Based on the provided financial report articles, the title of the article is: "Form 10-K for Climb Global Solutions, Inc. (0000945983) - Filing Date: February 24, 2025" This title indicates that the article is a Form 10-K filing with the Securities and Exchange Commission (SEC) for Climb Global Solutions, Inc. (0000945983), which is a publicly traded company. The filing date is February 24, 2025.
Climb Global Solutions, Inc. (the “Company”) reported financial results for the fiscal year ended December 31, 2024. The Company’s revenue increased by 15.0% to $15.0 million, driven by growth in its Distribution and Solutions segments. Net income was $683,198, or $0.68 per diluted share, compared to a net loss of $711,052, or $0.68 per diluted share, in the prior year. The Company’s cash and cash equivalents decreased to $4.6 million, primarily due to the use of funds for working capital and capital expenditures. The Company’s total assets increased to $10.0 million, primarily due to the acquisition of Douglas Stewart Software Services LLC and Data Solutions Holdings Limited. The Company’s total liabilities increased to $5.3 million, primarily due to the increase in accounts payable and accrued expenses. The Company’s stock-based compensation expense was $0.01 per share, and the Company had 10,000,000 shares of common stock outstanding as of December 31, 2024.
Overview
Our Company is a value added IT distribution and solutions company, primarily selling software and other third-party IT products and services through two reportable operating segments. Through our “Distribution” segment we sell products and services to corporate resellers, VARs, consultants and systems integrators worldwide, who in turn sell these products to end users. Through our “Solutions” segment we act as a cloud solutions provider and value-added reseller, selling computer software and hardware developed by others and provide technical services directly to end user customers worldwide. We offer an extensive line of products from leading software vendors and tools for virtualization/cloud computing, security, networking, storage and infrastructure management, application lifecycle management and other technically sophisticated domains as well as computer hardware.
Factors Influencing Our Financial Results
We derive most of our net sales though the sale of third-party software licenses, maintenance and service agreements. Our sales are impacted by the number of product lines we distribute, sales penetration of those products into the reseller channel, product lifecycle competition, and demand characteristics. Our sales are also impacted by external factors such as levels of IT spending and customer demand. We sell in a competitive environment where gross product margins have historically declined due to competition and changes in product mix. We grant discounts, allowances, and rebates to certain customers, which may vary from period to period. We have been able to implement cost efficiencies to operate profitably as margins have declined.
Gross profit is calculated as net sales less cost of sales. Selling, general and administrative expenses are mainly employee-related costs, facility costs, IT infrastructure, and professional fees. Our sales, gross profit and results have fluctuated and are expected to continue to fluctuate quarterly due to factors like industry conditions, product demand, merchandise returns, and changes in our product offerings.
Historically, we have returned value to investors through quarterly dividends and share repurchases. The technology, distribution and services sectors are subject to substantial volatility, and our stock price can be impacted by our operating performance as well as broader market conditions. We have not been adversely affected by inflation due to the nature of the IT industry.
Financial Overview
Net sales increased 32% to $465.6 million in 2024 compared to 2023. Gross profit increased 42% to $91.1 million. SG&A expenses increased 27% to $56.5 million. Acquisition related costs were $2.3 million in 2024 compared to $0.6 million in 2023. Amortization and depreciation expense increased $1.5 million to $4.3 million. Net income increased 51% to $18.6 million, and earnings per diluted share increased 49% to $4.06.
Critical Accounting Policies and Estimates
The Company’s financial statements are prepared in accordance with US GAAP. Key areas requiring judgment and estimation include:
Revenue Recognition: The Company evaluates performance obligations, allocation of sales prices, and whether maintenance is distinct from software licenses.
Allowances for Expected Credit Losses: The Company maintains allowances based on customer payment history, market conditions, and future forecasts.
Business Combinations: The Company applies ASC 805 to evaluate acquisitions and determine fair values of assets and liabilities, including intangibles and contingent consideration.
Goodwill: The Company tests goodwill for impairment annually or when events indicate potential impairment, using qualitative or quantitative assessments.
Intangible Assets: The Company reviews intangible assets for impairment when events indicate the carrying amount may not be recoverable.
Income Taxes: The Company considers future taxable income and tax planning strategies in assessing the need for valuation allowances on deferred tax assets.
Foreign Exchange: The Company may enter into foreign exchange contracts to hedge currency exposures, with changes in fair value recorded in earnings.
Recently Issued Accounting Pronouncements
The Company is evaluating the impact of recent FASB updates related to expense disaggregation disclosures, income tax disclosures, and segment reporting.
Results of Operations
The Company’s net sales, gross profit, and net income all increased significantly in 2024 compared to 2023, driven by organic growth as well as the impact of recent acquisitions.
Key Business Metrics
The Company uses GAAP and non-GAAP financial measures to evaluate its performance, including net income, adjusted EBITDA, and effective margin (adjusted EBITDA as a % of gross profit). Adjusted EBITDA increased 61% to $39.6 million, and effective margin improved to 43.5% from 38.3%.
The Company also tracks operational metrics like gross billings, which increased 42% to $1.79 billion, and gross billings margin, which remained flat at 5.1%.
Year Ended December 31, 2024 Compared to 2023
The Company completed two acquisitions in 2024 and 2023 that contributed to the strong financial results. Net sales increased 32% driven by organic growth and the acquisitions. Gross profit increased 42%, outpacing the revenue growth, leading to a 520 basis point improvement in effective margin.
SG&A expenses increased 27%, primarily due to higher payroll and related costs from the acquisitions. Acquisition-related costs also increased. The Company recorded a $3.6 million charge for changes in the fair value of contingent consideration related to prior acquisitions.
The effective tax rate declined slightly to 25.6% in 2024 from 26.6% in 2023.
Liquidity and Capital Resources
The Company’s cash balance decreased $6.5 million to $29.8 million at the end of 2024, primarily due to $20.9 million used for acquisitions and $13.0 million in financing activities, offset by $33.7 million in cash provided by operations.
The Company has a $50 million revolving credit facility and a $2.1 million term loan, with no amounts outstanding on the revolver as of December 31, 2024. Management believes the Company has sufficient liquidity to fund operations and growth initiatives for the foreseeable future.
The Company continues to return capital to shareholders through quarterly dividends and share repurchases, with $3.0 million in dividends and $1.6 million in share buybacks in 2024.
