What changed in this filing

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Item 1. Financial Statements

2024-08-07 compared with 2024-05-02 · 501 added, 75 removed, 380 unchanged (60% of the section changed)

6 unchanged sentences

Cash and cash equivalents

$ 48,363 $ 36,295

Accounts receivable, net of allowance for doubtful accounts of $ 626 and $ 709 , respectively

181,010 222,269

Inventory, net

1 unchanged sentence

Total current assets

236,797 269,060

Equipment and leasehold improvements, net

26,893 27,182

Other intangibles, net

25,182 26,930

Right-of-use assets, net

1 unchanged sentence

Deferred income tax assets

$ 302,770 $ 335,098

LIABILITIES AND STOCKHOLDERS’ EQUITY

1 unchanged sentence

Accounts payable and accrued expenses

$ 214,584 $ 249,648

Lease liability, current portion

1 unchanged sentence

Total current liabilities

215,602 250,638

Lease liability, net of current portion

3 unchanged sentences

Total liabilities

222,940 260,328

Commitments and contingencies

5 unchanged sentences

Additional paid-in capital

35,738 34,647

Treasury stock, at cost, 672,973 and 711,052 shares, respectively

( 12,462 ) ( 12,623 )

Retained earnings

57,862 53,215

Accumulated other comprehensive loss

( 1,361 ) ( 522 )

Total stockholders’ equity

79,830 74,770

Total liabilities and stockholders' equity

$ 302,770 $ 335,098

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(Amounts in thousands, except per share data)

Six months ended

Three months ended

16 unchanged sentences

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Comprehensive Income

(Amounts in thousands)

Six months ended

Three months ended

11 unchanged sentences

Balance at January 1, 2024

5,284,500 $ 53 $ 34,647 711,052 $ ( 12,623 ) $ 53,215 $ ( 522 ) $ 74,770

— — — — — 2,731 — 2,731

Translation adjustment

— — — — — — ( 718 ) ( 718 )

Dividends paid (per common share $ 0.17 )

— — — — — ( 756 ) — ( 756 )

Share-based compensation expense

— — 854 — — — — 854

Restricted stock grants (net of forfeitures)

— — ( 331 ) ( 18,938 ) 331 — — —

Treasury shares repurchased

— — — 7,255 ( 432 ) — — ( 432 )

Balance at March 31, 2024

5,284,500 $ 53 $ 35,170 699,369 $ ( 12,724 ) $ 55,190 $ ( 1,240 ) $ 76,449

— — — — — 3,430 — 3,430

Translation adjustment

— — — — — — ( 121 ) ( 121 )

Dividends paid (per common share $ 0.17 )

— — — — — ( 758 ) — ( 758 )

Share-based compensation expense

— — 1,113 — — — — 1,113

Restricted stock grants (net of forfeitures)

— — ( 545 ) ( 31,213 ) 545 — — —

Treasury shares repurchased

— — — 4,817 ( 283 ) — — ( 283 )

Balance at June 30, 2024

5,284,500 $ 53 $ 35,738 672,973 $ ( 12,462 ) $ 57,862 $ ( 1,361 ) $ 79,830

Comprehensive

1 unchanged sentence

Balance at January 1, 2023

5,284,500 $ 53 $ 32,715 806,068 $ ( 13,230 ) $ 43,904 $ ( 2,868 ) $ 60,574

— — — — — 3,324 — 3,324

Translation adjustment

— — — — — — 613 613

Dividends paid (per common share $ 0.17 )

— — — — — ( 749 ) — ( 749 )

Share-based compensation expense

— — 546 — — — — 546

Restricted stock grants (net of forfeitures)

— — ( 765 ) ( 43,824 ) 765 — — —

Treasury shares repurchased

— — — 5,604 ( 214 ) — — ( 214 )

Balance at March 31, 2023

5,284,500 $ 53 $ 32,496 767,848 $ ( 12,679 ) $ 46,479 $ ( 2,255 ) $ 64,094

— — — — — 1,381 — 1,381

Translation adjustment

— — — — — — 1,004 1,004

Dividends paid (per common share $ 0.17 )

— — — — — ( 754 ) — ( 754 )

Share-based compensation expense

— — 2,238 — — — — 2,238

Restricted stock grants (net of forfeitures)

— — ( 1,258 ) ( 71,965 ) 1,258 — — —

Treasury shares repurchased

— — — 19,703 ( 981 ) — — ( 981 )

Balance at June 30, 2023

5,284,500 $ 53 $ 33,476 715,586 $ ( 12,402 ) $ 47,106 $ ( 1,251 ) $ 66,982

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(Amounts in thousands)

Three months ended

Six months ended

Cash flows from operating activities

23 unchanged sentences

Dividends paid

Contingent consideration paid

Payments of deferred financing costs

Net cash and cash equivalents used in financing activities

10 unchanged sentences

Notes to Condensed Consolidated Financial Statements

March 31, 2024

June 30, 2024

(Amounts in tables in thousands, except share and per share amounts)

17 unchanged sentences

Certain reclassifications and immaterial revisions have been made to the prior period financial statements to conform to the current-year presentation.

Recently Issued Accounting Standards:

Recently Issued Accounting Standard s:

In November 2023, the FASB issued Accounting Standards Update 2023 - 07 “ Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures”.

The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

Improvements to Reportable Segment Disclosures ." The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The Company adopted the update in the first quarter of 2024 and it did not have a material effect on our consolidated financial statements.

3 unchanged sentences

Foreign currency transaction gains and losses are recorded as income or expenses as amounts are settled.

The net sales from our foreign operations for the three months ended March 31, 2024 and 2023 were $ 28.2 million and $ 24.6 million, respectively.

The net sales from our foreign operations for the three months ended June 30, 2024 and 202 3 were $ 22.9 million a nd $ 16.5 million, respectively.

The net sales from our foreign operations for the six months ended June 30, 2024 and 2023 were $ 51.1 mil lion and $ 41.1 million, respectively.

Comprehensive Income:

27 unchanged sentences

This involves considering if the software provides its original intended functionality to the customer without the updates, if the customer would ascribe a higher value to the upgrades versus the up-front deliverable, if the customer would expect frequent intelligence updates to the software (such as updates that maintain the original functionality), and if the customer chooses to not delay or always install upgrades.

If the Company determines that the accompanying third-party delivered software assurance is critical or essential to the core functionality of the software license,

the software license and the accompanying third-party delivered software assurance are recognized as a single performance obligation.

If the Company determines that the accompanying third -party delivered software assurance is critical or essential to the core functionality of the software license, the software license and the accompanying third -party delivered software assurance are recognized as a single performance obligation.

The value of the product is primarily the accompanying support delivered by a third party and therefore the Company is acting as an agent in these transactions and recognizes them on a net basis at the point the associated software license is delivered to the customer.

13 unchanged sentences

The purchase consideration includes approximately $ 2.3 million fair value for potential earn-out consideration if certain targets are achieved, payable in cash.

The earn-out liability is included in current liabilities as of March 31, 2024 and December 31, 2023.

The earn-out liability is included in current liabilities as of June 30, 2024 and December 31, 2023 .

There were no material changes in fair value since the acquisition date.

