What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-09 compared with 2021-03-16 · 63 added, 106 removed, 201 unchanged (46% of the section changed)

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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.

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.

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

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business.

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

In the first quarter of 2020, we took a number of precautionary measures designed to help minimize the risk of the spread of the virus to our employees, including temporarily closing our offices and requiring all employees to work remotely.

The majority of our employees continue to work remotely through the first quarter of 2021.

While we did not incur significant disruptions to our operations during the year ended December 31, 2020 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.

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business.

COVID-19 continues to create macroeconomic uncertainty, volatility and disruption, including supply constraints.

The supply constraints are being caused primarily by component availability, resulting in extended lead times and unpredictability.

In 2021, customer top priorities have been digital transformation, security, hybrid and cloud solutions, client devices, and preparing for workers to return to the office and enhancing remote enablement capabilities as hybrid environments become the future work model.

We have orchestrated solutions by leveraging client devices, accessories, collaboration tools, security, software and hybrid and cloud offerings to help customers build these capabilities and achieve their objectives.

Our employees continue to work in a hybrid environment, which includes splitting time between working from the office and working from home, as a result of the COVID-19 pandemic.

While we did not incur significant disruptions to our operations during the year ended December 31, 2021 as a result of the COVID-19 pandemic, as the duration and ongoing economic impacts of the COVID-19 pandemic remain uncertain, we are unable to predict the future impact this will have on our business, liquidity or results of operations at this time.

Technology trends could also change as customers consider the impact of the COVID-19 pandemic on their operations.

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

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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 (see management’s discussion and analysis below).

We evaluate the profitability of our business based on return on equity and effective margin (see discussion below).

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

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

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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 shares repurchased were $3.0 million and $3.7 million for the year ended December 31, 2020, respectively, and $3.1 and $0.1 million for the year ended December 31, 2019, respectively.

Total dividends paid and the dollar value of shares repurchased were $3.0 million and $0.5 million for the year ended December 31, 2021, respectively, and $3.0 million and $3.7 million for the year ended December 31, 2020, respectively.

The payment of future dividends 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.

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Selling, general and administrative (“SG&A”) expenses increased 34%, or $8.2 million, to $32.1 million for the year ended December 31, 2021, compared to $23.9 million for the same period in 2020.

Legal and financial advisory expenses, net - unsolicited bid and related matters were $1.6 million for the year ended December 31, 2020 compared to no expense for the same period in 2019.

Acquisition related costs were $1.5 million for the year ended December 31, 2020 compared to no expense for the same period in 2019.

There were no legal and financial advisory expenses, net - unsolicited bid and related matters for the year ended December 31, 2021 compared to $1.6 million in expense for the same period in 2020.

There were no acquisition related costs for the year ended December 31, 2021 compared to $1.5 million in expense for the same period in 2020.

Amortization and depreciation expense increased $0.8 million to $1.5 million for the year ended December 31, 2021 compared to $0.7 million for the same period in the prior year.

Net income was $9.2 million for the year ended December 31, 2021 compared to $4.5 million for the same period in 2020.

Weighted average diluted shares outstanding decreased by 3% from the prior year.

Income per diluted share was $2.09 for the year ended December 31, 2021 compared to $1.01 for the same period in 2020.

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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.

Allowance for Accounts Receivable

Allowances for Accounts Receivable

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

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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.

At the time of sale, we record an estimate for sales returns based on historical experience.

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.

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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.

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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

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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.

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.

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2016-13 on its Consolidated Financial Statements, particularly its recognition of allowances for accounts receivable.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” as part of its initiative to reduce complexity in the accounting standards.

The standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The standard also clarifies and simplifies other aspects of the accounting for income taxes.

The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption is permitted.

The Company is currently evaluating the impact that this guidance will have upon its financial position and results of operations, if any.

Results of Operations

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Income from operations

Other (expense) income

Income before income taxes

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

Costs of sales related to Software – security and highly interdependent with support and maintenance, support or other services

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 Software – security and highly interdependent with support and maintenance, support and other services.

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.

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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.

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.

Net income reconciled to adjusted EBITDA:

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During the year ended December 31, 2021, gross profit increased 38%, or $12.7 million, to $45.7 million compared to $33.0 million for the same period in 2020 while effective margin decreased 70 basis points to 33.9% compared to 34.6% for the same period in 2020.

