Climb Global Solutions Inc (CLMB) 2023 Q4 法說會逐字稿

Good morning, everyone, and thank you for participating in today's conference to discuss climate Global Solutions' financial results for the fourth quarter and full year ended December 31st, 2023.

Joining us today are Climb CEO, Mr. Dale Foster; the Company's CFO, Mr. Drew Clark; and the Company's Investor Relations Advisor, Mr. Sean Mansouri, with elevate IR.

By now everyone should have access to the fourth quarter and full year 2023 earnings press release, which was issued yesterday afternoon at approximately 4.05 P.M. Eastern time.

The release is available in the Investor Relations section of the client Global Solutions website at www.Climate Global Solutions.com. This call will also be available for webcast replay on the company's website.

Following management's remarks before opening the call for your questions.

I'd now like to turn the call over to Mr. Sean Mansouri for introductory comments please procced.

Thank you.

Before I introduce Dale, I'd like to remind listeners that certain comments made on this conference call and webcast, our considered forward-looking statements under the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements.

These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call.

Except as required by law, the Company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements or presentation also includes certain non-GAAP financial measures, including adjusted gross billings, adjusted EBITDA, adjusted net income and EPS and effective margin as supplemental measures of performance of our business,

All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules, you'll find reconciliation charts and other important information in the earnings press release and Form 8-K we furnished to the SEC yesterday.

I'd now like to turn the call over to client CEO.

Dale Foster.

Thank you, Sean, and good morning, everyone.

Our fourth quarter performance capped off another exceptional year for Climb as we generated record results in all of our key financial metrics and delivered on our acquisition objectives.

These results were driven by continued focus on our core initiatives and the integration of data solutions, which was acquired in October of 2023 and immediately benefited our top and bottom line.

We also continue to generate organic growth in both the US and Europe as we deepened our relationships with customers along with adding strategic vendors to our line card.

As a brief reminder on our acquisition of Data Solutions, a leading distributor of cloud and security solutions in Ireland and the UK, their team brings a long-standing network of relationships to clients such as Check Point, Citrix, HPE Aruba to state a few.

Data Solutions also carries a robust recurring revenue base with more than 90% of its fiscal 2023 revenue coming from existing reseller partners.

We are actively identifying cross selling opportunities and cost synergies and look forward to unlocking additional benefits as we further integrate Data Solutions into our financial and operating workflows.

Throughout 2023, we evaluated a rather robust pipeline of emerging vendors as we were very thoughtful in selecting the right partners to add to our line card.

We are focused on targeting and finding vendors that fit into our ecosystem and bring disruptive technology to the marketplace for perspective.

In Q4, we evaluated 13 vendors that signed agreements with only four of them quickly touching on a few of these wins.

First, we launched a partnership with DNS filter, a leading threat detection and content filtering application that redefines how organizations secure their largest threat vector, which is the Internet itself in US.

Filter, utilizes machine learning to protect over 26 million monthly users from fishing mower, advanced security threats.

Next, we partner with tight works a compliance and security application that enables organizations to identify track control and secure sensitive content communications under a single platform, kite works, protects over 35 million end users for almost for most 4,000 global enterprises and government agencies.

We are thrilled to kick off our partnership with each of these innovative technologies, and we look forward to building prosperous relationships with each of these vendors as we expand their reach throughout the channel.

As we have often stated in the past, our goal is to build deep and meaningful relationships with our partners and vendors.

It is a differentiator between us and our large competitors.

As a testament to our commitment, in November, we were named one of CDW's 2023.

Distributors of the Year for providing a customer first relationship, as well as exemplary products, services and solutions to support the CDW partnership and our customers.

We have grown side by side with CDW for more than 20 years as partners as we look forward to building on our mutual success in the years to come.

In addition to CDW's Partner of the Year, Climb was awarded Wasabi Technology Distributor of the Year Award in both North America and EMEA.

We are honoured to be recognized as Wasabi's Distributor of Choice and are excited to capitalize the momentum for 2023 into the year ahead.

