Climb Global Solutions Inc (CLMB) 2014 Q3 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 is being recorded. I would now like to introduce your host for today's conference, Ms. Melanie Caponigro. Ms. Caponigro, you may begin your conference at this time.

Thank you and good morning. Welcome to Wayside Technology's third-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 third quarter at approximately 5 PM Eastern Time Thursday, October 30, 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 WaysideTechnology.com/earnings-call.

This conference call and the associated webcast contain time sensitive information that is accurate only as of today, October 31, 2014. A detailed discussion of risks and uncertainties are discussed in our Forms 10-Q 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'd like to turn the call over to Simon Nynens.

Thank you, Melanie, and good morning to everybody. We are pleased to report a solid Q3 of 2014. Revenue increased 28% to a record $90.5 million and gross profit increased 17% and income from operations increased 6%. Cash and long-term receivables amounted to $26.4 million representing 68% of equity as of the end of September. Working capital amounted to $27.3 million representing 70% of equity as of the end of September.

As we announced earlier, Dan Jamieson, who served as Vice President and General Manager for our Lifeboat division since 2003, retired on August 18, 2014. Dan Jamieson has been with the Company for 22 years and has played a pivotal role into shaping Lifeboat Distribution into the great Company it currently is. We thank Dan for his tireless efforts, enthusiasm and stewardship. We wish him a great time with his family.

We also announced that Shawn Giordano, who served as Vice President of Sales TechXtend, left our Company on August 18, 2014. Shawn had been with us for six years. We are refocusing our sales team under the guidance of Bill Botti, and we thank Shawn for his services and we wish him all the best.

The Company sales directors of both divisions will now [reportly] directly to Bill Botti. Related to these changes our severance expenses of about $250,000 which we expensed in the current quarter.

We also announced that Evan Westenskow assumed the role of a newly created position, Director of Field Sales for North America. We are excited to have Evan join the Lifeboat Distribution team and he is responsible for building a team of field sales members that work closely with our reseller partners and our vendor partners to maximize the Lifeboat presence in the field.

We currently have four field sales reps and expect to double that again before the end of the year. Westenskow has an extensive track record of sales and business development success with high-tech vendor and distribution companies. With high-tech distributor alternative technology he led a greater than fourfold growth in distribution sales over a five-year period.

We are excited about the prospect of more software publishers joining us. Customer and vendor feedback confirms that we are on the right track. Our customer service is outstanding. We care and our customers notice. We will continue to invest in our team and, in addition to expanding our services with our new field sales team, we plan to hire more sales and support staff in order to manage our growth.

Finally we announced our corporate governance with the appointment of Duff Meyercord in a newly created role as Lead Director. Mr. Meyercord has served as a Director of our Company since December, 1991. Mr. Meyercord has been a managing partner of Carl Marks Advisory Group in New York since 1996. He is also the President and Founder of Meyercord Advisors Inc., a consultancy firm offering financial and operations assistance to corporations. Mr. Meyercord also currently serves as a director of the Peapack Gladstone Bank.

Now I would like to hand it over to Bill Botti, our Executive Vice President. Bill?

Thank you, Simon. I will address the Lifeboat and TechXtend segments individually.

Lifeboat's Q3 2014 results reflect positive year-over-year growth of 36%, this is a result of focus across key product lines as we change our model slightly to build a more robust solution set and increase our value to our reseller community. This allowed for deeper account penetration into key accounts in leveraging our new field sales team with our vendors to drive greater visibility across all segments of our business.

We also just finished a very successful partner event called Partner Connections in Atlantic City last week where we showcased some of our top vendors and introduced their solutions to our resellers.

The TechXtend decrease of 4% that was due to a small decrease in our extended payment term transactions when compared to Q3 of 2013 and reorganization efforts to align with our focused growth strategy for TechXtend. The reorganization of the sales team to focus more in New Jersey and the Northeast for deeper account penetration of enterprise accounts with the breadth of our solution set.

We are pursuing keep new supplier relationships for both business units and aggressive new marketing campaigns to attract new customers. Thank you, Simon. Back to you.

Thank you, Bill. 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 third-quarter financial results both on a consolidated basis as well as by business segment.

