Earnings call transcript: Climb Global Solutions Q4 2024 earnings beat expectations

Climb Global Solutions Inc. delivered robust financial results for the fourth quarter of 2024, significantly surpassing market expectations. The company reported an earnings per share (EPS) of $2.26, compared to the forecasted $0.96, marking a 135% surprise. Revenue reached $161.76 million, exceeding the anticipated $126.95 million. In response, the stock surged by 5.55% in premarket trading, reflecting investor confidence in the company’s performance and future prospects. According to InvestingPro data, the company has demonstrated impressive momentum with a 75% return over the last year, supported by a healthy 32.27% revenue growth rate.

Key Takeaways

• Climb Global Solutions posted a significant earnings and revenue beat in Q4 2024.
• The stock price increased by 5.55% in premarket trading following the earnings announcement.
• The company highlighted strong growth in gross billings and net sales.
• New vendor partnerships and leadership changes were pivotal in driving performance.
• Future guidance remains optimistic, with continued focus on growth and partnerships.

Company Performance

Climb Global Solutions demonstrated exceptional performance in Q4 2024, with gross billings increasing by 52% to $585 million and net sales rising by 51% to $161.8 million. This growth reflects the company’s effective sales strategies and successful vendor partnerships. The company’s focus on organic growth and strategic leadership changes have positioned it well within the competitive landscape.

Financial Highlights

• Revenue: $161.8 million, a 51% increase year-over-year.
• Earnings per share: $2.26, an 87% increase year-over-year on an adjusted basis.
• Net income: $7 million, a 33% increase year-over-year.
• Adjusted EBITDA: $16.1 million, a 75% increase year-over-year.

Earnings vs. Forecast

Climb Global Solutions reported an EPS of $2.26, significantly beating the forecast of $0.96 by 135%. Revenue also exceeded expectations, reaching $161.76 million against a forecast of $126.95 million, a 27.4% surprise. This substantial beat indicates strong operational performance and effective cost management.

Market Reaction

Following the earnings announcement, Climb Global Solutions’ stock price rose by 5.55% in premarket trading, reaching $125.40. This positive market reaction reflects investor confidence in the company’s performance and future outlook. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels. The stock trades between its 52-week range of $49.70 to $142.50, with analysts setting a consensus target price of $136. InvestingPro subscribers can access 10+ additional key insights about CLMB’s valuation and growth prospects through the comprehensive Pro Research Report.

Outlook & Guidance

Climb Global Solutions remains optimistic about its future prospects, with plans to continue building its sales foundation and exploring M&A opportunities. The company anticipates growth from new vendor partnerships and has declared a quarterly dividend of $0.17 per share. Future EPS forecasts for FY2025 and FY2026 are set at $2.99 and $3.61, respectively.

Executive Commentary

CEO Dale Foster emphasized the company’s commitment to organic growth and deepening relationships with existing vendors and customers. CFO Matthew Sullivan highlighted the company’s active pursuit of accretive M&A targets. Foster also expressed confidence in the company’s market positioning.

Risks and Challenges

• Macroeconomic pressures could impact growth and profitability.
• Execution risks associated with the implementation of a new ERP system.
• Maintaining growth momentum with a selective vendor signing process.
• Potential market saturation in key segments.
• Competition from larger players in the industry.

Q&A

During the earnings call, analysts inquired about the impact of a large VAT deal on Q4 performance and the success of the DSS acquisition in the education market. Executives reassured that all 13 new vendors signed in 2024 are currently productive, contributing to the company’s strong performance.

Full transcript - Climb Global Solutions Inc (CLMB) Q4 2024:

Conference Call Operator: Good morning, everyone, and thank you for participating in today’s conference call to discuss Climb Global Solutions Financial Results for the Fourth Quarter and Full Year Ended 12/31/2024. Joining us today are Klim’s CEO, Mr. Dale Foster the company’s CFO, Mr. Matthew Sullivan and the company’s Investor Relations Advisor, Mr. Aaron D’Souza with Elevate IR.

