Climb Global Solutions Inc (CLMB) 2014 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Wayside Technology Group conference call. (Operator Instructions). As a reminder, ladies and gentlemen, this conference call is being recorded.

I would now like to introduce your host for today's conference, Melanie Caponigro. Ms. Caponigro, you may begin your conference at this time.

Thank you and good morning. Welcome to Wayside Technology's first-quarter 2014 earnings call. Before turning the call over to Simon Nynens, the Company's Chairman and CEO, I will dispense with the customary cautionary language and comments about the webcast for this earnings call. We released earnings for the first quarter at approximately 5 PM Eastern time Thursday, April 24, 2014. 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 a rebroadcast will be available at www.waysidetechnology.com/earnings?call. This conference call and the associated webcast contain time sensitive information that is accurate only as of today April 25, 2014. A detailed discussion of risks and uncertainties are discussed in our Form 10-Q and also in greater detail in our Form 10-K. Wayside Technology Group Inc. sees no obligation to update and does not intend to update any forward-looking statement.

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

Thank you, Melanie, and good morning to everybody. We are pleased to report a solid performance for the first quarter of 2014. Revenue increased 9% and income from operations increased 7%. Cash and long-term receivables amounted to $21.3 million representing 59% of equity as of the end of March 2014. Working capital amounted to $25.7 million representing 71% of our equity as of the end of March 2014.

We provide easy access to the right IP products. In addition to our electronic license delivery systems, our outstanding customer service levels, and our dedicated sales staff truly sets us apart as we continue to explore, define and build our competitive advantages we continue to invest in our Company.

In addition, as announced earlier, Bill Botti has joined the Company as Executive Vice President effective April 21, 2014. We are excited about this addition to our team and Bill is with us this morning and he will be part of our regular investor calls. Bill, again, welcome to the team.

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

Thank you, Simon. Lifeboat's Q1 2014 overall results reflect positive growth across all cylinders of our business including revenue, gross margin and income from operations. The key factors in Lifeboat's Q1 2014 performance were the successful penetration and expansion of pivotal software lines within a variety of Lifeboat's premier reseller accounts, the large account resellers and DMRs, the direct market resellers, along with the successful expansion of business within targeted solution provider accounts including VARs, the value-added resellers, SIs, the system integrators, and other consultancy type companies.

Lifeboat signed three new distribution agreements in Q1 2014. These new agreements will strengthen Lifeboat's portfolio and enhance our focus in 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 I would like to hand it over to Shawn Giordano, our Vice President of our TechXtend division. Shawn?

Thank you, Simon. From an operational perspective, the TechXtend team performed well in the first quarter of 2014. Unfortunately that did not translate into increased margins. While we saw a 3% increase in revenue, our gross margin in dollars declined 8% as compared to the first quarter in 2013. Gross margin percentage was impacted by lower vendor rebates and our product mix. Costs were down primarily due to lower sales commissions paid to the sales staff.

We remain excited about our growth opportunities and we therefore continue to invest in our sales team. Our continued solutions focus is helping us build strong relationships with our clients acting as a trusted advisor and providing them easy access to the right IP solutions. We are working hard to increase our business and I look forward to reporting on that progress next quarter.

Thank you, Shawn. Kevin Scull will now report on the financial numbers. Kevin?

Thank you, Simon. Good morning to our investors, analysts and employees. I will discuss our first-quarter financial results both on a consolidated basis as well as by business segment.

Consolidated net sales for the first quarter 2014 were $71.7 million. This is compared to $66 million in Q1 last year representing a 9% increase on a consolidated basis. Sales for our Lifeboat Distribution segment were $59.3 million and represent 83% of our total revenue during Q1. Lifeboat sales reflect a 10% increase compared to Q1 last year. The increase in sales for the Lifeboat segment was mainly the result of the strengthening of our account penetration in addition of several key product lines.

Sales for our TechXtend segment were $12.5 million compared to $12.1 million in Q1 last year representing a 3% increase. The increase in net sales in the TechXtend segment was primarily due to an increase in extended payment term sales transactions as compared to the first quarter last year. On a consolidated basis, our gross profit was $5.5 million compared to $5.4 million for the first quarter of 2013 representing a 4% increase. Our gross profit margin for the first quarter was 7.7% compared to 8.1% last year.

Lifeboat Distribution gross profit for the first quarter was $4.1 million. This compared to $3.8 million in Q1 last year representing a 9% increase. This increase was primary due to higher sales volume in the current year.

Our TechXtend segment gross profit was $1.4 million and decreased by 8% compared to last year. Although TechXtend's net sales increased its gross profit due to a decrease in rebates during the current year compared to the prior year.

Total selling, general and administrative expenses were $4 million compared to $3.9 million last year. This increase is primarily the result of an increase in employee and employee-related expenses. Our net income for the quarter was $1.1 million compared to $1 million last year. Earnings per share on a fully diluted basis was $0.23 compared to $0.22 last year.

Now moving on to the balance sheet. Compared to our balance sheet at December 31, 2013, the following key accounts had fluctuations. Cash and marketable securities was a healthy $11.7 million at March 31, 2014 compared to $19.6 million at year end. Accounts receivable current and long-term decreased by 6% and accounts payable and accrued expenses decreased by 24% due to lower sales volumes in the first quarter of 2014 as compared to Q4 2013.

The Company has no debt. We do however have a $10 million revolving credit facility that can be used for working capital purposes including financing of larger extended payment term sales transactions.