2 unchanged sentences

In connection with the acquisition of Data Solutions on October 6, 2023, the Company acquired an invoice discounting facility (“IDF”) that is with recourse to the Company (See Note 11 – Credit Facilities).

The balance outstanding under the IDF at March 31, 2024 was zero compared to $ 4.3 million at December 31, 2023, which is included in accounts payable and accrued expenses on the Consolidated Balance Sheets.

The balance outstanding under the IDF at June 30, 2024 was zero, as the Company terminated the IDF during the period, compared to $ 4.3 million at December 31, 2023 , which is included in accounts payable and accrued expenses on the Consolidated Balance Sheets.

Goodwill and Other Intangible Assets:

The following table summarizes the changes in the carrying amount of goodwill for the three months ended March 31, 2024:

Balance January 1, 2023

Goodwill acquired

Translation adjustments

The following table summarizes the changes in the carrying amount of goodwill for the six months ended June 30, 2024 :

Balance December 31, 2023

$ 18,658 $ 8,524 $ 27,182

Translation adjustments

Balance March 31, 2024

( 232 ) ( 57 ) ( 289 )

Balance June 30, 2024

$ 18,426 $ 8,467 $ 26,893

Information related to the Company’s other intangibles, net is as follows:

As of March 31, 2024

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

As of June 30, 2024

Customer and vendor relationships

$ 30,615 $ 5,801 $ 24,814

$ 31,101 $ 5,919 $ 25,182

As of December 31, 2023

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Customer and vendor relationships

$ 30,968 $ 4,424 $ 26,544

$ 31,457 $ 4,527 $ 26,930

Customer relationships are amortized over thirteen years.

1 unchanged sentence

Trade name is amortized over fifteen years.

During the three months ended March 31, 2024 and 2023, the Company recognized total amortization expense for other intangibles, net of $ 0.7 million and $ 0.5 million, respectively.

Estimated future amortization expense of the Company’s other intangibles, net as of March 31, 2024 is as follows:

2024 (excluding the three months ended March 31, 2024)

During the three months ended June 30, 2024 and 2023 , the Company recognized total amortization expense for other intangib les, net of $ 0.7 million and $ 0.5 million, respectively.

During the six months ended June 30, 2024 and 2023, the Company recognized total amortization expense for other intangibles, net of $ 1.4 million and $ 1.0 million, respectively.

Estimated future amortization expense of the Company’s other intangibles, net as of June 30, 2024 is as follows:

2024 (excluding the six months ended June 30, 2024)

Right-of-use Asset and Lease Liability:

8 unchanged sentences

Information related to the Company’s ROU assets and related lease liabilities were as follows:

Three months ended

Six months ended

Cash paid for operating lease liabilities

Right-of-use assets obtained in exchange for new operating lease obligations

Weighted-average remaining lease term

Weighted-average remaining lease term (years)

Weighted-average discount rate

Maturities of lease liabilities as of March 31, 2024 were as follows:

2024 (excluding the three months ended March 31, 2024)

Maturities of lease liabilities as of June 30, 2024 were as follows:

2024 (excluding the six months ended June 30, 2024)

imputed interest

3 unchanged sentences

Total lease liabilities

The carrying amounts of financial instruments, including cash and cash equivalents, short-term accounts receivable, accounts payable and term loan approximated fair value at March 31, 2024 and December 31, 2023 because of the relative short maturity of these instruments.

The carrying amounts of financial instruments, including cash and cash equivalents, short-term accounts receivable, accounts payable and term loan approximated fair value at June 30, 2024 and December 31, 2023 because of the relative short maturity of these instruments.

The Company’s accounts receivable long-term are discounted to their present value at prevailing market rates at the time of sale.

1 unchanged sentence

Equipment and leasehold improvements consist of the following:

$ 3,436 $ 3,195

Capitalized software

Leasehold improvements

15,536 13,179

Less accumulated depreciation and amortization

During the three months ended March 31, 2024 and 2023, the Company recorded depreciation and amortization expense of $ 0.9 million and $ 0.7 million, respectively.

( 4,582 ) ( 4,329 )

$ 10,954 $ 8,850

During the three months ended June 30, 2024 and 2023 , depreciation and amortization expense remained consistent at $ 0.1 million, respectively.

During the six months ended June 30, 2024 and 2023 , depreciation and amortization expense remained consistent at $ 0.3 million, respectively.

In limited circumstances, the Company offers extended payment terms to customers for periods of 12 to 36 months.

4 unchanged sentences

Total amount due from customer

$ 1,576 $ 1,637

unamortized discount

( 15 ) ( 12 )

current portion included in accounts receivable

The undiscounted cash flows to be received by the Company relating to these accounts receivable long-term is expected to be $ 0.8 million, $ 0.4 million, $ 0.4 million during each of the 12-month periods ending March 31, 2025, 2026, and 2027, respectively.

( 809 ) ( 828 )

The undiscounted cash flows to be received by the Company relating to these accounts receivable long-term is expected to be $ 0.8 million, $ 0.4 million, $ 0.4 million during each of the 12 -month periods ending June 30, 2025, 2026, and 2027, respectively.

Accounts payable and accrued expenses consist of the following:

Trade accounts payable

$ 194,310 $ 218,717

Accrued expenses

15,430 22,903

Other accounts payable and accrued expenses

$ 214,584 $ 249,648

Credit Facility:

4 unchanged sentences

All outstanding loans issued pursuant to the Credit Agreement become due and payable, on May 18, 2028.

There were no amounts outstanding under the Credit Agreement as of March 31, 2024.

There were no amounts outstanding under the Credit Agreement as of June 30, 2024 .

Outstanding Loans comprising (i) ABR Borrowings bear interest at the ABR plus the Applicable Rate, (ii) Term Benchmark Borrowings bear interest at the Adjusted Term SOFR Rate or the Adjusted EURIBOR Rate, as applicable, plus the Applicable Rate and (iii) RFR Loans bear interest at a rate per annum equal to the applicable Adjusted Daily Simple RFR plus the Applicable Rate.

8 unchanged sentences

(“First American”) pursuant to a Master Loan and Security Agreement.

The proceeds from the Term Loan was used to fund certain capital expenditures.

The borrowing under the Term Loan bears interest at a rate of 3.73 % per annum and is being repaid over forty-eight month ly installments of principal and interest through April 2026.

At March 31, 2024 and December 31, 2023, the Company had $ 1.2 million and $ 1.3 million outstanding under the Term Loan, respectively.

At March 31, 2024, future principal payments under the Term Loan are as follows:

2024 (excluding the three months ended March 31, 2024)

The proceeds from the Term Loan were used to fund certain capital expenditures.

The borrowing under the Term Loan bears interest at a rate of 3.73 % per annum and is being repaid over forty-eight monthly installments of principal and interest through April 2026.

At June 30, 2024 and December 31, 2023 , the Company had $ 1.0 million an d $ 1.3 million outstanding under the Term Loan, respectively.

At June 30, 2024 , future principal payments under the Term Loan are as follows:

2024 (excluding the six months ended June 30, 2024)

In connection with the acquisition of Data Solutions (See Note 6– Acquisition), the Company acquired an IDF that is with recourse to the Company.

Data Solutions had previously entered into the IDF with AIB Commercial Finance Limited (“AIB”) pursuant to a Debt Purchase Agreement.