By now, everyone should have access to the fourth quarter and full year twenty twenty four earnings press release, which was issued yesterday afternoon at approximately 04:05 p. M. Eastern Time. The release is available in the Investor Relations section of Climb Global Solutions’ website at www.climbglopalsolutions.com. This call will also be available for webcast replay on the company’s website.

Following management’s remarks, we’ll be open the call for your questions. I’d now like to turn the call over to Mr. D’Souza for introductory comments.

Aaron D’Souza, Investor Relations Advisor, Elevate IR: Thank you, operator. Before I introduce Dale, I’d like to remind listeners that certain comments made on this conference call and webcast are 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. Our presentation also includes certain key operational metrics and non GAAP financial measures, including 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 eight K we furnished with the SEC yesterday. I would now like to turn the call over to Climb’s CEO, Dale Foster.

Dale Foster, CEO, Climb Global Solutions: Thank you, Aaron, and good morning, everyone. Our fourth quarter performance capped off an exceptional 2024, marking another year of record results across all key financial metrics. These achievements underscore our team’s execution of our core initiatives. We continue to focus on organic growth by deepening relationships with existing vendors and customers, while signing new emerging vendors to our line card and delivering on our acquisition goals. Throughout the year, we evaluated over 120 vendors and signed agreements with only 13 of them focusing on the most innovative technologies in our market segments.

In Q4, we evaluated 34 brands, but only partnered with two of them. I’d like to quickly highlight a couple of these wins. First, we launched a partnership with Scality, a global leader in cyber resilient storage software and for AI environments. This strategic collaboration aims to expand Scality’s reach across North America, enabling organizations to access scalable, secure and high performance storage solutions for their growing data needs. Next, we signed an agreement with Smartsheet, a dynamic work management platform that empowers teams to collaborate, automate workflows and drive innovation and scale with flexibility and security.

We are excited to collaborate with each of these vendors and bring their products to market, building a mutually beneficial relationship along the way. We continue to make progress with the implementation of our new ERP system, a critical step in streamlining processes and enhancing real time data accessibility across the global operations. While we still are in the early stages, we are already seeing improvements in transactional efficiency. As we continue optimizing our systems, we anticipate unlocking additional benefits, driving greater agility, visibility and operational effectiveness across the organization. In January, we announced several changes to our executive leadership team.

To start, we appointed Matt Sullivan, our Chief Financial Officer following the retirement of Drew Clark. I’d like to thank Drew for his invaluable contributions to Climb over the years and congratulate Matt on his well earned promotion to CFO. Since joining us in 2019 as Vice President and Corporate Controller, Matt has risen internally to his most recent role as Chief Accounting Officer, overseeing our global accounting functions, including external and internal reporting, compliance and planning. He has also played a pivotal role in advancing Climb’s growth strategy and helping drive our financial due diligence for five accretive acquisitions since 2020. Shortly after Matt’s appointment, we announced the promotion of two leaders who have played a pivotal role also in driving Climb’s growth and success.

First, Kim Stevens has been pointed to our Chief Marketing Officer. Kim’s proven track record of his success and commitment to excellence is a testament to our talent and dedication as we nurture within Climb. Next, Charles Bass was promoted to our newly created role of Chief Alliance Officer for Climb Global Solutions. Charles has taken on the global responsibility in identifying, vetting and onboarding our most innovative technologies in the marketplace into our ecosystem positioning Climb as a trusted partner for growth. I’m proud of the achievements of these two individuals and I look forward to seeing the impact that they will continue to make in their new roles.

At the January, we announced the appointment of John McCarthy as our new Chairman of the Board. John has over thirty years of experience in the technology

Vincent Colicco, Analyst, Barrington Research: sector

Dale Foster, CEO, Climb Global Solutions: of leadership. He is also a Board member, Board Director of Climb since 2019 and currently serves as the Compensation Committee Chair. We’re proud to have John lead our Board and Climb’s executive team looks forward to working with him to drive our strategic vision forward. We’re excited about the year ahead and while we have some holes to fill due to the public exit of Citrix leaving the channel, we view this as an opportunity to strengthen our mix and further diversify our offerings. Looking ahead, we will continue building on a sales foundation to generate strong organic growth, while further improving operating leverage.