Turning to personal development, in November, we announced the appointment of Kim Stevens to worldwide VP of Marketing and assumed the global marketing responsibility for clients, including the creation and execution of comprehensive marketing strategy, strategy, branding and also partner marketing teams, deployment as part of a long-term growth strategy to expand our reseller coverage, operations and marketing presence we are thrilled to have Kim to lead our global marketing efforts to align our branding as we further scale our footprint in the US and overseas.

Looking ahead, our strategy remains unchanged, leverage our global footprint of drug and drive organic growth, expanding our line card with the most innovative companies in the market.

We will also continue to pursue M&A opportunities in both the US and overseas that can broaden our geographic footprint, expand our vendor reach and also bolster our service and solution offerings between a robust balance sheet, a growing pipeline of prospective vendors and a proven track record of accretive acquisitions, we are well positioned to continue driving shareholder value.

With that, I will turn the call over to our CFO, Drew Clark, to take you through the financial results.

Thank you, Dale, and good morning, everyone.

As I've noted before, Dale gets to share all the fun, exciting aspects of our business and I'm stuck with discussing another boring record quarter in terms of our operating and financial results.

A quick reminder as we review the financial results for our fourth quarter, all comparisons and variance commentary refer to the prior year quarter unless otherwise specified.

Okay.

Let's jump into the results.

As reported in our earnings press release suggested gross billings or AGP, which we all know is a non-GAAP measure, increased 24% to $397 million compared to $319.8 million in the year-ago quarter.

Net sales in the fourth quarter of 2023 increased 20% to $106.8 million compared to $88.9 million, which primarily reflects organic growth from new and existing vendors, as well as contributions from our acquisition of Data Solutions in October of 2023.

As we've often stated, we focus on AGV is the true metric of our top line growth as the calculation of net sales was influenced by product mix and respective adjustments to convert AGV to net sales for financial reporting purposes under GAAP,

In the fourth quarter, net sales grew at a lower rate because of the impact of DataSolutions, which sells HPE Aruba appliances in connection with Citrix and the aforementioned product mix quarter-to-quarter.

Gross profit in the fourth quarter increased 31% to $21.1 million compared to $16.1 million.

Again, the increase was primarily driven by organic growth, new vendors in our existing top 20 vendors in North America and Europe, as well as the contribution from DataSolutions.

Gross profit as a percentage of AGB increased to 5.3% compared to 5% in the prior period and was positively impacted by DataSolutions and our vendor mix in the quarter.

SG&A expenses in the fourth quarter were $12.4 million compared to $9.1 million in the same period in 2022.

SG&A as a percentage of AGB, was 3.1% compared to 2.9% in the year ago period.

The dollar growth included $1.8 million from data solutions and expenses associated with sales performance in terms of increased commissions and our human capital base, salaries, benefits, bonuses and stock compensation, all of which were in line with our budget and expectations.

Net income in the fourth quarter of 2023 increased 10% to $5.2 million or $1.15 per diluted share compared to $4.8 million or $1.06 per diluted share for the comparable period in 2022.

As mentioned in our press release, earnings per diluted share in the fourth quarter of 2023 was negatively impacted by $0.09 in foreign exchange currency and $0.06 in fees associated with the acquisition of DataSolutions.

Adjusted EBITDA in the fourth quarter increased 24% to $9.2 million compared to $7.4 million in the prior period.

The increase, as previously noted, was primarily driven by organic growth as well as the contribution from data solutions.

Adjusted EBITDA as a percentage of gross profit or effective margin was 43.7% compared to 45.9% in the year-ago period.

Our fourth quarter was impacted by the continued early pay discount taken by our TDMR.s, which we expect to be the norm as we head into 2024.

So future comparisons to the prior year will be comparable.

Early Pay in the quarter was 900,000 or 230 basis points, which would have generated a 46% effective margin on an apples to apples comparison.

Again, as we move forward into 2024, we believe that the 2024 comparisons to 2023 will be comparable.

So we will no longer have to discuss early pay discounts that were taken in excess of prior periods.

