What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 99 added, 84 removed, 225 unchanged (45% of the section changed)

13 unchanged sentences

COVID-19 has resulted and will continue to result in significant economic disruption, which could also impact our business.

While we did not incur significant disruptions to our operations during the three and six months ended June 30, 2021 as a result of the COVID-19 pandemic, we are unable to predict the impact that the COVID-19 pandemic will have on our business, liquidity or results of operations at this time.

While we did not incur significant disruptions to our operations during the three and nine months ended September 30, 2021 as a result of the COVID-19 pandemic, we are unable to predict the impact that the COVID-19 pandemic will have on our business, liquidity or results of operations at this time.

This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.

20 unchanged sentences

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

Total dividends paid and shares repurchased were $0.7 million and $0.1 million during the three months ended June 30, 2021.

Total dividends paid and shares repurchased were $0.7 million and $3.5 million, which included 261,631 shares of our outstanding common stock repurchased for $3.5 million in accordance with the Settlement Agreement, during the three months ended June 30, 2020.

Total dividends paid and shares repurchased were $0.7 million and $0.2 million, respectively, during the three months ended September 30, 2021.

Total dividends paid and shares repurchased were $0.7 million and $0.1 million, respectively, during the three months ended September 30, 2020.

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 and other factors the Board of Directors may find relevant.

12 unchanged sentences

The extent to which COVID-19 impacts the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, including the impact on our reseller partners and the end customer markets they serve, among others.

We strongly urge current and prospective investors to carefully consider the cautionary statements and

risk factors contained in this report and our annual report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 16, 2021.

We strongly urge current and prospective investors to carefully consider the cautionary statements and risk factors contained in this report and our annual report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 16, 2021.

The Company operates in a rapidly changing business, and new risk factors emerge from time to time.

4 unchanged sentences

Financial Overview

Net sales increased 33%, or $18.8 million, to $75.4 million for the three months ended June 30, 2021 compared to $56.6 million for the same period in the prior year.

Gross profit increased 54%, or $3.9 million, to $11.0 million for the three months ended June 30, 2021 compared to $7.1 million for the same period in the prior year.

Selling, general and administrative (“SG&A”) expenses increased 49%, or $2.7 million, to $8.1 million for the three months ended June 30, 2021 compared to $5.5 million for the same period in the prior year.

Amortization and depreciation expense increased 178%, or $0.3 million, to $0.4 million for the three months ended June 30, 2021 compared to $0.1 million for the same period in the prior year.

Net income for the three months ended June 30, 2021 was $2.1 million compared to $0.6 million for the same period in the prior year.

Diluted income per share for the three months ended June 30, 2021 was $0.49 compared to $0.13 for the same period in the prior year.

Net sales increased 13%, or $8.0 million, to $68.9 million for the three months ended September 30, 2021 compared to $60.9 million for the same period in the prior year.

Gross profit increased 56%, or $4.1 million, to $11.3 million for the three months ended September 30, 2021 compared to $7.2 million for the same period in the prior year.

Selling, general and administrative (“SG&A”) expenses increased 30%, or $1.8 million, to $7.8 million for the three months ended September 30, 2021 compared to $6.0 million for the same period in the prior year.

Amortization and depreciation expense increased 132%, or $0.2 million, to $0.4 million for the three months ended September 30, 2021 compared to $0.2 million for the same period in the prior year.

Net income for the three months ended September 30, 2021 was $2.4 million compared to $0.5 million for the same period in the prior year.

Diluted income per share for the three months ended September 30, 2021 was $0.55 compared to $0.13 for the same period in the prior year.

Critical Accounting Policies and Estimates

10 unchanged sentences

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

Management determines the estimate of the allowance for uncollectible accounts receivable by considering a number of factors, including historical experience, aging of the accounts receivable, and specific information obtained by the Company on the financial condition and the current creditworthiness of its customers.

Management determines the estimate of the allowance for uncollectible accounts

receivable by considering a number of factors, including historical experience, aging of the accounts receivable, and specific information obtained by the Company on the financial condition and the current creditworthiness of its customers.

If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

42 unchanged sentences

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.

The fair value of forward purchase contracts at June 30, 2021 was not material to the consolidated financial statements.

The fair value of forward purchase contracts at September 30, 2021 was not material to the consolidated financial statements.

