Climb Global Solutions (CLMB) 4 May 232023 Q1 Earnings call transcript

Good morning, everyone, and thank you for participating in today's Conference Call to discuss Climb Global Solutions' Financial Results for the First Quarter Ended March 31, 2023.

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

have which the at was p.m. should earnings quarter approximately everyone release, press issued now, access first to XXXX X:XX By yesterday afternoon Time. Eastern The section Investor website release www.climbglobalsolutions.com. in Global at Climb Solutions Relations is available of the webcast This company's on website. available the replay call be will also for

like Mansouri Following management's with now introductory the the call your questions. call comments. remarks, turn for over we'll I'd open to to Mr.

Amy. you, Thank

of and any risks statements remind are are in materially statements listeners conference Do the subject Before cause uncertainties forward-looking and forward-looking any that those are other comments on to obligation by no required that like the I reliance as the to which filings introduce publicly results are law, as Private of actual these unknown from this webcast forward-looking forward-looking Dale, from made risks Act as These as the call under could time certain Except undertakes to this These not with revise assumptions and any Reform of and statements. company's subject uncertainties the SEC. are the to call. being results reflected forward-looking considered I'd company statements time known on Litigation revision or differ undue to release to forward-looking made that certain Securities of XXXX. in well to only date also statements, place described statements.

with been supplemental the rules. adjusted business. of directly our presentation reconciled and Our performance non-GAAP certain as have in GAAP measures, measures most non-GAAP gross also includes measures to measures accordance comparable All EBITDA adjusted SEC financial effective margin including billings, of

over X-K the information and and to charts Climb's earnings Foster. furnished Dale call now other SEC to reconciliation we the turn release in the I'll find CEO, You'll important press yesterday. Form

Thank Sean, and morning, good you, everyone.

metrics. momentum in record carried of our from can year significant financial growth into key As all quarter first XXXX with our has you see, our

driven organic to was continuing vendors our initiatives, on generating new performance vendors line Our our core existing with adding by growth card. execute to while

growth our expansion August from In we of of continue which to drive acquired addition, Spinnakar, and last last year. we margin integration

generated we line, growth to our U.S. card the as in of the business core scale bottom top demonstrating and continue strength abroad. and we our Spinnakar, Excluding both double-digit line on the

On partnered one was the North XX partnerships of evaluated X the They brands platform. that and our commitment QX I'd compliance business America. agreements them, to globally. of the latest to only We we technology we innovative throughout relationship market. vendors forward a part on a demonstrating provider vendors. as are of solutions our that card the the continue line we to that quarter, in we with leading limited is of Risk the the to launched of We transformative a LogicGate, highlight with in our look focused most like that with signed Spinnakar growing on portfolio LogicGate, cloud risk vendor delivered first scale in

and specialty U.K. cloud XXXX this team. a as of IT Group, service strategy M&A are component by the geographic growth targets Technologies, in would our you began CDF enhance distributor, of evaluate with that will aware, strategic Toronto-based extend an continue as a our be provider. of continue as acquisition We we Climb of important Interwork many to our as vendors to acquisition well the As potential value-added reach software, initiative distributor followed

IT focused region. U.K.-based earlier, August, channel completed of As we EMEA another the acquisition I Spinnakar, in distributor mentioned last the

market States, recent benefit These relationship us have region. reflected with further entity but transactions our between the in with to are transactions reach opportunities accretive geographic beyond the cross-selling enabled each -- French reap our VAST in have accretive these each extended This only Spinnakar's of United also Data. entry not into

-- reach our across expected regions. new additional cross-selling we expand We we as opportunities expect

potential a spend see on software do environment, effect slow of we sales. which IT could have downstream Quickly across macro in on our the commenting a hardware regions, sales, mainly

in could in lead servers, such For investments a as solutions. laptops, example, endpoint computers, hardware, various less and reduction to

With the both and being needs recent businesses, their our vendors of paying be and customers of announcements to rightsizing maintain where growth close we the customers. while we attention to our large adaptive will can agile

operating the for verticals in are somewhat management, as core companies. connectivity market which HCI, the issues investment We data impacting areas technology emerging are key from the where other these segments we insulated most of network of and cybersecurity, believe focus, cloud includes storage, companies, broader

with to remainder not the operating to and goals. towards our and further balance strong strategic M&A will leverage our Looking as pipeline be targets, growth a continue align but With organic we scale will only continue of we our and expect culture drive XXXX, we that business. business, to as sheet our accretive of pursue we to acquisitions selective improve be

