Climb Global Solutions Inc (CLMB) 2012 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Wayside Technology Group conference call.

At this time all participants are in a listen only mode.

Later we will conduct a question-and-answer session.

Please note that all callers are limited to one question each.

(Operator Instructions).

As a reminder, ladies and gentlemen, this conference is being recorded.

I would now like to introduce your host for today's conference, Ms.

Nathalie Turner.

Ms.

Turner you may begin your conference at this time.

Thank you, Sahib, and good morning everyone.

Welcome to Wayside Technology's first-quarter 2012 earnings call.

Before returning a call over to Simon Nynens, the Company's Chairman and CEO, I will dispense with the customary cautionary language and comment about the webcast for this earnings call.

We released earnings for the first-quarter at approximately 5 p.m.

Eastern time Thursday, April 26, 2012.

The earnings release is available at the Company's Investor Relations website at waysidetechnology.com.

Today's call, including all questions and answers, is being webcast live and can be accessed via the website earnings.com.

A rebroadcast of this call will be available at waysidetechnology.com.

This conference call and the associated webcast contains time sensitive information that is accurate only as of today, April 27, 2012.

A detailed discussion of risks and uncertainties are discussed in our Forms 10-K and also in greater detail in our Forms 10-K.

Wayside Technology Group, Inc., sees no obligation to update and does not intend to update any forward-looking statements.

Now I would like to turn the call over to Simon.

Thank you, Nathalie, and good morning to everybody.

We delivered strong results this quarter.

We strengthen our position in the software distribution market and continue to sign on new vendors.

We also maintained our focus on costs, which allowed us to drive a solid earnings performance.

We continue to have one of the most conservative balance sheet as a public company and do not have a current need for debt.

During these challenging economic times, many software publishers are looking for alternatives when it comes to distribution of their products.

Mainstream distribution continues to see software as an add-on to sale to hardware and continues to treat software lines as such.

These distributors lead with an ultra low pricing strategy for software, and make their money by charging software publishers marketing, license and a whole menu of other fees.

Many software publishers continue to look for a distributor that can truly act as an extension of their internal sales and marketing organizations, and that is exactly who we are.

We know the products we sell, and we make money when we sell products, not by charging a whole menu of fees.

Our interest and the software publisher's interest are therefore perfectly aligned.

It is important to mention that we not only manage our operations closely in terms of revenue and gross margins, but also in terms of measuring the superior service we provide to software publishers.

Now as stated in our press release, we closely monitor our gross margins both in dollars and as a percentage of sales.

Some of our competitors lowered their prices significantly in the first quarter of this year and we responded immediately.

As a result, product gross margins as a percentage of rebates and discounts in dollars that are elements of overall profitability for the Company were negatively impacted this quarter.

However, overall income from operations was still up significantly.

Now to be prudent we cannot currently quantify the precise impact of 2000 as a whole.

However, we do anticipate that gross margins and discounts and rebates earned for the remainder of this year will be affected by the current trend.

Yet as we have stated before, despite this challenge, and I want to be very clear on this, we remain excited about the overall growth opportunities in our markets.

The key there is to manage our SG&A as a percentage of sales and to drive income from operations in terms of dollars, which is ultimately what we strive for.

We have the tools in place to add more publishers, including a great team and a great IT infrastructure.

Although we cannot influence the larger economic forces that are currently at work we do look forward with great confidence in our team.

Now I would like to hand it over to Dan Jamieson, Vice President and General Manager of our Lifeboat Division.

Dan.

Thank you, Simon.

Lifeboat's Q1 2012 results reflect positive year-over-year growth across all key segments of the business, including increases in revenue, margin and income from operations.

The key growth factors in Lifeboat's Q1 results were the successful penetration and expansion of pivotal software lines within a variety of Lifeboat's premier reseller accounts -- the LARs, the large account resellers; the DMRs, the direct market resellers; along with the successful expansion of businesses in targeted solution provider accounts, including VARs, the value-added resellers; SIs, the systems integrators; and other consultancy type companies.

Lifeboat signed three new distribution agreements in Q1.

These new agreements will strengthen Lifeboat's portfolio and enhance our focus on our go-to-market concentration areas, including virtualization, security, application lifecycle management, database infrastructure, application and network infrastructure and business productivity.

Thank you, Simon.

Thank you, Dan.

Now onto our TechXtend division.

Shawn.

Thank you, Simon.

The TechXtend sales team performed exceptionally well in the first quarter of 2012 as we saw year-over-year increases in revenue, gross margin and income from operations.