Interest, Net

13 unchanged sentences

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

Six months ended

Nine months ended

Three months ended

September 30,

Cost of sales

12 unchanged sentences

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

Nine months ended

Three months ended

September 30,

Adjusted gross billings (Non-GAAP)

5 unchanged sentences

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

During the three months ended June 30, 2021, gross profit increased 54%, or $3.9 million, to $11.0 million compared to $7.1 million for the same period in the prior year while effective margin increased to 32.0% compared to 29.3% for the same period in the prior year.

During the six months ended June 30, 2021, gross profit increased 43%, or $6.5 million, to $21.8 million

compared to $15.3 million for the same period in the prior year while effective margin decreased to 28.2% compared to 34.1% for the same period in the prior year.

During the three months ended September 30, 2021, gross profit increased 56%, or $4.1 million, to $11.3 million compared to $7.2 million for the same period in the prior year while effective margin increased to 37.4% compared to 25.6% for the same period in the prior year.

During the nine months ended September 30, 2021, gross profit increased 47%, or $10.6 million,

to $33.1 million compared to $22.5 million for the same period in the prior year while effective margin decreased to 31.3% compared to 31.4% for the same period in the prior year.

Reconciliations of Non-GAAP Financial Measures

Six months ended

Nine months ended

Three months ended

September 30,

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

6 unchanged sentences

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

Nine months ended

Three months ended

September 30,

Net income reconciled to adjusted EBITDA:

20 unchanged sentences

Operating results of CDF are included in either our Distribution segment or Solutions segment.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Net Sales and Adjusted Gross Billings

Net sales for the three months ended June 30, 2021 increased 33%, or $18.8 million, to $75.4 million compared to $56.6 million for the same period in the prior year.

Adjusted gross billings for the three months ended June 30, 2021 increased 48%, or $76.4 million, to $235.1 million compared to $158.7 million for the same period in the prior year.

Net sales for the three months ended September 30, 2021 increased 13%, or $8.0 million, to $68.9 million compared to $60.9 million for the same period in the prior year.

Adjusted gross billings for the three months ended September 30, 2021 increased 33%, or $55.9 million, to $226.9 million compared to $171.0 million for the same period in the prior year.

Adjusted gross billings increased at a faster rate than net sales due to shift in product mix from hardware sales, which are recorded on a gross basis, to security, maintenance and cloud products which are recorded net of related cost of sales.

Distribution segment net sales for the three months ended June 30, 2021 increased 29%, or $15.7 million, to $69.9 million compared to $54.2 million for the same period in the prior year.

Adjusted gross billings for the Distribution segment for the three months ended June 30, 2021 increased 42%, or $64.6 million, to $219.4 million compared to $154.8 million for the same period in the prior year.

The increase in net sales and adjusted gross billings in our Distribution segment was primarily due to the impact of the Interwork and CDF acquisitions for the three months ended June 30, 2021.

Solutions segment net sales for the three months ended June 30, 2021 increased 131%, or $3.1 million, to $5.5 million compared to $2.4 million for the same period in the prior year.

Adjusted gross billings for the Solutions segment for the three months ended June 30, 2021 increased 298%, or $11.8 million, to $15.7 million compared to $3.9 million for the same period in the prior year.

The increase in net sales and adjusted gross billings in our Solutions segment was primarily due to the impact of the CDF acquisition for the three months ended June 30, 2021.

During the three months ended June 30, 2021, we relied on two key customers for a total of 34% of our net sales, with each customer accounting for 17% of our total net sales.

The Company had two major customers that accounted for 29% and 18%, respectively, of its total net sales during the three months ended June 30, 2020.

The Company had two major vendors that accounted for 18% and 12%, respectively, of total purchases during the three months ended June 30, 2021 and 16% and 10%, respectively, of total purchases during the three months ended June 30, 2020.

Gross profit for the three months ended June 30, 2021 increased 54%, or $3.9 million, to $11.0 million compared to $7.1 million for the same period in the prior year.

Distribution segment gross profit for the three months ended June 30, 2021 increased 33%, or $2.2 million, to $8.8 million compared to $6.6 million for the same period in the prior year.

The increase in Distribution segment gross profit resulted primarily from the impact of the acquisitions of Interwork and CDF, partially offset by higher early pay discounts and other rebates and discounts offered to our customers.

Solutions segment gross profit for the three months ended June 30, 2021 increased 360%, or $1.7 million, to $2.2 million compared to $0.5 million for the same period in the prior year.

Distribution segment net sales for the three months ended September 30, 2021 increased 12%, or $7.0 million, to $64.1 million compared to $57.1 million for the same period in the prior year.