Turning to our balance sheet, cash and cash equivalents were $36.3 million on December 31, 2023, compared to $20.2 million on December 31, 2022, while working capital decreased by $4.5 million during this period.

The increase in cash was primarily attributed to the timing of receivable collections and vendor payments, partially offset by the cash paid for the acquisition of DataSolutions, net of cash acquired of $12.7 million as of December 31, 2023, we had $1.3 million of outstanding debt with no borrowings outstanding under our $50 million revolving credit facility.

Subsequent to quarter end and consistent with prior quarters, our Board of Directors declared on February 27, 2024, a quarterly dividend of $0.17 per share of our common stock payable on March 15, 2024, to shareholders of record as of March 11, 2024.

As Dale mentioned earlier, our strong liquidity position continues to provide us with the flexibility to execute our organic and inorganic growth strategies while expanding our relationships with vendor networks and customers across the globe.

We will remain active in the M&A front as we evaluate accretive targets in both domestic and international markets.

We look forward to executing on our goals and delivering another year of record results in 2024.

This concludes our prepared remarks.

We'll now open it up for questions from those participating in the call.

Operator, back to you.

Thank you

(Operator Instructions).

Vince Colicchio from Barrington Research.

Dale, you just big picture.

How are you feeling about the tech environment and the economic environment now versus a quarter ago?

And also, maybe you could talk about sales cycles and pricing, how that may have changed?

Yes.

Thanks, Vince, and thanks for joining.

We often talk to the exec team as far as the macro environment, we get it from our vendors and some of our customers.

And we don't we still don't see, you know, the headroom that we have as far as the size of our company compared to some of our competitors and the other advantage, we have is we're a 90% software.

So, we don't have the logistical issues that a lot of the different companies have in our market.

But we just haven't really seen the softening.

We talk about the European market, you know, potentially going into a cause a recession.

I haven't really seen it with our teams over there because I think we have a diversified portfolio and like I felt like my, so my sales teams have with phone and sometimes not so and we have a lot of tools in our sales bag to sell that security is always going to be their data center is really behind that.

And that's our two leading categories.

And then we have to go for other folks declared on technology sectors that we sell into.

So we just haven't seen it.

I can tell you it will, as I mentioned, robust pipeline of vendors still coming out of way past the start-up phase where they're getting their second and third rounds of funding and the funding levels.

And I look at are a lot more than we've seen in the past.

So, on you, we haven't seen it will.

We will be open and upfront if we see some real softening.

But we have not seen that our team and we have seen a true consolidation of some of the distribution partners to source vendors, taking different distribution partners, either consolidating that, which is good for us because we're seeing is the specialty.

And a lot of these vendors want to see a broadline distributor and then a specialty, which there's not a lot of choices in North America.

There's quite a few choices overseas that will capitalize on both of those.

The organic growth appears to have been solid in the quarter.

Was it broad based across vendors or there's one or were there one or two large deals driving the quarter?

There's always a couple of large deals and then pop in there.

And we've had in oh eight, as you look at quarter by quarter when something goes down events and can be lumpy.

We had some nice stuff going on.

But then in Q4, Q4 is always our largest quarter because companies are extinguished their budgets.

So, it kind of blurs the channel.

It really depends on what happens in Q3 and falls over a federal buying season.

And then, of course, you know what we can capture in Q4 before it goes into Q1.

But the yes, there's some lumpiness in that.

But overall, if I look at my territories and we tracked by territories, in the US and we track by customers in the UK and Ireland.

We haven't seen any weakness in any event in that business.

And the top 20 vendors, was there any notable weakness among them or was it fairly strong across that metric, that group of vendors?

Yeah, we totally talk about our top two, which we make up a couple of $100 million of SolarWinds and Sophos.

Sophos went through an ERP change, there was some delays in some of that.

They finished up their quarter I'm sorry, they finished up their fiscal year at the end of March, so we'll see some of that picked up.

But I think there were some hiccups in the November timeframe, but other than that, we haven't seen any of that.