The proceeds from the IDF will be used for working capital needs of Data Solutions.

Borrowings under the IDF are based on accounts receivable up to 80 % of the outstanding accounts receivable balance.

The Company subsequently terminated the IDF during the quarter ended June 30, 2024.

The proceeds from the IDF were used for working capital needs of Data Solutions.

Borrowings under the IDF were based on accounts receivable up to 80 % of the outstanding accounts receivable balance.

The discount rate under the IDF is equal to 2.5 % above AIB’s applicable lending rates that vary based on the currency of the accounts receivable.

At March 31, 2024 and December 31, 2023, the outstanding balance under the IDF at was zero and $ 4.3 million, respectively, which is included in accounts payable and accrued expenses on the Consolidated Balance Sheet.

The balance outstanding under the IDF at June 30, 2024 was zero , as the Company terminated the IDF during the period, compared to $ 4.3 million at December 31, 2023 , which is included in accounts payable and accrued expenses on the Consolidated Balance Sheets.

Earnings Per Share:

5 unchanged sentences

A reconciliation of the numerators and denominators of the basic and diluted per share computations follows:

Six months ended

Three months ended

6 unchanged sentences

Major Customers and Vendors:

The Company had two major vendors that accounted for 16 % and 10 % of total purchases during the three months ended March 31, 2024, and 21 % and 10 %, respectively, of total purchases during the three months ended March 31, 2023.

The Company had two major customers that accounted for 20 % and 15 %, respectively, of its net sales during the three months ended March 31, 2024, and 19 % and 14 %, respectively, of its net sales during the three months ended March 31, 2023.

These same customers accounted for 16 % and 6 %, respectively, of total net accounts receivable as of March 31, 2024, and 15 % and 6 %, respectively, of total net accounts receivable as of December 31, 2023.

The Company had one major vendor that accounted fo r 10 % of total purchases during the three months ended June 30, 2024 , and 12 % of total purchases during the three months ended June 30, 2023 .

The Company ha d one m ajor vendor that accounted fo r 13 % o f total purchases during the six months ended June 30, 2024 , and 17 % of total purchases during the six months ended June 30, 2023 .

The Company had two major customers that accounted for 18% , respectively, of its net sales during the three months ended June 30, 2024 , and 22 % and 14 %, respectively, of its net sales during the three months ended June 30, 2023 .

The Company had two major customers that accounted for 19 % and 16 %, respectively, of its net sales during the six months ended June 30, 2024 , and 21 % and 14%, respectively, of its net sales during the six months ended June 30, 2023 .

These same customers accounted for 14 % and 10%, res pectively, of total net accounts receivable as of June 30, 2024 , and 15 % and 6%, respectively, of total net accounts receivable as of December 31, 2023 .

Income Taxes:

5 unchanged sentences

The 2021 Plan was approved by the Company’s stockholders at the 2021 Annual Meeting in June 2021.

The total number of shares of the Company’s common stock, par value $ 0.01 per share (“Common Stock”) initially available for award under the 2021 Plan was 500,000 shares.

As of March 31, 2024, the number of shares of Common Stock available for future award grants to employees, officers and directors under the 2021 Plan is 222,130 .

The tota l number of shares of the Company’s common stock, par value $ 0.01 per share (“Common Stock”) initially available for award under the 2021 Plan was 500,000 shares.

As of June 30, 2024 , the number of shares of Common Stock available for future award grants to employees, officers and directors under the 2021 Plan is 190,917 .

The 2012 Stock-Based Compensation Plan (the “2012 Plan”) authorized the grant of Stock Options, Stock Units, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Bonuses and other equity-based awards.

1 unchanged sentence

Immediately prior to the replacement of the 2012 Plan by the 2021 Plan, there were 352,158 shares of Common Stock available under the 2012 Plan.

The 2012 Plan has been replaced by the 2021 Plan and none of the remaining shares of

Common Stock authorized under the 2012 Plan will be transferred to or used under the 2021 Plan nor will any awards under the 2012 Plan that are forfeited increase the shares available for awards under the 2021 Plan.

As of March 31, 2024, the number of shares of Common Stock available under the 2012 Plan was zero .

During the three months ended March 31, 2024, the Company granted a total of 18,938 shares of Restricted Stock to officers and employees.

The 2012 Plan has been replaced by the 2021 Plan and none of the remaining shares of Common Stock authorized under the 2012 Plan will be transferred to or used under the 2021 Plan nor will any awards under the 2012 Plan that are forfeited increase the shares available for awards under the 2021 Plan.

As of June 30, 2024 , the number of shares of Common Stock available under the 2012 Plan was zero.

During the six months ended June 30, 2024 , the Company granted a total of 51,812 s hares of Restricted Stock to directors, officers and employees.

These shares of Restricted Stock vest immediately, over time in three equal installments or over time in sixteen equal quarterly installments.

During the three months ended March 31, 2023, the Company granted a total of 43,824 shares of Restricted Stock to officers.

These shares of Restricted Stock vest over time in sixteen equal quarterly installments.

A summary of nonvested shares of Restricted Stock awards outstanding under the 2012 and 2021 Plans as of March 31, 2024, and changes during the three months then ended is as follows:

During the six months ended June 30, 2024, a total of 1,661 shares of Restricted Stock were forfeited.

During the six months ended June 30, 2023 , the Company granted a total of 115,789 shares of Restricted Stock to officers and employees.

These shares of Restricted Stock vest immediately, over time in three equal installments or over time in sixteen equal quarterly installments.

A summary of nonvested shares of Restricted Stock awards outstanding under the 2012 and 2021 Plans as of June 30, 2024 , and changes during the six months then ended is as follows:

Average Grant

Nonvested shares at January 1, 2024

143,294 $ 36.48

Granted in 2024

Vested in 2024

( 50,305 ) 35.87

Forfeited in 2024

Nonvested shares at March 31, 2024

As of March 31, 2024, there is approximately $ 4.9 million of total unrecognized compensation costs related to nonvested share-based compensation arrangements.

The unrecognized compensation cost is expected to be recognized over a weighted-average period of 1.7 years.

During the three months ended March 31, 2024 and 2023, the Company recognized share-based compensation expense of $ 0.8 million and $ 0.5 million, respectively.

( 1,661 ) 42.58

Nonvested shares at June 30, 2024

143,140 $ 44.71

As of June 30, 2024 , there is approximately $ 5.9 million of total unrecognized compensation costs related to nonvested share-based compensation arrangements.

The unrecognized compensation cost is expected to be recognized over a weighted-average period of 2.3 y ears.

During the three months ended June 30, 2024 and 2023 , the Company recognized share-based compensation expense of $ 1.1 million and $ 2.2 million, respectively.

During the six months ended June 30, 2024 and 2023 , the Company recognized share-based compensation expense of $ 1.9 million and $ 2.7 million, respectively.

Segment Information:

10 unchanged sentences

The “Solutions” segment is a provider of cloud solutions and value-added reseller of software, hardware and services to customers worldwide.

the same products and services to similar clients and are considered together when the Company’s CODM decides how to allocate resources.

As permitted by FASB ASC Topic 280, the Company has utilized the aggregation criteria in combining its operations in Canada, Europe and the United Kingdom with the domestic segments as the international operations provide the same products and services to similar clients and are considered together when the Company’s CODM decides how to allocate resources.

