CLMB Climb Global Solutions Inc

Climb Global Solutions, Inc. (NASDAQ:CLMB) (“Climb”, the “Company”, “we”, or “our”), a value-added global IT channel company providing unique sales and distribution solutions for innovative technology vendors, is reporting results for the third quarter ended September 30, 2024.

Third Quarter 2024 Summary vs. Same Year-Ago Quarter

• Net sales increased 52% to $119.3 million.
• Adjusted gross billings (a non-GAAP financial measure defined below) increased 65% to $465.2 million.
• Net income increased more than 2x to $5.5 million or $1.19 per diluted share.
• Adjusted net income (a non-GAAP financial measure defined below) also increased more than 2x to $7.1 million or $1.55 per diluted share.
• Adjusted EBITDA (a non-GAAP financial measure defined below) increased 96% to $9.9 million.

Management Commentary

“Q3 was another period of exceptional growth for Climb as we generated record levels across all key financial metrics, while delivering on our acquisition objectives,” said CEO Dale Foster. “Our strong performance was driven by the execution of our core initiatives and the integration of DSS and DataSolutions into our operating platform. We also generated double-digit organic growth in both the U.S. and Europe as we deepened relationships with existing customers while signing new, innovative vendors to our line card.

“Looking ahead, we will continue to leverage our global infrastructure to foster organic growth while actively evaluating M&A targets that complement our geographic footprint, expand our service and solution offerings and, most importantly, align with our high-performance culture. We expect to unlock additional synergies from our acquisitions and further improve operating leverage as we execute across our global platform. We believe that these initiatives, coupled with our proven track record of accretive M&A, will enable us to close out 2024 on a strong note and achieve another year of record results.”

Dividend

Subsequent to quarter end, on October 28, 2024, Climb’s Board of Directors declared a quarterly dividend of $0.17 per share of its common stock payable on November 15, 2024, to shareholders of record on November 11, 2024.

Third Quarter 2024 Financial Results

Net sales in the third quarter of 2024 increased 52% to $119.3 million compared to $78.5 million for the same period in 2023. This reflects organic growth from new and existing vendors, as well as contributions from the Company’s acquisitions of Douglas Stewart Software & Services, LLC (“DSS”) on July 31, 2024 and DataSolutions Holdings Limited (“DataSolutions”) on October 6, 2023. In addition, adjusted gross billings (“AGB”) in the third quarter of 2024 increased 65% to $465.2 million compared to $281.9 million in the year-ago period.

Gross profit in the third quarter of 2024 increased 70% to $24.3 million compared to $14.3 million for the same period in 2023. The increase was driven by organic growth from new and existing vendors in both North America and Europe, as well as contributions from DSS and DataSolutions.

Selling, general, and administrative (“SG&A”) expenses in the third quarter of 2024 were $13.9 million compared to $10.1 million in the year-ago period. SG&A from DSS and DataSolutions drove the majority of the increase as well as variable sales compensation attributed to the growth in AGB. SG&A as a percentage of adjusted gross billings decreased to 3.0% for the third quarter of 2024 compared to 3.6% in the year-ago period.

Net income in the third quarter of 2024 increased more than 2x to $5.5 million or $1.19 per diluted share, compared to $2.4 million or $0.52 per diluted share for the same period in 2023. Net income was impacted by a $1.2 million charge related to a change in fair value of acquisition contingent consideration associated with DataSolutions. Adjusted net income also increased more than 2x to $7.1 million or $1.55 per diluted share, compared to $2.6 million or $0.56 per diluted share for the year-ago period. The Company’s earnings per diluted share in the third quarter of 2024 was negatively impacted by $0.05 in FX compared to the year-ago period.

Adjusted EBITDA in the third quarter of 2024 increased 96% to $9.9 million compared to $5.1 million for the same period in 2023. The increase was primarily driven by organic growth from both new and existing vendors, as well as contribution from the Company’s acquisitions of DSS and DataSolutions. Effective margin, which is defined as adjusted EBITDA as a percentage of gross profit, increased 500 basis points to 41% compared to 36% for the same period in 2023.