As of March 31, 2014, we have no outstanding balance under the facility. Working capital at the end of the quarter was $26 million. Our stockholder equity now stands at $36 million. At our April 23, 2014 Board meeting, the Board of Directors declared a $0.17 dividend per share to its common stock payable May 16. The Company has now paid dividends consecutively for the last 45 quarters.

In conclusion, the Company continues to have solid operating results, a strong balance sheet and is adequately capitalized to support our continued growth plans. Simon, I turn it back to you.

Thank you, Kevin. Before we start with the Q&A session, I would just like to state again that we remain focused on adding new publishers, providing our customers with excellent customer service and providing our employees with a great and rewording working environment.

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

(Operator Instructions). Alan Weinfeld, River Research.

Pretty good first quarter. (inaudible) You didn't say anything about business going on internationally. I know that hurt some people. I know you guys are mostly domestic focused. How did you guys fare out there?

So as a percentage of our overall sales that remain constant at 16% of our overall sales and we did not feel -- in fact, sales were slightly up, our margins were up a little higher as we had a couple of low margin deals last year. But as you said, the majority of our business is done in North America. We remain excited about the opportunities in EMEA especially that market seems to be growing faster than even the North American market so we remain very interested in that market.

Brian Hollenden, Sidoti & Company.

Good morning, guys. Thanks for taking my call. Can you just talk a little bit about in what environment rebates will improve for you in terms of what needs to happen?

Those rebates are set on usually on a quarter-by-quarter or on a six-month schedule by the vendors. It is in conjunction with the upfront margin set we get. It is also in addition to rebate set marketing funds and so they all play together so the way to really look at that is on the average gross margin and as we said, we are operating in North America definitely in a very competitive environment.

We try as much as we can to set aggressive rebates and try to get to that goal but we have to be very careful in terms of how we manage the overall margin because you could start selling at 0% to get a rebate but that would not be good for us on an overall basis. And as we said in the past, we really manage this Company based on the income from operations, we have really got to get that number up and that is what we strive for to enhance that shareholder value.

[Chris Partner].

Thanks very much and Simon and everyone, another good quarter and I had two questions. One is I know you probably can't comment a lot on the action of the stock which you don't have much control over of course but just want to be aware of whether you are aware of any unusual trading activity in the stock? I noticed it is up 50% in 12 sessions in the last month.

The second question is regarding the balance sheet, a little further probing on the accounts payable. I noticed last year in the comparable first quarter when sales were also down as they usually are in the first quarter versus the fourth quarter of the previous year, there was no significant change in accounts payable and just wondering what changed this year to make the significant conversion of cash to accounts payable this year?

Right. To answer your question, with regards to your first question in terms of the stock price, we have Bill Botti with us this morning who started on April 21 and we announced I think two days after that analyst report came out on Sunday and we announced that Bill Botti joined us and that was just before a while our stock was gaining significant appreciation. So Bill told us that it was due to his action.

But in all seriousness, that is something we cannot control and as I said before what we can control are our numbers and I believe that our stock will ultimately follow the execution of a good plan.

I am just very pleased to see that we in my opinion finally got the recognition that I think we deserved for a long time and if you look at our price, earnings right now and our dividends yield, it is still a pretty competitive price right now. So I am very happy about that.

I think it is very good also for our employees and it shows the growth of our Company not only internally but also finally externally so I am very pleased with that but although as you said, we don't have a lot of influence on that.

The second question with regards to the accounts payable, usually you will see that related to the cash as well. There was one large accounts receivable balance that we did not get and it was related to normal payment cycles that just went into April. So you see that the balance decreasing and in accounts payable we just had a large, large payment to accounts payable just a couple of days prior to that. So those are just basically due to normal payment cycles, those fluctuations.

And in accounts receivable, you see that as the increase in financial payment sales transactions, you saw that we basically had those later in the quarter so last year so you didn't see that affect yet in terms of paying. This quarter we had financial payment transactions, significant ones in February so we had to pay the vendor prior to the end of the quarter while we used our cash to finance our customer. So that was with regards to accounts payable.

[Aaron Leeman].

Good morning. Had another good quarter. Thank you. I have a major question. Perhaps a year and a half ago or so shortly after you opened up the European operations, you had indicated that there might be some interest in expanding in South America or in the Asia arena. Any further thoughts on that and timing?

Thank you, Aaron, for the kind words and to answer your question yes, we have and we are expanding in those areas. What we have found is that after doing our careful research there is that the resellers in those areas typically like our set up and are pleased with our support in terms of when it comes to the lines that we carry. Now again, remember we are very focused on the separate line so you cannot compare us to a mainstream distributor but they are pleased with the service that they get and we are expanding it because again our overall sales are increasing and our international sales are increasing just as much as they are because it remains constant at 15%. It was that a couple of years ago. They are growing with us.

In EMEA, as I said before, I believe we can further expand the office as that is a very mature market.

With hindsight I'm glad we really did our research because those markets are really hurting right now and I would have hated to go into Singapore or Hong Kong a couple of years ago to now write it down. So with hindsight, I am very glad that we did what we did was focus on North America market. There is still a rounding error of the overall industry. We have a lot of room to grow and the same for EMEA that is really focused on those markets. That does not mean that we don't care about the rest of the world. We are focused on them, we travel there regularly but opening up an office is currently not in the cards for us.

Thank you. At this time I'm showing no further questions. Please continue with any closing remarks.

We appreciate everybody's interest in our Company and we look forward to reporting our progress with regards to the second quarter at the end of July of this year. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may disconnect at this time and thank you for your participation.