We've seen growth.

I looked at my top 20 vendors.

We are at SKL last week, Vince, and 18 of them grew in 2020 of the 20 top vendors, which make up 70% to 80% of our business.

And Dale, one question for you.

How sustainable are the really nice level of adjusted gross margin relative to AGB and adjusted SG&A relative to AGB?

Yeah, So a couple of things on the solutions piece of our business overseas really helps out and maintains more of a stable margin profile and that's the key.

The rest of it is all on us as far as what the actual drop through is.

And also, the European market, the pressures or the competitiveness and what they two things, the competitiveness is not nearly what we have in the States with some of the big three.

And then the other side of that, there's just a higher margin profile because of the service you're delivering over there.

So that's why we have still targeting some acquisitions in the US, but really it's overseas.

We like the margin profile.

We think that we can maintain that even as we scale the business.

Okay.

I'll go in the queue.

Thanks.

Thank you.

Bill Dezellem from Tieton Capital Management.

Thank you.

I appreciate that.

Would you please discuss the vendors that you believe have the opportunity to have some real legs and potentially drive the business essentially the whole that potential home run vendors?

Yeah, I'll pick three of them, Bill.

We talk about VAST Data quite a bit and then we acquired Spinnaker in August of 2022.

We talk about it being lumpy because the deal size are very large, right.

So, we see them in Q1 of 2023, we saw some large deals in Q4 of 2023 as well.

So that's one of them and there's continued to grow.

We're now officially on board with them in the US.

And we have got some good opportunities as they're rolling out.

Three of our execs are in Vancouver with VAST and their sales kick off in Canada this week.

The next one I'll pick is SUSE, which is in the Linux operating system space.

We are just doubling with those guys.

And they're taking advantage and we're taking advantage with them of IBM buying Red Hat. There was only two competitors in that space, Red Hat and SUSE, and SUSE was about 20% of the market share.

IBM is only going after their top customers, so there's a lot of greenfield that they're picking up and we're right in that mix.

And then the last one that I'll talk about is the group of security vendors that are just getting larger and larger in our portfolio.

We we used to say, hey, what if we can do $1 million, $2 million in the first year.

And now we have five that are down the card security vendors that we starting at the $5 million range.

So, we see a lot of upside from what we're signing.

We're being more selective, like I mentioned on who we sign, and we had our SKO last week, and we talk about the three pillars of the company, right, first to the employees.

As far as the team that we have, what they're doing every day that really matters.

Second is the vendors who don't have the vendors and we don't have anything to sell.

So that is one of the things we've transformed the company as far as really focusing at the vendors we bring in focus and the vendors we keep and then pushing the vendors to our climb elevate team.

So, it doesn't clutter our line card.

And then lastly, our customers and you say I have kind of strange me, you're talking about your customers last.

If we have the vendors, we will get the customers just buy our service and support to them.

Great.

That's very helpful.

Thank you.

And then the there were a question about to kind of one-off or one-time revenue and that the fourth quarter is typically the largest quarter that way.

What is it of Q1 through Q3?

What is a typical level of one-time or nonrecurring revenue?And

then how does that and a number generally look in the fourth quarter or this quarter specifically, however, you would like to answer it?

It could pop up tomorrow, I mean, we if I looked at my pipeline, we've got a couple of large opportunities with some newer vendors in the $10 million to $20 million to $30 million range for order.

But I mean those we can't predict those the Q4 we can predict just because we have a history of the cyclical nature of that.

And we also know our DataSolutions team in Ireland, what strong quarters they have, but some other than that, we're diverse enough that we don't have this big uptick up and downs, and I don't know if you want to add to that, Drew, I don't there's nothing that we see.

There are a couple that we have in the pipe.

And I think in addition to Dale's comments, it's not necessarily one off non-recurring transactions we've talked about and Dale referenced VAST, which is an up and coming super strong vendor and partner of ours.

Very large transaction sizes.

They tend to have longer sales cycles to Vince question earlier, because you're talking about significant 7-digit investments by their customers at the end of day into the data center space.