Segment income is based on segment revenue less the respective segment’s cost of revenues as well as segment direct costs (including such items as payroll costs and payroll related costs, such as profit sharing, incentive awards and insurance) and excluding general and administrative expenses not attributed to an individual segment business unit.

2 unchanged sentences

The following segment reporting information of the Company is provided:

Six months ended

Three months ended

$ 174,663 $ 154,678 $ 87,842 $ 76,128

9,835 12,093 4,234 5,604

184,498 166,771 92,076 81,732

Gross Profit:

$ 29,898 $ 23,801 $ 15,683 $ 11,074

5,679 5,100 2,875 2,619

35,577 28,901 18,558 13,693

Direct Costs:

$ 14,912 $ 9,976 $ 7,535 $ 5,010

2,683 2,618 1,302 1,317

17,595 12,594 8,837 6,327

Segment Income Before Taxes:

$ 14,986 $ 13,825 $ 8,148 $ 6,064

2,996 2,482 1,573 1,302

Segment Income Before Taxes

17,982 16,307 9,721 7,366

General and administrative

$ 7,901 $ 9,212 $ 4,137 $ 5,240

Acquisition related costs

Depreciation and amortization expense

1,736 1,317 865 604

Interest, net

557 441 354 330

Foreign currency transaction loss

( 246 ) 40 ( 162 ) ( 4 )

Income before taxes

$ 8,064 $ 6,228 $ 4,442 $ 1,839

Excludes general corporate expenses including interest and foreign currency transaction loss

Selected Assets by Segment:

$ 200,974 $ 242,927

34,471 37,992

Segment Select Assets

235,445 280,919

Corporate Assets

Geographic areas and net sales mix related to operations for the three months ended March 31, 2024 and 2023 were as follows.

67,325 54,179

$ 302,770 $ 335,098

Geographic areas and net sales mix related to operations for the three and six months ended June 30, 2024 and 2023 were as follows.

Revenue is allocated to a geographic area based on the location of the sale, which is generally the customer’s country of domicile.

Six months ended

Three months ended

March 31, 2024

June 30, 2024

$ 130,450 $ 2,989 $ 133,439 $ 68,087 $ 1,081 $ 69,168

Europe and United Kingdom

32,642 6,284 38,926 14,357 2,877 17,234

11,571 562 12,133 5,398 276 5,674

Total net sales

$ 174,663 $ 9,835 $ 184,498 $ 87,842 $ 4,234 $ 92,076

Timing of Revenue Recognition

Transferred at a point in time where the Company is principal (1)

$ 151,467 $ 5,894 $ 157,361 $ 75,735 $ 2,336 $ 78,071

Transferred at a point in time where the Company is agent (2)

23,196 3,941 27,137 12,107 1,898 14,005

Total net sales

$ 174,663 $ 9,835 $ 184,498 $ 87,842 $ 4,234 $ 92,076

Six months ended

Three months ended

March 31, 2023

June 30, 2023

$ 119,387 $ 6,303 $ 125,690 $ 62,644 $ 2,637 $ 65,281

Europe and United Kingdom

22,550 5,089 27,639 7,134 2,589 9,723

12,741 701 13,442 6,350 378 6,728

Total net sales

$ 154,678 $ 12,093 $ 166,771 $ 76,128 $ 5,604 $ 81,732

Timing of Revenue Recognition

Transferred at a point in time where the Company is principal (1)

$ 136,439 $ 8,869 $ 145,308 $ 67,872 $ 4,036 $ 71,908

Transferred at a point in time where the Company is agent (2)

18,239 3,224 21,463 8,256 1,568 9,824

Total net sales

$ 154,678 $ 12,093 $ 166,771 $ 76,128 $ 5,604 $ 81,732

Includes net sales from third -party hardware and software products.

Includes net sales from third -party maintenance, software support and services.

Geographic identifiable assets related to operations as of March 31, 2024 and December 31, 2023 were as follows.

Geographic identifiable assets related to operations as of June 30, 2024 and December 31, 2023 were as follows.

Identifiable Assets by Geographic Areas

$ 155,976 $ 171,080

26,537 23,994

Europe and United Kingdom

120,257 140,024

$ 302,770 $ 335,098

Related Party Transactions:

The Company made sales to a customer where a family member of one of our executives has a minority ownership position.

During the three months ended March 31, 2024 and 2023, net sales to this customer totaled approximately $ 0.7 million and $ 0.5 million, respectively.

Amounts due from this customer as of March 31, 2024 and December 31, 2023 were approximately $ 0.5 million and less than $ 0.1 million, respectively, which were or are expected to be settled in cash subsequent to each period end.

The Company made sales to a customer where a family member of one of our executives had a minority ownership position.

The minority ownership position has been terminated as of June 30, 2024.

During the three months ended June 30, 2024 and 2023 , net sales to this customer totaled approximately zero and $ 0.5 million, respectively.

During the six months ended June 30, 2024 and 2023 , net sales to this customer totaled approximately $ 0.7 m illion and $ 1.0 million, respectively.

Amounts due from this customer as of June 30, 2024 and December 31, 2023 were approximat ely zero a nd less than $ 0.1 million, respectively, which was settled in cash subsequent to each period end.

Fair Value Measurements

7 unchanged sentences

The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques.

The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2024 and December 31, 2023, respectively, are as follows:

As of March 31, 2024

The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of June 30, 2024 and December 31, 2023 , respectively, are as follows:

As of June 30, 2024

Treasury bills

$ — $ — $ — $ —

Contingent earn-out

$ — $ — $ 3,959 $ 3,959

Total liabilities

$ — $ — $ 3,959 $ 3,959

As of December 31, 2023

Treasury bills

$ 5,096 $ — $ — $ 5,096

Contingent earn-out

$ — $ — $ 4,189 $ 4,189

Total liabilities

$ — $ — $ 4,189 $ 4,189

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

2 unchanged sentences

The Company’s investment in treasury bills are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as level 1 within the fair value hierarchy.

The Company’s contingent earn-out

liability is measured at fair value on a recurring basis and is classified as level 3 within the fair value hierarchy.

The Company’s contingent earn-out liability is measured at fair value on a recurring basis and is classified as level 3 within the fair value hierarchy.

During the fourth quarter of each year, the Company evaluates goodwill for impairment at the reporting unit level.

2 unchanged sentences

The following table presents the changes in the Company’s level 3 financial instruments measured at fair value on a recurring basis:

Balance January 1, 2023

Data Solutions acquisition - contingent earn-out

Translation adjustments

Balance December 31, 2023

Contingent earnout paid

Translation adjustments

Balance March 31, 2024

Balance June 30, 2024

There were no material changes in fair value since the respective acquisition dates associated with the contingent earn-outs.

Subsequent Events

On July 31, 2024, Climb Global Solutions DSS, LLC (“Buyer”), a wholly-owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) and purchased the entire share capital of Douglas Stewart Software & Services, LLC ("DSS"), a Florida limited liability company, for an aggregate purchase price of approximately $ 20.3 million (subject to certain adjustments) plus a potential post-closing earnout payment.

DSS distributes software to VARs and campus stores across North America in both the K- 12 and higher education markets.

The Purchase Agreement contains customary representations, warranties, covenants and indemnities.

