Climb Global Solutions Q2 2024 Earnings Call Transcript

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August 7, 2024

Key Takeaways

  • Climb delivered strong Q2 results, with a 31% increase in adjusted gross billings to $359.8 million, net sales up 13% to $92.1 million, net income more than doubling to $3.4 million, and adjusted EBITDA rising 48% to $6.9 million.
  • Organic growth was driven by deeper partner relationships and selective new vendor additions, evaluating 31 brands and signing deals with Automox, Flashpoint and expanding its GSA IT70 contract to include Wasabi Technologies.
  • Climb closed the acquisition of Douglas Stewart Software, adding over 20 new vendor partners in the K-12 and higher education technology channel and expecting immediate cross-selling synergies.
  • The company went live on a new ERP platform in North America and the UK (with Ireland and DSS integration planned by November), aimed at real-time data access, operational efficiency and streamlined M&A integration.
  • Climb maintains a strong balance sheet with $48.4 million in cash, no revolver borrowings, a $0.17 quarterly dividend, and remains disciplined and selective in pursuing future acquisitions aligned with its culture and strategy.
AI Generated. May Contain Errors.
Earnings Conference Call
Climb Global Solutions Q2 2024
00:00 / 00:00

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Operator

Good morning, everyone, and welcome, and thank you for participating in today's conference call to discuss Climb Global Solutions financial results for the second quarter ended June 30, 2024. Joining us today are Climb's CEO, Mr. Dale Foster, the company's CFO, Mr. Drew Clark, and the company's investor relations advisor, Mr. Sean Mansouri, with Elevate IR. By now, everyone should have access to the second quarter 2024 earnings press release, which was issued yesterday afternoon at approximately 4:05 P.M. Eastern Time. The release is available in the Investor Relations section of Climb Global Solutions website at www.climbglobalsolutions.com. This call will also be available for webcast replay on the company's website. Following management's remarks, we will open the call for your questions. I would now like to turn the call over to Mr. Mansouri for introductory comments.

Sean Mansoury
Investor Relations Advisor at Elevate IR

Thank you. Before I introduce Dale, I'd like to remind listeners that certain comments made on this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements.

Sean Mansoury
Investor Relations Advisor at Elevate IR

Our presentation also includes certain non-GAAP financial measures, including adjusted gross billings, adjusted EBITDA, adjusted net income and EPS, and effective margin as supplemental measures of our performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation charts and other important information in the earnings press release and Form 8-K we furnished to the SEC yesterday. I'll now turn the call over to Climb's CEO, Dale Foster.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Thank you, Sean, and good morning, everyone. Our teams produced another great quarter in Q2 as we increased adjusted gross billings, net income, and adjusted EBITDA year-over-year. These results underscore our team's continued execution of our core strategy. We continue to grow organically by deepening relationships with existing partners, signing new emerging technology vendors to our line card, and delivering on our acquisition goals. As we've often emphasized, our commitment to a focused vendor line card enables us to partner with the most innovative technology companies in the market. During the second quarter, we evaluated 31 new brands and signed agreements with only 3 of them. Let me briefly highlight a couple of these wins. First, we launched a partnership with Automox, a leading cloud-native IoT automation endpoint management solution to our North American partners.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

With the addition of Automox, Climb can provide customers in the capabilities to save time, eliminate risk, and automate the patching, configuration, and control of all Windows, macOS, and Linux endpoint systems with one modern IT platform. Next, we finalized our agreement with Flashpoint, a globally trusted leader in risk intelligence that includes organizations, and helps organizations protect their most critical assets, infrastructure, and stakeholders from security risks as cyberattacks, ransomware, fraud, and physical threats. We are excited to collaborate with each of these vendors and bring their products to market, building on a mutually beneficial relationship along the way. Last month, we announced an expansion of our GSA IT-70 contract with the addition of Wasabi Technologies, a market leader in hot cloud storage. Wasabi delivers low-cost, high-performance, secure cloud object storage for customers that require in-depth defense approach to data protection.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Climb will also offer Wasabi Surveillance Cloud on our GSA contract, which enables organizations to cost-effectively scale and protect video surveillance footage in the cloud. Wasabi's layered approach to data security ensures customers' data is protected by physical and logical elements that meet or exceed critical compliance requirements. We're pleased to offer our partners in the public sector this innovative solution and look forward to adding further depth to our GSA contract in the future. Now, to some really exciting news. Last week, we closed the acquisition of Wisconsin-based IT distributor, Douglas Stewart Software, or DSS, adding complementary scale and expertise to our North American operations. This acquisition brings more than 20 new vendor partners to Climb, including Adobe, GoGuardian, and Incident IQ.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