tone and with the strong first will look for expect over I take through Drew? you turn Clark, profitability. growth forward XXXX financial will call of the our he With and to results. quarter year the another delivering Drew that, We to and a exceptional CFO,

get good Thank you, Dale, the the gets everyone. boring. exciting and content, Dale I morning, and

year and to results, specified. commentary quarter, that to the As everyone variance otherwise financial I'd our remind prior we discuss comparisons all unless first quarter like refer

profitability QX results So started. marked our let's eighth consecutive quarter get improvement. of double-digit

are qualified those. for was remind that likes Dale only X I We or of me here to

quarter. was billings, and year closed in in growth measure, vendors a from our well year. our as of acquisition organic The gross which new Spinnakar, last press in of which to non-GAAP by $XXX.X adjusted reported XX% existing is As increased as a to release, from driven the compared million August increase million contribution earnings ago $XXX.X

million to slight from reflects top In both to in existing reduction as of increased in increase growth compared million, compared million. from The a by international addition, North million and organic the net our increased a the growth sales as $XX America $XX.X contribution to a and impact in Gross first and primarily to vendors the as XX% FX. of first from $XX.X contribution Spinnakar, due profit XXXX $XX.X offset the which well XX% double-digit new to Spinnakar vendors quarter as from to business. XX well Europe attributable was impact our less FX XX% new vendors quarter of existing

$XX.X million X.X%. for billings gross percentage in compared $X.X the points SG&A a quarter first XXXX. profit gross of as percentage XX.X% to X.X% expenses to X.X%. remained year SG&A as billings Gross adjusted a compared of the a XX.X% to million as sales were And increased of in adjusted compared XXX to same period flat in to net quarter. at the prior decreased percentage basis

Net organic operating $X.X period this new XXX compared increase million as XX% income as EBITDA was well to diluted points Spinnakar. to we growth XXXX in by as or see diluted the million per leverage existing XX.X% to the $X.X quarter year-ago compared million a the to Again, XX.X% increased to the prior of increased compared of year for $X.X first or Adjusted basis in share from comparable from vendors both in effective as first contribution and gross per our in percentage margin business. in driven increased in $X.XX to the continue profit share million $X.XX $X.X XXXX. to period EBITDA quarter XX% Adjusted or period. a

collections XXXX to receivable while cash attributed were million XX, December capital this our the equivalents Turning timing million and compared $XX.X period. March Cash $X sheet. to on and $XX.X balance of increased cash on million working The primarily increase to by in during XX, XXXX, was payables.

expect We and normalized cash cash forward. to return to equivalents levels moving

had $X.X borrowings million we closed outstanding proceeds had the upon of March under term our As XXXX million GBP debt capital used expenditures. certain from which the either XXXX, no of in loan facilities. April XX, in X that credit We million $XX or outstanding for were

of and quarterly shareholders declared Subsequent quarters, record our with dividend per to common to May on of end XXXX payable Board quarter on May X, on Directors XX, prior XX, XXXX, of of consistent XXXX. a share May $X.XX stock our

business sense last and an nature reiterate mentioned generate a I solutions recurring as model. like As traditional of revenue not we distribution I'd IT company, our the in the recurring of do call, to SaaS in our conference

roughly reoccurring our customers we year. average generate renewal do of rates revenue every as with we continue to However, XX%

renewals forward. the While have experienced impact our not to moving point any we this to and expectation remains up uncertain, environment macro this carry to continue

and position liquidity strong growth customers initiatives, relationship vendor our with our the the execute across on enables to with ahead, provide expand to flexibility globe. networks and organic continues scale us to Looking us while inorganic both our

the year delivering our M&A service that to look targets we forward will referred and growth efforts, addition another enhance footprint Regarding to of continue we geographic our We to to them, in in can profitability evaluate and year our offerings. as solution ahead. Dale

our call. open for you. participating from the back Operator, concludes questions up those We'll remarks. This now prepared to in it

Barrington first [Operator Instructions] question Research. with Our Vincent comes from Colicchio

quarter. Nice Yes.

sales slowing be changes that of bit. related terms cycles categories such any if no vendor Any -- be of the in helpful. on a to or in economic would commentary any mentioned if economy, you response signs -- impacts that issues renewals as there's Curious pricing, would of as pushbacks So any are yet. of your any for had to your of the

Vince. Thanks, Yes.

of week. partner, counsel come had our last comments the Some from. We adviser

So customers. we big small customers, have

vendors. all top our have We XX of

the at there said So and side vendor marketplace. just rightsizing the side. Like -- on I it's noise some these commentary, in of both the in companies, the customer was

we pretty little things. So because Like with insulated software softness maybe -- side to the on don't that deal so logistics of it. I of feel a have piece said, we

-- And not the people then that whether not mentioned People whether that going firewall. sell. endpoint, to just for Drew product under that protection have security, it's the it's I the think network mix we often are

software that pretty to our lot that the a portfolio cover is critical infrastructure. So we across of whole

keep some out we're we it kind an that broader on do that's mentioned we just in the see going of there So to why market. and eye stuff

to fastest-growing management, data if continue, you I that is. and security are categories, assume it expect and your So

Yes. and either for in collect -- piece and So thing cybersecurity very there, or is the the endpoint to fastest mean, witness They security security protect -- same -- data from the space. ransomware data your at all are right? we we And -- what of sell, it we center markets security both. you also fastest-growing for a cover out one look the they're and we're when I whether big just large, the of

we products then cloud. a So don't I want into they movement, know a get cloud. into data have you to hybrid when what, lot critical do want realize, I setup. management to don't people my data want the all And the of

some with companies. do shared center have they'll on-prem as another or local data company or So well they'll

unique. We see that and that's more space, two DevOps into fastest. So you'll we have those just are products And still signed why there. the and great hooks definitely that's just more

margins And better to areas. part us the self-define as look. can't there's I X limit sell have mean another -- are think in that potentially continue I we that our we of another we into, that know adjacent you fit might group products certain but with we categories us portfolio. to we are that what, of we that add that say doesn't

Drew, you EBITDA had in margins. adjusted improvement year-over-year a nice

sales momentum going your similar can forward? improvements continues, Assuming we expect year-over-year

you high confident we're we applications again think discontinue I that optimistic renewal say growth would continue. over not To the Will several are we've as year-over-year endpoints protect People improvement into security center. trend Vince, the we'll going all experienced cautiously Yes, the the that I But have and data we're to provide don't way back down we've we slow point, that continue a but Dale's know, last have had cautiously to optimistic sequential quarters. the that renewing potentially. that that rate. quarterly will guidance, that

Dale, you take it you'll bit of weaken valuations if market, Or And advantage better the do you cautious? have may improved? we make more the do more -- pricing? of in terms think see you acquisition economy And here, a think

opportunistic. We're

hopefully, better out that's we'll market. So in take pricing the

mentioned still We then North have some I've in Europe, our there's really And the for U.S. Western it's America, but both before. is target

a there. of seen lot We haven't change

had haven't on people are right really meetings. the Not that now. think internal focused businesses I we their

NDAs. haven't signed We the

a quite out. continue there. scope out have But really nothing that changed We to few there we has

Of really in we've course, going then past But be we'd we for very And the done actually what we're it strategically are right do getting looking space. it in business? to Is X. the discount. in as a that

Our next Investor. Individual Root, question from comes Howard

just That's go around. hear this Drew. outstanding and okay? Dale quarter, you Congrats, Can me simply

know we're Yes. Howard, don't tell We us boring. we're boring.

Drew CFO, a the gets shallow funniest very for the pool. award that's but

the it's So not phrase. same

the grant, company grant I the So that is of announced a I vesting, the a to onetime going Dale, of because two all today, that on to immediate questions don't I vesting and without $X.X question where million stock G&A think and that see have expense a my to about picture. or QX one at in a handcuffs you keep kind with one it's the on as and -- it's which be week hit or XX,XXX one, all, you, shares. the you, I it's golden that's amount housekeeping the it the it, CEO kind Climb. the doesn't need but announced you The of in over role where disproportionate consider on at X X vesting is bigger not And ago housekeeping have the is to years there X next we idea

that you why give Or very know happened, package it the that part your -- because of decision any a the in happened? one-off my of experience. because the is can And it, how relay recipient you're just compensation wasn't you Boards but this the it's this deal? is Can I unusual give --

and chime it's -- as of this a issue, well, I'll Howard, Drew but things. couple -- more can in timing a really deal, it's Yes. and a one-off of

slate years firms, you X done created the from entire back when created committees company an lot a done lot members. We've different it. And go lawyers, of things weren't we've that the Board ago on We've things a audit of name just me really Let side. of changing out before. governance had

to a help in lacked committee. that brought of took process. we consultants we one we XXXX do the And on was care that us things And and of compensation

So it flow, we'll it. won't a regular get something share timing but as through the was forward. it. of It's ideal, lot we'll And will be Again, that. see catch-up really of into piece we not go just and that you a like it stuff more

would Board of I with augment concurrently. that the did Howard, couple a commentary Yes, Dale's things

management and really external to some create hand compensation engaged Worked that plan the we comp Board today long-term Dale program to is hand in of and committee to team the As of referenced, the incentive with the consulting helpful new some timing. we a that compensation bonus, salary, the the metrics the that committee very have -- changes firm an compensation was Board.