The acquisition was funded utilizing cash from the Company’s balance sheet.

Due to the timing of the closing of the acquisition subsequent to the end of the reporting period, the acquisition is subject to post-closing adjustments and the purchase price allocation is not yet complete.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.

This following information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management ’ s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company ’ s Annual Report on Form 10-K filed with the SEC on for the fiscal year ended December 31, 2023.

In addition to historical information, the following discussion contains certain forward-looking information.

See “ Cautionary Note Regarding Forward-Looking Statements ” above for certain information concerning -forward-looking statements.

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, value added 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.

We market these products through creative marketing communications, including our web sites, local and on-line seminars, webinars, social media, direct e-mail, and printed materials.

We have subsidiaries in the United States, Canada, the Netherlands, the United Kingdom and Ireland, through which sales are made.

Factors Influencing Our Financial Results

We derive the majority of our net sales through the sale of third-party software licenses, maintenance and service agreements.

In our Distribution segment, sales are impacted by the number of product lines we distribute, and sales penetration of those products into the reseller channel, product lifecycle competition, and demand characteristics of the products which we are authorized to distribute.

In our Solutions segment sales are generally driven by sales force effectiveness and success in providing superior customer service and cloud solutions support, competitive pricing, and flexible payment solutions to our customers.

Our sales are also impacted by external factors such as levels of IT spending and customer demand for products we distribute.

We sell in a competitive environment where gross product margins have historically declined due to competition and changes in product mix towards products where no delivery of a physical product is required.

In addition, we grant discounts, allowances, and rebates to certain customers, which may vary from period to period, based on volume, payment terms and other criteria.

To date, we have been able to implement cost efficiencies such as the use of drop shipments, electronic ordering (EDI) and other capabilities to be able to operate our business profitably as gross margins have declined.

We evaluate the profitability of our business based on return on equity and effective margin.

Gross profit is calculated as net sales less cost of sales.

We record customer rebates, discounts and returns as a component of net sales and record vendor rebates, discounts and returns as a component of cost of sales.

Selling, general and administrative expenses are comprised mainly of employee salaries, commissions and other employee related expenses, facility costs, costs to maintain our IT infrastructure, public company compliance costs and professional fees.

We monitor our level of accounts payable, inventory turnover and accounts receivable turnover which are measures of how efficiently we utilize capital in our business.

The Company’s sales, gross profit and results of operations have fluctuated and are expected to continue to fluctuate on a quarterly basis as a result of a number of factors, including but not limited to:

the condition of the software industry in general, shifts in demand for software products, pricing, industry shipments of new software products or upgrades, fluctuations in merchandise returns, adverse weather conditions that affect response, distribution or shipping, shifts in the timing of holidays and changes in the Company’s product offerings.

The Company’s operating expenditures are based on sales forecasts.

If sales do not meet expectations in any given quarter, operating results may be materially adversely affected.

Dividend Policy and Share Repurchase Program.

Historically we have sought to return value to investors through the payment of quarterly dividends and share repurchases.

Total dividends paid and the dollar value of the shares repurchased were $0.8 million and $0.3 million, r espectively, during the three months ended June 30, 2024.

Total dividends paid and the dollar value of the shares repurchased were $0.8 million and $1.0 million, respectively, during the three months ended June 30, 2023.

The payment of future dividends and share repurchases is at the discretion of our Board of Directors and dependent on results of operations, projected capital requirements, applicable legal, tax and regulatory restrictions, and other factors the Board of Directors may find relevant.

Stock Volatility.

The technology, distribution and services sectors of the United States stock markets is subject to substantial volatility.

Numerous conditions which impact these sectors or the stock market in general or the Company in particular, whether or not such events relate to or reflect upon the Company’s operating performance, could adversely affect the market price of the Company’s Common Stock.

Furthermore, fluctuations in the Company’s operating results, announcements regarding litigation, the loss of a significant vendor or customer, increased competition, reduced vendor incentives and trade credit, higher operating expenses, and other developments, could have a significant impact on the market price of our Common Stock.

We have historically not been adversely affected by inflation, as abrupt changes in technology, rapid changes in customer preferences, short product life cycles and evolving industry standards within the IT industry have generally caused the prices of the products we sell to decline.

This requires us to sell new products and have growth in unit sales of existing products in order to increase our net sales.

We believe that most price increases could be passed on to our customers, as prices charged by us are not set by long-term contracts;

however, as a result of competitive pressure, there can be no assurance that the full effect of any such price increases could be passed on to our customers or cause a reduction in our customers spending.

Financial Overview

Net sales increased 13%, or $10.4 million, to $92.1 mi llion for the three months ended June 30, 2024 compared to $81.7 million for the same period in the prior year.

Gross pro fit increased 36%, or $4.9 million, to $18.6 milli on for the three months ended June 30, 2024, compared to $13.7 million for the same period in the prior year.

Selling, general and administrative (“SG&A”) expense s increased 12%, or $1.4 million, to $13.0 million for the three months ended June 30, 2024 compared to $11.6 million for the same period in the prior year.

Depreciation and amortization expen se increased 43%, or $0.3 million, to $0.9 m illion for the three months ended June 30, 2024 compared to $0.6 million for the same period in the prior year.

Net inco me increased 148%, or $2.0 million, to $3.4 million for the three months ended June 30, 2024 compared to $1.4 million for the same period in the prior year.

Diluted income per share increas ed 142%, or $0.44, to $0.75 for the three months ended June 30, 2024 compared to $0.31 for the same period in the prior year.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements that have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, intangible assets, income taxes, stock-based compensation, contingencies and litigation.

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates.

The Company believes the following critical accounting policies used in the preparation of its consolidated financial statements affect its more significant judgments and estimates.

The Company utilizes judgment regarding performance obligations inherent in the products for services it sells including, whether ongoing maintenance obligations performed by third party vendors are distinct from the related software licenses, and allocation of sales prices among distinct performance obligations.

These estimates require significant judgment to determine whether the software’s functionality is dependent on ongoing maintenance or if substantially all functionality is available in the original software download.

We also use judgment in the allocation of sales proceeds among performance obligations, utilizing observable data such as stand-alone selling prices, or market pricing for similar products and services.

Allowances for Expected Credit Losses

The Company maintains allowances for expected credit losses for estimated losses resulting from the inability of its customers to make required payments.

Management determines the estimate of the allowance for expected credit losses by considering a number of factors, including historical experience, aging of the accounts receivable, as well as current market conditions and future forecasts of our customers’ ability to make payments for goods and services.

At the time of sale, we record an estimate for sales returns based on historical experience, which is included in accounts payable and accrued expenses on the Consolidated Balance Sheets.

If actual sales returns are greater than estimated by management, additional expense may be incurred.

Business Combinations

We apply the provisions of ASC 805, Business Combinations (“ASC 805”), in accounting for our acquisitions.

ASC 805 requires that we evaluate whether a transaction pertains to an acquisition of assets, or to an acquisition of a business.

A business is defined as an integrated set of assets and activities that is capable of being conducted and managed for the purpose of providing a return to investors.

Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets and liabilities assumed on a relative fair value basis;

whereas the acquisition of a business requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at the acquisition date fair values.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.

