Climb Global Solutions, Inc. (CLMB) June 2026 Conference Transcript

Up next, we have Climb Global Solutions. They're trading on NASDAQ under symbol CLMB. On behalf of the company, we have Dale Foster, CEO, and Matthew Sullivan, CFO.

We have a small crowd, so we'll make this real informal. We'll give a little bit of background on each one of us and then kind of take you into the Climb story and take it two pieces as far as where we've come from and where we're taking the company. So my background, 30-plus years in the distribution, in the IT distribution market. I was running a company called Promark Technology out of Annapolis Junction, Maryland. And we were everything in the data center space. And we were selling IT data center storage compute into what we consider a two-tier market. So as a distributor, we're selling into resellers, and you'll be familiar with some of these names, like CDW, SHI, Insight, a couple of those are public companies, and then the 30,000-plus identified resellers in North America. In 2012, there was a roll-up of distributors in North America, and in 2012, we sold it to Ingram Micro. So Ingram Micro, and we'll talk about this in the future, three big distributors in North America. Ingram Micro, a public company on the NASDAQ, Tech Data Cinex, another $60 billion-plus company, and then Arrow Electronics. So those three make up $150 billion of IT spend. They're the largest three in the world. The next size down to that is about a $6 billion company that's out there. So sold it to Ingram. It was strategic sale. They looked at us for government contracts, and also the reason we were popular is the emerging products that were out there, and we were good at identifying emerging products. If you're familiar with companies that we signed that were earlier in their stages, and this flows all the way through to where Climb is today, and that is companies like Nutanix, Rubrik, Data Domain. They were all bought up either by EMC or Dell over the years. so we acquired by Ingram Micro like I said 130 140 million dollar company then spent five years at Ingram Micro and look for the next thing we couldn't really move the needle of course Ingram was being acquired went private public private now public and look for the next thing I came to this company called Lifeboat so if you look through the the decks as far as where we came from Public company, 1995, under the shell of WSTG called Wayside, and the operating distributor was called Lifeboat. I've been here eight years. Matt will be about the same tenure, and we changed the name to Climb four years ago. I think something like that. And it's all underneath CLMB on the NASDAQ, as the presenter mentioned. A couple things when I came to Climb and I realized what they needed. They weren't good. They were about a $500 million company. What they needed was vendor recruiting. And in distribution in North America, vendor recruiting is the lifeblood, right? It's the Field of Dreams movie. You know, if you build it, they will come. If you have the vendors, you can get the customers just by service and by selling. So that's the biggest thing we did. The next thing we did was add a field sales force. And that field sales force sits in region. We have 16 regions in North America, and then we have some dedicated teams for the bigger resellers. So our go-to-market is technology in the software space as a distributor. And I'll let Matt introduce himself, and then I'll jump into the slides.

So I'm Matt Sullivan. I'm the company's CFO. I joined what was back then Wayside in 2019, about a year after Dale did. I joined the company as the corporate controller, and then eventually was promoted into the chief accounting officer and more recently, about a year and a half ago, the CFO. And my background before Climb was I started my career for a number of years here in Manhattan in the public accounting world and then previous spent two years in a privately held company before joining Climb.

