Good morning, everyone, and thank you for participating in today's conference call to discuss Wayside Technology Group's financial results for the fourth quarter and full year ended December 31, 2021. Joining us today are Wayside's CEO, Mr. Dale Foster; the company's CFO, Mr. Drew Clark; and the company's Investor Relations adviser, Mr. Sean Mansouri with Elevate IR. By now, everyone should have access to the fourth quarter and full year 2021 earnings press release, which was issued yesterday afternoon approximately at 4:05 p.m. Eastern Standard Time. The release is available in the Investor Relations section of Wayside Technology Group's website at waysidetechnology.com. This call will also be available for webcast replay on the company's website. Following management's remarks, we'll open the call for questions. I'd now like to turn the call over to Mr. Mansouri for introductory remarks.

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 our 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. Our presentation also includes certain non-GAAP financial measures, including adjusted gross billings and adjusted EBITDA as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measure 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 Wayside's CEO, Dale Foster.

Thank you, Sean, and good morning, everyone. 2021 was a record year for Wayside as we generated record financial results across all of our key financial metrics, including adjusted gross billings, net sales, gross profit, EPS and adjusted EBITDA. The same applies to our fourth quarter results as we closed out the year on a very strong note. As we introduced last year, our growth initiatives fall into three buckets: driving organic growth with existing vendors and customers, adding new emerging vendors to our line card and delivering on our acquisition objectives. In our existing vendor network, we continue to execute on deepening our partnerships and increasing wallet share. In 2021, we generated $588 million of adjusted gross billings in North America with our top 20 vendors compared to $471 million in the year prior, a 25% increase. This reflects both the value we are offering to our partners and customers as well as our ability to evaluate and partner with the right emerging technology companies that are driving growth and bringing value-added products to market. As we have often stated in the past, we evaluate hundreds of emerging vendors each year, and we are very thoughtful in our approach, selecting the right partners to add to our line card. For perspective, during the fourth quarter alone, we evaluated nearly 40 vendors and only signed 4, including Atlassian, Sonatype, Vultr and IRONSCALES. IRONSCALES is the fastest-growing emerging security solution in the world, Sonatype is a developer-friendly, full-spectrum software supply chain management platform and Vultr is an incredibly reliable cloud platform that offers a simple, modern infrastructure. We look forward to providing a new sales channel for these companies and offering their products to thousands of valued resellers in our network. Turning to our acquisition objectives. Q4 marked the one-year anniversary of our CDF acquisition that was really our first acquisition of size and our first test as a team in terms of integration. Overall, CDF has been an excellent addition to our organization. In 2021, their business grew 17%, accounted for $10 million of our total gross profit and 25% of our overall growth in gross profit. The transaction has been accretive to our gross profit margin, and we are still just scratching the surface in terms of cross-selling our vendor networks and leveraging cost synergies, which are two areas that we will improve upon as we move forward. In 2022, we expect to better leverage our vendor networks to drive growth between the regions, and we also plan to integrate both CDF and Wayside back-offices under a uniform ERP platform, which will lead to additional cost synergies down the road. As for potential M&A targets, we are continuing to evaluate opportunities both in the U.S. and abroad. As a reminder, we are focused on targeting companies that will be accretive to earnings and fit our strategic direction. The potential targets will fit into one of our defined categories: geographical reach, vendor perspective and servicing solutions. We have ample room on our balance sheet and financing capacity to execute both tuck-ins and acquisitions of size. Looking at the year ahead, 2022 is already off to a great start. In January, we became an approved vendor for the NCPA contract, which is a leading national government purchasing cooperative. There are over 90,000 agencies nationwide from both the public and nonprofit sectors that are eligible to utilize this cooperative purchasing contract, and this partnership will allow us to leverage their extensive agency network to deliver best-in-class security and IT solutions across the government, health care and education sectors. In less than a month, as an approved vendor, we signed our first NCPA contract with Datadobi. So I believe we have a great opportunity ahead of us. Also, I want to touch on a key addition to the Wayside team. In February, our Board of Directors elected Greg Scorziello to join the Board as the seventh director; six of them are independent. Greg brings over 30 years of experience creating and building global operations for early and mid-stage companies. Throughout his career, Greg has held several international leadership and management roles with companies like Immuta, Activio and IBM. He currently serves as a board member, strategic adviser and investor in multiple technology companies as well. We plan to leverage his extensive knowledge in the European technology market to continue building our business overseas and we are thrilled to have him on our Board. Before passing it to Drew, I would like to take a moment to recognize the continued turmoil that is escalating in Ukraine. We have very little business activity involving customers or vendors in Russia, and we have already placed a hold on transacting business with those companies. Our thoughts go out to the family members that are affected by this troubling turn of events. With that, I will turn the call over to Drew, and he will take you through our financial results. Drew?