Our valuation of acquired assets and assumed liabilities requires estimates, especially with respect to intangible assets that was derived using valuation techniques and models such as the income approach.

Such models require use of estimates including discount rates, and future expected revenue.

The approach to estimating an initial contingent consideration associated with the purchase price also uses similar unobservable factors such as projected cash flows over the term of the contingent earn-out period, discounted for the period over which the initial contingent consideration is measured and expected volatility.

Based upon these assumptions, the initial contingent consideration is then valued using a Monte Carlo simulation.

We have used third-party qualified specialists to assist management in determining the fair value of assets acquired and liabilities assumed.

This includes assistance with the determination of economic useful lives and valuation of identifiable intangibles.

We estimate the fair value based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from our estimates.

Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.

As a result, during the measurement period, which may be up to one year from the business acquisition date, we record certain adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

All acquisition-related costs are accounted for as expenses in the period in which they are incurred.

Contingent consideration is remeasured each reporting period using Level 3 inputs, and the change in fair value, including accretion for the passage of time, is recognized in acquisition related costs in the consolidated statement of earnings.

We test goodwill for impairment on an annual basis and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The Company performs an evaluation of goodwill, utilizing either a qualitative or quantitative impairment test.

The annual test for impairment is conducted as of October 1.

The Company’s reporting units included in the assessment of potential goodwill impairment are the same as its operating segments.

Goodwill is not amortized but is subject to periodic testing for impairment at the reporting unit level.

In a qualitative assessment, we assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill.

If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary.

If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform the quantitative goodwill impairment test.

We may also elect the unconditional option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test.

In the quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill.

If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired.

Conversely, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including net sales growth rates, gross profit margins, operating margins, discount rates and future market conditions, among others.

Any changes in the judgments, estimates or assumptions used could produce significantly different results.

Intangible Assets

Intangible assets with determinable lives are amortized on a straight-line basis over their respective estimated useful lives, which is determined based on their expected period of benefit.

Intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition.

If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value.

In addition, each quarter, the Company evaluates whether events and circumstances warrant a revision to the remaining estimated useful life of each of these intangible assets.

If the Company were to determine that a change to the remaining estimated useful life of an intangible asset was necessary, then the remaining carrying amount of the intangible asset would be amortized prospectively over that revised remaining useful life.

The Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance related to deferred tax assets.

In the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.

Share-Based Payments

Under the fair value recognition provision, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period.

We make certain assumptions in order to value and expense our various share-based payment awards.

In connection with our restricted stock programs we record the forfeitures when they occur.

We review our valuation assumptions periodically and, as a result, we may change our valuation assumptions used to value stock-based awards granted in future periods.

Such changes may lead to a significant change in the expense we recognize in connection with share-based payments.

Foreign Exchange

The Company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product.

In cases where the Company is not able to create a natural hedge by maintaining offsetting asset and liability amounts in the same currency, it may enter into foreign exchange contracts, typically in the form of forward purchase agreements, to facilitate the hedging of foreign currency exposures to mitigate the impact of changes in foreign currency exchange rates.

These contracts generally have terms of no more than two months.

The Company does not apply hedge accounting to these contracts and therefore the changes in fair value are recorded in earnings.

The Company does not enter into foreign exchange contracts for trading purposes and the risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the Company minimizes by limiting its counterparties to major financial institutions.

There were no contracts outstanding as of June 30, 2024.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update 2023-07 “ Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ” .

The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The Company adopted the update in the first quarter of 2024 and it did not have a material effect on our consolidated financial statements.

Results of Operations

The following table sets forth for the periods indicated certain financial information derived from the Company’s unaudited condensed consolidated statements of earnings expressed as a percentage of net sales.

This comparison of financial results is not necessarily indicative of future results:

Six months ended

Three months ended

Cost of sales

Selling, general and administrative expenses

Acquisition related costs

Depreciation and amortization expense

Income from operations

Income before income taxes

Income tax provision

Key Operating Metrics / Non-GAAP Financial Measures

Our management monitors several financial and non-financial measures and ratios on a regular basis in order to track the progress of our business.

We believe that the most important of these measures and ratios include net sales, adjusted gross billings, gross profit, adjusted EBITDA, gross profit as a percentage of adjusted gross billings and adjusted EBITDA as a percentage of gross profit.

We use a variety of operating and other information to evaluate the operating performance of our business, develop financial forecasts, make strategic decisions, and prepare and approve annual budgets.

These key indicators include financial information that is prepared in accordance with US GAAP and presented in our Consolidated Financial Statements as well as non-US GAAP performance measurement tools.

Six months ended

Three months ended

Adjusted gross billings (Non-GAAP)

Gross profit - Distribution

Gross profit - Solutions

Adjusted EBITDA (Non-GAAP)

Gross margin % - Adjusted gross billings (Non-GAAP)

Effective margin % - Adjusted EBITDA (Non-GAAP)

We consider gross profit growth and effective margin to be key metrics in evaluating our business.

During the three months ended June 30, 2024, gross prof it increased 36%, or $4.9 million, to $18.6 m illion compared to $13.7 million for the same period in the prior year while effec tive margin increased to 37.3% compared to 34.2% f or the same period in the prior year.

During the six months ended June 30, 2024, gross profit increased 23%, or $6.7 million, to $35.6 million compar ed to $28.9 million for the same period in the prior year while effective margi n decreased to 35.0% compared to 35.8% f or the same period in the prior year.

Reconciliations of Non-GAAP Financial Measures

Six months ended

Three months ended

Reconciliation of net sales to adjusted gross billings (Non-GAAP):

Costs of sales related to sales where the Company is an agent

Adjusted gross billings

We define adjusted gross billings as net sales in accordance with US GAAP, adjusted for the cost of sales related to sales where the Company is an agent.

We provided a reconciliation of adjusted gross billings to net sales, which is the most directly comparable US GAAP measure.

We use adjusted gross billings of product and services as a supplemental measure of our performance to gain insight into the volume of business generated by our business, and to analyze the changes to our accounts receivable and accounts payable.

Our use of adjusted gross billings of product and services as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under US GAAP.

In addition, other companies, including companies in our industry, might calculate adjusted gross billings of product and services or similarly titled measures differently, which may reduce their usefulness as comparative measures.

Six months ended

Three months ended

Net income reconciled to adjusted EBITDA (Non-GAAP):

Provision for income taxes

Depreciation and amortization

Interest expense

Share-based compensation

Acquisition related costs

Adjusted EBITDA

We define adjusted EBITDA, as net income, plus provision for income taxes, depreciation, amortization, share-based compensation, interest, and acquisition related costs.

We define effective margin as adjusted EBITDA as a percentage of gross profit.

We provided a reconciliation of adjusted EBITDA to net income, which is the most directly comparable US GAAP measure.

We use adjusted EBITDA as a supplemental measure of our performance to gain insight into our businesses profitability when compared to the prior year and our competitors.

Adjusted EBITDA is also a component to our financial covenants in our credit facility.

Our use of adjusted EBITDA has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under US GAAP.

In addition, other companies, including companies in our industry, might calculate adjusted EBITDA, or similarly titled measures differently, which may reduce their usefulness as comparative measures.

