Climb Global Solutions (CLMB) 3 Aug 232023 Q2 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 Second Quarter Ended June 30, 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 second 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

Following management's open for your the remarks, call we questions. will

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

Carmen. you, Thank

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

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

X-K press in and reconciliation find and the to yesterday. SEC Form furnished other charts You'll the we information earnings important release

to Dale over CEO, I'll Climb's call Foster. the now turn

you, Sean, morning, and everyone. good Thank

card. This on vendors During quarter ninth base led to consecutive vendor top improvement. growth our generate line initiatives of of period new to while within innovative adding the another to we to profitability core double-digit continued our our quarter, the our in execute growth existing line to

In territory investments and expansion strategic made addition, reinforce foundation. our personnel, training sales new development throughout the operating programs our quarter, systems, to we and in

focus and are card, line efficient well our infrastructure footprint. positioned continue a our growth as our and grow plans -- continuous clean we on global to strengthening With we and profitability scale for to

We card, which we committed enables to focused are the vendors and strategic technology we quarter, through Out brands agreements second the market. four a line the with only of with the partner cutting-edge us XX signed of them. to most in evaluated

on touching latest wins. Quickly a few of our

First, security we partnered environment management provides consumer traded simple and that with enterprise solutions systems for personal publicly a end-to-end is secure, that company and protects an Apple-first privacy. Jamf,

of platform professional Security these Offensive We to finalized which And one training Offensive workforce our cybersecurity. be of leading most our within to building each for of we we a agreement segments look provider will fastest-growing products relationship prosperous a Next, the their our security finally, line a business. viable the offerings, forward in market. is vendors signed of to card, comprehensive our cross-sell DevSecOps Security, with AI-powered world. with GitLab as take development we our

line the a enabled the while and company, expand other cybersecurity call. us in particular, In with will April, partnership relationship strategic wins partnership Tanium, in distribution to a management this has on Radius market leverage sales markets for addition the entered distributor with unique to a them Drew the trend infrastructure a transact. systems consistent which been commitment in vendor of through has later an winner a In This with in we strong mechanics channel. card selling called to our into providing Radius with vendor Radius. direct partnership to another the

this new Manhattan NASDAQ the in the In well we achievement network is our consistent of even bringing built years of celebrate on the effective by testament bell in success the outstanding to customers weeks forward -- prouder Index, milestone became June few to I became Russell as XXXX ringing and We our a late and team a employee be XX. look vendors. entire and which in This in greater as couldn't the we've global inclusion May, ago. dedication announced into closing ahead. which achieving execution our

line the As our solid have organic place continue we innovative vendors a adding vendors to with we new of enter the driving year, while back foundation growth card. half to in existing

M&A continue our will we with robust These -- as enable objectives will our as our to as sheet well and XXXX. can opportunities service and footprint. growth enhance that coupled balance initiatives, We us to evaluate organic inorganic execute profitability in and also and solutions geographic

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

and Dale, you, Thank morning, everyone. good

and I comparisons all commentary to would remind prior to specified. results, quarter financial otherwise quarter everyone second our the review like we variance unless year refer As that

had previous we as as quite quarter, eight. While not another was boring the it strong

jump in. let's So

our press non-GAAP the XX% measure, ago which million gross $XXX.X increased $XXX.X in adjusted earnings a to reported year release, million compared in is As AGB, billings quarter. to or

of million, existing quarter In growth from $XX.X vendors. addition, in compared primarily net increased sales organic million which the XX% XXXX to $XX.X reflects and new second to

before, of on and convert mix to our communicated net purposes of the respective the under as is reporting financial GAAP. we sales by AGB sales metric have net we product AGB to true the adjustment As as influenced for growth focus calculation

profit top was than and and XX% to $XX.X million. that vendors prior products such TGB-X by in well was In second the vendors growth of growth discounts driven This Tintri sales net increase included in year. pay sales. North at a to level greater taking existing had advantage offset organic quarter by increased the America quarter, XX we the primarily in from new $XX.X million as Europe. partially from second in our lower an customers the as Gross a early compared increase hardware Again, adjustment therefore, a of as