So I'm going to jump around a little bit, and we'll make this really interactive as a small group. As I mentioned, these are some of the distributors that exist in the world. Arrow, Ingram, Cinex Tech Data, all over $50 billion companies. Infinegate in Europe, Espernet in Europe, and those guys just had some events. And then Climb sits as more of an emerging distributor that's out there. We're looking for emerging technology and taking it to a reseller base. We do not touch the end-user market. That's for our resellers to do. Here's the two different strategies. And you've seen the book out there, Red Ocean, Blue Ocean. We turned it into a red mountain, blue mountain. We compete where we want to compete in the market space. We work with resellers that we want to work with, MSPs, dealers, whatever they want to call themselves, as long as they're a two-tier base and going to the customer. If you look at our line card, our line card, you know, we have some tier ones. We have Microsoft in Europe. We have Adobe in the U.S. But we aren't selling Dell, HP, Cisco that's out there. we're selling the challengers to those companies or the challengers to those companies in their software segment. We're about 90 percent in the software space, and that's where we'll continue to stay. So this is the markets that we see and have identified that we sell into. So here's how we kind of stack up with the big three. We have vendors in line or in common with them, and we still garner the market share, the line share of the market with competing with them. And why is that? Is we out-service our competitors. A lot of share shift happens toward climb, and it's all based on service. If you look at the IT market, you're saying, hey, you're selling software. Why doesn't it just go to a hyperscaler like an AWS? You go and download your software and an end user use it. Why do you need all this channel stuff? And the number one answer to that is it's a more efficient route to market to get a product to an end user as far as the selling and marketeering to that. uh the the channel itself is very well established uh you have distributors not there very many of them now and then you have a consolidation of resellers like i said in our space probably uh 10 to 15 000 that actually sell the actual products but it's a quick way for startups and emerging product or vendors to get their products to market and if you think about it you come up with a great idea you're an ex-cisco engineer that you say hey i do sdwan and I think I can do it better than Cisco. You start a company called CloudGenics. CloudGenics starts SD-WAN. It's got this whiz-bang product. Okay, I got to go hire a bunch of people. First, I start with four or five sales reps. Wow, somebody wants to buy my product. Chipotle was one of the big ones. Now, I'm like, how can I expand this? I'm going to have to hire more and more direct sellers, super expensive, and if you look at it, the channel already exists for the margin profile of 25%, 30%. I can get in front of probably 5,000 end users in six months. I can't do that with direct sales force without spending a lot of dollars. So that's how it typically goes to market. And that is what we've seen as a maturity of the channel and it coming back and swinging back this way to the channel marketing side of things. So we're looking for those emerging vendors. We're looking now as we've grown from 500 million to over 2 billion in gross billings. we're looking for vendors that are moving the needle bigger for us instead of an emerging startup. And what happened to CloudGenics, it was one of our vendors at the time, they got bought by Palo Alto and Palo Alto sucked them back in after they got to a critical mass of a hundred and some million dollars in ARR. So that's the market. Any questions on that or where we fit? Like I said before, this is Gartner's Magic Quadrant slide if you see in the technology space. we're looking at challenger products. We do have some that sit in the leader space, but most of the time we're looking at challengers. We're not looking for niche players or visionaries. Yes, we talk to them, but they need to get to critical mass to move the needle for climb and for us to bring them on board. The most amount of time that we spend is onboarding a vendor in the emerging space. We sign probably 10 to 15 new vendors each year, and we try to shed 10 to 15 new vendors each year to try to stay in that 70 to 50 range of vendors that we can actually focus on, because I say focus, and it's a lot to focus on for technology. So if a company's in its early stages, we'll talk to them. If they don't have the right channel leaders, if they don't have the right go-to-market, the channel mechanics mean more to us than the product itself. You could have the most amazing product, but if you don't have the right channel mechanics or haven't got the channel leaders, we know that this is gonna be a long, drawn-out process, and we don't wanna burn our man hours. As soon as Charles Bass says, and he's our chief alliance officer, says, hey, you know what, we're going to sign these guys? That's when all the man hours kick in. We have to onboard them, SKUs, get connected with all of our customer bases, trainings, all those things happen. So we're very selective. We didn't used to be selective. Now that's a big thing for us. Can we get to $50 million? Can we get to $100 million with that product as a run rate? This is kind of the global IT spend or total addressable market that we see out there. 70% of our products are in the security space, cybersecurity space, and that goes all the way from a firewall all the way to an endpoint and everything in between on that. This is where we look as we're onboarding vendors. We do play in the data center in the cloud space, but it could be in the backup or we actually are doing some in the data center on the hardware side. Here's why we win. Just like the big tier one vendors go to the tier one distributors, they are a logistics company first. I spent my five years at Ingram. It's logistics. If I compete against Ingram today, I'm competing against a fifth-line manager that has no control over the field sellers that are at Ingram Micro, and there's about 1,400 of them in North America. When a vendor comes in to climb, they can get access to my field sellers the next day to take them into their top five resellers to get to their top five end users and each one of those resellers. So in front of my top customers, my top vendors, and of course my sales team, what I sell every day is speed. How fast can I get eyeballs on your product? How fast can I deliver that? How easily can we transact and how quickly can we collect the dollars that go through? So Climb, if you look at us in any way, we actually sell speed to market. And that's when our success really took off is how fast we can and officially can we can do things inside a climb. So what we're seeing with that, as we get more exposure to the vendor market, we're getting bigger players. So we signed Fortinet last year, they didn't, you know, we didn't prospect to them, they came to us. I was nervous at first, because I didn't want them to change the culture. They are a $60 billion dollar market cap companies you know three billion dollars in the u.s but it was a good fit because it was a personal person to person to person relationship with their teams and we know we're going to take share shift away from our competitors we didn't have a big crossover their products what was in our current portfolio um i can tell you q1 we did okay with fortinet as we kicked it off q2 we're up probably 10x over q1 and we'll continue to continue to see that grow as we take market share from our competitors and take their new products to market. This is the NASCAR slide with all the different logos on here with the different components. You know, our top 20 vendors make up about 86% of our overall. Some of them are good vendors because they cross sell and they're never going to get to be that size, but it's like, you know, you're going to get the burger and you're going to get the fries to go with it. We have cross level products. One of the things we hear from our vendor or from our customers every every day and that is we just wish you'd carry more products well I'm not going to carry you know tier one products but that's what they're looking for us because they have that customer experience and when I say customer experience yes I believe the best marketing is a handshake I say it all the time so we're out there in the field meeting with the resellers meeting with the business owners they want to buy more from us but once they decide to buy from us that's when the efficiency needs to kick in and we need to be much more efficient as how we go to market. So hence, new ERP system, new CIO that we are now connecting with our technology partners in a big way. I would love to get it where we have a back office finance that actually collects the dollars. And then on the front end, I just have sales and marketing and the rest of it's taken care of by our internal systems, whether they're AI, you know, generated systems or where they're EDI APIs, whatever that is, we want to get more efficient so we can just focus on the selling and marketing side. Here's my team. The team's been me a long time. I say a long time in this business, eight years. So a long time. Charles Bass came over with me from Ingram. Tim Popovich is our longest standard employee that's been at Lifeboat back in the day, so he tells us all the old stories. Like I said, Matt's been with us, and Carlos came from an acquisition we did in Canada. I'll talk about acquisitions in a second, and I'll let Matt kick over.