Adjusted gross billings for the Distribution segment for the three months ended September 30, 2021 increased 28%, or $46.6 million, to $212.3 million compared to $165.7 million for the same period in the prior year.

The increase in net sales and adjusted gross billings in our Distribution segment was due to both organic growth and the impact of the CDF acquisitions for the three months ended September 30, 2021.

Solutions segment net sales for the three months ended September 30, 2021 increased 25%, or $1.0 million, to $4.8 million compared to $3.8 million for the same period in the prior year.

Adjusted gross billings for the Solutions segment for the three months ended September 30, 2021 increased 176%, or $9.3 million, to $14.6 million compared to $5.3 million for the same period in the prior year.

The increase in net sales and adjusted gross billings in our Solutions segment was primarily due to the impact of the CDF acquisition for the three months ended September 30, 2021.

During the three months ended September 30, 2021, we relied on two key customers for a total of 36% of our net sales, with each of these customers accounting for 18% of our total net sales, respectively.

The Company had two major customers that accounted for 22% and 12%, respectively, of its total net sales during the three months ended September 30, 2020.

The Company had two major vendors that accounted for 20% and 9%, respectively, of total purchases during the three months ended September 30, 2021 and 21% and 12%, respectively, of total purchases during the three months ended September 30, 2020.

Gross profit for the three months ended September 30, 2021 increased 56%, or $4.1 million, to $11.3 million compared to $7.2 million for the same period in the prior year.

Distribution segment gross profit for the three months ended September 30, 2021 increased 41%, or $2.7 million, to $9.3 million compared to $6.6 million for the same period in the prior year.

The increase in Distribution segment gross profit resulted primarily from the impact of the acquisition of CDF and lower 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 September 30, 2021 increased 210%, or $1.4 million, to $2.0 million compared to $0.6 million for the same period in the prior year.

The increase in Solutions segment gross profit resulted primarily from increased sales from the acquisition of CDF.

Customer rebates and discounts for the three months ended June 30, 2021 were $2.5 million compared to $1.3 million for the same period in the prior year.

This increase is attributable to a change in payment terms with one of our larger customers during the second quarter of 2020, which resulted in a cash inflow of approximately $30 million from the date the program was implemented, as well as increased rebates and discounts to national resellers.

Customer rebates and discounts for the three months ended September 30, 2021 were $1.9 million compared to $1.6 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, 2021 were $1.1 million compared to $0.9 million for the same period in the prior year.

Vendor rebates and discounts for the three months ended September 30, 2021 were $1.0 million compared to $0.6 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.

2 unchanged sentences

Selling, General and Administrative Expenses

SG&A expenses for the three months ended June 30, 2021 increased 49%, or $2.7 million, to $8.1 million compared to $5.5 million for the same period in the prior year, primarily due to the impact of the acquisition of CDF and Interwork, as well as $0.2 million of employee separation expenses.

SG&A expenses were 10.8% of net sales for the three months ended June 30, 2021, compared to 9.7% for the same period in the prior year.

The Company expects that its SG&A expenses, as a percentage of net sales, may vary depending on changes in sales volume, as well as the levels of continuing investments in key growth initiatives.

SG&A expenses for the three months ended September 30, 2021 increased 30%, or $1.8 million, to $7.8 million compared to $6.0 million for the same period in the prior year, primarily due to the impact of the acquisition of CDF.

SG&A expenses were 3.4% of adjusted gross billings for the three months ended September 30, 2021, compared to 3.5% 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 in key growth initiatives.

We plan to continue to expand our investment in business development, sales and marketing to maximize our market penetration.

Amortization and Depreciation Expense

Amortization and depreciation expense for the three months ended June 30, 2021 increased 178%, or $0.3 million, to $0.4 million compared to $0.1 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the Interwork and CDF acquisitions.

Amortization and depreciation expense for the three months ended September 30, 2021 increased 132%, or $0.2 million, to $0.4 million compared to $0.2 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the CDF acquisition.

Legal and Financial Advisory Expenses, Net – Unsolicited Bid and Related Matters

There were no legal and financial advisory expenses, net – unsolicited bid and related matters incurred during the three months ended June 30, 2021 compared to $0.5 million for the same period in the prior year.

There were no legal and financial advisory expenses, net – unsolicited bid and related matters incurred during the three months ended September 30, 2021 compared to a recovery of $0.1 million relating to reimbursement for insurance proceeds realized during the same period in the prior year.