Gross sales prior to adjusted compared was net gross by discounts billings a to XXXX. profit year pay in taken XXXX compared those quarter. the percentage the percentage as a of of impacted Both to X% in customers compared XX.X% X.X% early as of was the by and XX.X%

second common expenses $XX.X in to SG&A onetime, was announced attributed the for compared the X.X% year to and gross as quarter million April The the a Dale adjusted to period. billings of in compared in in increase SG&A primarily ago stock previously grant of $X.X were period to XXXX. $X.X same million was well-deserved X.X% million percentage the XXXX.

impact non-cash has the adjusted no grant EBITDA. charge and on a our As most investors aware, are is

as costs. of increased to earlier, including SG&A addition, and investments ERP In and development referenced as improve Dale a training personnel, result made our infrastructure, new

variable non-recurring expenses increased million due in year's Commissions, in that expense quarter which SG&A the over prior nature. growth of to AGB. are Altogether, the are approximately $X.X included our

of XXXX most half scale will our SG&A recent the as decline we've after new we trends of percentage and second For ERP year, AGB consistent with in operations. a our and the to expect implemented the be more continue

recognize has note by typical partnership and to are profile economics with Radius partnerships. than a vendor that generated economic that important Radius. different mechanics the our The we formed such our newly distribution AGB total It's

profile, infrastructure SG&A GP as and accretive utilizing the they of earlier, mentioned opportunities to XX% different are business. economic partnership EBITDA. their income Radius to sales this offers Despite operation running effectively as direct their vendors Dale transact own net other through their in adjusted pay is we our However, while cross-sell And with geographies.

period ago share per second XXXX diluted $X.X SG&A to diluted the stock XX% compared diluted the $X.X to compared XXXX. per or to $X.XX in pay as was which Adjusted million or increased $X.XX higher share early was non-GAAP discounts. measure, in $X.X the decrease grant, income, to income increased diluted or or comparable $X.XX share primarily period. as per for a well per the net The of quarter $X.X million for million Net million attributed $X.XX share excludes year one-time

of and period. XX.X% in costs our The by ago growth XX.X% the Spinnakar in investments compared XXXX. to $X.X million and was by with in as associated was margin to EBITDA made infrastructure August new existing profit both $X.X effective vendors, our a driven compared of EBITDA Adjusted increased year the quarter increase to gross in offset of percentage partially second acquisition million. X% Adjusted from or organic

early Our customer effective increase margin drop-through and aforementioned pay were impacted in discounts. Radius and by the

line X.X% Under of with JPMC years into $XX our JPMorgan our year. of based million. and which with facility I'd touch diving ahead. the adjusted rate agreement, to on fund was to Chase We on in to set $XX to accordion capacity replaced secured SOFR forward with feature growth execute increase and additional flexibility term the to revolving previous Before look position, size million five-year up up we as million June Citibank, liquidity initiatives in in This facility have to secured $XX X.XX% the has our our working the facility expire to like the borrowing this of on plus capital our now the spread. new a to strategic of and we closed interest is The new team credit facility an May. credit credit

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

As under We proceeds 'XX, credit capital had to million expenditures. loan new which $X.X in of borrowings we June our fund April XXXX, $XX term that closed of outstanding outstanding were used with million of the revolving from XX, we no facility debt JPMC. had certain the

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

delivering the of are and strong of which growth our solutions executing forward inorganic domestically we abroad liquidity future global point will evaluate half enhance stock summary, our echo opportunities offerings double-digit To our team onetime to another and AGB the excludes our utilize to M&A organic and the to of earlier, grant. period In look we another of and back of objectives quarter and both and effort proud to XXXX existing position results continue in geographies. operating generate beyond. service and to EPS, Dale's We across in robust

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

first is proceed. Colicchio Instructions] from with question Research. Barrington Vincent Our Please [Operator

Dale, cycles? in period? in particular, backdrop the guys. to pushback pricing changes In morning, are current any quarter or Good any changes you you're from Yes. sales on last seeing curious, the any seeing demand

from about to talking QX You're QX?

