EATONTOWN, N.J., Nov. 10, 2020 (GLOBE NEWSWIRE) -- Wayside Technology Group, Inc. (NASDAQ: WSTG), an IT channel company providing innovative sales and distribution solutions, is reporting results for the third quarter ended September 30, 2020.

Third Quarter 2020 Summary vs. Same Year-Ago Quarter

• Net sales increased 16% to $60.9 million compared to $52.4 million.
• Gross profit increased 3% to $7.2 million compared to $7.1 million.
• Net income was $0.5 million or $0.13 per share, compared to $1.4 million or $0.32 per share.
• Net income excluding legal and financial advisory expenses, net - unsolicited bid and related matters and acquisition related costs, net of taxes (a non-GAAP financial measure defined below) was $0.8 million or $0.19 per share, compared to $1.4 million or $0.32 per share
• Adjusted EBITDA (a non-GAAP financial measure defined below) was $1.9 million compared to $2.4 million.

Management Commentary

“During the third quarter, we made progress in our recovery from the industry-wide lows of the pandemic in Q2,” said Dale Foster, CEO of Wayside. “We drove improvements in both net sales and gross profit as we continued our integration of Interwork and added several new vendors to our line card. Even as we operate amid pandemic-related uncertainties, our resilient strategy has allowed us to continue improving our market position in emerging technology distribution.

“Our investments in sales and marketing over the past year have enabled us to continue meeting the needs of our vendors and customers within this challenged environment. Just last month, we completed the integration of our U.S. sales team with Interwork’s Canadian sales team, and they have already begun to execute on multiple cross-sell opportunities in both geographies. The overall integration process has continued to progress smoothly, and we expect to realize additional cost synergies with Interwork in the fourth quarter.

“Yesterday, we announced our acquisition of CDF Group (CDF), a UK-based cloud, software and IT distributor and services provider. CDF’s two main go-to-market brands comprise Grey Matter, a value-added reseller that provides cloud, software, and technical services, and Sigma Software Distribution, which delivers innovative software products to resellers throughout the EMEA region.

“CDF brings a robust cloud services platform that will strategically enhance our positioning with both current and prospective vendors and customers, while significantly expanding our presence in the EMEA market. Businesses and consumers have become increasingly dependent on cloud-based infrastructures, and CDF’s cloud offerings will present a long-term opportunity to add more value-oriented services via Grey Matter’s consulting business, Cloud Know How, which will be margin accretive to our business.

“Looking to the fourth quarter and 2021, we plan to build upon our sales momentum as our business and industry continue to stabilize. We are continuing to build market awareness following our Lifeboat rebrand to Climb Channel Solutions, and this will be a consistent message as we onboard new vendors and deepen relationships with current partners. As recently reported by Gartner, after a tumultuous 2020, the research agency predicts that global IT spend is positioned for a solid recovery in 2021, and we expect to capitalize on these tailwinds through our strong operational foundation and strategic acquisitions.”

Dividend

Subsequent to the quarter, on November 3, 2020, Wayside’s board of directors declared a quarterly dividend of $0.17 per share of its common stock payable on November 27, 2020 to shareholders of record on November 23, 2020.

Third Quarter 2020 Financial Results

Net sales in the third quarter of 2020 increased 16% to $60.9 million compared to $52.4 million for the same period in 2019. Segment net sales for Climb Channel Solutions (formerly Lifeboat Distribution) in the third quarter increased 17% to $57.1 million compared to $48.8 million, and TechXtend segment net sales for the third quarter increased 8% to $3.8 million compared to $3.5 million.

Adjusted gross billings (a non-GAAP financial measure defined below) in the third quarter of 2020 increased 15% to $171.0 million compared to $149.1 million for the same period last year.

Gross profit in the third quarter of 2020 increased 3% to $7.2 million compared to $7.1 million for the same period in 2019. The increase in gross profit was driven by the acquisition of Interwork technologies, partially offset by a $0.4 million impact related to the implementation of an early-pay discount program for a large customer in the second quarter of 2020.

Total selling, general, and administrative (“SG&A”) expenses in the third quarter of 2020 were $6.4 million compared to $5.1 million in the same period in 2019. The increase was driven by sales related salaries and commissions, higher stock compensation expense and higher professional fees. SG&A expenses also include approximately $0.2 million of expenses from Interwork that the Company plans to phase out in the fourth quarter of 2020. As a percentage of revenue, SG&A was 10.8% compared to 9.7% in the third quarter of 2019.

Net income in the third quarter of 2020 was $0.5 million or $0.13 per diluted share, compared to $1.4 million or $0.32 per diluted share for the same period in 2019. Net income excluding costs related to the unsolicited bid and related matters and Interwork acquisition was $0.8 million or $0.19 per share, compared to $1.4 million or $0.32 per share in the third quarter of 2019.

Financial results include operations of Interwork Technologies effective May 1, 2020. The initial allocation of the purchase price of Interwork Technologies was based on preliminary information and is subject to adjustment during a one-year measurement period. This may include adjustments to intangible asset values, amortization and deferred taxes. More information is available in the Company’s quarterly report filed on Form 10-Q with the Securities and Exchange Commission.

Adjusted EBITDA in the third quarter of 2020 was $1.9 million compared to $2.4 million in the year-ago period.

Effective margin, which is defined as adjusted EBITDA (a non-GAAP financial measure defined below) as a percentage of gross profit, was 25.6% compared to 34.7% in the prior year period. The decrease was primarily driven by the aforementioned impacts to gross profit and increased SG&A.

Cash and cash equivalents increased significantly to $40.3 million at September 30, 2020, compared to $15.0 million at December 31, 2019. The increase was primarily driven by the early-pay discount program the Company implemented in the second quarter with one of its large customers. The Company remained debt free at September 30, 2020, and had no borrowings outstanding under its $20 million credit facility.

About Wayside Technology Group

Wayside Technology Group, Inc. (NASDAQ: WSTG) is an IT channel company and parent of Climb Channel Solutions, an international value-added distributor for Emerging Technology Vendors with solutions for Security, Data Management, Connectivity, Storage & HCI, Virtualization & Cloud and Software & ALM. Climb provides vendors access to thousands of VARs, MSPs, CSPs and other resellers. Climb holds an IT-70 GSA contract vehicle that provides resellers and vendors with a competitive edge within the Public Sector.

Additional information can be found by visiting www.waysidetechnology.com.