Net sales for the quarter were $90.5 million compared to $70.5 million last year, representing a 28% increase on a consolidated basis. Sales for our Lifeboat Distribution segment were $77.4 million compared to $56.9 million last year, representing a 36% increase. Lifeboat sales represent 86% of our total sales.

The 36% increase in net sales for the Lifeboat Distribution segment was mainly a result of our strengthening of our account penetration, our continued focus on the expanding virtual infrastructure centric business, product mix and the addition of several key product lines.

Sales for our TechXtend segment were $13.1 million compared to $13.6 million last year representing a 4% decrease. The decrease in net sales on the TechXtend statement was primarily due to a decrease in extended payment term sales transactions as compared to the prior year.

On a consolidated basis our gross profit was $6.2 million compared to $5.3 million last year representing a 17% increase. Our gross profit margin for the quarter was 6.8% compared to 7.5% last year. Lifeboat Distribution's gross profit for the quarter was $4.7 million compared to $3.8 million last year which represents a 23% increase.

Our TechXtend segment's was profit was $1.4 million for the quarter, essentially flat as compared to the prior year. Total selling, general and administrative SG&A expenses for the quarter -- third-quarter of 2014 were $4.3 million compared to $3.5 million for the same quarter last year.

This increase is primarily the result of an increase in employee and employee-related expenses including salaries, commissions, bonus, benefits and severance expenses of $300,000 as compared to 2013. As a percentage of sales SG&A expenses were 4.7% compared to 4.9% last year.

Our net income for the quarter was $1.4 million compared to $1.3 million in the prior year. Earnings per share on a fully diluted basis were $0.29 per share, unchanged from the same period in 2013.

Now 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 $15.6 million at September 30 compared to $19.6 million at year end.

Accounts receivable current and long-term increased by $700,000 on increased volume in the third quarter of 2014 as compared to the fourth quarter of 2013.

Accounts Payable and accrued expenses decreased by 14% primarily due to the Company taking early pay discounts in 2014 and fewer large sales transactions in the third quarter of 2014 as compared to the fourth quarter of 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 terms and sales transactions. As of September 30 we have no outstanding balance under the credit facilities. Working capital at September 30 was $27.2 million. Our stockholder equity now stands at $38.8 million.

At our October 29 Board meeting the Board of Directors declared a $0.17 per share dividend per common stock payable November 17 to shareholders of record on November 10. The Company has now paid dividends consecutively for the last 47 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 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.

Next to Evan Westenskow we also announced that Ruud van Noort assumed the role of Manager Director in Europe. We expect to realize growth both in the US as well as in Europe. And we 6continue to provide our employees with a great and rewarding working environment.

We are excited about the future and with a PE multiple just over 12 times; a dividend yield over 3.8%; and over $26 million, almost a third of our market cap, in cash and long-term receivables we are confident in the performance of our stock price. Thank you. Operator, we can now start with the Q&A session.

(Operator Instructions). Brian Hollenden, Sidoti.

What were the primary factors driving Lifeboat's 36% revenue growth? And what impact did the new sales reps have on that growth?

Bill, you want to take that?

Yes, Simon, thank you. Thank you for the question as well. The primary driver for the additional revenue growth is the addition and rapid growth of one of our product portfolios, the Sophos product line. We added them through an acquisition of [Astaro] in February and have provided a great deal of focus on the growth of their line. And so, that was a key single driver.

The field sales team, that addition was only done in September -- 15th was the first days aboard, so they've had minimal impact on Q3 and should have an impact for us in Q4.

Right. So what you saw too, Brian, is, as we said in the Q and in the press release. Really what that is is the penetration of our accounts. We continue to sell more lines into our customer base and the field sales reps also are going to -- expanding our customer base.

But more importantly, also visiting customers who just bought one or two products from us and tried to get to -- sell into their organizations, offer them new product lines so they can then in turn sell to their customers. So it is really extending that, it is a product mix and penetration of the account.

(Operator Instructions). I'm showing no further questions at this time. Please continue with any closing remarks.

Thank you. We appreciate the interest in our Company and we look forward to reporting our Q4 and full-year results in the first week of February of 2015. Thank you.

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