I'm sorry?

Yes, from QX QX. to

stopped have of We've of really they've people that that some haven't we that. that. buying more really seen hardware, lot are seen our seen a slowdown seen haven't a but we little centered or competitors hardware-centric So as

We our haven't seen it from vendors.

seen We as have going some consolidation many not distributors. vendors with of

through enough of they're competition So trimming that there's it looking we've line lot broad And something not that's that. fortunate the side. a to that. and much they're fit at strategic a those because and strategic more typically been on And then we make

haven't seen I pullback. really So a

you Any seeing same changes are as there? technology quarter? the in prior strength And the segments

terms are. We out the, the of we being slicks mean promoting, but lot center if And what our A we we focus we ones. data are segments are it have look of -- security. into lot on, in the they're course, we're put all of I now side, in you see their marketing, AI claiming seeing security our vendors starting we're heavy much security, slowdown haven't. at six of our a the marketing but and a one to of propagate biggest little

markets QX, start that are adjacent hey, six normal announce our of should in And probably for diving this we're into we've that continually we'll got say, is really categories and outside we to looking something some QX.

of the with business? grow top exceptions line there? in growth vendors Any the XX did And the

our at starting It was away the new are mix XX. the XX. to in vendors top of top terms very We've vendor emerging that consistent chip some in got

we as We will top expect slightly into of XXXX. will of that end that mix to move XX the the get and year that, -- shift

a some look if they vendors, we've of million. million market. in signed. And see you $XX you'll at if that Vince, a million, of vendor of the sizes, of we $XX you look at the raised -- range. some now lot have we in a as have But They're accepting couple distribution their million, really $XXX they're vendors much They $XXX go-to times, the revenue.

for channel, us. seen companies, a which of trimming a so thing is being you've just the lot and just leverage or expecting good cautious a putting little If the the they're from they're with more technology more economy,

And -- the something side, term? near better to about so, on the more done here lastly, does acquisition make feel have And improve? in getting if that continued valuations you

Yes.

at -- overseas, higher, higher look targets, for If multiples typically varies it the they're margins you the it's so some a looking are because if the of multiple. are typically

a some not that. in think those change drastic. big bit, I of I a little have softened seen haven't

Okay. guys. I’ll go back the Thanks in queue.

from comes the Root. of proceed. question Next Howard Please line

Good and can Drew, okay? morning, me Dale hear you

We sure can.

Sure.

nice quarter, morning. mind, if this So progress. I three nice you job the won't questions, continued on got

One more on for Drew SG&A. the

jump in Drew, press then was $XXX,XXX, that that these But So forward, doesn't year-over-year so million, which fees understand $X.X grant do They think the that up level you service million mentioned there the have -- we Board the about but that which, professional don't again. release. onetime and that that going was was you load $X.X I hopefully, issue. onetime stock was the said, I that

So then if which million year-over-year. to increase, that $X.X looking $X.X it is $X.X grant of from the but the included. a went about million, there's sequentially, isn't stock up But and then even million not amount $XX.X certainly million I'm just that's another $XX.X million, which

of me give dollar what You little amount? a level number or expect level do QX? forward you looking on SG&A you hint? What's the a loaded in that, QX maybe we're can as loaded So appropriate

part variable and delta between component, was prior Yes. so year a On dollar Q that of this commissions. a amount, the Q

at if to were quarter-over-quarter, So commensurately you AGB compared looked commissions increased.