DSS is a proven leader in the education technology channel and provides services to more than 500 value-added resellers and 250 campus stores across North America in both K-12 and higher education markets. We're thrilled to welcome Chuck Hulen and his team to the Climb family and look forward to unlocking synergies and cross-selling opportunities as we integrate DSS into our platforms in the coming months. As I have stated before, the culture and go-to-market strategies we've created at Climb set us apart in the market. Getting to know Chuck over the past 18 months solidifies this belief, as Chuck and his team have built an excellent company that has similar core values and go-to-market plans as we do here at Climb... I am pleased to announce also this month that we went live with our ERP system.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

This new platform will significantly enhance our operations by providing better access to real-time data across finance, sales, and other reporting functions. The implementation of the new system represents a major step forward in our ability to derive operational efficiencies, improve decision-making, and support our continued growth across our global operation, particularly with new acquisitions that we will onboard to our platform. I would like to personally thank Vito Legrottaglie, our CTO, and his entire team that took on this project from the concept phase to a working system, and this will only enhance our competitiveness in the market. As we enter the back half of the year, our solid foundation will enable us to continue driving strong organic growth while further improving operating leverage through the recent implementation of our ERP system.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

As we move into 2025, we anticipate the increased amortization expense associated with the ERP will be offset through planned operating synergies in our platform. With a strong balance sheet and robust pipeline of M&A targets, we can be patient and selective as we pursue acquisitions that will not only bolster our service and solution offerings, but align with our culture and strategic goals. The combination of these initiatives will enable us to deliver on both our organic and inorganic growth objectives in 2024 and beyond. With that, I will turn the call over to our CFO, Drew Clark, to go through our financial results. Drew?

Drew Clark
Drew Clark
CFO at Climb Global Solutions

Thank you, Dale. Good morning, everyone. Well, our second quarter provided some excitement for our company and team members, and it was anything but boring. A quick reminder as we review the financial results for our second quarter, all comparisons and variance commentary refer to the prior year quarter, unless otherwise specified. As reported in our earnings press release, Adjusted Gross Billings, or AGB, increased 31% to $359.8 million, compared to $274.7 million in the year ago quarter. Net sales in the second quarter of 2024 increased 13% to $92.1 million, compared to $81.7 million, which reflects organic growth from new and existing vendors, as well as a contribution from our acquisition of DataSolutions in October of last year.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

At the recommendation of our team at Elevate IR, who correctly suggested, we will call out DataSolutions versus abbreviating to DS in order to avoid any confusion with our recent acquisition of DSS. So excluding DataSolutions, AGB increased by $53.5 million, or 19.5% for the quarter on an organic basis. DataSolutions generated $31.6 million in AGB for the quarter, which was $3 million or 10.6% greater than the prior year's quarter. Both strong indicators of our dual approach to efficiently deploy shareholder capital in our existing business as well as new acquisitions.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

As Dale and I frequently state, we focus on AGB as the true metric of our top line growth, as the calculation of net sales is influenced by product mix and the respective adjustment to convert AGB to net sales for financial reporting purposes under GAAP. In the second quarter, we had an increase in the sale of security, maintenance, and cloud products, which are recorded net of related cost of sales, and therefore leads to a larger adjustment from AGB to net sales. DataSolutions and our solutions business generate a higher adjustment to AGB to net sales. Gross profit, or GP, in the second quarter increased 36% to $18.6 million, compared to $13.7 million. Again, the increase was driven by organic growth from new and existing vendors in both North America and Europe, as well as the contribution from DataSolutions.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

Excluding DataSolutions, GP increased by $2.4 million, or 17.8% for the quarter. DS generated $2.4 million in GP for the quarter, a significant increase over the prior year's quarter. Gross profit as a percentage of AGB increased to 5.2% compared to 5%. Moving to the expense side of the income statement, SG&A expenses in the second quarter were $13 million compared to $11.6 million for the same period in 2023. DataSolutions represented most of the increase at $1.3 million. SG&A, as a percentage of AGB, decreased to 3.6% compared to 4.2% in the year ago period, reflecting the inherent operating leverage in our business model, which will further improve with the addition of DSS and global implementation of our ERP.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

Net income in the second quarter of 2024 increased more than 2x to $3.4 million, or $0.75 per diluted share, compared to $1.4 million, or $0.31 per diluted share for the comparable period in 2023. Adjusted net income increased 19% to $3.8 million, or $0.83 per diluted share, compared to $3.2 million, or $0.72 per diluted share for the year ago period. The company's earnings per diluted share in the second quarter of 2024 were negatively impacted by $0.03 in FX compared to the prior year quarter. Adjusted EBITDA in the second quarter increased 48% to $6.9 million, compared to $4.7 million in the prior period.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

The increase was primarily driven by the aforementioned organic growth from both new and existing vendors, as well as the contribution from DataSolutions. Adjusted EBITDA as a percentage of gross profit or effective margin increased 310 basis points to 37.3%, compared to 34.2% in the year ago period. Turning to our balance sheet. Cash and cash equivalents were $48.4 million as of June 30, 2024, compared to $36.3 million on December 31, 2023, while working capital increased by $2.8 million during this period.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

...The increase in cash was primarily attributed to DataSolutions' cash balance, as well as the timing of receivable collections and vendor payments. As of June 30, 2024, we had $1.0 million of outstanding debt, with no borrowings outstanding under our $50 million revolving credit facility with JPMorgan Chase. In addition, we terminated the invoice discounting facility that DataSolutions utilized as a short-term financing vehicle for working capital. As of August 6, consistent with prior quarters, our board of directors declared a quarterly dividend of $0.17 per share of common stock to shareholders of record as of August 16 and payable on August 22, 2024. Building on Dale's earlier comments, we plan to continue driving organic growth with existing partners while adding new innovative vendors to our line card.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

We will also remain diligent in our M&A approach as we evaluate targets that will be accretive to earnings and fit our strategic direction. DSS is another example of delivering on our commitment to be good stewards of the capital we've been entrusted with. As noted in our press release, DSS generated $5.3 million in EBITDA for the trailing 12 months ended June thirtieth. Our expectation is to expand DSS' top line, implement operating expense synergies in the first 3-4 months post-closing, and therefore, grow EBITDA. We believe these initiatives, coupled with our robust liquidity position, will enable us to deliver strong growth and profitability in the second half of 2024 into 2025 and beyond. This concludes our prepared remarks. We'll now open it up for questions from those participating in the call. Operator, back to you.

Operator

Thank you. And at this time, if you would like to ask a question, please signal by pressing star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. And once again, that is star one to ask a question, and we will take our first question from Vincent Colicchio with Barrington Research. Please go ahead.

Vincent Colicchio
Vincent Colicchio
Managing Director at Barrington Research

Yeah, Dale, good morning. Starting off, sounds like security and data center is continues to be the core drivers of growth. First of all, am I correct there? And is that what you expect, would expect for the second half of the year?

Dale Foster
Dale Foster
CEO at Climb Global Solutions

You are correct, Vince. I just actually yesterday came in from a Black Hat event in Vegas, which is growing very quickly as a conference. You know, RSA is the premier one, but this one is quick. We have 23 of our security vendors presenting there. And then the data center, you know, there's some lag there, just because some of the hardware, but not on our side, 'cause we're you know, very focused. They get the hardware from different places, but it's really on the software side that we're delivering on.

Vincent Colicchio
Vincent Colicchio
Managing Director at Barrington Research

Was growth broad-based? Did your top 20 vendors grow in line with your overall business?

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Yeah, we saw it across, you know, across all of our regions as far as growth. We have self-defined territories in the U.S., and the teams there can sell, you know, any products in our line card, in our top 100 that we talk about. We had growth in Q2 in every territory, all of our DMRs, the direct marketers, like CDW, SHI, except for one, I think that was more flat, but other than that, growth all the way across.

Vincent Colicchio
Vincent Colicchio
Managing Director at Barrington Research

And then, on the DSS acquisition, how long do you think it should take before you generate cross-selling synergies here?

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Yeah, it'll be pretty quick. I mean, you know, we don't, we didn't really spell it out, but I mean, they lead with Adobe because Adobe is so strong in that K-12 and higher ed space. And we have. So we talk to, you know, we look at these targets way in advance and get to know them pretty well, and Chuck and his team. And when you look at, you know, where they're selling to, we did our own internal, 'cause, you know, one thing about distributors, we have great data for years and years of both resellers and end users. So we went back and looked at our .edus, and we were selling to something like 15,000 locations, you know, unique locations in that space.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Even though we don't call it out as a vertical, like, DSS does, we sell that many products already. So I think the cross-selling is very good. The other side of it is that they need more vendors. Just like a lot of the smaller distributors that we acquire, they're looking for vendors that fit into their ecosystem, and we did our math with them and saying, "Hey, we have quite a few that fit into that." A lot of it is gonna be in the cloud and cloud, you know, storage and backup space.

Vincent Colicchio
Vincent Colicchio
Managing Director at Barrington Research

Then, on the DataSolutions side, did you achieve your cross-selling synergies in the quarter?

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Yeah, two, two things there. You know, one is the cross-selling synergies. The other side of it is getting our teams aligned between the two groups. And, we have, you know, different heads of both our original acquisition with CDF, then Spinnaker, and now, DataSolutions. Those three, we have different team members running different aspects of the business. So as far as integration of the teams, that is all done. And then what we're finding is, you know, in the Irish market, it's easy to sign vendors, and then the tough thing is to get them to expand to the UK market. So we're seeing some of that. Same thing with our vendors moving over from the US. I can name two or three of them that actually have moved over and that we have some success with.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

So it'll just continue to be an organic flow, and most of the time it's from the U.S. to the U.K.. But like I mentioned, in Q1, we've had a couple that have come back this way that we actually signed in the U.S. after they were signed in the UK or Ireland.

Vincent Colicchio
Vincent Colicchio
Managing Director at Barrington Research

Okay, and thanks for that, and a nice quarter. I'll go back in the queue.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Thanks, Vince.

Operator

Our next question will come from Bill Dezellem with Tieton Capital Management. Please go ahead.

Bill Dezellem
Founder, President and CIO at Tieton Capital Management

... Thank you. Did you mention, Dale, that you'd been in discussions for 18 months with Douglas Stewart?

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Yeah, and I'll, you know, any of the prospects, and, and Bill, we talk about the targets that are out there, and some of the excitement that we have as far as our growth organically, is how many vendors are out there that we continue to look at, and, and you can see this quarter looked at over 30 vendors. I was talking. I was with Charles yesterday, our CMO, and he's looked at 210, I think, in the last, you know, eight months. There was that many coming out. And the same thing on the targets of acquisitions. Most of them are overseas. We're looking at Western Europe first, but this is one that Drew introduced us to, and we started chatting, and I knew of Douglas Stewart in my past life.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

But the closer we got to them, I'm like: This is such a great fit for us. They do a vertical into the education space, when we don't really call out verticals. You know, we, we consider our vertical as, as emerging tech and getting into the market, when they actually have emerging tech, and they go into the education space. And you can say, well, Adobe's not emerging, but a lot of the products and cross-level products that we think we can sell around Adobe and build like a cottage industry, that's, that's really where the excitement is in. But, yeah, we've been talking for quite a while.

Bill Dezellem
Founder, President and CIO at Tieton Capital Management

Thank you for that. Would you please detail the earn-out tied with this acquisition?

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Yeah, I'll let Drew jump in on that.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

Yeah. So the earn-out structure around two elements. The primary element is a gross profit margin target. Bill, so we looked at a forecast and budget. We increased that by, you know, a percentage of growth that we expected DSS to generate. And they have several target levels. They can get to 85%, 100%, 115% of an earn-out if they achieve those gross profit margin targets. And then there's also a component of increasing EBIT—the cash above EBITDA during a twelve-month period, that also is a component of the earn-out.

Bill Dezellem
Founder, President and CIO at Tieton Capital Management

Thanks, Drew. What's the total dollar amount that that earn-out could be? What's the maximum?

Drew Clark
Drew Clark
CFO at Climb Global Solutions

So if you look at the max target would be about $4.2 million, I believe.

Bill Dezellem
Founder, President and CIO at Tieton Capital Management

Okay. Thank you. Congratulations on the transaction. Relative to the ERP implementation, was that in the U.S. only, or was that across all geographies?

Dale Foster
Dale Foster
CEO at Climb Global Solutions

I'll let Drew talk to that, but we're launching. Our team is in the UK right now as our second launch, and then we have the other one coming up. But go ahead, Drew.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

Yeah, yeah, we-

Dale Foster
Dale Foster
CEO at Climb Global Solutions

This is Drew's baby. Him and his team have done a great job on this one.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

Yeah. Thanks, Dale. It's, and again, good call out for Vito and the team. So as Dale mentioned, Vito and Phil from his team, Vito Legrottaglie, who's our CIO, are over. They just went live in the U.K. on Monday, went very well. Previously, we went live in North America on July fifteenth. We will go live in Ireland August fifth, and then we'll bring-

Dale Foster
Dale Foster
CEO at Climb Global Solutions

September.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

Excuse me, September fifth.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Yeah.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

Thank you. And then, DSS, probably the first week of November. We don't want to interrupt their strong selling months of September and October. Obviously, August and July are very strong, very strong months for DSS. So, by November, we'll be completely on an integrated global platform.

Bill Dezellem
Founder, President and CIO at Tieton Capital Management

Great. Thank you, and congratulations on a solid quarter.

Drew Clark
Drew Clark
CFO at Climb Global Solutions

Thanks, Bill.

Operator

Our next question will come from Howard Root, a private investor.

Analyst

Good morning, Dale. Congratulations to you and the entire Climb team. Just an outstanding quarter, and this looks like, probably, I think, maybe your best acquisition yet, and we'll see the results. But congrats on that.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Thanks.

Analyst

Two questions for me. First, kind of little things on the, on the DSS acquisition. Is it the same, and maybe I missed this, is it about the same gross margins? Or is there anything different in the gross margins or the adjusted gross billings in this business than your existing business, kind of on a, on a global or on an overall basis?

Dale Foster
Dale Foster
CEO at Climb Global Solutions

It's very similar. You know, they have some different rebate structure, but because they have a limited number of vendors, so the rebates will show a little bit more than ours, even though we have vendors that have similar, you know, rebates in how we get paid. They have funded heads like we have funded heads with our vendor manager team. So if you look at them, they're kind of a micro Climb, and they're focused, like I said, in the K-12 SLED and nonprofit space.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

So, you know, we pick up some great team members, you know, as we look and say: Wow, this is people that already do the same thing that we do, have a lot of the same mindsets with their vendors, you know, as they go to market. You'll see us amalgamate our teams over the next six months. They have some territory. They don't have a lot of field representation, and similar to, you know, what was before Climb Lifeboat here, and we'll, our teams will add that to them right off the bat, so they'll all get paid on that stuff as they take their products to market.

Analyst

Okay. As I look at, you know, the number you gave is about a little over $5 million in Adjusted EBITDA for the trailing twelve months, which looks to me like maybe a little bit around 20% of Climb's. Is this about a 20% add to your bottom line? Is it immediately accretive in that way, or how do you look at it going forward in terms of percentage increase?

Dale Foster
Dale Foster
CEO at Climb Global Solutions

It's immediately accretive to what we're doing. You know, and they run a very lean team, 36 employees, similar to our DataSolutions in Ireland, extremely lean. They had, you know, a leading vendor of Citrix, and this is a leading with Adobe. But, right off the bat, you'll see the results in Q3.

Analyst

... And I mean, just on a ballpark number, is it around a, now I'm not saying 20% increase to your bottom line, but is it about a 20% increase to your adj, adjusted EBITDA with this addition, or am I missing something there?

