
We draw your question by pressing star two.
And once again that is star one if you would like to join the queue.
Our first question from Vincent Colicchio with Barrington Research. Please go ahead. Your line is open.
Good morning.
Good quarter.
My first question is.
Security and data center continues to lead growth in the quarter or is it broadening out somewhat.
It has.
Those are our top two in the security being the stronger of those two events, but yes those are leading it.
Make sense or anything in the securities market continues to heat up and then.
In the data center space as we keep bringing in tools that are either data migration tools or storage tools.
That's going to be our leader for quite some time.
And how does your top 20 vendors perform versus the overall business are they keeping track.
Staying at a pace in line.
If you take a look at our.
When you say the top 20, there's probably like five or six at the bottom end of that from 12 to 20 that are taking go into the 20th we have some of the other ones jump forward.
Some of the ones, we've talked about dark trace is going to make more of an impact as we go through the rest of this year as we just got.
<unk> with them.
<unk> just got our basically our teams aligned as we announced it and then.
That is going to be the biggest impact for the second half of the year, but yes, it's a new entrant that can get into that top 20, nothing really has changed that much in the top 10, but from 10 to 20, we of dumping ones that are just performing better in the quarter.
And were there any large deals which made this quarter, especially strong which may not necessarily recur.
Following quarter.
Yes, so what we do is we talked about this in.
We argue internally.
To call out that data because we considered organic because we had that company for about three years now.
So we have it we get lumpy with that we had a vast order.
That we budgeted for Q3 that got pulled into Q2. So we will have to make that up in Q3, but so that definitely helped the quarter out to put us over the top but just organically without that we were still growing it.
Good clip.
And.
Are you seeing meaningful synergies as of yet from the Douglas.
Douglas Stewart acquisition.
We do so we have already announced that they are on our ERP systems and also their lines have moved into our common portfolio with vendors, we still are carving out and calling of hey, we can go after this the K 12 and higher Ed space.
This is just like I said in my comments. This is the growth there.
The excitement period for that is everybody joining school year and everybody's extinguished in their budgets.
And in the end of June and then buying new going into the new school year, but yes, I mean, we we have integrated that team into our teams. Our teams. We have 14 teams regional teams and then some dedicated teams in North America, and they're already not.
Not only quoting processing, but also in our learning the Douglas Stuart's product lines.
Okay I'll go into the queue. Thanks.
Thank you Vince good talking to you.
Thank you and once again that is star one if you would like to join the queue. We will move next with Howard root private Investor. Please go ahead. Your line is open.
Hi, Good morning Daily Matt Congratulations.
Just another outstanding quarter.
Very little to explain actually and the results, it's kind of hard to find stuff to pick on.
But.
I've got a couple of questions I guess first on a couple of little things on the income statement.
I've always looked at it as.
Our gross margin as a percent of gross billings in that as you said moved up from 5% to five 3%.
And there's always that 5% was kind of the target is that a trend or is that just a little bouncing around or how do you see that going forward.
Gross margin.
Thanks Howard.
So yes for Q2 of this year, we went from five 2% of Q2 last year to five three for this quarter and.
Internally, we continue to project it to be in that 551%.
The real driver of that.
That higher percentage, a slightly higher percentage. This quarter was was the timing of that the lumpy transactions that Dale just alluded to somehow.
Some have higher margins is there.
Yes.
And then our typical base business, but thats, what really contributed to the higher gross profit as a percentage of gross billings.
Your question and thanks for the question Robert.
It's not going to be a trend that we're going to continue to see that.
Band It will just be lumpy just like it was before because of that they are there big orders and they have typically a lot of margin with them.
It's something that we look at like Matt said can we do and we get asked by investors. All the time can we expand our margins it's going to be with.
Spanning our solutions team and then as we've talked about we want to add more services to the company that will help move that up in the basis points right now.
Continued in that five to $5 one range.
Okay, Great and then on SG&A, I mean that jumped up by 28% year over year, but your gross billings went up by 39%. So your percent goes from $3 six down to three 3%.