The decline in gross margin percentage and effective margin during the year ended December 31, 2020

compared to the prior year is partially attributable to the implementation of an early pay discount program for one of our large customers (see Liquidity and Capital Resources below)

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

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The operating results of Interwork are included in our operating results effective May 1, 2020.

See further information on acquisition accounting in Note 6 to the Consolidated Financial Statements in Item 1 of this report.

On November 6, 2020 we completed the acquisition of CDF Group Limited (“CDF”) for a purchase price of $17.4 million, subject to certain working capital adjustments.

The operating results of CDF are included in our operating results effective November 7, 2020.

See further information on acquisition accounting in Note 6 to the Consolidated Financial Statements in Item 1 of this report.

Operating results of Interwork are included in our Distribution segment.

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

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

Net sales for the year ended December 31, 2021 increased 12%, or $31.0 million, to $282.6 million compared to $251.6 million for the same period in 2020.

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Net sales in our Distribution segment for the year ended December 31, 2021 increased 11%, or $25.6 million, to $259.4 million compared to $233.8 million for the same period in the prior year.

The increase in net sales in our Distribution segment was primarily due to sales from the CDF and Interwork acquisitions, as well as organic growth from our existing vendor lines.

The increase in net sales in our Distribution segment was due to both organic growth from our existing vendor lines and the impact of the CDF and Interwork acquisitions for the full year ended December 31, 2021.

Adjusted gross billings for the Distribution segment for the year ended December 31, 2021 increased 25%, or $172.2 million, to $872.3 million compared to $700.1 million for the same period in 2020.

Net sales in our Solutions segment for the year ended December 31, 2021 increased 30%, or $5.4 million, to $23.2 million compared to $17.8 million for the prior year.

The increase in net sales in our Solutions segment was primarily due to sales from the CDF acquisition for the period from acquisition through December 31, 2020.

The increase in net sales in our Solutions segment was primarily due to the impact of the CDF acquisition for the full year ended December 31, 2021.

Adjusted gross billings for the Solutions segment for the year ended December 31, 2021 increased 116%, or $33.6 million, to $62.7 million compared to $29.1 million for the same period in 2020.

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Gross profit for the year ended December 31, 2021 increased 38%, or $12.7 million, to $45.7 million compared to $33.0 million for the same period in 2020.

Distribution segment gross profit for the year ended December 31, 2020 increased 9%, or $2.3 million, to $29.1 million compared to $26.8 million for the same period in 2019 due to higher net sales discussed above, which were partially offset by the impact of lower gross margin as a percentage of net sales.

The decline in gross margin as a percentage of net sales was partially attributable to early pay discount programs implemented in 2020, resulting in lower accounts receivable and increased cash and liquidity (see Liquidity and Capital Resources).

Solutions segment gross profit for the year ended December 31, 2020 increased 22%, or $0.7 million, to $3.9 million compared to $3.2 million for the same period in 2019 due to the increased level of net sales discussed above and a higher

gross margin as a percentage of net sales resulting from the inclusion of the CDF business.

CDF Solutions sales gross profit as a percentage of net sales is generally higher than our historical average.

Distribution segment gross profit for the year ended December 31, 2021 increased 25%, or $7.4 million, to $36.5 million compared to $29.1 million for the same period in 2020.

The increase in Distribution segment gross profit resulted primarily from the impact of the acquisition of CDF and Interwork acquisitions for the full year ended December 31, 2021 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 year ended December 31, 2021 increased 135%, or $5.3 million, to $9.2 million compared to $3.9 million for the same period in 2020.

The increase in Solutions segment gross profit resulted primarily from increased sales from the acquisition of CDF for the full year ended December 31, 2021.

Customer rebates and discounts for the year ended December 31, 2021 were $8.7 million compared to $6.3 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 and timing of payments from other larger customers.

This increase is attributable to a change in payment terms with one of our larger customers during the second quarter of 2020, as well as increased rebates and discounts to national resellers.

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 year ended December 31, 2020 were $3.9 million compared to $3.3 million for the same period in 2019.

Vendor rebates are dependent on reaching certain targets set by our vendors.

Vendor rebates and discounts for the year ended December 31, 2021 were $4.5 million compared to $3.9 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.

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

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Selling, General and Administrative Expenses

SG&A expenses for the year ended December 31, 2020 increased 15%, or $3.0 million, to $23.9 million, compared to $20.9 million for the same period in 2019 primarily due to expenses from Interwork and CDF for the period from acquisition to December 31, 2020.

Sales related salaries and commissions, higher stock compensation expense and higher professional fees related to our obligations as a public company also increased during the period.

SG&A expenses were 9.5% of net sales for the year ended December 31, 2020, compared to 10.0% for the same period in 2019.

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.

We plan to continue to expand our investment in information technology and sales marketing to support the growth of our business.

SG&A expenses for the year ended December 31, 2021 increased 34%, or $8.2 million, to $32.1 million, compared to $23.9 million for the same period in the prior year primarily due to the impact of the acquisition of CDF and Interwork for the full year ended December 31, 2021.

SG&A expenses were 3.4% of adjusted gross billings, a non-GAAP financial measure, for the year ended December 31, 2021, compared to 3.3% for the same period in the prior year.

The Company expects that its SG&A expenses, as a percentage of adjusted gross billings, a non-GAAP financial measure, 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 information technology to support the growth of our business.

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

Legal and financial advisory expenses, net – unsolicited bid and related matters for year ended December 31, 2020 were $1.6 million compared to no expense for the same period in the prior year.

These expenses relate to the costs incurred in conjunction with the unsolicited bid and shareholder demand discussed below.

There were no legal and financial advisory expenses, net – unsolicited bid and related matters during the year ended December 31, 2021 compared to $1.6 million in expense for the same period in the prior year.

These expenses relate to the costs incurred in conjunction with the unsolicited bid and shareholder demand resolved in the prior year (see Note 14 in the Notes to the Consolidated Financial Statements).

Acquisition Related Costs

Acquisition related costs for the year ended December 31, 2020 were $1.5 million compared to no expense for the same period in the prior year.

These expenses relate to costs incurred in conjunction with the acquisition of Interwork and CDF.

Foreign Currency Transaction Gain

Foreign currency transaction gain for the year ended December 31, 2020 was $0.8 million compared to $0.1 million in for the same period in 2019.

There were no acquisition related costs for the year ended December 31, 2021 compared to $1.5 million in expense for the same period in the prior year.

These expenses relate to costs incurred in conjunction with the acquisition of CDF and Interwork.

Foreign Currency Transaction (Loss) Gain

Foreign currency transaction loss for the year ended December 31, 2021 was $0.1 million compared to a foreign currency transaction gain of $0.8 million for the same period in the prior year.

These expenses primarily relate to the change in the value of accounts payable and other monetary assets and liabilities denominated in currencies other than their functional currency between the date of origination and settlement.

For the year ended December 31, 2020, the Company recorded a provision for income taxes of $1.7 million, or 28.1% of income before taxes, compared to $2.3 million, or 25.0% of income before taxes for the same period in 2019.

The Company’s effective tax rate for the year ended December 31, 2020 was impacted by limitations on the deductibility of certain facilitative acquisition related costs.

Unsolicited Bid and Shareholder Demand

On July 15, 2019 and August 23, 2019, the Company received letters from Shepherd Kaplan Krochuk, LLC (“SKK”) and North & Webster SSG, LLC (“N&W”) announcing an unsolicited bid to acquire the Company.

The proposal was subject to a number of contingencies, including the need for SKK and N&W to secure financing to complete a transaction.

On November 27, 2019, SKK, N&W, and Messrs.

Shepherd, Kaplan, Krochuk and Kidston (collectively, the “SKK 13D Group”) entered into a Joint Filing Agreement and filed a Schedule 13D with the SEC, disclosing an aggregate 5.8% ownership stake in the Company.

Also on November 27, 2019, Mr.

Nynens entered into an agreement with SKK and N&W (the “November 27 Agreement”), granting SKK an irrevocable proxy to vote his shares of Common Stock (i) in favor of any acquisition proposal by SKK, (ii) against any third-party acquisition, and (iii) as directed by SKK with respect to the election of directors nominated by persons other than the Company.

On December 20, 2019, Mr.

Nynens delivered a nomination notice to the Company regarding his intent to nominate Kim J.

McCauley, Delynn Copley, Dennis M.

Crowley, III and Nilesh Shah at the Meeting.

On February 11, 2020, after considering the proposals with its financial advisers, the Board responded to SKK and N&W that the expired proposal received on December 10, 2019 would not have been in the best interests of the Company’s stockholders because it undervalues the Company, and did not serve as a basis for further diligence or discussion.

On January 22, 2020, the Company received a letter from one of its stockholders demanding that the Board investigate and bring an action against Mr.

Nynens for breaches of certain restrictive covenants contained in his Separation and Release Agreement, dated May 11, 2018, including his covenant not to seek future employment with the Company.

As a result, the Company filed a lawsuit (the “Lawsuit”) against Mr.

Nynens, SKK, and N&W in the Superior Court of New Jersey Monmouth County, on February 14, 2020.

On April 16, 2020 (the “Effective Date”), the Company entered into a Settlement Agreement (the “Settlement Agreement”) with Mr.

Nynens, SKK, N&W, and each of Dennis Crowley, David Shepherd, David Kaplan, Timothy Krochuk and Samuel Kidston (collectively with SKK and N&W, the “SKK Parties”).

Pursuant to the Settlement Agreement, the Company agreed to voluntarily dismiss the Lawsuit with prejudice, and to purchase all of Mr.

Nynens’ 261,631 shares of the Common Stock owned, of record or beneficially, as of the Effective Date, at fair market value, as defined in the agreement.

Nynens and the SKK Parties terminated the November 27 Agreement and the Joint Filing Agreement.

Additionally, Mr.

Nynens agreed to withdraw the notice of intent to nominate director candidates for election at the 2020 annual meeting of stockholders of the Company, submitted by Mr.

Nynens on December 20, 2019, and to cease all solicitation of proxies and other activities in connection with such annual meeting.

For further information, see the Current Report on Form 8-K filed by the Company on April 17, 2020.

On April 23, 2020, the Company purchased all of Nynens’ 261,631 shares of Common Stock at $13.19 per share pursuant to the Settlement Agreement, representing approximately 5.8% of the issued and outstanding Common Stock of the Company, for an aggregate purchase price of $3.5 million.

The Company incurred approximately $1.6 million in legal and advisory expenses, net during the year ended December 31, 2020 related to the above matter.

In connection with the above matter, the Company made certain claims for reimbursement under its insurance policies.

During the year ended December 31, 2020, reimbursement for insurance proceeds realized totaling $0.3 million has been recorded.

Interwork Technologies

On April 30, 2020, pursuant to a Stock Purchase Agreement dated April 20, 2020, CLIMB Channel Solutions (Canada) Inc.

(“Buyer”), a newly-formed indirect subsidiary of the Company completed the purchase of Interwork Technologies Inc., a Delaware corporation (“Interwork US”) and Interwork Technologies Inc., a corporation incorporated under the laws of the Province of Ontario, Canada (“Interwork Canada”).

Buyer acquired Interwork US and Interwork

Canada for an aggregate purchase price of $5 million Canadian dollar (equivalent to $3.6 million USD), subject to certain working capital adjustments, paid at closing plus a potential post-closing $1.1 million Canadian dollar (equivalent to $0.8 million USD) earn-out.

CDF Group Limited

On November 6, 2020, Wayside Technology UK Holdings Limited (“Buyer”), a private limited company under the laws of England and Wales and a newly-incorporated, wholly-owned subsidiary of the Company, entered into a Share Purchase Agreement (“SPA”) and purchased the entire share capital of CDF Group Limited, a private limited company under the laws of England and Wales, for an aggregate purchase price of approximately £13.3 million (equivalent to approximately $17.4 million USD), subject to certain working capital and other adjustments.

For the year ended December 31, 2021, the Company recorded a provision for income taxes of $3.2 million, or 25.6% of income before taxes, compared to $1.7 million, or 28.1% of income before taxes for the same period in the prior year.

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 increased by $14.3 million to $29.3 million at December 31, 2020 from $15.0 million at December 31, 2019.

The increase in cash and cash equivalents was primarily the result of $38.0 million of cash and cash equivalents provided by operating activities resulting from a change in payment terms with one of our customers, offset by $16.8 million of cash for acquisitions, $3.7 million of cash used to purchase treasury stock and $3.0 million of cash used for dividends.

Net cash provided by operating activities for the year ended December 31, 2020 was $38.0 million, comprised of net income adjusted for non-cash items of $6.7 million and changes in operating assets and liabilities of $31.3 million.

During the second quarter of 2020, we implemented a change in the payment terms with one of our large customers.