Dale Foster
Dale Foster
CEO at Climb Global Solutions

No, you're, you're right on. Go ahead.

Analyst

Okay, all right. Great. Then, you know, my other question, kind of, as I always ask, is looking at the future with the business. I mean, 31% increase in Adjusted Gross Billings, but admittedly, you know, the second quarter last year wasn't a great quarter, so it was a pretty easy comp for you. But still growing, mid-double-digit growth in, you know, really what I look at is in terms of revenue and increasing leverage to the bottom line. And now, you know, congrats, maybe early congrats, but congrats so far on your ERP implementation, 'cause that's a big obstacle with—I don't see anything else. I'm not hearing anything else big in terms of added expenses coming in down the pipeline, which means more drops to the bottom line.

Analyst

And with a strong market for your products, do you see anything reducing the kind of linear increase that you've had in your top line and a little bit better than that increase to your bottom line as we look forward? I just wanna give you the opportunity to talk a little bit about the future without giving any specific guidance.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Yeah, and let me talk, I think, maybe jump into some of the macro stuff, 'cause we track both customers we sell to that are, that are very large, and they're public companies and also some of our competitors that are extremely large. And I think some people try to put us in those buckets, and we don't seem to track where they're tracking because they have such a hardware component of their overall sales. So when you have... You know, of course, COVID was the logistics issue with hardware, and then you see some slowdown, you know, with people buying endpoint, you know, from laptops or, you know, servers, but they still continue to buy security, and that is our leader on that side.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

So we don't, we have not followed that trend of, you know, some of the companies that reported last week. We have looked at this quarter after quarter after quarter. So if you look at the ebb and flow that we have at Climb, it's really a vendor's performance, right? A large vendor would underperform, like Q1 with Sophos. We were down with Sophos, and they had some challenges with some of their ERP. So there's always some kind of reasons for it, but it's not typically a market thing.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

And here's what I tell my teams, and I'll tell our investor community, and that is, we have a broad enough portfolio that, you know, if and we have a lot of sales cycles, so if we're not selling in one discipline, we'll start looking in the other. Our teams are highly compensated on gross profit, so if we're not bringing in dollars, they don't get paid, so they're aggressive that way. And that model has worked for us, Howard, the model of us, you know, looking at new vendors and putting the vendors that are not performing at a high level onto our elevate team, so we don't just spend as many sales cycles or energy. And then we're just keep fine-tuning our model.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

But then the other thing is we're still extremely small to the market that we sell into, so we can just change rapidly, and we keep our, you know, ear to the ground as far as, Hey, do we need to make some changes here? We talk about it continually, and we have both sides of it, right? The vendor side and then the, like I said before, the acquisition side.

Analyst

Great. Thanks. Thanks for that explanation. I mean, congrats, and the results have been impressive. Congrats on a great quarter, and keep up the great work. Thanks.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Thanks. Thanks, Howard.

Operator

This will conclude our question and answer session. I would now like to turn the call back to Mr. Dale Foster for closing remarks.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Thank you, Operator. Thank you to all shareholders. In closing, I wanna thank the entire Climb team. It's been, you know, we talked about ERP a couple of years ago, and we finally have implemented it. And like Drew said, we'll implement it through all our organization, and we'll be complete by, you know, the end of this year. But the amount of hours that not only our IT team has put in, but also what we call our SMEs, our subject matter experts in each division, have put in those extra time to make sure that it was a successful launch. I know a lot of people, when they hear ERP, they think, Wow, this is gonna be a mess.

Dale Foster
Dale Foster
CEO at Climb Global Solutions

Our team has made that a very minimal amount of mess, and we are off and running, so we will close out July as the first time on our new system. So with that, I appreciate everybody joining. Thank you.

Operator

This will conclude today's teleconference. Ladies and gentlemen, you may now disconnect.

Executives
Analysts
    • Bill Dezellem
      Founder, President and CIO at Tieton Capital Management
    • Sean Mansoury
      Investor Relations Advisor at Elevate IR
    • Vincent Colicchio
      Managing Director at Barrington Research
    • Analyst
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