We will continue to also evaluate M and A opportunities that will enhance our services and solutions offerings, as well as expand our geographic footprint in The U. S. And overseas. These initiatives coupled with our demonstrative track record of execution and robust balance sheet will enable us to deliver on organic and onorganic initiatives in 2025. With that, I will turn the call over to our CFO, Matt Sullivan, to take you through the financial results.

Matthew Sullivan, CFO, Climb Global Solutions: Thank you, Dale, and good morning, everyone. I’m pleased to address you for the first time as Climb’s new CFO. 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. As reported in our earnings press release, gross billings increased 52% to $6.00 $5,000,000 compared to $397,000,000 in the year ago quarter. Distribution segment gross billings increased 57% to $582,000,000 and Solutions segment gross billings decreased 9% to $23,000,000 Net sales in the fourth quarter of twenty twenty four increased 51% to $161,800,000 compared to $106,800,000 which primarily reflects organic growth from new and existing vendors as well as contribution from our acquisition of DSS in July of last year.

Gross profit in the fourth quarter increased 48% to $31,200,000 compared to $21,100,000 dollars Again, the increase was driven by organic growth from new and existing vendors in both North America and Europe as well as the contributions from DSS. Gross profit as a percentage of gross billings was 5.2% compared to 5.3% in the year ago period. SG and A expenses in the fourth quarter were $17,100,000 compared to $12,400,000 for the same period in 2023. SG and A from DSS accounted for $2,200,000 of the increase. SG and A as a percentage of gross billings decreased to 2.8% compared to 3.1% in the year ago period.

Net income in the fourth quarter of twenty twenty four increased 33% to $7,000,000 or $1.52 per diluted share compared to $5,200,000 or $1.15 per diluted share for the comparable period in 2023. As referenced in our press release, net income was impacted by a $2,500,000 charge related to a change in fair value of acquisition contingent consideration associated with Spinnaker Limited. Adjusted net income increased 87% to $10,300,000 or $2.26 per diluted share compared to $5,500,000 or $1.21 per diluted share for the year ago period. Adjusted EBITDA in the fourth quarter increased 75% to $16,100,000 compared to $9,200,000 in the prior year quarter. The increase was driven by the aforementioned organic growth from both new and existing vendors as well as contribution from DSS.

Adjusted EBITDA as a percentage of gross profit or effective margin increased seven eighty basis points to 51.5% compared to 43.7% in the year ago period. Turning to our balance sheet, cash and cash equivalents were $29,800,000 as of 12/31/2024, compared to $36,300,000 on 12/31/2023, while working capital decreased by about $9,300,000 during this period. The decrease in cash was primarily attributed to the cash paid at closing for acquisition of DSS of twenty point four million dollars as well as the timing of receivable collections and vendor payments. As of 12/31/2024, we had $800,000 of outstanding debt with no borrowings outstanding under our $50,000,000 revolving credit facility with JPMorgan Chase. On 02/28/2025, our Board of Directors declared a quarterly dividend of $0.17 per share of our common stock to shareholders of record as of 03/17/2025 and payable on 03/21/2025.

Looking ahead, our strong liquidity position continues to provide us with the flexibility to pursue both organic and inorganic growth opportunities, while expanding our relationships with vendors and customers worldwide. We will continue to be active on the M and A front as we evaluate accretive targets in both North America and overseas. With a disciplined approach to expansion and a focus on execution, we believe we are well positioned to deliver another year of growth and enhanced profitability in 2025. This concludes our prepared remarks. We will now open it up for questions from those participating in the call.

Operator, back to you.

Conference Call Operator: Thank you. You. And we will take our first question from Vincent Colicco with Barrington Research. Please go ahead.

Vincent Colicco, Analyst, Barrington Research: Yes. Good morning, Dale. Nice job in the quarter.

Dale Foster, CEO, Climb Global Solutions: Thanks, Vince.

