Wayside Technology Group, Inc. (NASDAQ: WSTG) (“Wayside” or the
“Company”), a value-added global IT channel company providing
innovative sales and distribution solutions for emerging technology
vendors, is reporting results for the second quarter ended June 30,
2021.
Second Quarter 2021 Highlights vs. Year-Ago
Quarter
- Net sales increased 33% to $75.4
million.
- Adjusted gross billings (a non-GAAP
financial measure defined below) increased 48% to $235.1
million.
- Gross profit increased 54% to a
record $11.0 million.
- Net income increased approximately
4x to $2.1 million or $0.49 per diluted share.
- Adjusted EBITDA (a non-GAAP
financial measure defined below) increased 68% to $3.5
million.
Management Commentary
“We generated exceptional growth across all key operating and
financial metrics during the second quarter, driven by execution of
our organic growth initiatives, operating leverage and the benefit
of successfully integrating two acquisitions over the past year,”
said CEO Dale Foster. “Although Q2 2020 was impacted by the effects
of the pandemic, we even exceeded pre-COVID performance levels,
which is a testament to the foundation we have built and our team’s
perseverance through a difficult 2020.
“Operationally, we continue to focus on our growth initiatives:
drive organic growth from existing vendors while trimming
non-performers; enhance our line card with the addition of new
emerging vendors; and execute upon our acquisition strategy
utilizing our balance sheet and free cash flow to acquire companies
that will be strategic, accretive to earnings and improve gross
profit margins. Our execution of these initiatives is reflected in
our results and through several new and expanded partnerships with
marquee technology companies like Palo Alto Networks, Micro Focus
and StorOne.
“We also launched our new Climb Expedition cloud marketplace
during the second quarter, which is now live for our entire
customer base to acquire and manage vendor software licenses.
Further, our rebranding of Sigma Distribution in the UK to Climb
Channel Solutions is complete and our distribution teams are in
lock-step globally.
“As we progress into the second half of the year, we plan to
continue executing on our growth drivers and identifying
acquisition opportunities to enhance our geographic footprint,
solutions and product mix. We are well-positioned to utilize our
strong balance sheet for these inorganic opportunities while
capitalizing on the growth potential of our existing asset base,
especially given the tailwinds across several of our core product
categories, including cybersecurity, cloud and data center
technologies.”
Dividend
Subsequent to the quarter end, on August 3, 2021, Wayside’s
board of directors declared a quarterly dividend of $0.17 per share
of its common stock payable on August 20, 2021 to shareholders of
record on August 16, 2021.
Second Quarter 2021 Financial Results
Net sales in the second quarter of 2021 increased 33% to $75.4
million compared to $56.6 million for the same period in 2020. This
reflects both strong organic growth and the benefit from the
acquisition of CDF, as well as one month of incremental
contribution from Interwork, which was acquired in May 2020.
Adjusted gross billings (a non-GAAP financial measure defined
below) in the second quarter of 2021 increased 48% to $235.1
million compared to $158.7 million for the same period in 2020.
Gross profit in the second quarter of 2021 increased 54% to a
record $11.0 million compared to $7.1 million for the same period
in 2020. The increase in gross profit was driven by organic growth
and the benefit of the CDF and Interwork acquisitions.
Total selling, general, and administrative (“SG&A”) expenses
in the second quarter of 2021 were $8.5 million compared to $6.4
million for the same period in 2020. The increase was primarily
driven by incremental costs related to the operations of CDF and
Interwork. Further, these expenses reflect increased investments
ahead of the Company’s growth objectives, which are expected to
drive continued increases in gross profit during the coming
quarters. As a percentage of net sales, SG&A was 11.3% compared
to 11.2% for the same period in 2020.
Net income in the second quarter of 2021 increased approximately
4x to $2.1 million or $0.49 per diluted share, compared to $0.6
million or $0.13 per diluted share for the same period in 2020.
Adjusted EBITDA (a non-GAAP financial measure defined below) in
the second quarter of 2021 increased 68% to $3.5 million compared
to $2.1 million for the same period in 2020. The increase was
driven by the aforementioned organic growth and benefit from CDF
and Interwork, as well as operating leverage.
Effective margin, which is defined as adjusted EBITDA as a
percentage of gross profit, was 32.0% in the second quarter of 2021
compared to 29.3% for the same period in 2020.
Cash and cash equivalents were $23.8 million on June 30, 2021,
compared to $29.3 million at December 31, 2020. The decrease was
attributed to timing of cash flows which are expected and not an
indication of any other business or operating trend. The Company
remained debt free on June 30, 2021, with no borrowings outstanding
under either its $20 million or £8 million credit facilities.
Financial results include operations of Interwork Technologies
effective May 1, 2020, as well as operations of CDF Group effective
November 6, 2020. The initial allocation of the purchase price of
CDF Group is based on preliminary information and is subject to
adjustments during a one-year measurement period following the
close date of the acquisition. This may include adjustments to
provisional balances including the fair value of the recorded
tangible and intangible assets, related amortization expense and
deferred taxes. More information will be available in the Company’s
quarterly report filed on Form 10-Q with the Securities and
Exchange Commission.
Conference Call
The Company will conduct a conference call tomorrow, August 5,
2021, at 8:30 a.m. Eastern time to discuss its results for the
second quarter ended June 30, 2021.
Wayside management will host the conference call, followed by a
question-and-answer period.
Date: Thursday, August 5, 2021Time: 8:30 a.m. Eastern
timeToll-free dial-in number: (888) 771-4371International dial-in
number: (847) 585-4405Conference ID: 50203349
Please call the conference telephone number 5-10 minutes prior
to the start time. An operator will register your name and
organization. If you have any difficulty connecting with the
conference call, please contact Elevate IR at (949) 200-4603.
The conference call will be broadcast live and available for
replay here and on the investor relations section of the
company’s website at www.waysidetechnology.com.
About Wayside Technology Group
Wayside Technology Group, Inc. (NASDAQ: WSTG) is a value-added
IT distribution and solutions company specializing in emerging and
disruptive technologies. Wayside operates across the US, Canada and
Europe through multiple business units, including Climb Channel
Solutions, Grey Matter, TechXtend and CloudKnowHow. The Company
provides IT distribution and solutions for emerging companies in
the Security, Data Management, Cloud, Connectivity, Storage &
HCI, Virtualization, and Software & ALM industries.
Additional information can be found by
visiting www.waysidetechnology.com.
Non-GAAP Financial Measures
We use non-GAAP financial measures, including adjusted gross
billings and adjusted EBITDA, as supplemental measures of the
performance of our business. Our use of these financial measures
has limitations, and you should not consider them in isolation or
use them as substitutes for analysis of our financial results under
generally accepted accounting principles in the United States of
America (“U.S. GAAP”). The attached tables provide a reconciliation
of each non-GAAP financial measure to the most nearly comparable
measure under U.S. GAAP.
Forward-Looking Statements
The statements in this release concerning the Company’s future
prospects are forward-looking statements that involve certain risks
and uncertainties. These risks and uncertainties include, without
limitation, the continued acceptance of the Company’s distribution
channel by vendors and customers, the timely availability and
acceptance of new products, product mix, market conditions,
contribution of key vendor relationships and support programs, as
well as factors that affect the software industry in general and
other factors. Currently, one of the most significant factors,
however, is the potential adverse effect of the current pandemic of
the novel coronavirus, or COVID-19, on the Company, the global
economy, and financial markets. 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. The forward-looking statements
contained herein are also subject generally to other risks and
uncertainties that are described from time to time in our filings
with the Securities and Exchange Commission.
Company Contact
Drew ClarkChief Financial Officer(732)
389-0932drew@waysidetechnology.com
Investor Relations Contact
Sean Mansouri, CFAElevate IR(949)
200-4603WSTG@elevate-ir.com
|
|
|
|
|
WAYSIDE
TECHNOLOGY GROUP, INC. AND SUBSIDIARIES |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
(Amounts in
thousands, except share and per share amounts) |
|
|
|
|
|
|
|
June 30, 2021 |
|
December 31, 2020 |
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current
assets |
|
|
|
|
Cash and cash equivalents |
$ |
23,781 |
|
|
$ |
29,348 |
|
Accounts receivable, net of allowances of $922 and $892,
respectively |
|
101,878 |
|
|
|
93,821 |
|
Inventory, net |
|
4,108 |
|
|
|
4,936 |
|
Vendor prepayments and advances |
|
3,440 |
|
|
|
1,235 |
|
Prepaid expenses and other current assets |
|
3,934 |
|
|
|
3,837 |
|
Total current assets |
|
137,141 |
|
|
|
133,177 |
|
|
|
|
|
|
Equipment and leasehold improvements, net |
|
2,163 |
|
|
|
2,308 |
|
Goodwill |
|
|
17,566 |
|
|
|
16,816 |
|
Other intangibles, net |
|
10,600 |
|
|
|
10,625 |
|
Right-of-use assets, net |
|
1,738 |
|
|
|
1,933 |
|
Accounts receivable long-term, net |
|
116 |
|
|
|
304 |
|
Other
assets |
|
|
490 |
|
|
|
257 |
|
Deferred income tax assets |
|
77 |
|
|
|
113 |
|
|
|
|
|
|
Total
assets |
|
$ |
169,891 |
|
|
$ |
165,533 |
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current
liabilities |
|
|
|
|
Accounts payable and accrued expenses |
$ |
117,430 |
|
|
$ |
116,692 |
|
Lease liability, current portion |
|
476 |
|
|
|
490 |
|
Total current liabilities |
|
117,906 |
|
|
|
117,182 |
|
|
|
|
|
|
Lease liability, net of current portion |
|
1,937 |
|
|
|
2,167 |
|
Deferred income tax liabilities |
|
1,462 |
|
|
|
1,467 |
|
|
|
|
|
|
Total
liabilities |
|
|
121,305 |
|
|
|
120,816 |
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
Common stock, $.01 par value; 10,000,000 shares authorized,
5,284,500 shares |
issued, and 4,385,785 and 4,361,997 shares outstanding ,
respectively |
|
53 |
|
|
|
53 |
|
Additional paid-in capital |
|
32,037 |
|
|
|
31,962 |
|
Treasury stock, at cost, 898,715 and 922,503 shares,
respectively |
|
(14,393 |
) |
|
|
(14,747 |
) |
Retained earnings |
|
30,356 |
|
|
|
28,191 |
|
Accumulated other comprehensive income (loss) |
|
533 |
|
|
|
(742 |
) |
Total stockholders' equity |
|
48,586 |
|
|
|
44,717 |
|
Total liabilities and stockholders' equity |
$ |
169,891 |
|
|
$ |
165,533 |
|
|
|
|
|
|
|
WAYSIDE
TECHNOLOGY GROUP, INC. AND SUBSIDIARIES |
CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS |
(Unaudited) |
(Amounts in
thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Six months
ended |
|
Three months
ended |
|
|
June 30, |
|
June 30, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
Net
Sales |
|
$ |
138,163 |
|
|
$ |
119,206 |
|
|
$ |
75,350 |
|
|
$ |
56,586 |
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
|
|
116,341 |
|
|
|
103,927 |
|
|
|
64,371 |
|
|
|
49,472 |
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
21,822 |
|
|
|
15,279 |
|
|
|
10,979 |
|
|
|
7,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
|
16,551 |
|
|
|
10,873 |
|
|
|
8,138 |
|
|
|
5,469 |
|
Legal and
financial advisory expenses, net - unsolicited bid and related
matters |
|
|
- |
|
|
|
1,833 |
|
|
|
- |
|
|
|
509 |
|
Acquisition
related costs |
|
|
- |
|
|
|
638 |
|
|
|
- |
|
|
|
235 |
|
Amortization
& depreciation expense |
|
|
796 |
|
|
|
239 |
|
|
|
398 |
|
|
|
143 |
|
Total
selling, general and administrative expenses |
|
|
17,347 |
|
|
|
13,583 |
|
|
|
8,536 |
|
|
|
6,356 |
|
|
|
|
|
|
|
|
|
|
Income from
operations |
|
|
4,475 |
|
|
|
1,696 |
|
|
|
2,443 |
|
|
|
758 |
|
|
|
|
|
|
|
|
|
|
Interest,
net |
|
|
301 |
|
|
|
86 |
|
|
|
291 |
|
|
|
24 |
|
Foreign
currency transaction (loss) gain |
|
|
(66 |
) |
|
|
276 |
|
|
|
25 |
|
|
|
161 |
|
Income
before provision for income taxes |
|
|
4,710 |
|
|
|
2,058 |
|
|
|
2,759 |
|
|
|
943 |
|
Provision
for income taxes |
|
|
1,046 |
|
|
|
641 |
|
|
|
615 |
|
|
|
362 |
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
3,664 |
|
|
$ |
1,417 |
|
|
$ |
2,144 |
|
|
$ |
581 |
|
|
|
|
|
|
|
|
|
|
Income per
common share - Basic |
|
$ |
0.84 |
|
|
$ |
0.31 |
|
|
$ |
0.49 |
|
|
$ |
0.13 |
|
Income per
common share - Diluted |
|
$ |
0.84 |
|
|
$ |
0.31 |
|
|
$ |
0.49 |
|
|
$ |
0.13 |
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding - Basic |
|
|
4,254 |
|
|
|
4,351 |
|
|
|
4,260 |
|
|
|
4,255 |
|
Weighted
average common shares outstanding - Diluted |
|
|
4,254 |
|
|
|
4,351 |
|
|
|
4,260 |
|
|
|
4,255 |
|
|
|
|
|
|
|
|
|
|
Dividends
paid per common share |
|
$ |
0.34 |
|
|
$ |
0.34 |
|
|
$ |
0.17 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP and Non-GAAP Financial Measures
(unaudited) |
|
|
|
|
|
|
|
|
(Amounts in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table
below presents net sales reconciled to adjusted gross billings
(Non-GAAP): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
Three months ended |
Adjusted Gross Billings (Non-GAAP) (1) |
|
June 30, |
|
June 30, |
|
June 30, |
|
June 30, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Net
sales |
|
$ |
138,163 |
|
|
$ |
119,206 |
|
|
$ |
75,350 |
|
|
$ |
56,586 |
|
Costs of
sales related to sales where the Company is an agent |
|
|
307,818 |
|
|
|
212,632 |
|
|
|
159,770 |
|
|
|
102,152 |
|
Adjusted
gross billings (Non-GAAP) |
|
$ |
445,981 |
|
|
$ |
331,838 |
|
|
$ |
235,120 |
|
|
$ |
158,738 |
|
|
|
|
|
|
|
|
|
|
|
(1) We define adjusted gross billings as net sales in accordance
with US GAAP, adjusted for the cost of sales related to sales where
the Company is an agent. We provided a reconciliation of adjusted
gross billings to net sales, which is the most directly comparable
US GAAP measure. We use adjusted gross billings of product and
services as a supplemental measure of our performance to gain
insight into the volume of business generated by our business, and
to analyze the changes to our accounts receivable and accounts
payable. Our use of adjusted gross billings of product and services
as analytical tools has limitations, and you should not consider
them in isolation or as substitutes for analysis of our financial
results as reported under US GAAP. In addition, other companies,
including companies in our industry, might calculate adjusted gross
billings of product and services or similarly titled measures
differently, which may reduce their usefulness as comparative
measures. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below
presents net income reconciled to adjusted EBITDA (2): |
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
Three months ended |
|
|
June 30, |
|
June 30, |
|
June 30, |
|
June 30, |
Net
income reconciled to adjusted EBITDA: |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
3,664 |
|
|
$ |
1,417 |
|
|
$ |
2,144 |
|
|
$ |
581 |
|
Provision for income taxes |
|
|
1,046 |
|
|
|
641 |
|
|
|
615 |
|
|
|
362 |
|
Depreciation and amortization |
|
|
796 |
|
|
|
239 |
|
|
|
398 |
|
|
|
143 |
|
Interest expense |
|
|
36 |
|
|
|
41 |
|
|
|
18 |
|
|
|
24 |
|
EBITDA |
|
|
5,542 |
|
|
|
2,338 |
|
|
|
3,175 |
|
|
|
1,110 |
|
Share- based compensation |
|
|
616 |
|
|
|
400 |
|
|
|
337 |
|
|
|
233 |
|
Legal and financial advisory expenses, net - unsolicited bid and
related matters |
|
|
- |
|
|
|
1,833 |
|
|
|
- |
|
|
|
509 |
|
Acquisition related costs |
|
|
- |
|
|
|
638 |
|
|
|
- |
|
|
|
235 |
|
Adjusted
EBITDA |
|
$ |
6,158 |
|
|
$ |
5,209 |
|
|
$ |
3,512 |
|
|
$ |
2,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
Three months ended |
|
|
June 30, |
|
June 30, |
|
June 30, |
|
June 30, |
Components of interest, net |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
Amortization
of discount on accounts receivable with extended payment terms |
|
$ |
(42 |
) |
|
$ |
(108 |
) |
|
$ |
(17 |
) |
|
$ |
(46 |
) |
Interest income |
|
|
(295 |
) |
|
|
(19 |
) |
|
|
(292 |
) |
|
|
(2 |
) |
Interest expense |
|
|
36 |
|
|
|
41 |
|
|
|
18 |
|
|
|
24 |
|
Interest,
net |
|
$ |
(301 |
) |
|
$ |
(86 |
) |
|
$ |
(291 |
) |
|
$ |
(24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) We define
adjusted EBITDA, as net income, plus provision for income taxes,
depreciation, amortization, share-based compensation, interest,
legal and financial advisory expenses, net – unsolicited bid and
related matters and acquisition related costs. We define effective
margin as adjusted EBITDA as a percentage of gross profit. We
provided a reconciliation of adjusted EBITDA to net income, which
is the most directly comparable US GAAP measure. We use adjusted
EBITDA as a supplemental measure of our performance to gain insight
into our businesses profitability when compared to the prior year
and our competitors. Adjusted EBITDA is also a component to our
financial covenants in our credit facility. Our use of adjusted
EBITDA has limitations, and you should not consider it in isolation
or as a substitute for analysis of our financial results as
reported under US GAAP. In addition, other companies, including
companies in our industry, might calculate adjusted EBITDA, or
similarly titled measures differently, which may reduce their
usefulness as comparative measures. |
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