On October 6, 2023, we completed the acquisition of Data Solutions for an aggregate purchase price of approximately €15.0 million (equivalent to $15.9 million USD), subject to certain working capital and other adjustments, paid at closing plus a potential post-closing earn-out.

The operating results of Data Solutions are included in our operating results from the date of acquisition.

Operating results of Data Solutions are included in our Distribution segment.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Net Sales and Adjusted Gross Billings

Net sales for the three months ended June 30, 2024 incr eased 13%, or $10.4 million, to $92.1 m illion compared to $81.7 million for the same period in the prior year.

Adjusted gross billings for the thre e months ended June 30, 2024 increased 31%, or $85.1 million, to $359.8 million compared to $274.7 million for the same period in the prior year.

Net sales and adjusted gross billings increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of Data Solutions.

Adjusted gross billings increased at a greater rate than net sales due to differences in the product mix between the two periods.

During the three months ended June 30, 2024 , adjusted gross billings included a greater percentage of security, maintenance and cloud products, which are recorded net of related cost of sales, while during the three months ended June 30, 2023 , adjusted gross billings included a greater percentage of hardware and software products, which are recorded on a gross basis.

Distribution segment net sales for the three months ended June 30, 2024 i ncreased 15%, or $11.7 million, to $87.8 milli on compared to $76.1 million for the same period in the prior year.

Adjusted gross billings for the Distribution segm ent for the three months ended June 30, 2024 increased 33%, or $84.2 million, to $340.1 million compared to $255.8 million for the same period in the prior year.

Net sales increased at a lesser rate than adjusted gross billings increased due to the aforementioned differences in the product mix between the two periods.

Solutions segment net sales for the three months ended June 30, 2024, dec reased 24%, or $1.4 million, to $4.2 mill ion compared to $5.6 million for the same period in the prior year.

Adjusted gross billings for the Solutions segment for the three months ended June 30, 2024 incr eased 5%, or $0.9 million, to $19.8 m illion compared to $18.9 million for the same period in the prior ye ar.

Net sales decreased while adjusted gross billings increased due to the aforementioned differences in the product mix between the two periods.

During the three months ended June 30, 2024, the Company had two major customers that accounted fo r 18%, respectively, of our total net sales.

During the three months ended June 30, 2023, the Company had two m ajor customers that accounted for 22% and 14%, respectively, of our total net sales.

The Company had one m ajor vendor that accounted for 10% of total purchases during the three months ended June 30, 2024 and 12% of total purchases during the three months ended June 30, 2023.

Gross profit for the three months ended June 30, 2024 increased 36%, or $4.9 million, to $18.6 mi llion compared to $13.7 million for the same period in the prior year.

Gross profit increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of Data Solutions.

Distribution segment gross profit for the three months ended June 30, 2024 inc reased 42%, or $4.6 million, to $15.7 m i llion compared to $11.1 million for the same period in the prior year.

The increase in Distribution segment gross profit was due to the aforementioned organic growth from our existing vendor partnerships as well as the contribution from the acquisition of Data Solutions , partially offset by higher early pay discounts and other rebates and discounts offered to our customers as a percentage of adjusted gross billings.

Solutions segment gross profit for the three months ended June 30, 2024 inc reased 10%, or $0.3 million, to $2.9 million compared to $2.6 million for the same period in the prior ye ar.

This increase was driven by the aforementioned increase in adjusted gross billings compared to the same period in the prior year.

Customer rebates and discounts for the three months ended June 30, 2024 were $3.2 mi llion compared to $2.5 million for the same period in the prior year.

Customer rebates and discounts vary based on terms of rebate and early pay discount programs offered to customers and timing of payments ultimately received from our customers.

Vendor rebates and discounts for the three months ended June 30, 2024 were $1.6 m illion compared to $2.1 million for the same period in the prior year.

Vendor rebates are dependent on programs offered by our vendors and in some cases reaching certain volume targets set by our vendors or meeting certain early payment programs offered by our vendors.

The Company monitors vendor rebate levels, competitive pricing, and gross profit margins carefully.

Selling, General and Administrative Expenses

SG&A expenses for the three months ended June 30, 2024 increased 12%, or $1.4 million, to $13.0 million compared to $11.6 million for the same period in the prior year primarily due to the impact of the acquisition of Data Solutions.

SG&A expenses were 3.6% of adjusted gross billings for the three months ended June 30, 2024, compared to 4.2% for the same period in the prior year.

The Company expects that its SG&A expenses, as a percentage of adjusted gross billings, may vary depending on changes in sales volume, as well as the levels of continuing investments to drive future growth.

Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended June 30, 2024, inc reased 43%, or $0.3 million, to $0.9 mi llion compared to $0.6 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the Data Solutions acquisition.

Acquisition Related Costs

Acquisition related costs for the three months ended June 30, 2024 were $0.5 million, which were costs incurred in conjunction with the acquisition of Douglas Stewart Software & Services, LLC discussed below, compared to less than $0.1 million for the same period in the prior year.

For the three months ended June 30, 2024 and 2023, the Company recorded a provision for income taxes of $1.0 mill ion and $0.5 million, respectively.

The effective tax rate for the three months ended June 30, 2024 and 2023 was 22.8% and 2 4.9%, r espectively.

The change in effective tax rate for the three months ended June 30, 2024 compared to the same period in the prior year is a result of limitations on the deductibility of certain executive compensation amounts during the current period.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Net Sales and Adjusted Gross Billings

Net sales for the six months ended June 30, 2024 inc reased 11%, or $17.7 million, to $184.5 mil lion compared to $166.8 million for the same period in the prior year.

Adjusted gross billings for the six months ended June 30, 2024 increased 23%, or $133.7 million, to $715.1 m illion compared to $581.4 million for the same period in the prior year.

Net sales and adjusted gross billings increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of Data Solutions.

Adjusted gross billings increased at a greater rate than net sales due to differences in the product mix between the two periods and an unfavorable impact of foreign exchange rates.

During the six months ended June 30, 2024 , adjusted gross billings included a greater percentage of security, maintenance and cloud products, which are recorded net of related cost of sales, while during the six months ended June 30, 2023 , adjusted gross billings included a greater percentage of hardware and software products, which are recorded on a gross basis.

Distri bution segment net sales for the six months ended June 30, 2024 increased 13%, or $20.0 million, to $174.7 million compared to $154.7 million for the same period in the prior year.

Adjusted gross billings for the Distribution segment for the six months ended June 30, 2024 increased 24%, or $131.1 million, to $674.7 millio n compared to $543.6 million for the same period in the prior year.

Net sales increased at a lesser rate than adjusted gross billings due to the aforementioned differences in the product mix between the two period s.

Solutions segment net sales for the six months ended June 30, 2024, decreased 19%, or $2.3 million, to $9.8 millio n compared to $12.1 million for the same period in the prior year.

Adjusted gross billings for the Solutions segment for the six months ended June 30, 2024 i ncreased 7%, or $2.5 million, to $40.4 m illion compared to $37.9 million for the same period in the prior year.

Net sales decreased while adjusted gross billings increased due to the aforementioned differences in the product mix between the two periods.

During the six months ended June 30, 2024, the Company had two m ajor customers that accounted fo r 19% and 16%, respectively, of our total net sales.

During the six months ended June 30, 2023, the Company had two major customers that accounted for 21% and 14%, respectively, of our total net sales.