Vincent Colicco, Analyst, Barrington Research: You’re welcome. Did you have any large unexpected deals in the quarter because it was quite a result?

Dale Foster, CEO, Climb Global Solutions: Yes. So, and we’ve said this, I think it’s coming up on a couple of years, it goes back quite a ways Vince. But we acquired Spinnaker, we acquired the vast vendor relationship with that. And it’s been if you listen to our strategic plans as far as technology starting here and taking it to really Western Europe, that’s our plan. This is a vendor that came back to The U.

S. So we started with a relationship there and then to The U. S. So we have some good things for 2025. But yes, we have some lumpy quarters.

We had a large VAT deal that came in the end of Q4 that helped the numbers. But we also just looking outside of that just had a great growth across all of our divisions in Q4. And Q4 is typically our larger one. So if you’re selling software applications in SaaS and you keep hammering in that same quarter that’s big, you should get that recurring revenue the next year. So we’re taking advantage of that as well.

Vincent Colicco, Analyst, Barrington Research: Did security continue to lead growth amongst your segments?

Dale Foster, CEO, Climb Global Solutions: It did. It did. It is still making up between fifty five percent and sixty five percent of our portfolio. And a lot of vendors put this word security and now we’re seeing new money flow into our vendors from their investors to build out AI components just to make their products better. So we’ll see that really in 2025.

We’ll talk about that as the announcements come out.

Vincent Colicco, Analyst, Barrington Research: And how did DSS perform versus your expectations?

Dale Foster, CEO, Climb Global Solutions: They do good. I mean Q4 is not their biggest quarter because they’re heavy into the education market. So it’s really Q, they’re at the end of Q2 and Q3. And then but they were up year over year, but nothing it isn’t one of the bigger quarters. They kick off as you’re going into the buying seasons of the state and local governments.

Vincent Colicco, Analyst, Barrington Research: Of the number of vendors, I’m forgetting the number offhand that you added for the year, were all of them productive? How would you characterize that?

Dale Foster, CEO, Climb Global Solutions: Yes. So, like I say, it’s kissing a lot of frogs and vetting as much as you can upfront before you sign a vendor. Because when you think a lot of the hard work is building that relationship, getting the vendors say, hey, this is a good fit for us. As soon as we say, yes, that’s when all the energy gets consumed inside the Climb because we have to onboard them, it goes from ops to finance before it even goes back to the sales team to start selling. So if I look at the of those 13 that we signed, they’re all up.

Then again, we’re still pushing the ones that we signed could be quarters ago or years ago and we’re pushing them to our Climb Elevate team because they didn’t perform. We’ll still transact with them, but we just highlighted a couple in Q4 that we’ve already some of the share shift that starts off as they’re moving from a direct to an indirect model. And I know just on scalability alone, we picked up probably $2,000,000 or $3,000,000 as we’ve launched that brand. So I’d have to go into individual ones, but we don’t we try to get to a fast no and we also try to get to a quick move if they don’t launch or run at the rate that we believe that they were when we signed them.

Vincent Colicco, Analyst, Barrington Research: Okay. I’ll go back in the queue. Thanks.

Dale Foster, CEO, Climb Global Solutions: Thanks, Vince.

Conference Call Operator: Thank you. And it appears that we have no further questions at this time. I will now turn the program back to Dale for any additional or closing remarks.

Dale Foster, CEO, Climb Global Solutions: Thank you, operator. And again, thank you to our shareholders supporting us in 2024. Just a great year for Climb. Also, I’d never want to miss thanking our teams. We have our sales kickoffs at the beginning of the year.

We did one in North America, which we usually do. We did our first ever one in Europe for EMEA teams to finally get them together from all the different countries. We pulled into Bristol, UK and had a great couple of days of planning and celebrating. But I want to thank our team members, tremendous job in 2024. We have our work cut out for us in 2025, but just we’re in a good market space as we’ve always talked about.

So thank you again. Thank you, operator.

Conference Call Operator: Thank you. This does conclude today’s presentation. Thank you for your participation. You may disconnect at any time.

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