And so we did have a very nice transaction with VAST in Q4 of this year.

We also had a similar transaction in Q4 of last year and we had VAST activity that goes on throughout the year.

We think as they continue to grow and refine their market and channel strategy that we'll have a little more consistency with that Bill.

But again, those transactions can take 18 months, 6 months somewhere in between.

We think we'll get to a more steady state in the run rate with VAST as we continue to grow with them over the next several quarters.

But that's a significant variance to our average sales price of our normal vendors.

So that's just one that does have a meaningful impact and it's just not consistent right now until we get more traction with them in the marketplace around the globe.

And also, Bill, real quick, Bill, let me add to that.

As far as the we have three, four big DMR customers, we call them direct resellers, like we mentioned CDW and SHI in the past.

But when they have bid cycles that come up, we typically start the beginning of the year.

We start bidding in October, November timeframe.

There was anything significant.

We would let the shareholders know on that.

But we've won pretty much all the bids that we've had in the past.

We've picked up some smaller ones, but nothing that they're receiving both in the positive or the negative side.

So we'll have those for six months.

They typically put them on a cycle for every six months and they come up with a new group of them are vendors for us to bid out.

Thank you both.

I'm going to ask one follow-up to that and then I'll step back in the queue.

In this day and age where many companies prefer to go down the SaaS route.

So, they don't have a large and large cap, the capital outlay and instead paid by the quarter.

What are the dynamics or reasons that these larger orders take place as opposed to the software simply being purchased in the SaaS model?

Well, when we're talking about VAST data, they have a hardware component to go with that.

And if you look at VAST, they're talking about AI every day.

So it's going into data centers.

These are large appliances that go in and then they run other software on that.

They announced their relationship with Super Micro, which is a good thing, Supermicro's and taking off lately, is there anybody watch that because they're going to use that as the underlying platform?

That's really, they work every day on their teams as software.

But it's we're in the middle, the middle ground where there's vendors that they're trying to sell yearly licenses and act like it's as a service and then you're buying a three-year license.

Of course, they want to get to more of a recurring monthly or quarterly revenue piece.

And some of them are getting there, it's going to take a while because they don't have the platforms or the marketplaces in place to really service that.

So, part of that is we're seeing that transformation, with some of our software vendors, but not this really going to affect a lot of what we're doing on a monthly or quarterly basis.

Great.

Thank you both for your time and congratulations on a great quarter.

Thanks.

Thank you.

Howard Root who is a Private Investor.

Thanks, guys, and congratulations on the outstanding quarter.

Drew, I do have to correct you on one thing you call this a boring quarter, and I always say I love your boring quarters.

This is not a boring quarter when you increase sales by 20% and it's not just you.

It's the whole client team.

And so I have like two questions.

One is on this growth in adjusted gross billings at $387 million in Q4, up $78 million, 24% up from the year ago fourth quarter.

If you can kind of Dale talk a little bit about the breakdown of it, maybe on a percentage basis.

I don't want to get into talking about vendors specifically, but what part of that was acquisitions that would be data solutions?

I guess what part would be new products?

what part would be growth of existing products in new markets?

And then the fourth bucket would be growth of existing products in the existing markets.

If you look at it on a year over year over year basis?

Yes.

So, if you look at we call, we closed the DataSolutions October 6, and we got the advantage of their sales.

They had a good quarter.

They were down a little bit year-over-year because they had some lumpiness that fell in fell out, whether it's coming into the quarter out of the quarter from the year before.

But Andrew can correct me, but I think it's the if we're talking say never of $80 million,

I think about half of that was data solutions.

So we're still had organically for the quarter on our teams on the vendor side, there's it's hard on the hold back some of the positives we have from the vendors coming at us either reducing their go to market and climb being one of the leftover channel plays that they have.

So, we're seeing a lot of that.

We had that happened at the end of Q3 started seeing helping in Q4, and we'll see in 2024 pretty heavily.