The Company had one major vendor that accounted for 13%, respectively, of total purchases during the six months ended June 30, 2024 and 17% of to tal purchases during the six months ended June 30, 2023.

Gross profit for the six months ended June 30, 2024 incr eased 23%, or $6.7 million, to $35.6 mi llion compared to $28.9 million for the same period in the prior year.

Gross profit increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of Data Solutions.

Distribution segment gross profit for the six months ended June 30, 2024 in creased 26%, or $6.1 million, to $29.9 mi llion compared to $23.8 million for the same period in the prior year.

The increase in Distribution segment gross profit was due to the aforementioned organic growth from our existing vendor partnerships as well as the contribution from the acquisition of Data Solutions, partially offset by higher early pay discounts and other rebates and discounts offered to our customers as a percentage of adjusted gross billings.

Solutions segment gross profit for the six months ended June 30, 2024 in creased 11%, or $0.6 million, to $5.7 mil lion compared to $5.1 million for the same period in the pri or year.

This increase was driven by the aforementioned increase in adjusted gross billings compared to the same period in the prior year.

Customer rebates and discounts for the six months ended June 30, 2024 were $6.6 mill ion compared to $6.4 million for the sam e period in the prior year.

Customer rebates and discounts vary based on terms of rebate and early pay discount programs offered to customers and timing of payments ultimately received from our customers.

Vendor rebates and discounts for the six months ended June 30, 2024 wer e $3.6 million compared to $3.8 million for the same period in the prior year.

Vendor rebates are dependent on programs offered by our vendors and in some cases reaching certain volume targets set by our vendors or meeting certain early payment programs offered by our vendors.

The Company monitors vendor rebate levels, competitive pricing, and gross profit margins carefully.

Selling, General and Administrative Expenses

SG&A expenses for the six months ended June 30, 2024 incre ased 17%, or 3.7 million, to $25.5 m illion compared to $21.8 million for the same period in the prior year, primarily due to the impact of the acquisition of Data Solutions.

SG&A expenses wer e 3.6% of adj usted gross billings for the six months ended June 30, 2024, compared to 3.7% for the same period in the prior year.

Depreciation and Amortization Expense

Depreciation and amortization expense for the six months ended June 30, 2024, increa sed 32%, or $0.4 million, to $1.7 mil lion compared to $1.3 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the Data Solutions acquisition.

Acquisition Related Costs

Acquisition related costs for the six months ended June 30, 2024 were $0.6 million, which were costs incurred in conjunction with the acquisition of Douglas Stewart Software & Services, LLC discussed below, compared to less than $0.1 million for the sa me period in the prior year.

For the six months ended June 30, 2024 and 2023, the Company recorded a provision for income taxes of $1.9 mi llion and $1.5 million, respectively.

The effective tax rate for the six months ended June 30, 2024 and 2023 wa s 23.6% an d 24.5%, respectively.

The change in the effective tax rate for the six months ended June 30, 2024 compared to the same period in the prior year is a result of limitations on the deductibility of certain executive compensation amounts during the current period.

Subsequent to June 30, 2024, on July 31, 2024, Climb Global Solutions DSS, LLC (“Buyer”), a wholly-owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) and purchased the entire share capital of Douglas Stewart Software & Services, LLC, a Florida limited liability company, for an aggregate purchase price of approximately $20.3 million (subject to certain adjustments) plus a potential post-closing earnout payment.

The Purchase Agreement contains customary representations, warranties, covenants and indemnities.

Liquidity and Capital Resources

Our cash and cash equivalents as of June 30, 2024 in creased 33%, or $12.1 million, to $48.4 million compared to $36.3 million as of December 31, 2023.

Net cash and cash equivalents provided by operating activities for the six months ended June 30, 2024 was $21.3 million, comprised primarily of changes in operating assets and liabilities o f $11.5 milli on and net income adjusted for non-cash item s of $9.8 million.

Net cash and cash equivalents used in investing activities during the six months ended June 30, 2024 consisted of $2.4 million purchases of fixed assets supporting our ongoing ERP project.

Net cash and cash equivalents used in financing activities during the six months ended June 30, 2024 w as $6.9 mill ion, comprised of dividend payments on our Common Stock of $1.5 million, purchases of treasury stock of $0.7 million, repayments of borrowings under term loan of $0.3 mil lion and repayments of borrowings under credit facil ities of $4.2 m illion.

Subsequent to June 30, 2024, the Company entered into the Purchase Agreement on July 31, 2024 to purchase Douglas Stewart Software & Services, LLC for an aggregate purchase price of approximately $20.3 million (subject to certain adjustments) plus a potential post-closing earnout payment.

On May 18, 2023, the Company entered into a revolving credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A.

(“JPM”), providing for a revolving credit facility of up to $50.0 million, including the issuance of letters of credit and swingline loans not to exceed $2.5 million and $5.0 million, respectively, at any time outstanding.

In addition, subject to certain conditions enumerated in the Credit Agreement, the Company has the right to increase the revolving credit facility by a total amount not to exceed $20.0 million.

The proceeds of the revolving loans, letters of credit and swingline loans under the Credit Agreement may be used for working capital needs, general corporate purposes and for acquisitions permitted by the terms of the Credit Agreement.

All outstanding loans issued pursuant to the Credit Agreement become due and payable, on May 18, 2028.

There were no amounts outstanding under the Credit Agreement as of June 30, 2024.

On April 8, 2022, the Company entered into a $2.1 million term loan (the “Term Loan”) with First American Commercial Bancorp, Inc.

(“First American”) pursuant to a Master Loan and Security Agreement.

The proceeds from the Term Loan was used to fund certain capital expenditures.

The borrowing under the Term Loan bears interest at a rate of 3.73% per annum and is being repaid over forty-eight monthly installments of principal and interest through April 2026.

As of June 30, 2024, the Company had $ 1.0 million outstanding under the Term Loan.

In connection with the acquisition of Data Solutions, the Company acquired an invoice discounting facility (“IDF”) that was with recourse to the Company.

Data Solutions had previously entered into the IDF with AIB Commercial Finance Limited (“AIB”) pursuant to a Debt Purchase Agreement.

The proceeds from the IDF were used for working capital needs of Data Solutions.

Borrowings under the IDF are based on accounts receivable up to 80% of the outstanding accounts receivable balance.

The discount rate under the IDF is equal to 2.5% above AIB’s applicable lending rates that vary based on the currency of the accounts receivable.

At June 30, 2024, the outstanding balance under the IDF at was zero, as the Company terminated the IDF during the period .

We anticipate that our working capital needs will increase as we invest in the growth of our business.

We believe that the funds held in cash and cash equivalents and our unused borrowings under our Credit Agreement will be sufficient to fund our working capital and cash requirements for at least the next 12 months.

Foreign Exchange

The Company’s foreign subsidiaries are subject to changes in demand or pricing resulting from fluctuations in currency exchange rates or other factors.

We are subject to fluctuations primarily in the Canadian Dollar, Euro Dollar and British Pound-to-U.S.

Dollar exchange rate.

Off-Balance Sheet Arrangements

As of June 30, 2024, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934, as amended.

Quantitative and Qualitative Disclosures about Market Risk

Smaller reporting companies are not required to provide the information required by this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements