What changed in this filing

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Item 1. Business

2023-03-16 compared with 2022-03-09 · 64 added, 36 removed, 90 unchanged (53% of the section changed)

Wayside Technology Group, Inc., a Delaware corporation, and its subsidiaries (the “Company,” “us,” “we,” or “our”) is a value added information technology (“IT”) distribution and solutions company.

The Company is a value added information technology (“IT”) distribution and solutions company.

The Company primarily operates through its “Distribution” segment, which distributes emerging technologies to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide under the name “Climb Channel Solutions”.

The Company also operates a smaller segment called “Solutions”, which is a cloud solutions provider and value-added reseller of software, hardware and services for customers worldwide under the names “TechXtend” and “Grey Matter”.

Across both segments, 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.

The Company was incorporated in Delaware in 1982.

Our common stock, par value $0.01 per share (“Common Stock”) is listed on The NASDAQ Global Market under the symbol “WSTG”.

Our main web site address is www.waysidetechnology.com, and the other web sites maintained by our business include www.climbcs.com, www.techxtend.com, and www.greymatter.com.

The information contained on, or otherwise accessible through, our websites is not part of, or incorporated by reference into, this report.

On October 31, 2022, the Company adopted its current name, Climb Global Solutions, Inc.

Our common stock, par value $0.01 per share (“Common Stock”) is listed on The NASDAQ Global Market under the symbol “CLMB”.

Distribution Segment

In our Distribution segment, which accounted for approximately 93% of our consolidated net sales and 83% of our consolidated gross profit during the year ended December 31, 2022, we distribute technology products from software developers, software vendors or original equipment manufacturers (OEMs) to resellers, and system integrators worldwide.

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We continually review the marketplace to identify new and emerging vendors and products to potentially add to our vendor partners.

Solution Segment

We also provide comprehensive IT solutions directly to end users through our Solutions segment, which accounted for approximately 7% of our consolidated net sales and 17% of our consolidated gross profit during the year ended December 31, 2022.

Products in this segment are acquired directly from original equipment manufacturers (OEMs),

software developers or distributors and sold to end users.

Products in this segment are acquired directly from OEMS, software developers or distributors

and sold to end users.

We provide customer service, billing, sales and marketing support in this segment and provide extended payment terms to facilitate sales.

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In 2020, we completed two acquisitions to add scale, broaden our geographic footprint, expand partner relationships and add cloud support capabilities.

● Interwork Technologies Inc.

(“Interwork”) acquired on April 30, 2020, is a technology distributor specializing in cyber security products based in Toronto, Canada.

The acquisition added scale to our existing Canadian operation and brought key vendor partner relationships to our portfolio.

● CDF Group Limited (“CDF”) acquired on November 6, 2020, is a technology distributor and solutions provider with a specialty in cloud enablement and support services.

The acquisition expanded our sales presence in the United Kingdom and Europe, added a key vendor partner relationship for Microsoft cloud products, and provided valuable technical expertise in cloud enablement and support.

In 2022, we completed the acquisition of Spinnakar Limited (“Spinnakar”), which expanded our sales presence in the United Kingdom distribution operations and brought key vendor partner relationships to our portfolio.

We plan to continue to evaluate acquisition opportunities as part of our strategic growth plan going forward.

An essential part of our ongoing operations and strategic growth plan in our Distribution segment is the continued recruitment of software vendors for which we become authorized distributors of their products.

Through our Distribution segment, we sell a wide variety of technology products from a broad range of software vendors and manufacturers, such as Bluebeam Software, Flexera Software, Intel Software, Microsoft, Micro Focus, Mindjet, SmartBear Software, SolarWinds, Sophos, StorageCraft Technology, TechSmith, Trend Micro, Unitrends, CloudGenix, Tintri and Extrahop.

On a continuous basis, we screen new vendors and products for inclusion in our line card based on their features, quality, price, profit margins and current market trends.

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In our Solutions business, an essential part of our strategic growth plan is to pursue opportunities with higher growth prospects and gross margin characteristics through the sale of specialty products, services and cloud offerings.

Through the acquisition of CDF we added certain technical and administrative support capabilities to enable us to resell cloud and software as a service products (“SaaS”) including Microsoft products in the United Kingdom.

Through acquisitions in the prior years, we added certain technical and administrative support capabilities to enable us to resell cloud and software as a service products (“SaaS”) including Microsoft products in the United Kingdom.

Our strategic growth plan is to expand our cloud offerings by leveraging these support services to other markets and products.

For the year ended December 31, 2021, Sophos and SolarWinds accounted for 20% and 10%, respectively of our consolidated purchases.

For the year ended December 31, 2020, Sophos and SolarWinds accounted for 20% and 12%, respectively of our consolidated purchases.

For the year ended December 31, 2022, the Company had two vendors that accounted for 17% and 9%, respectively, of our consolidated purchases.

For the year ended December 31, 2021, these same two vendors accounted for 20% and 10%, respectively, of our consolidated purchases.

The loss of a key vendor or group of vendors could disrupt our product availability and otherwise have an adverse effect on the Company.

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An essential part of our strategic growth plan is to provide value added services to our vendor partners and customers to enhance their ability to market these products.

This includes maintaining infrastructure to facilitate licensing of cloud and SaaS products, providing technical support for cloud products, and providing integration and enablement services.

The acquisition of CDF provided us with the ability to provide support for these cloud services in the United Kingdom and Europe.

We plan to continue to leverage these capabilities to provide cloud support services throughout our worldwide operations.

This includes maintaining infrastructure to facilitate licensing of cloud and SaaS products, providing technical support for cloud products, and providing integration and enablement

We currently have the ability to provide support for these cloud services in the United Kingdom and Europe, and plan to continue to leverage these capabilities to provide cloud support services throughout our worldwide operations.

Marketing and Distribution

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These programs provide a cost-effective and service-oriented means to market and sell and fulfill software products and meet the needs of users.

We sell products to large, multi-national broad line resellers, sometimes referred to as direct market resellers (DMRs), as well as thousands of value added resellers (VARs ), which tend to be smaller and focus on value added services to their customers.

We sell products to large, multi-national broad line resellers, sometimes referred to as direct market resellers (DMRs), as well as thousands of VARs, which tend to be smaller and focus on value added services to their customers.

As part of our strategic growth plan, we expect to continue diversifying our customer base by offering compelling products to the VAR community as we develop our vendor partner lineup.

As a result, a higher proportion of our sales in 2021 were from VARs, driven by a focus on increasing sales to larger VARs with more than $1 million in annual sales.

The Company had two customers that each accounted for more than 10% of total consolidated net sales for 2021.

For the year ended December 31, 2021, CDW Corporation (NASDAQ:

CDW) (“CDW”) and Software House International Corporation (“SHI”), both of whom are considered DMRs, accounted for 18%, and 17%, respectively, of consolidated net sales and as of December 31, 2021, 18% and 22%, respectively, of total net accounts receivable.

For the year ended December 31, 2020, CDW Corporation (NASDAQ:

CDW) (“CDW”) and Software House International Corporation (“SHI”), accounted for 24%, and 14%, respectively, of consolidated net sales and as of December 31, 2020, 19% and 9%, respectively, of total net accounts receivable.

As a result, an increasing proportion of our sales in 2022 were from VARs, driven by a continued focus on increasing sales to larger VARs with more than $1 million in annual sales.

For the year ended December 31, 2022, the Company had two customers, both of whom are considered DMRs, that accounted for 21%, and 16%, respectively, of consolidated net sales and as of December 31, 2022, 16% and 18%, respectively, of total net accounts receivable.

For the year ended December 31, 2021, these same two customers accounted for 18%, and 17%, respectively, of consolidated net sales and as of December 31, 2021, 18% and 22%, respectively, of total net accounts receivable.

Our top five customers accounted for 52% and 51% of consolidated net sales in 2022 and 2021, respectively.

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As is customary in the industry, the Company has no long-term supply contracts with any of its vendor partners, and substantially all the Company’s contracts with its vendors are terminable upon 30 days’ notice or less, however, it is notable that the tenure of our relationships with vendor partners tends to extend over a longer term.

attribute this to the deep relationships we establish with our partners involving sales support, product and customer knowledge, and tailored infrastructure to facilitate efficient order processing.

We attribute this to the deep relationships we establish with our partners involving sales support, product and customer knowledge, and tailored infrastructure to facilitate efficient order processing.

Most vendor partners or distributors will “drop ship” products directly to the customers, which reduces physical handling by the Company.

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Inventory levels may vary from period to period, due in part to increases or decreases in sales levels, the Company’s practice of making advance purchases when it deems the terms of such purchases to be attractive, and the addition of new vendor partners and products.

From time to time, we may make advance payments to vendors to apply against future purchases from the vendor.

From time to time, we may make advance payments to vendors to apply

against future purchases from the vendor.

Moreover, the Company’s order fulfillment and inventory control systems allow the Company to order certain products in time for next day shipping.