And we're talking about four vendors that I can just think of right off the bat that are and you know what we're going to do the broadliner and especially the distributor or in the case of solar winds.

And we haven't made it totally public and we were the sole distributor of Solar Winds, which is our number-two brand solar winds.

You know, it's had the difficulties in the past, but has recovered from that.

They've got a great team.

We have them globally now with our you know, our both our UK, and Ireland teams.

So I'm just there's a lot of energy coming into that for 2024.

Yeah, And Howard, I would just add on to Dale's comments just in terms of and these are fairly accurate percentages.

The DataSolutions accounted for about 40%, 45% of that gross growth in the quarter.

And then obviously the rest of it was our organic growth with existing vendors, not a big movement in terms of geography in revenue growth or in the vendor mix.

It was fairly consistent with the prior quarter fairly consistent obviously, our line card does adjust quarter-to-quarter, but pretty consistent vendor representation in the growth as Vince was asking earlier.

So, no real shifts in meaningful shifts in either the vendor mix or the geography mix, but DataSolutions about 40% plus and the balance of that growth was all organic.

Great.

That's real helpful.

So, the second thing, kind of the again about leading on from that, I always like to ask about future guidance, and I'd love for you guys to talk more about it in Europe, your prepared remarks and I give guidance going forward.

But if we look at where we are today and go forward.

Can you talk about what stage of market penetration you are in kind of general terms and then and then more in specific terms 2022, you did have we crossed $1 billion market and adjusted gross billings 2023 to $1.3 billion.

Are you on a linear ramp, taking out all the bumps you go up and down within the quarters, but $1.0 billion, $1.3 billion, $1.6 billion this quarter, $1.7 billion.

I don't want to tie you to a number, but I just want to get a feel for where you are in the market penetration of the overall market and how long you can continue to have these 20% growth year-over-year, or if it's going to accelerate or taper from that?

So, Howard, and we talk about it and take a look at some of the distributors that I would we don't compete with them, and I'm going to I'm going to jump around a little bit.

We had our SKL last week and we barely mentioned on stage, and this is me all the way through any by the end of my phone, our competitors.

And in the past we talked about them a lot.

So, when we talk about, you know, we've mentioned on some calls, red ocean, green, blue ocean, where we really are we're going to have blue ocean where we are creating our own market.

We don't see as many, many competition as much competition.

We're not fighting it out every day over margin.

So just the fact that our sales kick off, 188 employees in the US, 60 vendor reps that showed up to support us, making up 25 vendors, it was just a lot of energy of what we're actually doing as a company and where we're going to go.

So gross billings of $1.26 billion and you look at a lot of disties now saying in their earnings release, the public ones at least, just telling you what their gross billings are.

Tech Data came out and said, hey, there are $80 billion in billings before the netting.

You know how much headroom we have?

We could double, triple the size of the business and not really run into them and not being seen because we're competing inside such a small fraction division inside of some of these big disties.

Charles, our CMO, was saying to our teams last week saying, there could be two or three competitors like Climb in our marketplace and we still would have so much opportunity.

So, I'll leave that there and then Andrew can tone me down a little bit.

But here's what our goal is, and that is our goal is to double the business in by 2026.

And can we do that?

Yes, we can do that.

Through some acquisitions and organic growth like we're doing currently, it's going to be that combination.

But if you want to know what we're doing, just look at what we've done in the last few years.

We're going to do much of the same thing.

There's still a lot of targets, there's still a lot of vendors and there's still the vendors that are really Climb vendors.

Like they look like they're part of Climb.

When you come to our meetings and stuff, they're like, they just act like they're strategizing with my team.

So, it's a very different look and feel than it was three years ago.

Yeah, I think, Dale, as we've said, Howard, we believe that between the organic growth and our acquisition strategy, we can double the size of this business and in theory, continue to be more effective with leverage and then have increased drop-through of that gross profit that we grow ourselves or we acquire and then continue to augment and grow Ireland and the DataSolutions acquisition will be really great case study for us to be able to share with the investors as we move forward throughout 2024 about how well we've integrated the sales teams, the vendor cross-selling vendors of Citrix and Microsoft pair up really nicely.