This growth is attributed to a few key areas -- an increase in larger transactions, those as defined as deals greater than $50,000, as well as an increase in our software renewal rates, this as a result of our continued focus in this area.

Our customer service oriented approach has helped us increase loyalty within our existing customer base and has led to an increase in new account acquisition.

In addition to our legacy programming and development tools business, we have also more clearly defined our solution sets.

These are virtualization in cloud, storage and data management, and business intelligence and information management.

We are excited as we continue to build on our reputation of being a trusted advisor to our clients.

Thank you, Shawn.

Kevin Scull will now report on the financial numbers.

Kevin.

Thank you, Simon, and good morning everyone.

I will discuss our first-quarter financial results on a Companywide basis as well as per segment.

Net sales were $66.9 million compared to $51.5 million last year, representing a 30% increase.

Sales for our Lifeboat segment were $49.3 million compared to $39.5 million last year, representing a 25% increase.

Sales for our TechXtend segment were $17.6 million compared to $12 million last year, representing a 47% increase.

Gross profit was $5.6 million compared to $4.8 million last year.

Gross profit as a percentage of net sales was 8.3% compared to 9.4% last year.

Gross profit margin as a percentage of sales for our Lifeboat segment was 7.7% compared to 8.6% last year.

Gross profit margin as a percentage of sales for our TechXtend segment was 10.2% compared to 11.3% last year.

Total selling, general and administrative, SG&A, expenses were $4 million compared to $3.5 million last year.

As a percentage of sales SG&A expenses were 6% compared to 6.9% last year.

Selling costs increased by $135,000, the result of the increased volume and the company's investing in and rewarding employees for sales growth.

Our net income amounted to $1 million compared to $840,000 last year.

On a fully diluted basis our earnings per share were $0.22 compared to $0.18 last year.

Now moving on to the balance sheet.

Compared to our year-end balance sheet the following accounts had significant fluctuation.

Prepaid expenses and other current assets decreased by $500,000 on lower rebate receivable, and accrued expenses decreased by $1.3 million mainly due to year-end bonus payouts.

Our book value per share is $6.30, and equity now stands at $29.4 million.

And cash and marketable securities make up 50% of equity.

This concludes my remarks.

Simon, back to you.

Thank you, Kevin.

Now before we start the Q&A session let me make one more comment.

We thank our vendors, the software publishers, for their trust and partnership.

We are a flexible, proactive and knowledgeable partner who acts like an extension of vendor sales and marketing team.

We remain focused on adding new publishers, providing our customers with excellent customer service and providing our employees with a great and rewarding working environment.

We look forward with great confidence in the people who make these results possible, our team here at Wayside Technology Group.

And to them I say thank you for your hard work during this past quarter and thank you for your continued passion to win.

Thank you, operator, we can now start with the Q&A session.

(Operator Instructions).

[Karin Lehman], [LSP Partners].

In terms on basically navigating in a difficult marketplace, you have made no comments about your European operations, and I am just wondering if you have any thoughts along those lines, and does that hinder your further expansion into other geographical areas?

A word about our international operations in terms of our European operations first.

Overall, our international sales increased very nicely from I would say about 27% in this quarter.

We are based in the Netherlands, in the northern region of Europe, and despite all the talk of Europe, Germany and the Netherlands and the Nordic countries, as well as the Eastern European part of the European Union, is doing very well.

We continue to expand significantly in Europe.

And as a percentage of sales, therefore, despite the fact that we grew overall 30%, Europe continued to amount -- our international sales, including Canada, continued to amount to about 17% of our overall revenue.

So we are definitely not too -- I mean, of course, it is not good what is happening in Europe, but the same goes here in the US.

We remain -- the overall economy remains very uncertain.

But in a way that continues to be good for us, as software publishers, to continue to look for alternatives.

So that counts for here.

It counts for Latin America, Asia, as well as Europe.

So we continue to expand in Europe, and I'm actually quite pleased with the results in Europe, as well as Canada.

Dan, you might want to add to that.

Absolutely.

Thanks, Simon.

Yes, I just think that what Simon was saying, actually the climate right now almost benefits us because our office in Almere really represents a pan-European approach to vendors without having to put boots on the ground in each different country.

So it is very effective, and we take thoughtful steps.

We have got a real great team over there, and we continue to grow.

I'm actually showing no one else in queue at this time, sir.

Perfect.

Then I would like to thank everybody for their interest in our Company, and we look forward to reporting our results in the second quarter, and that will be the end of July.

Thank you.

Ladies and gentlemen, thank you for participating in today's conference.

This concludes our program for today.

You may all disconnect, and have a wonderful day.