Thank you, Dale, and good morning, everyone. As Dale just noted, we're excited to have Greg join our Board and look forward to working with him and the entire board as we continue to grow Wayside through our organic growth and acquisition strategies. As we review our operating results, I want to remind everyone that all the comparisons and variance commentary refer to the prior year quarter unless otherwise specified. As reported in our earnings press release, adjusted gross billings, a non-GAAP measure, increased 16% to $262.1 million compared to $226.4 million in the year ago quarter. We generated strong organic growth of 12% or $25.1 million, with incremental contributions of $10.6 million from CDF. Net sales in the fourth quarter of 2021 increased 6% to $75.5 million compared to $71.4 million. This reflects both continued organic growth and the benefit from the acquisition of CDF. Excluding the acquisition, we increased net sales by $2.8 million year-over-year, with CDF contributing an estimated $1.3 million. As we've noted before, the ASC 606 adjustment to calculate net sales from adjusted gross billings is impacted by our vendor and product mix. CDF has a larger portion of vendors, including the Microsoft CSP solution for which our role as agent represents a higher component of the economic transaction. In addition, several of our more recent vendors and those with higher growth rates have a larger portion of the billing related to maintenance and support, which is ultimately provided by the vendor and thus not recognized in net sales. Gross profit in the fourth quarter of 2021 increased 20% to a record $12.6 million compared to $10.5 million. Our gross profit as a percentage of adjusted gross billings increased to 4.8% versus 4.6%, which represented 16.7% of net sales compared to 14.7% in the prior quarter. Again, the increase was driven by organic growth and the addition of $1.2 million from our CDF acquisition. SG&A expenses in the fourth quarter were $8.2 million compared to $7.7 million. SG&A as a percentage of adjusted gross billings declined to 3.1% during the fourth quarter compared to 3.4% in Q4 2020. This trend reinforces Dale's comments on our ability to leverage and scale our investments in the business, including the integration of our acquisitions. Another record for the company was net income generated in the fourth quarter of 2021, which increased 36% to $3.4 million or $0.78 per diluted share compared to $2.5 million or $0.58 per diluted share in the prior year quarter. Adjusted EBITDA in the fourth quarter increased 17% to $5.1 million compared to $4.4 million. The increase was driven by the organic growth, improved operating leverage and CDF acquisition benefits. Effective margin, defined as adjusted EBITDA as a percentage of gross profit, was 40.7% in the fourth quarter of 2021 compared to 41.4% in the year ago quarter. However, I would like to point out the quarterly trend in 2021 continued to improve as we increased our effective margin from 37.4% in Q3 and 32.0% in Q2. This is an excellent barometer of our ability to grow and deliver an increasing amount of the incremental gross profit to earnings. With regard to our balance sheet, cash and cash equivalents held flat at $29.3 million as of December 31, 2021 compared to the same period in the prior year. While working capital increased by $8.6 million during this period, we continue to remain debt free with no outstanding borrowings under either our USD 20 million or GBP 8 million credit facilities. As Dale previously noted, we are actively pursuing M&A opportunities and our cash position, working capital and leverage-free balance sheet puts us in a position of strength as we move forward. On March 1, our Board of Directors declared a quarterly dividend of $0.17 per share of common stock. The dividend is payable on March 18 to shareholders of record as of March 14. As we look ahead into 2022, our strong liquidity position continues to provide us with the flexibility to execute on both our organic and inorganic growth strategies, as I just noted a moment ago, in addition to allowing us to expand our relationships with new vendor networks and customers across the globe. This concludes our prepared remarks, and we'll now open it up for questions from those participating in the call. Operator, I'll turn the meeting back over to you. Thank you.