be executive So there's the with a X-year legal officer compensation And place program. into cliff to also test that's we to our going named engaged put harmonize counsel LTIP agreements. help

Dale's applaud the and company I think Dale for shareholders would getting adjustments when back some together if into stock things all he the bought too joined be And detail, employment with gave much plus that were look historical leadership. absolutely the should where with agreement you this in pulled of today, company. under to satisfied you you've extremely performance some we So and without there that, made to performance the connection price the him all the at Dale's rewarding

employment mentioned, drive us years. went our are for here So plenty executive and to in plans there the it's next of of value as with again. Dale into And But was there we handcuffs a stay not that incentives number onetime factors and that for that X-plus will occur something believe grant. place,

Great.

So Am just $X.X million one on a grant. will that. that expense that it's correct a in get on I follow-up about QX

us, not There we operating my yes, expense back will adjusted always But going an look and obviously. be going at Correct. through if statement. EBITDA share-based an will recurring. flow the reduction be to compensation, EPS that for it's you From be income add that's perspective, to

of satisfied and point, committee the from this with vesting? was, I the have some end the result. was So the Yes, just right done solution compensation possibly, could and Dale think, but we felt Board to your we type multiyear that

Okay.

year I plotting mean, were crossing don't like a $X.X a guys are picture trees and told billion mean we ago, gross don't reaching I where in that annualizing much bigger that was the your billion you appreciation $X you sounds number, But And grow now you're you're bigger in I kind have huge, growth. and industry. XX% adjusted for to I but sky. in big billings, at huge playing billion, an potential. market a of picture. always So $X.X

too say, quarter. we product that can -- is slice the new these focused years? kind Or really approach end guidance, growth reach the asking your acquisitions, And take ask you much of offerings, in every couple terms, your but are early just and the the just middle you that organic to innings it of Is of later growth market? XX% you in something with so are over X if not specific this innings, excluding and -- of for the next that and continue not general innings, your with upper adding of

of here's never my their very the we they double a one how without want are tell they talk at quickly, we're are we look than that we go Yes, I play Howard, them we competitors between that where -- where is and gap companies that routes market. all phase, I get that then if into being anybody about, startup can that you X about if other them. billion And $XX the coming is that in with and the And size could knowing take. actually for I to even looking vendors But we to are in smallest sales, market. the who we choose never the products go to to tell out manufacturers sign. in

that our we'll that. pick toward route, resources putting start they Once then

team a we've X vendors see that we of vendor in There's just per does So I look that. if can't you yes, on many I the never obstacles. size? I at alliance before. and calls tell heard that can how next new out. don't years, my triple coming any we see mean double vendor week many I

years it, say days, to -- ago, be my were loves it used team we to in the we So were desperate. X early

we need anybody So to fog a that going just and line mirror our card." we to really "Hey, are could sign out build say,

have us. them toward Now coming we

-- of the that we're getting some of seen. we're it's think some doing I branding that

of what in last service we also jobs. have and Some continually mentioned summit is it couldn't we they believe that by week, just IT it vendor side at there's that vendors. Pat And our I jump the markets gone better. people is word-of-mouth X,XXX

work team. Channels the and hey, we them. years is with there's VP So onboard they one another did the follow me, they're person Climb I to want want X later, for This like, and one what of company, to running jockeys. at This is I

So we're first instead look looks. getting of second

looks those [distis], getting now saying, First would as them the well big we're be of let's and hey, looks first instead as [boutique]. find

that's Yes, at deck operate website, Howard, addressable we're look corporate market sorry, the in for add space included billion the $X.X the that we've some that billion. it's $XX we in, investor And presentation available I if TAM would on you our total doing indicators. roughly,

as products You to we next can and we get a extrapolate line we new the can of vendor and share great years? for job size X if confident referenced, and top do over Dale's the double it. we our We're continue shift, Can the grow triple partners.

yes, And in, did I I helpful. buy happy. Very Great. am when very Dale came and

Keep So the work. great thanks the for performance, up

closing no turn to showing like time. I I'm And Dale remarks. at the conference further would now Foster back this for questions to

to to our and shareholders update and after forward We you, all look Thank dedicated our our to Thank thank performance. and you. giving growth an family members and team operator, QX. makeup that of of Climb you

for you participating. This conference call. concludes today's Thank

disconnect. now may You