Acquisition Related Costs

There were no acquisition related costs incurred during the three months ended June 30, 2021 compared to $0.2 million for the same period in the prior year.

Acquisition related costs incurred in the prior year were in conjunction with the acquisition of Interwork.

For the three months ended June 30, 2021 and 2020, the Company recorded a provision for income taxes of $0.6 million and $0.4 million, respectively.

The effective tax rate for the three months ended June 30, 2021 and 2020 was 22.3% and 38.4%, respectively.

The change in the effective tax rate for the three months ended June 30, 2021 compared to the same period in the prior year is a result of changes in the mix of jurisdictions in which taxable income was earned and limitations on the deductibility of certain facilitative acquisition related costs in the prior year.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

There were no acquisition related costs incurred during the three months ended September 30, 2021 compared to $0.3 million for the same period in the prior year.

Acquisition related costs incurred in this period in the prior year were in conjunction with the acquisition of CDF.

For the three months ended September 30, 2021 and 2020, the Company recorded a provision for income taxes of $0.8 million and $0.2 million, respectively.

The effective tax rate for the three months ended September 30, 2021 and 2020 was 23.7% and 31.1%, respectively.

The provision for income taxes in the current year was impacted by the result of changes in the mix of jurisdictions in which taxable income was earned.

The provision for income taxes in the prior year was impacted by limitations on the deductibility of certain facilitative acquisition related costs in the prior year.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net Sales and Adjusted Gross Billings

Net sales for the six months ended June 30, 2021 increased 16%, or $19.0 million, to $138.2 million compared to $119.2 million for the same period in the prior year.

Adjusted gross billings for the six months ended June 30, 2021 increased 34%, or $114.2 million, to $446.0 million compared to $331.8 million for the same period in the prior year.

Net sales for the nine months ended September 30, 2021 increased 15%, or $27.0 million, to $207.1 million compared to $180.1 million for the same period in the prior year.

Adjusted gross billings for the nine months ended September 30, 2021 increased 34%, or $170.0 million, to $672.9 million compared to $502.9 million for the same period in the prior year.

Distribution segment net sales for the six months ended June 30, 2021 increased 12%, or $13.2 million, to $124.7 million compared to $111.5 million for the same period in the prior year.

Adjusted gross billings for the Distribution segment for the six months ended June 30, 2021 increased 29%, or $92.1 million, to $412.8 million compared to $320.7 million for the same period in the prior year primarily due to the impact of the acquisitions of Interwork and CDF.

Solutions segment net sales for the six months ended June 30, 2021 increased 74%, or $5.8 million, to $13.5 million compared to $7.7 million for the same period in the prior year.

The increase in net sales in our Solutions segment was primarily due to sales from the CDF acquisition for the six months ended June 30, 2021.

Adjusted gross billings for the Solutions segment for the six months ended June 30, 2021 increased 197%, or $22.1 million, to $33.2 million compared to $11.2 million for the same period in the prior year.

During the six months ended June 30, 2021, we relied on two key customers for a total of 34% of our net sales, with each customer accounting for 17% of our total net sales.

The Company had two major customers that accounted for 29% and 18%, respectively, of its total net sales during the six months ended June 30, 2020.

The Company had two major vendors that accounted for 21% and 9%, respectively, of total purchases during the six months ended June 30, 2021 and 19% and 10%, respectively, of total purchases during the six months ended June 30, 2020.

Gross profit for the six months ended June 30, 2021 increased 43%, or $6.5 million, to $21.8 million compared to $15.3 million for the same period in the prior year.

Distribution segment gross profit for the six months ended June 30, 2021 increased 21%, or $2.9 million, to $16.7 million compared to $13.8 million for the same period in the prior year.

The increase in early pay discounts was impacted by a change in payment terms with one of our larger customers during the second quarter of 2020.

Solutions segment gross profit for the six months ended June 30, 2021 increased 248%, or $3.6 million, to $5.1 million compared to $1.5 million for the same period in the prior year.

Distribution segment net sales for the nine months ended September 30, 2021 increased 12%, or $20.3 million, to $188.8 million compared to $168.5 million for the same period in the prior year.

Adjusted gross billings for the Distribution segment for the nine months ended September 30, 2021 increased 29%, or $138.7 million, to $625.1 million compared to

$486.4 million for the same period in the prior year primarily due to both organic growth and the impact of the acquisitions of Interwork and CDF.

Solutions segment net sales for the nine months ended September 30, 2021 increased 58%, or $6.7 million, to $18.3 million compared to $11.6 million for the same period in the prior year.