(Operator provided instructions for the Q&A.) And our first question comes from the line of Howard Roop, he is a private investor.

Congratulations, guys, just a simply outstanding quarter. If you had a stock analyst covering the stock, it'd be due for a rerating and I'm still shocked that there's no analysts covering you yet. But congrats on the quarter. I'll ask two quick questions, one quick question and one longer question. The quick question is more for Drew. Accounts receivable kind of took a big bump up in Q4, up by about $25 million. Can you give me a little explanation of what happened? Is that a continuing trend, or is that just a one-time deal?

Howard, thanks for participating in the question. We had a couple of our larger customers that delayed payment toward year-end. So it's a little bit of a double-edged sword. Obviously, it grows the receivable portfolio, but it fully collected post year-end. The benefit though to the company is some of those customers did not take advantage of the early pay discount, which had a positive impact on our gross profit and the margin for Q4. So no indication that there's a trend there, it was just probably a timing of them doing some balance sheet management on their side.

Okay, great. A larger question for Dale: as we've discussed before, I look at adjusted gross billings because allocating that to net sales is just an accounting decision. When I look at adjusted gross billings, the sequential jump was impressive, year-over-year and quarter-over-quarter up about $35 million, from $227 million in the third quarter to $262 million in Q4. You are also maintaining gross profit, which I view as about 4.9% of adjusted gross billings, while SG&A is relatively flat. Do you see this as a one-off bump, or what caused that big spike from Q3 to Q4 in adjusted gross billings? Do you think gross profit will remain around 4.9 to 5% of adjusted gross billings and SG&A will stay flat? Looking at those metrics, is this a new trend for the company going forward or a one-time occurrence in Q4?

A couple of things. Let's talk about gross profit. Our goal is to be in that 5% range. We're always looking at this and often discuss shedding some of our lower-margin vendors on the line card and replacing them with new emerging vendors we've selected. We talked about adding more, and we continually evaluate that. We should earn higher margins on some of the new vendors when we engage with them. Regarding Q3 to Q4, Q4 is when many customers finalize budgets and renewals, so we always see a stronger Q4 than Q3. Once we expand our public sector practice, which I'm familiar with from my past experience, we expect Q3 to strengthen as well. Right now we leverage other customers' contract vehicles for public sector work, but we want to do it under our own GSA contract and, as announced, the NCPA contract. It's a good trend. Many of our vendors are recovering and gaining strength, and we're riding that wave with them as people are getting out, buying more, and setting up their systems.

Okay. If I could sneak one last question in. You mentioned acquisitions a little more than you did in prior calls. And just on that, how do you view the use of stock versus cash in making acquisitions?

Yes. We haven't had to use stock right now. If it's transformative, where we think we have to use some of our equity or capital, we would do that. But it's not something we think about right off the bat. It really depends on the size and how transformative the business is to the company. And I think we talk about it because it's front of mind for the entire management team. We didn't complete any acquisitions in 2021. We plan on them in 2022. But we've talked to a lot of companies, if I could put it that way, and we're getting close to some of them, so if this is going to happen, we're going to pull the trigger in 2022.

And our next question comes from the line of Bob Sales with LMK Capital Management.

Great performance. Just one comment and a couple of questions. I would say this playbook is just—here's my comment. This playbook is just so fixed for great things on the bottom line for the company and for the stock price. I would encourage you to think about this continued additive acquisition playbook versus transformative deals with a heavy stock component, which always adds significant risk. It seems there is solid runway for what you are doing, particularly with the new line card additions that will feed into 2022. So that's just one investor's view. The two questions I have are, first, could you dive a little deeper? You commented on ASC 606 and mentioned CDF, a larger portion of Microsoft revenue, and that some of your newer customers have more maintenance. Can you explain that a little more?

Go ahead, Drew.