-- expense QX $XXX,XXX again, XXXX. excuse of with but we about commission variable incremental So me, expense, in QX had, associated a comp probably plus

then And Dale's the -- -- payroll-related is will take. had not grant obviously not reoccur was about quarter, subsequent prior expense we with give associated that or in some the that $XXX,XXX

see closer level-set to be that's back on $XX think I probably $XX.X us million. million, to a you'll So going level basis, pull a to

Yes. Great. Okay.

SG&A have take you for the would off been million, level the gross that's So $XX.X the of adjusted if that million of $X.X what billings.

that, add I to though. Howard, to want

So to going be we're opportunistic.

of think Field of I if Dreams, -- we come. you they sometimes And it, build the whole will

team, if team to what we we've done to move have have had platform, they do want -- are in start And separate take into investing members build to to asking that. renewals we've to we that. Sometimes the vendors over the to add a renewals and us our

plate and starting of be into we'll push they're as So opportunistic the to channel. more off things their

paid little get for usually, Of but it's course, we a that, lagging.

be going to and So we are do that.

be want certain say, quarters, we program don't and don't there's flows, going do to this, in to vendors and two So in we have at So the but have that want incumbency I to going one and another to level last be this, that's we want we this of don't your that come it want to competitors." not to run, run say we "Hey, perfect, -- ebbs but it's of our quarter. at some and and you want you to

can spot an We part increased quarterly internal internal perspective, our last that We Spinnakar brought tell guidance Yes. operating in not I of some basis, was we And additional guidance headcount on that a was or right? And XXXX. expectations. you with expense is provide Howard, our detailed of acquired that even QX granular though on don't reflected headcount, on year. from

EMEA of, there. now remain some Spinnakar the in Chief us, over X or running So folks significant obviously, and think with including, employees, Revenue vendor XX-plus Officer I of I X Gerard still opportunities is think, those

do and have we that we So increases some expected for. planned headcount built-in

year-over-year well. part that's So in SG&A the of change as

Fair enough. Okay.

maybe. quarter. $XX million one that increase $XX quarter it's if quarter on I question that? But QX wasn't aspect drop a down, a year-over-year, of of QX kind nice Or the billings. sequentially not down is what expect adjusted in I or you look what But what gross I two, -- billings, to there gross going do Second sequentially, And million, that there? mean, sequential adjusted were forward? on seeing XX%. expect would up from you

own over Spinnakar headwinds some internal to Europe. new landed transaction over pushed on rates, obviously, Interest were a expansion same got center of QX we with target that Data builds, and the at out level. because down QX perform What Western Western again, didn't that in so quite slowed Vast grows. Europe. didn't in both vast data QX opportunities happened due construction center economic significant, we delays in the Howard, our Yes, was expectations. expect.

So of opportunities some a lot with have slowed the of Spinnakar. center slowed down therefore, data which, down process, owner-operators we some of vast their that the

we going is lumpiness Spinnakar future going strong really And or They've acquired when pipeline. each into the quarters. acquisition. out we some have as some to there quarter, off previously, gone Spinnakar the the cyclicality to quarters. have Nothing's just and to made be indicated We're comments moved

going some flows Vast, for like higher of ebbs Instinct because some cycles products We're they're much and longer size and but and larger much to just Deep vendor in sales have the dips some and margins.

we So once but center-related XXXX will of vendors, a with quarter-after-quarter, like that bit beyond the normalized into get some lumpiness/roller-coaster data that those there's over and next into more vendors Vast, be get rate as probably we quarters. believe of several to a run little going consistency

Okay. next it, or point forward quarter you And at giving of question on at least there of guidance. then guidance targets? know some It's my will is last you don't related kind what long-term Is do to are give start but ramp? you what same kind the going? market? question this keep this in to growth see? acquisitions the starting you in Is this every linear? this starting? call, revenue Where the you Is meet it's like are Where I just

targets headed. long-term this for take kind to it where company judge get this going at guidance of is and get can to then of your we you kind helpful forward just in least be call It'd or on more so

some of kind you you speakers]. and say are right [multiple can the where what now of So

give we at the we won't thing just talk I right that. general about with can that just now I think guidance. best We're the that detailed you, -- But feel stage we can not tell distribution comfortable that actually as that far has the industry holds American and consolidation in noticed as I what happened market the North in in we anybody think for acquisitions. a see. And while has

after. target, greenfield market, be to really going that European that our is the we're going is In that our and