The Company promotes the use of EDI with its vendor partners and customers, which helps reduce overhead and the use of paper in the ordering process.

The Company operates in a highly competitive environment, both in the United States and internationally.

There is significant competition within each market segment and geography served that creates pricing pressure and the need to continually improve services.

The market for the technology products we sell is characterized by rapid changes in technology, user requirements, and competitive pricing.

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We compete against much larger broad-line distributors with more resources than we have, including Arrow Electronics Inc.

ARW), Synnex Corporation (NYSE:

SNX), Tech Data Corporation and Ingram, as well as specialty distributors.

ARW), TD Synnex Corporation (NYSE:

SNX) and Ingram Micro, as well as specialty distributors.

We believe we offer a compelling solution for emerging technology vendors seeking to establish the IT channel as a route to market, by offering broad distribution capabilities with more flexibility than some of our larger competitors.

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In that regard, the Company anticipates that it will, from time to time, require software and hardware upgrades for its present IT systems.

The Company conducts its business under various trademarks and service marks including Climb Channel Solutions, TechXtend, Grey Matter and International Software Partners.

Trademarks, Service Marks and Domain Names

The Company conducts its business under various trademarks and service marks including Climb Channel Solutions, Grey Matter, Cloud Know How and International Software Partners.

The Company protects these trademarks and service marks and believes that they have significant value to us and are important factors in our marketing programs.

As of December 31, 2021, Wayside Technology Group, Inc.

and its subsidiaries had 269 total employees, including 268 full-time employees.

We have registered and maintained Internet domain names, including “climbglobalsolutions.com”.

Government Regulation

The Company is subject to and endeavors to comply with various government regulations in the United States as well as various jurisdictions where it operates.

These regulations cover several diverse areas including trade compliance, anti-bribery, anti-corruption, money laundering, securities, environmental, and data and privacy protection.

Increased government scrutiny of the Company's actions or enforcement could materially and adversely affect its business or damage its reputation.

In addition, the Company may conduct, or it may be required to conduct, internal investigations or face audits or investigations by one or more domestic or foreign government or regulatory agencies, which could be costly and time-consuming, and could divert management and key personnel from the Company’s business operations.

See Risk Factors in Part I, Item 1A.

Employees and Human Capital

We understand the importance of human capital and prioritize building our culture, talent development, compensation and benefits, and diversity and inclusion.

Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.

The attraction, retention and development of employees is critical to our success.

We accomplish this, in part, by our competitive compensation practices, training initiatives, and growth opportunities within the Company.

The Company believes its capabilities and services are made possible by a broad group of professionals who understand its customer's problems from numerous perspectives and curate forward-looking, comprehensive solutions.

The Company's employees’ diverse backgrounds have melded into rich perspectives that sharpen the Company, drive more scale, extending the Company's value, winning in the market with the diversity of its people and the strength of its culture, to enhance value for customers and benefit all stakeholders.

The Company's business results depend in part on its ability to successfully manage human capital resources, including attracting, identifying, and retaining key talent.

Factors that may affect the Company's ability to attract and retain qualified employees include employee morale, its reputation, competition from other employers, and availability of qualified individuals.

As of December 31, 2022, the Company had 300 total employees, including 284 full-time employees.

The Company is not a party to any collective bargaining agreements with its employees, has experienced no work stoppages and considers its relationships with its employees to be satisfactory.

The following table shows the Company’s approximate headcount by region:

Workforce Health and Safety

We take workplace safety very seriously and our robust safety program means that we are constantly evaluating our safety protocols in an effort to keep our facilities safe for our employees.

The Company continued to provide a safe work environment as the COVID-19 pandemic persisted during 2022.

It aligned with and followed the guidance of the world’s leading health authorities, as well as related local, regional, and national government directives.

We continue to monitor the impact of the COVID-19 pandemic on our teammates and within our operations, and proactively modify or adopt new practices to promote their health and safety.

Compensation and Benefits

As part of our compensation philosophy, we believe that we must offer and maintain market competitive compensation and benefit programs for our employees in order to attract and retain superior talent.

In addition to competitive base wages, additional programs include the 2021 Omnibus Incentive Plan, a company matched 401(k) Plan, healthcare and insurance benefits, flexible spending accounts, paid time off and employee assistance programs.

Diversity and Inclusion

We are committed to our continued efforts to increase diversity and foster an inclusive work environment that supports the workforce and the communities we serve.

We recruit the best qualified employees regardless of gender, ethnicity or other protected traits and it is our policy to fully comply with all laws applicable to discrimination in the workplace.

What changed 10-K

Item 1. Business