Climb Global Solutions Inc (CLMB) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Wayside Technology Group's second-quarter 2014 earnings result conference call. (Operator Instructions). And as a reminder, this conference call may be recorded. At this time I like to have a conference over to this Melanie Caponigro.

Thank you and good morning. Welcome to Wayside Technology's second-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 second quarter at approximately 5 PM Eastern time Thursday, July 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, July 25, 2014. A Detailed discussion of risk 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 statements. 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 Q2 of 2014. Revenue increased 14%, gross profit increased 3%, and income from operations increased 1.4%. This compared to a strong Q2 of 2013. Cash and long-term receivables amounted to $25.1 million, representing 66% of equity as of the end of June 2014, and working capital amounted to $27.2 million, representing 71% of equity as of the end of June, 2014.

We provide easy access to the right IT 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. The 14% increase in net sales for Lifeboat Distribution segment was mainly a result of the strengthening of our account penetration and the addition of several key product lines. The 12% increase in net sales in TechXtend segment was primarily due to an increase in extended payment term sales transaction as compared to the second quarter of last year.

Gross profit for the second quarter was $6.1 million, a 3% increase as compared to $6 million for the second quarter of 2013. Gross profits for our Lifeboat segment was $4.6 million, compared to $4.5 million for the second quarter, representing a 2% increase. Gross profit for our TechXtend segment was essentially flat as compared to the second quarter of 2013.

Gross profit margin -- so the gross profit as a percentage of net sales -- for this quarter was 7.3% as compared to 8.1% for the second quarter of last year. These margins were impacted by the fact that TechXtend saw an increase in larger extended payment term sales transactions, which typically carry lower margins. The Lifeboat margin was impacted by pricing pressure mainly on two main lines. Margins outside of these lines did not increase and in fact increased nicely.

Kevin Scull will now report on the financial numbers. Kevin?

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

Net sales for the quarter were $84.4 million, compared to $74.1 million last year, representing a 14% increase on a consolidated basis. Sales for our Lifeboat Distribution segment were $70 million, compared to $61.2 million last year, representing a 14% increase. Lifeboat sales represent 83% of our total sales. The increase in sales in the Lifeboat segment, as Simon mentioned, were the result of our strengthening of our account penetration and the addition of several key product lines. Sales for our TechXtend segment were $14.4 million, compared to $12.9 million last year, representing a 12% increase. The increase in net sales in the TechXtend segment was primarily due to increase in extended payment termed sales transactions in the current year.

On a consolidated basis, our gross profit was $6.1 billion compared to $6 billion last year, representing a 3% increase. Our gross profit margin for the quarter was 7.3%, compared to 8.1% last year. Lifeboat's gross profit for the quarter was $4.6 million, compared to $4.5 million last year, which represents a 2% increase. This increase was primarily due to higher sales volume in the current year. Our TechXtend segment gross profit was $1.5 million for the quarter, essentially flat as compared to the prior year.

Total selling, general and administrative expenses were $4 million for the quarter compared to $3.8 million last year. This increase is primarily the result of an increase in employee and employee-related expenses, salaries, commissions, bonus accruals and benefits, and occupancy expenses in 2014 as compared to 2013. As a percentage of sales, SG&A expenses were 4.7%, compared to 5.1% for the prior year. Our net income for the quarter was $1.48 million compared to $1.54 million in the prior year. Earnings per share on a fully diluted basis or $0.31 per share, compared to $0.34 last year.

Moving on to the balance sheet, compared to our year-end balance sheet, the following key accounts had fluctuations. Cash and marketable securities was a healthy $14.7 million at June 30 compared to $19.6 million at year-end. Accounts receivable, current and long-term, decreased by 4% and accounts payable and accrued expenses decreased by 21% due to lower sales volumes in Q2 as compared to the year-end quarter.

The Company has no debt. We do have a $10 million revolving credit facility that can be used working capital purposes including financing of larger extended payment term sales transactions. As of the end of June, we have no outstanding balance under the credit facility. Working capital at June 30 was $27 million. Our stockholder equity now stands at $38 million. At our July 22, 2014 board meeting, the Board of Directors declared a $0.17 dividend per share payable August 15 to shareholders of record on August 6, 2014. The Company has now paid dividends consecutively for over the last 46 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 starting 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 rewarding working environment.

With a P/E multiple just over 11 times, a dividend yield of over 4%, and over $25 million, almost a third of the market cap, in cash and long-term receivables, we are very confident in the performance of our stock price. Thank you. Operator, we can now start with the Q&A session.

(Operator Instructions) Brian Hollenden.

Good morning and thanks for taking my call. I wanted to ask you, Simon, a question about something that you had just mentioned about the two main lines in Lifeboat that contributed to the gross margin pressure.

Right.

You mentioned that other parts of the segment actually had a higher gross margin. Could you maybe drill down a little bit on those two other areas that you are feeling the pressure and what is contributing and potentially what changes that moving forward?

So two things, those main lines, what we see is we saw an increase in sales. As a percentage, those other lines are relatively flat as compared to last year, maybe a slight increase over that. Those two main lines were impacted. One was by a rebate. They -- overall that company did not grow as fast as they thought they would and therefore we do not receive any rebates, which impact our gross margin percentages. It's something that we will discuss with that company in terms of achievable growth rates for the future. The other company changed their model and we were faced with additional distribution resources for that company. So that is a one-off.

If you look at going forward, we expect that margin for both lines to be -- kind of bottom out. But like we said before, it is hard to predict the future in our industry. However, we have several key initiatives now in place with Bill Botti joining us too at the executive vice president role to look at every single line to compare gross margin as a percentage of their sales and to decide how much we should invest in customer service, because we are really known as the customer service-centric company and we deliver great results and great service to a software publisher as well as our customers.

We are just going to really take a close look at realigning the resources in terms of making sure that our resources are focused on what delivers the greatest results for our Company as well. So we are excited about that. We thought if we deem it conservative and just making sure that we put that line in again, that paragraph that some people have mentioned as well: the price competition in our market persisted in 2014 and we anticipate that margins will continue to be under pressure in the near future.

We have mentioned that several times over the last time. And that is just to be prudent. We just want to make sure that that is out there that there is margin pressure. However, if you look at our gross margin percentage of Lifeboat Distribution and you compare it to our mainstream distributors, our main competition, we are still well above their gross margin percentages.

So right now, I would say we are kind of hopeful that this has bottomed out and Q2. However, that as per today and we do not give forward-looking information. Quite actually, we are dependent on our software publishers as well as the results in terms of sales to achieve those rebates. But that is what I currently see is out there.

Why we are confident about the future is that we have added some really key lines and hence you see the increase in sales. There is a lot more out there and people are really right now -- the software publishers are really looking at alternatives, albeit slow. But we continue to be very successful in adding new lines and in fact we hope to see that accelerate in the future.

[Peter Lucks]

The only thing I wanted to say to you, Simon, I have known you a long time and I want to express my condolences for you as a Dutch national for the tragedy there that was perpetrated on your country. I am sure you are feeling it. So that is the only thing I want to say.

Thank you. I really appreciate it, Peter. I really appreciate it.

Thank you. And I am showing no further questions at this time, sir.

We want to thank everybody for their interest in our Company and we look forward to reporting our third-quarter results at the end of October. Thank you.

Ladies and gentlemen, thank you participating in today's conference. This concludes our program. You may all disconnect and have a wonderful day.