On September 30, 2024, cash and cash equivalents were $22.1 million compared to $36.3 million on December 31, 2023, while working capital decreased by $12.3 million during this period. The decrease in cash was primarily attributed to the cash paid at closing for the acquisition of DSS, $20.9 million, as well as the timing of receivable collections and payables. Climb had $0.9 million of outstanding debt on September 30, 2024, with no borrowings outstanding under its $50 million revolving credit facility.

For more information on the non-GAAP financial measures discussed in this press release, please see the section titled, “Non-GAAP Financial Measures,” and the reconciliations of non-GAAP financial measures to their nearest comparable GAAP financial measures at the end of this press release.

Conference Call

The Company will conduct a conference call tomorrow, October 31, 2024, at 8:30 a.m. Eastern time to discuss its results for the third quarter ended September 30, 2024.

Climb management will host the conference call, followed by a question-and-answer period.

Date: Thursday, October 31, 2024Time: 8:30 a.m. Eastern timeToll-free dial-in number: (800) 274-8461International dial-in number: (203) 518-9814Conference ID: CLIMBWebcast: Climb’s Q3 2024 Conference Call

If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.

The conference call will also be available for replay on the investor relations section of the Company’s website at www.climbglobalsolutions.com.

About Climb Global Solutions

Climb Global Solutions, Inc. (NASDAQ:CLMB) is a value-added global IT distribution and solutions company specializing in emerging and innovative technologies. Climb operates across the US, Canada and Europe through multiple business units, including Climb Channel Solutions, Grey Matter and Climb Global Services. The Company provides IT distribution and solutions for companies in the Security, Data Management, Connectivity, Storage & HCI, Virtualization & Cloud, and Software & ALM industries.

Additional information can be found by visiting www.climbglobalsolutions.com.

Non-GAAP Financial Measures

Climb Global Solutions uses non-GAAP financial measures, including adjusted gross billings, adjusted net income and adjusted EBITDA, as supplemental measures of the performance of the Company’s business. Use of these financial measures has limitations, and you should not consider them in isolation or use them as substitutes for analysis of Climb’s financial results under generally accepted accounting principles in the United States of America (“U.S. GAAP”). The attached tables provide definitions of these measures and a reconciliation of each non-GAAP financial measure to the most nearly comparable measure under U.S. GAAP.

Forward-Looking Statements

The statements in this release, other than statements of historical fact, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to come within the safe harbor protection provided by those sections. These forward-looking statements are subject to certain risks and uncertainties. Many of the forward-looking statements may be identified by words such as ”look forward,” “believes,” “expects,” “intends,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “under construction,” “in development,” “opportunity,” “target,” “outlook,” “maintain,” “continue,” “goal,” “aim,” “commit,” or similar expressions, or when we discuss our priorities, strategy, goals, vision, mission, opportunities, projections, intentions or expectations. In this press release, the forward-looking statements relate to, among other things, declaring and reaffirming our strategic goals, future operating results, and the effects and potential benefits of the strategic acquisition on our business. Factors, among others, that could cause actual results and events to differ materially from those described in any forward-looking statements include, without limitation, our ability to recognize the anticipated benefits of the acquisitions of Data Solutions Holdings Limited and Douglas Stewart Software & Services, LLC, the continued acceptance of the Company’s distribution channel by vendors and customers, the timely availability and acceptance of new products, product mix, market conditions, competitive pricing pressures, the successful integration of acquisitions, contribution of key vendor relationships and support programs, inflation, as well as factors that affect the software industry in general. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described in the section entitled “Risk Factors” contained in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and from time to time in the Company’s filings with the Securities and Exchange Commission.