The impact of this change in payment terms resulted in a reduction of our accounts receivable and corresponding increase in cash of approximately $30 million from the date the program was implemented.

This change in terms also had the impact of reducing our net sales and gross profit by approximately $1.1 million for the year ended December 31, 2020, however, we believe the additional liquidity will improve our return on equity and provide us greater flexibility in pursuing our strategic objectives.

Net cash and cash equivalents used in investing activities during the year ended December 31, 2020 primarily consisted of payments for acquisitions.

On April 30, 2020, the Company completed the purchase of Interwork US and Interwork Canada for an aggregate purchase price of $5 million Canadian dollar (equivalent to $3.6 million USD), subject to certain working capital adjustments, paid at closing plus a potential post-closing $1.1 million Canadian dollar (equivalent to $0.8 million USD) earn-out.

On November 6, 2020, the Company completed the purchase of CDF Group Limited for an aggregate purchase price of £13.3 million (equivalent to approximately $17.4 million USD), subject to certain working capital and other adjustments.

The Company financed these acquisitions from existing capital resources.

Net cash and cash equivalents used in financing activities during the year ended December 31, 2020 was $6.7 million, primarily comprised of the purchase of treasury stock of $3.7 million and dividend payments on our Common Stock of $3.0 million.

On April 23, 2020, the Company purchased 261,631 shares of its outstanding common stock at $13.19 per share, representing approximately 5.8% of its issued and outstanding shares for $3.5 million in accordance with the Settlement Agreement.

Our cash and cash equivalents remained consistent at $29.3 million at December 31, 2021 and December 31, 2020, respectively.

Cash and cash equivalents remaining consistent was primarily the result of $4.7 million of cash and cash equivalents provided by operating activities, offset by $0.3 million of cash used in investing activities and $4.4 million of cash used in financing activities.

Net cash provided by operating activities for the year ended December 31, 2021 was $4.7 million, comprised of net income adjusted for non-cash items of $12.9 million offset by changes in operating assets and liabilities of $8.2 million.

Net cash and cash equivalents used in investing activities during the year ended December 31, 2021 consisted of $0.3 million of purchases of fixed assets.

Net cash and cash equivalents used in financing activities during the year ended December 31, 2021 was $4.4 million, primarily comprised of dividend payments on our Common Stock of $3.0 million, contingent consideration paid of $0.9 million and purchases of treasury stock of $0.5 million.

On December 3, 2014, the Board of Directors of the Company approved an increase of 500,000 shares of Common Stock to the number of shares of Common Stock available for repurchase under its repurchase plans.

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

(“Citibank”) pursuant to a Second Amended and Restated Revolving Credit Loan Agreement (the “Loan Agreement”), Second Amended and Restated Revolving Credit Loan Note (the “Note”), Second Amended and Restated Security Agreement and Second Amended and Restated Pledge and Security Agreement.

(“Citibank”) pursuant to a Second Amended and Restated Revolving Credit Loan Agreement (the

“Loan Agreement”), Second Amended and Restated Revolving Credit Loan Note (the “Note”), Second Amended and Restated Security Agreement and Second Amended and Restated Pledge and Security Agreement.

On August 31, 2020, the Company entered into an amendment to the Credit Facility (the “Amended Credit Facility”) pursuant to a First Amendment to Second Amended and Restated Revolving Credit Loan Agreement and Other Loan Documents (the “Amended Loan Agreement”) and First Allonge to Second Amended and Restated Revolving Credit Loan Note (the “Amended Note”).

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The Index was 2.50% at December 31, 2021.

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 December 31, 2021, no borrowings were outstanding under the Uncommitted Credit Facility.

At December 31, 2021 and 2020, the Company had no borrowings outstanding under the Credit Facility.

The Company incurred $0.1 million of interest expense, related to the Credit Facility for the years ended December 31, 2020 and 2019, respectively.

The Company incurred $0.1 million of interest expense, related to the Credit Facility for each of the years ended December 31, 2021 and 2020.

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

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Off-Balance Sheet Arrangements

As of December 31, 2020, we did not have any off-balance sheet arrangements, as defined in Item 303 (a)(4)(ii) of SEC Regulation S-K.

As of December 31, 2021, we did not have any off-balance sheet arrangements.

Quantitative and Qualitative Disclosures about Market Risk

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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-K

Item 7. Management’s Discussion and Analysis