So that targets over of we see a there. lot

emerging front. It's vendors. Bass talked that's So that targets. the Charles plenty on with talks of targets I There's our almost many about as about as acquisition CMO

look look of need But I But if course, grow you field, don't names, you're because to some the doing believe if think of at. signed. heard to actually they're we growing. XX% that what at to to them technology you'll these you vendors deep the organically into you of vendors still unless into and they're And range of you we the what us at some never emerging names. from that's -- XX% actually super you grow go look and how in Crunchbase, into or continue and We should grow

acquiring at where at grow established grows don't an vendor GDP They unless companies. they're

that's X% growing X% So broadline -- that our or GDP X% in not to competitors all. at growing range -- are

internal So an That's vendor. that's what that's we we're drive that continually emerging to as and see, team. trying we is what focus what to to going

emerging billion it. grow get sub-$X little we'll As fast, still companies. we some condense a top still established some vendors become consider don't larger piece of because because more they see The we slowdown a they our as they're of and bit, but vendors, margins yes,

you just and quarter do, every But can is job, into and work you the us and good going enough, nice more continue. and perspective things to where especially again, continue give more what's next on Fair helpful quarter, great Okay. it hope year, whatever headed. for we're the see guidance

with the Colicchio Please Vincent follow-up Barrington have from Research. We proceed.

cited say can level for just client to that type XX% for with. the you this the you tell? of of Yes, you number Dale, year, target they're on that's Would sort XX% growth work you best

I overall mean, piece I'm to that to that's when things like for we if are at. that's grow what we come mix, don't trying But global our this opportunistic at have on saying, I And is of build we yes, to held have we're you it. want do. hey, have us to some and things look I that our to a our of goal. we're vendors where expenses Yes, be at said, vendor team. we -- look at the there individual some that But quarter not

put that Let's way. it

I focused way. perhaps market's little would understand this I need this need have quarter-to-quarter. But the not the along on Vincent, for and as And stated the more earlier game. investors' long guidance well, for a we're and in We're

be fairly organic as both robust. we're that is As said, Dale which opportunities, well acquisition going opportunistic organic pipeline our in investments and growth as our to

the grow our I double-digit would to our that that confident this But be overall, over grows. growth. years, have we're population comfortable the may same adjusted very low gross will but different, rate say at we're that a billings as vendor Quarter-to-quarter several business continue we'll next

to Dale, Should X Okay. of sort one. And vendors approximately each add then we game continue to one the last you that Is expect plan? quarter?

what they're actually see It's and we really. when ready go. Not to

to them but who as and to Some for We're about of continue about to more we trim be up couple, talk But we going I five. mean, signing We still channel them, going there might excited trend. we lot want on or signing they're it's sometimes a sometimes structure. a are trying be of setting it they yes, or add. their course,

trim. We we what really don't about talk

Climb it So is get any over doesn't so over we core focus. get XXX on lot they client now of dollars it. Elevate, to it but It actually takes a the vendors it doesn't that transact, which push business, spent marketing vendors of real out

So there customers. connection the that be transactional than our to there's and other nothing systems

We've So do to over that. we'll launched U.K. also Climb in continue Elevate the

then with same for And exact talking online, ERP will thing all they're pond. more We'll So our across the a the little us doing and the language we'll there. get it easier it same be over coming efficient. make

Dale questions. Thank Foster you back pass it I your to for will final for all remarks.

our deliver and to thank a and look core company, to team to Thank you talking we you shareholders, to you, to next quarter. going Thank forward to on initiatives Climb operator. continue globally. you We're the as the

conclude does Thank this conference. you. And the

may You you. disconnect. all Thank