With your implementing ERP and growing and setting the stage I mean, that's all understandable, but.
How do you see that going forward do you see that getting closer to 3% of gross billings is that going to be a trend.
I think I think the percentage that you saw this quarter is what we expect to see as we move forward.
So we had a 900000 contribution.
Dollar contribution.
Of DSS this quarter that we didn't have in the prior year quarter, but that three 3% range is more consistent with what we expect going forward, yeah, and Howard So DSS wasn't a comparable from last year, because we required them in July of last year. So that's the added SG&A, but on.
We've integrated they didn't have a lot of infrastructure. So if you look at hey can we clear out some of the back office, it's more about.
Ben Mending the teams together and then looking for efficiencies in that play, but that's the biggest thing is the DSS.
Expenses.
Okay, Great and then kind of on your international side is there anything material on tariffs are on currency fluctuation that you see right now that could affect things going forward.
So we talk about the tariff we've had no real impact and we have legal entities in the UK and Ireland and some of the other EU countries. So we can we can play with that as far as where we're dealing with in shipping. So we havent had impact on that.
One thing that we had with <unk>.
Meetings of course before these earnings calls when we talk about our FX and how we deal with that and we're just trying to come up with better schemes to deal with our currency because most of our vendors we're buying in U S. Dollars. So any kind of fluctuation of the dollar got weaker we're going to have that impact. So we're doing some hedging, but we're looking for better strategies because we.
Realized and unrealized gains and some one quarter over another you know will affect us and then a lot of times, we'll get that pick up but it will be on a quarter or two quarters down.
Okay. So then looking at bigger picture.
I kind of look back it was that Q3 of 2022, so at less than three years ago, you crossed over into the $1 billion in gross billings and now you are crossing 2 billion back then were on the call. I asked you know how is this continue I mean, one billions a big number and your response was in your market 1 billion still small potatoes.
Really a lot of area going forward, which you've proved yourself correct over the last two plus years.
But as you cross the 2 billion do you still see that I mean, you still see yourself as a fairly small player in the overall market with the potential to continue this type of.
Growth going forward or when will you reach kind of a little bit of a limitation large.
The limits of large size numbers.
But youre right I mean, we are still such a small player and I can just give you some inside baseball, where we meet with vendors. We've talked about this quarter, we met with 15 different vendors the vendors have choices on how they want to go to market and once they choose distribution. They get the big three right. We had Ingram micros and expect data in Aero and that is worldwide those are the big.
Three the next largest one I would say exclusive networks is in the $5 billion to $6 billion range. They just got taken private in Q1 or the end of Q1. So we are still extremely small but when these vendors come in we talk about these big players, but we're talking about competing them such as one of their smaller divisions. So.
Our headroom between $2 billion and $30 billion.
I would say that's a big gas. So we can grow a lot, but if we take a look at where they actually compete against us in software application server security data center only because were.
So different in that space, we still have I would say, it's 2 billion to.
$20 billion.
So compare it that way, it's a lot of headroom that we can go before we'd be disrupt were disruptive to them, where they would say hey, we need to make some kind of move and we're just not that disruptive than we think we can still grow under that.
Umbrella of being that emerging.
Hi touch.
SaaS to market.
Channel partner.
Great Great I mean, that's just so unusual for me that it just kind of a little bit hard to believe but you've proven proving me wrong.
Sure.
And we've talked about this if you look at our marketing all the roll up of distributors in the United States happened ended up in <unk>.
2013, so theres nobody right. We have these three massive ones that are worldwide, but really focused in North America, and then us and there are some other ones that are on the adjacent market space, but nothing thats directly competitor in Lake Charles our CMO loves to say.
Hey, there could be two or three more claims in our space and we still would have that many vendors to look at and that many vendors onboard.
It's shocking how many $100 million.
SaaS vendors are out there that we haven't touched yet and the ones, we touch where maybe they are not ready for us maybe when they're not we're not ready for them, but theres a lot of them to choose from and that's the excitement of our market lot of good acquisition targets overseas in a lot of good vendors coming into our space.