The increase in net sales in our Solutions segment was primarily due to sales from the CDF acquisition for the nine months ended September 30, 2021.

Adjusted gross billings for the Solutions segment for the nine months ended September 30, 2021 increased 191%, or $31.4 million, to $47.9 million compared to $16.5 million for the same period in the prior year.

During the nine months ended September 30, 2021, we relied on two key customers for a total of 34% of our net sales, with one of these customers accounting for 18% and the other customer accounting for 16% of our total net sales.

The Company had two major customers that accounted for 26% and 14%, respectively, of its total net sales during the nine months ended September 30, 2020.

The Company had two major vendors that accounted for 20% and 9%, respectively, of total purchases during the nine months ended September 30, 2021 and 20% and 9%, respectively, of total purchases during the nine months ended September 30, 2020.

Gross profit for the nine months ended September 30, 2021 increased 47%, or $10.6 million, to $33.1 million compared to $22.5 million for the same period in the prior year.

Distribution segment gross profit for the nine months ended September 30, 2021 increased 27%, or $5.6 million, to $26.0 million compared to $20.4 million for the same period in the prior year.

The increase in Distribution segment gross profit resulted primarily from the impact of the acquisitions of Interwork and CDF.

Solutions segment gross profit for the nine months ended September 30, 2021 increased 237%, or $5.0 million, to $7.1 million compared to $2.1 million for the same period in the prior year.

The increase in Solutions segment gross profit resulted primarily from increased sales from the acquisition of CDF.

Customer rebates and discounts for the six months ended June 30, 2021 were $4.5 million compared to $2.4 million for the same period in the prior year.

Customer rebates and discounts for the nine months ended September 30, 2021 were $6.4 million compared to $4.0 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 six months ended June 30, 2021 and 2020 were $1.9 million, respectively.

Vendor rebates and discounts for the nine months ended September 30, 2021 were $2.9 million compared to $2.5 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.

2 unchanged sentences

Selling, General and Administrative Expenses

SG&A expenses for the six months ended June 30, 2021 increased 52%, or $5.7 million, to $16.6 million compared to $10.9 million for the same period in the prior year, primarily due to the impact of the acquisition of CDF and Interwork, as well as $0.5 million of employee separation expenses.

SG&A expenses were 12.0% of net sales for the six months ended June 30, 2021, compared to 9.1% for the same period in the prior year.

SG&A expenses for the nine months ended September 30, 2021 increased 44%, or $7.4 million, to $24.3 million compared to $16.9 million for the same period in the prior year, primarily due to the impact of the acquisition of CDF and Interwork, as well as $0.5 million of employee separation expenses.

SG&A expenses were 3.6% of adjusted gross billings for the nine months ended September 30, 2021, compared to 3.4% for the same period in the prior year.

The Company expects that its SG&A expenses, as a percentage of net sales, may vary depending on changes in sales volume, as well as the levels of continuing investments in key growth initiatives.

1 unchanged sentence

Amortization and Depreciation Expense

Amortization and depreciation expense for the six months ended June 30, 2021 increased 233%, or $0.6 million, to $0.8 million compared to $0.2 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the Interwork and CDF acquisitions.

Amortization and depreciation expense for the nine months ended September 30, 2021 increased 192%, or $0.8 million, to $1.2 million compared to $0.4 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the Interwork and CDF acquisitions.

Legal and Financial Advisory Expenses, Net – Unsolicited Bid and Related Matters

There were no legal and financial advisory expenses, net – unsolicited bid and related matters incurred during the six months ended June 30, 2021 compared to $1.8 million for the same period in the prior year.

There were no legal and financial advisory expenses, net – unsolicited bid and related matters incurred during the nine months ended September 30, 2021 compared to $1.8 million for the same period in the prior year.

Acquisition Related Costs

There were no acquisition related costs incurred during the six months ended June 30, 2021 compared to $0.6 million for the same period in the prior year.

Acquisition related costs incurred in the prior year were in conjunction with the acquisition of Interwork.

For the six months ended June 30, 2021 and 2020, the Company recorded a provision for income taxes of $1.0 million and $0.6 million, respectively.

The effective tax rate for the six months ended June 30, 2021 and 2020 was 22.2% and 31.1%, respectively.

The change in the effective tax rate for the six months ended June 30, 2021 compared to the same period in the prior year is a result of changes in the mix of jurisdictions in which taxable income was earned and limitations on the deductibility of certain facilitative acquisition related costs in the prior year.