Yes, we again, as Howard noted, it is really the accounting mechanisms at play here versus the economics of the transactions. Some of our newer vendors and those with higher growth, when we evaluate the full economic component of what we sell, are normally software licenses. We do not sell much hardware, so more than 88% of our adjusted gross billings and net sales are related to software solutions and applications. When we identify the components of what is delivered after installation by our resellers to the client, it becomes a mix issue, and some of these new products have a larger component that relates to ongoing support or maintenance from the ultimate vendor. That is the situation with the CSP products that we will continue to grow from CDF, and now that we have a full year of activity there it is a smaller balance in total but will continue to put a bit of downward pressure on the net sales number. We target net sales to be around the 30 percent range of adjusted gross billings, and we do not expect that trend to change significantly as we move into 2022 and beyond.

Okay. And then with sort of the major geopolitical events going on, and I would think the widespread concern on security across corporate and government networks. Can you give us a sense of the landscape in terms of sales opportunities now versus, say, six months ago and whether or not you're seeing an incremental interest in new offerings in sales inquiries?

Yes. I'll give you the upside: a lot of security vendors are coming to market that we're evaluating. You can see our portfolio is heavy on security, and the second largest portion is data center. On the downside, North America makes up the majority of our sales, the U.K. is the next biggest market, and then sales are sprinkled throughout Europe — that's really where we're selling to. We agree that many vendors have reported customers actively approaching them and looking for security solutions. With continued cyberattacks, customers want to know where their vulnerable areas are, and companies like SecurityScorecard do exactly that — they score you as a company so you can identify your holes and then look for the technology to plug them. I see opportunity; it's definitely up, though not off the charts. I don't know whether that's due to the world opening up after the pandemic or something else. I don't have insight into that.

And Dale, would you like to respond to my comment, perhaps with your view of what would intrigue you and tilt the scales towards considering a formative acquisition that might entail a heavier equity component and cost more?

Yes. I mean it would just have to be that size that made sense for us. I mean this is going to be a full management discussion along with our board, saying, 'Hey, does this make sense for our shareholders to do that.' But right now, a lot of the ones that we've done, we've been able to use our own cash. We still haven't tapped into any kind of debt facility. We would look at those first before we go to the equity piece. And I can't give you a number as far as transformative to do that. It would just be based on what that acquisition looks like.

Yes, let me just reiterate Dale's point, which is that we have really strong leverage capability on our balance sheet. We are having conversations with our existing lead bank, Citi, as well as others in the marketplace, about what types of structures we could put in place for acquisition financing. So we have two paths. To be honest, one would be a cash flow term type of facility, which would provide the market-rate leverage turn. But we also probably have greater capacity with an ABL facility, utilizing our receivable portfolio combined with the acquisition target. So if we do have that transformative opportunity, most likely we could use debt and cash on our balance sheet to consummate the transaction. The question for us would be if there was an incentive for the seller who wanted additional upside, and there could be a small equity component. But right now, the management team and the Board's thought process is that we would look to fund the transaction predominantly with senior and/or mezzanine-type financing.

Yes. Well, and again, the playbook I see is the tremendous return on invested capital and operating leverage that flows to EPS accretion; it's sort of in the sweet spot of where IT is right now and something you don't see very often. So I just think that playbook is wonderful.

We agree and thanks. And the team will record this for promotional activities in the future.

And I'm showing no further questions at this time. And I would like to hand the conference back over to Dale Foster for any further remarks.

Thank you, operator, and thanks again for everyone that's watching us, the Wayside family. I'd like to give everybody a little insight into what's going on in the company. We had our sales kick-off last week. We had everybody in-person, over 100 people. I think we had over 40 vendor reps in person, so it was great to see everybody. And the energy is there. I think some of it's from getting out of your houses and moving around a little bit more. So just a great energy, setting up plans for 2022. We see just some great growth opportunities that we're going to capitalize on. And I talked to my Wayside family that works every day that we have shareholders, we have employees, customers and vendors, all considered stakeholders. So I appreciate the stakeholders in the company and watching us. And with that, we can finish the call. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.