Great great. Okay I appreciate it.
And then final question for me is just a little bit if you could talk a little bit about your acquisition process and what you see out there in terms of the.
Market for potential acquisitions, and the valuation that youre seeing and then how.
Do you view currency to do the acquisition, what you've done so far has been cash and so little bit of debt, which you've done a great job of making it accretive almost immediately and paying off the debt.
But how do you see it going forward because I assume youre looking at a couple of deals bigger things as well as more things like what you've done already.
Yes, correct. So this year Howard we're looking at ones that we would just use cash for they're not that big but they would be strategic for us. So we look at it that way.
The strategic plan as far as acquisitions.
We're looking at the services companies, because we want to add that and there's two reasons for that we'd like the margin profile, we want to become more sticky with vendors that we currently have and if we have services.
And if you look at the vendors right theyre, making 80% of margin selling their product why would they have an internal services team just for customer sat when enrolling making 30%. So if they can.
Back to the channel that's perfect for US we won't compete with our customer base, but when they don't have those capabilities and the vendor wants us to do that that's what I want to build into the company. So there's a couple of small ones. We're looking at there.
And then outside of that 2026 spot on like what can really move the needle for climate. It's nonstrategic is going to have to be much more sizeable and that'll be a 2026 and into 2027 play for us but.
A lot of good targets out there, but we would do cash on anything this year.
Valuations on those targets have changed at all are so strong market here that we start with.
Yeah, Here's how we start Howard and it's funny, because we're being rewarded in the market for being a differentiator.
Go to markets or are multiples are a lot higher but we still started in that 7% to nine multiple and then it all depends if you look at Douglas Stewart. It was a much lower margin multiple because there were so concentrated with one vendor. We also look at the acquisitions as far as what vendors. They bring in because we think that's the lifeblood of what we have inside of climate and what we take out to the market.
But we just started that and then it's the give and take that what is that company really going to bring to us.
And can we actually expand and how can we actually get it to all of our territories, depending on what they bring but we started that and we.
Paid more than the multiple we're trading at no we have not so.
No that's not a perfect answer but the answer is it depends.
That's very helpful. So yes.
Gratulation once again until you until you guys into the whole client team on another outstanding quarter, just great job.
Thanks, good talking to you.
Thank you and we do have a follow up from Vincent Colicchio with Barrington Research. Please go ahead.
Uh huh.
Yes.
So obviously the business appears quite robust, but I am wondering.
Any signs of economic headwinds.
<unk> nature.
We do not see it Vince and I think it goes back to.
Howard's remarks that we are extremely small.
In our space and you can say hey, we're going to go to the $2 billion, Mark, but we're still small in our space and if you look at.
We've spent some time with the <unk> team, which is an analyst group and if you look at the overall market and our it services.
Looking at 1% to two trillion dollar space. So a lot of new entrants, we still see money flowing from the vcs into a lot of startups.
We're still having a huge pipeline of vendors coming toward us and I've talked about this in the past that we've had to go and find them in over the last 18 months, it's theyre finding us so we don't and.
So I'll just talk about the downside for Q2, we lost Citrix, we announced that in Q1.
Our Ireland group of when we acquired data solutions the team.
Was tracking very well in Q1, because we still have that but in Q2 that was where the hole and here's what I will say the sales teams have sales cycles and they have a lot of tools in their bag, if they're not selling citrix theyre selling something else, we feel and we did not change our budget going into this knowing that this is coming.
We think we can fill that hole as well so.
Kudos to our our overall teams is performing and looking at hey, Okay. I don't have this sell anymore.
So I'm going to take those new products into my customer base.
Okay Thats it from me thank you.
Thanks, guys.
Thank you.
And this conclude our Q&A session I will now turn the call over to Mr. Foster for closing remarks.
Thanks, operator, once again, thanks to all of our shareholders for supporting US and also to the greater climbed team on their excellent performance they've been continued to focus on growing clients.
With that we'll end the call. Thank you.
Thank you and this does.
This conclude todays program.
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