Company Contact

Drew ClarkChief Financial Officer(732) 389-0932Drew@ClimbGS.com

Investor Relations Contact

Sean Mansouri, CFA or Aaron D’SouzaElevate IR(720) 330-2829CLMB@elevate-ir.com

CLIMB GLOBAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
	(Unaudited)
(Amounts in thousands, except share and per share amounts)
		September 30, 2024				December 31, 2023
ASSETS
Current assets
	Cash and cash equivalents	$	22,139			$	36,295
	Accounts receivable, net of allowance for doubtful accounts of $640 and $709, respectively		247,907				222,269
	Inventory, net		4,445				3,741
	Prepaid expenses and other current assets		6,629				6,755
Total current assets			281,120				269,060
Equipment and leasehold improvements, net			12,151				8,850
Goodwill			29,628				27,182
Other intangibles, net			46,041				26,930
Right-of-use assets, net			937				878
Accounts receivable long-term, net			752				797
Other assets			863				1,077
Deferred income tax assets			448				324
Total assets		$	371,940			$	335,098
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable and accrued expenses	$	273,893			$	249,648
	Lease liability, current portion		533				450
	Term loan, current portion		555				540
Total current liabilities			274,981				250,638
	Lease liability, net of current portion		796				879
	Deferred income tax liabilities		5,671				5,554
	Term loan, net of current portion		334				752
	Non-current liabilities		2,490				2,505
Total liabilities			284,272				260,328
Stockholders' equity
	Common stock, $.01 par value; 10,000,000 shares authorized, 5,284,500 shares
	issued, and 4,606,790 and 4,573,448 shares outstanding , respectively		53				53
	Additional paid-in capital		36,676				34,647
	Treasury stock, at cost, 677,710 and 711,052 shares, respectively		(12,777	)			(12,623	)
	Retained earnings		62,560				53,215
	Accumulated other comprehensive income (loss)		1,156				(522	)
Total stockholders' equity			87,668				74,770
Total liabilities and stockholders' equity		$	371,940			$	335,098

CLIMB GLOBAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands, except per share data)
	Nine months ended								Three months ended
	September 30,								September 30,
		2024				2023				2024				2023
Net Sales	$	303,847			$	245,229			$	119,349			$	78,457
Cost of sales, excluding depreciation and amortization expense		244,014				202,053				95,092				64,183
Gross profit		59,833				43,176				24,257				14,274
Selling, general and administrative expenses		39,433				31,930				13,937				10,122
Depreciation & amortization expense		2,933				1,934				1,197				617
Acquisition related costs		1,201				277				609				246
Total selling, general and administrative expenses		43,567				34,141				15,743				10,985
Income from operations		16,266				9,035				8,514				3,289
Interest, net		755				760				198				318
Foreign currency transaction loss		(688	)			(100	)			(442	)			(140	)
Change in fair value of acquisition contingent consideration		(1,152	)			-				(1,152	)			-
Income before provision for income taxes		15,181				9,695				7,118				3,467
Provision for income taxes		3,561				2,618				1,659				1,095
Net income	$	11,620			$	7,077			$	5,459			$	2,372
Income per common share - Basic	$	2.54			$	1.57			$	1.19			$	0.52
Income per common share - Diluted	$	2.54			$	1.57			$	1.19			$	0.52
Weighted average common shares outstanding - Basic		4,458				4,392				4,476				4,414
Weighted average common shares outstanding - Diluted		4,458				4,392				4,476				4,414
Dividends paid per common share	$	0.51			$	0.51			$	0.17			$	0.17
Reconciliation of GAAP and Non-GAAP Financial Measures (unaudited)
(Amounts in thousands, except per share data)
The table below presents net sales reconciled to Adjusted Gross Billings (Non-GAAP) (1):
	Nine months ended								Three months ended
	September 30,				September 30,				September 30,				September 30,
		2024				2023				2024				2023
Net sales	$	303,847			$	245,229			$	119,349			$	78,457
Costs of sales related to sales where the Company is an agent		876,447				618,110				345,835				203,458
Adjusted gross billings (Non-GAAP)	$	1,180,294			$	863,339			$	465,184			$	281,915