There were no acquisition related costs incurred during the nine months ended September 30, 2021 compared to $1.0 million for the same period in the prior year.

Acquisition related costs incurred in the prior year were in conjunction with the acquisitions of Interwork and CDF.

For the nine months ended September 30, 2021 and 2020, the Company recorded a provision for income taxes of $2.2 million and $0.9 million, respectively.

The effective tax rate for the nine months ended September 30, 2021 and 2020 was 27.3% and 31.2%, respectively.

The provision for income taxes in the current year was impacted by a deferred tax adjustment due to an increase in the corporate tax rate in a foreign jurisdiction the Company operates in that will impact the rate at which deferred taxes are reversed in future periods, partially offset by changes in the mix of jurisdictions in which taxable income was earned.

The provision for income taxes in the prior year was impacted by limitations on the deductibility of certain facilitative acquisition related costs in the prior year.

Liquidity and Capital Resources

Our cash and cash equivalents decreased to $23.8 million as of June 30, 2021 compared to $29.3 million as of December 31, 2020.

The decrease in cash and cash equivalents was primarily the result of $0.9 million of cash and cash equivalents used in operating activities, $3.2 million of cash used in investing activities and $1.7 million of cash used for dividends.

Net cash and cash equivalents used in operating activities for the six months ended June 30, 2021 was $0.9 million, comprised primarily of net income adjusted for non-cash items of $5.3 million, partially offset by changes in operating assets and liabilities of $6.2 million.

Net cash and cash equivalents used in investing activities during the six months ended June 30, 2021 consisted of $3.0 million of vendor advances and $0.2 million of purchases of fixed assets.

Net cash and cash equivalents used in financing activities during the six months ended June 30, 2021 was $1.7 million, comprised of dividend payments on our Common Stock of $1.5 million and purchases of treasury stock of $0.2 million.

Our cash and cash equivalents increased to $29.9 million as of September 30, 2021 compared to $29.3 million as of December 31, 2020.

The increase in cash and cash equivalents was primarily the result of $7.5 million of cash and cash equivalents provided by operating activities, $3.2 million of cash used in investing activities and $3.5 million of cash used for dividends.

Net cash and cash equivalents provided by operating activities for the nine months ended September 30, 2021 was $7.5 million, comprised primarily of net income adjusted for non-cash items of $8.8 million, partially offset by changes in operating assets and liabilities of $1.3 million.

Net cash and cash equivalents used in investing activities during the nine months ended September 30, 2021 consisted of $3.0 million of vendor advances and $0.2 million of purchases of fixed assets.

Net cash and cash equivalents used in financing activities during the nine months ended September 30, 2021 was $3.5 million, comprised of dividend payments on our Common Stock of $2.2 million, contingent consideration paid of $0.9 million and purchases of treasury stock of $0.4 million.

On November 15, 2017, the Company entered into a $20,000,000 revolving credit facility (the “Credit Facility”) with Citibank, N.A.

2 unchanged sentences

The Amended Credit Facility, which will continue to be used for working capital and general corporate purposes, matures on June 30, 2023, at which time the Company must pay all outstanding principal of all outstanding loans plus all accrued and unpaid interest, and any, fees, costs and expenses.

As of June 30, 2021, no borrowings were outstanding under the Credit Facility.

As of September 30, 2021, no borrowings were outstanding under the Credit Facility.

On April 13, 2021, Wayside Technology UK Holdings Limited (“Wayside UK”), a wholly-owned subsidiary of the Company, entered into an uncommitted short term credit facility of £8,000,000 (“Uncommitted Credit Facility”) with Citibank N.A., London Branch (“Citibank London”) pursuant to certain terms and conditions.

Obligations under the Uncommitted Credit Facility are guaranteed by the Company and will be used for working capital and general corporate purposes and have a maturity date of April 13, 2022, at which time Wayside UK must pay all outstanding principal of all outstanding loans plus all accrued and unpaid interest, and any interest, fees, costs and expenses, if any.

As of June 30, 2021, no borrowings were outstanding under the Uncommitted Credit Facility.

As of September 30, 2021, no borrowings were outstanding under the Uncommitted Credit Facility.

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

5 unchanged sentences

Off-Balance Sheet Arrangements

As of June 30, 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

As of September 30, 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Quantitative and Qualitative Disclosures about Market Risk

1 unchanged sentence

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 2. Management’s Discussion and Analysis