Business context and reporting period
The supplied filing is Wayside Technology Group, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2021. This differs from the request metadata naming Climb Global Solutions, Inc.; investors should verify the issuer and filing before relying on this summary. Wayside distributes third-party technology products and provides cloud, software, hardware, and technical solutions through its Distribution and Solutions segments. Unless noted otherwise, financial amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Net sales | $62.8 million | $62.6 million; up 1% |
| Gross profit / margin | $10.8 million / 17.3% | $8.2 million / 13.0% |
| Operating income / margin | $2.0 million / 3.2% | $0.9 million / 1.5% |
| Net income / diluted EPS | $1.5 million / $0.35 | $0.8 million / $0.18 |
| Adjusted EBITDA (non-GAAP) | $2.6 million | $3.1 million; down 15% |
| Cash and cash equivalents | $33.7 million at March 31 | $29.3 million at December 31, 2020 |
| Operating cash flow | $8.2 million provided | $2.4 million used |
- Gross profit rose 33%, while SG&A increased 56% to $8.4 million, including acquisition effects and $0.3 million in employee separation expenses. Depreciation and amortization increased to $0.4 million, primarily reflecting acquired intangible assets.
- Cash from operations benefited from a $9.9 million increase in accounts payable and accrued expenses, partly offset by a $3.3 million increase in vendor prepayments. Investing used $3.1 million, including $3.0 million of vendor advances; financing used $0.8 million, primarily for dividends.
- Current assets were $144.7 million and current liabilities $127.3 million at March 31, 2021 (working capital about $17.3 million). The company had no borrowings under its $20 million revolving facility; total lease liabilities were $2.6 million.
- Quarterly dividends were $0.17 per share, totaling $0.75 million. The reported effective tax rate was 22.1%, versus 25.0% a year earlier.
Material changes versus the prior comparable period
- Net sales were nearly flat, but adjusted gross billings, a company-defined non-GAAP measure, increased 22% to $210.9 million. Management attributed the divergence to a shift toward security, maintenance, and cloud offerings recorded net as agent, rather than hardware recorded gross.
- Distribution sales declined 4% to $54.8 million, primarily due to lower hardware sales; its gross profit increased 10% to $7.9 million. Solutions sales rose 49% to $8.0 million and gross profit nearly tripled to $3.0 million, principally reflecting the CDF acquisition.
- Adjusted EBITDA declined despite higher GAAP net income. It excludes, among other items, prior-year legal and acquisition expenses; effective margin (adjusted EBITDA as a percentage of gross profit) fell to 24.4% from 38.2%.
- Foreign sales were $16.7 million versus $4.7 million, with the comparison affected by acquired international operations. CDF contributed approximately $8.4 million of revenue and $0.4 million of net income in Q1 2021.
Outlook, commentary, risks, contingencies, and unusual items
- Management expected cash on hand and unused revolving-credit availability to cover working-capital and cash requirements for the next 12 months, while noting that working-capital needs may increase with growth. It provided no specific revenue or earnings guidance.
- On April 13, 2021, a U.K. subsidiary entered an uncommitted £8 million facility guaranteed by the company. The lender may cancel it and has discretion to reject draw requests. The existing $20 million facility matures June 30, 2023; the company reported compliance with its covenants.
- COVID-19 had not caused significant operating disruption in the quarter, but management said its future effects on the business, liquidity, and results remained uncertain. Most employees continued working remotely.
- Customer and vendor concentration is material: two customers represented 20% and 13% of quarterly sales; two vendors represented 24% and 9% of purchases, respectively. Management cited competition, pricing, product mix, vendor rebates, customer discounts, foreign exchange, and dependence on key relationships as risks.
- The CDF acquisition purchase-price allocation remained provisional. The Interwork earn-out liability was remeasured to approximately $0.9 million and was payable in Q3 2021. No Q1 2021 legal expenses related to the prior unsolicited bid were recorded, compared with $1.3 million in Q1 2020.
- Management stated that disclosure controls were effective, but excluded CDF controls from its assessment while integration work continued.
Most important facts for investors to verify
- Confirm that this Wayside Technology Group filing—not a Climb Global Solutions filing—is the intended document.
- Assess whether gross-profit improvement and the sharp increase in adjusted gross billings reflect sustainable underlying growth, given acquisition effects and the shift to net-reported agency sales.
- Review the quality of operating cash flow: it was substantially supported by higher payables, while vendor prepayments rose.
- Monitor customer/vendor concentration, customer rebate and discount costs, and the impact of the CDF and Interwork acquisitions, including CDF’s still-provisional purchase accounting.
- Reconcile the MD&A wording that describes Q1 2021 operating cash flow as “used” with the cash-flow statement, which reports $8.2 million provided; the statement’s cash-flow figures show a $4.4 million net increase in cash.