(1) We define adjusted gross billings as net sales in accordance with US GAAP, adjusted for the cost of sales related to sales where the Company is an agent. We provided a reconciliation of adjusted gross billings to net sales, which is the most directly comparable US GAAP measure. We use adjusted gross billings of product and services as a supplemental measure of our performance to gain insight into the volume of business generated by our business, and to analyze the changes to our accounts receivable and accounts payable. Our use of adjusted gross billings of product and services as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under US GAAP. In addition, other companies, including companies in our industry, might calculate adjusted gross billings of product and services or similarly titled measures differently, which may reduce their usefulness as comparative measures.

	The table below presents net income reconciled to adjusted EBITDA (Non-GAAP) (2):
		Nine months ended								Three months ended
		September 30,				September 30,				September 30,				September 30,
			2024				2023				2024				2023
Net income		$	11,620			$	7,077			$	5,459			$	2,372
	Provision for income taxes		3,561				2,618				1,659				1,095
	Depreciation and amortization		2,933				1,934				1,197				617
	Interest expense		266				94				105				45
EBITDA			18,380				11,723				8,420				4,129
	Share-based compensation		2,810				3,422				904				687
	Acquisition related costs		1,201				277				609				246
Adjusted EBITDA		$	22,391			$	15,422			$	9,933			$	5,062
		Nine months ended								Three months ended
		September 30,				September 30,				September 30,				September 30,
Components of interest, net			2024				2023				2024				2023
	Amortization of discount on accounts receivable with extended payment terms	$	(23	)		$	(41	)		$	(6	)		$	(12	)
	Interest income		(998	)			(813	)			(297	)			(351	)
	Interest expense		266				94				105				45
Interest, net		$	(755	)		$	(760	)		$	(198	)		$	(318	)

(2) We define adjusted EBITDA, as net income, plus provision for income taxes, depreciation, amortization, share-based compensation, interest and acquisition related costs. We define effective margin as adjusted EBITDA as a percentage of gross profit. We provided a reconciliation of adjusted EBITDA to net income, which is the most directly comparable US GAAP measure. We use adjusted EBITDA as a supplemental measure of our performance to gain insight into our businesses profitability when compared to the prior year and our competitors. Adjusted EBITDA is also a component to our financial covenants in our credit facility. Our use of adjusted EBITDA has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under US GAAP. In addition, other companies, including companies in our industry, might calculate adjusted EBITDA, or similarly titled measures differently, which may reduce their usefulness as comparative measures.

The table below presents net income reconciled to adjusted net income (Non-GAAP) (3):
	Nine months ended								Three months ended
	September 30,				September 30,				September 30,				September 30,
		2024				2023				2024				2023
Net income	$	11,620			$	7,077			$	5,459			$	2,372
Acquisition related costs, net of income taxes		901				208				457				185
One-time CEO stock grant		-				1,796				-				-
Change in fair value of acquisition contingent consideration		1,152				-				1,152				-
Adjusted net income	$	13,673			$	9,081			$	7,068			$	2,557
Adjusted net income per common share - diluted	$	3.00			$	2.03			$	1.55			$	0.56

(3) We define adjusted net income as net income excluding acquisition related costs, net of income taxes, the stock compensation expense recognized for the one-time CEO stock grant, and the change in fair value of acquisition contingent consideration. We provided a reconciliation of adjusted net income to net income, which is the most directly comparable U.S. GAAP measure. We use adjusted net income as a supplemental measure of our performance to gain insight into comparison of our businesses profitability when compared to the prior year. Our use of adjusted net income has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. In addition, other companies, including companies in our industry, might calculate adjusted net income, or similarly titled measures differently, which may reduce their usefulness as comparative measures.