So, we think, look organically we again you're correct we're not providing guidance and we're not really even providing guardrails on sort of trends.

But we think if you look at our historical results, we think we can continue to perform at those historical levels in terms of organic growth.

On an annual basis, we are going to have some cyclicality in quarters.

DataSolutions typically Q2 of the calendar year is their weakest quarter.

So we'll expect that.

We'll see some pullback on a consolidated basis in Q2, but growth over the prior year Q2 most likely that there is a little bit of cyclicality in the business based on geographies and vendors and partners.

But as we look forward, as Dale said, lots of activity in the pipeline for us to continue to grow through the acquisition strategy and also organically.

And at some point, we may provide a little bit more detail as we move into the quarters ahead, but hopefully that gives you a little bit of perspective and some level of indication of where we think the business will go.

And just to add to Howard, we've all talked about in the past, we haven't brought it up on this call yet and it's probably been overused inside the company.

But our EPR is going to go live in Q2.

We've talked about it for a couple of years now, we are ready to do that.

Our teams have been working double time because they've had to do their regular jobs every day and then do all the testing.

So, if you're our sales rep or you're sitting in finance, you're going to do all your stuff on our existing ERP and then you're going to spend the hours doing in the new system.

We're comfortable with that.

We know we can platform companies a lot faster.

The DataSolutions team, when we acquired them October 6th, we restructured all sales and marketing together.

As I mentioned, Kim's on board and she did that on the marketing side.

On the sales team, I just came back from Europe two weeks ago.

We've got all the sales structures fully, integrated with each other, and then phase 2 is when we go ERP live, all the insight teams will be integrated together as well.

So, look at us in the end of June, we'll have everybody on the same ERP system speaking the same language no matter where you live.

Great.

That's very helpful.

And congrats again on the very exciting quarter that you had again for the year.

Thanks.

Thanks, you.

Vince Colicchio from Barrington Research.

Yes.

Just one last one for me.

Dale, I'm curious, securities, obviously, the key driver here for your business for some time.

Has it been proven in any other segments in the quarter?

The reason I'm going the security, of course, it's there, it's strong.

It's very diverse if you look at the top vendors.

And this is something I didn't mention, Vince, that kind of triggered me, and that is as far as what I want to put out there, so when we look back three years, we've if you look at our top 70 vendors, they make up 96% of our overall sales.

Of those top 70 vendors, 36 of them have been brought on since 2020.

So, you can see we have a very robust way to bring vendors in.

They get into our top group.

The 70th vendor with us transact about $4 million.

So that's kind of our limited threshold, because we'd love to be able, I love to have 50 vendors doing 90% and really have more of a focus on our team and have our Climb Elevate team do the rest of it as far as the Clutter piece of it goes.

So that's the one segment.

The other segment that we're seeing more, of course, everybody is saying the word AI, but what our team what our vendors are doing is they're building AI into their products.

So, there's two or three that we're looking at that I think will probably start an AI division.

If their true application is gonna be more than 50% of what they do.

Right?

They can't just be, hey.

You know, we're a backup that uses AI to do some kind of hierarchical storage management of software or of your backups.

So that'll be another pillar that we probably add or amount that we had to our group.

Outside of that, it's really the Linux, the SUSE business, the data management with Adobe, things like that.

But it's always around security data center and then it's everybody that supports that.

Thanks, guys.

This concludes our question-and-answer session.

I would like to turn the floor back over to Dale Foster for closing comments.

Thank you, Robert, and thank you for everybody for joining today and just want to have a big thank you for 2023, all the stakeholders that are watching clients supporting climb and all the teams that we have internally just a lot of energy going into 2024.

Like I said, we're coming off our sales kickoff.

It's one of the best ones as we do our surveys with our teams that are vendors that we think time has ever had.

And like I said, the opportunity go into that and we appreciate and keep up.

We're going to keep an eye on what we're doing in Q1, Q2.

Thank you.

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