So here on this slide, we talk about the kind of shift in the company vision. So when the current management team that Dale just highlighted came on board, the company before that had really been mostly a lifestyle company, and it had, you know, continued along at a consistent gross billing and gross profit. I think the year before this one that's shown here, in 2019, it was about a $500 million gross billing company. before we started our shift in the company vision. So that shift in the company vision really focused on becoming a sales-focused organization, incentivizing our sales folks based on the gross profit dollars that they're generating and producing to the company, and then implementing the vendor recruitment plan, which Dale touched on a little bit. And then 2020 was when we started our M&A journey. The company had never done any acquisitions prior to 2020 since 2020 we've done uh six acquisitions uh we did two of them over in the uk one uh canada u.s uh focused back in 2020 we did another one in 23 in ireland uh in 24 we completed the data solutions acquisition or douglas stewart acquisition um of the uh they focused on in Adobe in the education space, and then the most recent one was a distributor in Greece that gave us a greater presence in that region of Europe. So that's kind of why here on this slide we start with 2020 and show the trajectory up to 2025. So really the gross billings and gross profit growth have been driven by a combination of these M&A activities in most of the given years, as well as the organic growth that we're experiencing. And we track or project towards each year or strive for each year, you know, a gross billing and gross profit growth in the low double digits, which is consistent with the security space overall, which is where we're most heavily focused. And then as far as gross profit goes, you know, that's a combination, same as the gross billings, that's a combination of the M&A activity and the organic growth we experienced here in North America, the gross profit percentage is slightly less than over in Europe. There's less competition in each of the geographies over in Europe. So it's a blended, on average, 5.1, 5.2% of gross billings. And that's really where we focus on is what that gross profit percentage is as a percentage of gross billings. And then here's just a couple highlights from our Q126. A couple things to highlight here. We did complete a four for one stock split back in Q1. So this 1889 was the stock price at that time. I think we closed yesterday at about $24 a share. But that is all adjusted after our four for one stock split that we completed earlier in the year. We have a significant volume of cash on hand at the end of Q126, that's really, you know, timing of receivables, timing of payables. We have some customers that have early pay arrangements where they pay earlier than their 30-day terms, and they receive additional discounts, whereas most of our vendor terms are in the 30 to 45-day range. And then the other thing to highlight here is no debt outstanding. We do have a $50 million revolver with JP Morgan. We've had that for about three years now. Before that, we had a slightly lesser are aligned with Citi for a number of years. We very rarely utilize that at this point in time. For the most part, our adjusted EBITDA converts right to free cash flow that we're able to not need to tap into that revolver at any point in time. Some other highlights, I think the biggest pieces to think about here for Q1, our gross billings and our gross profit continue to grow at a healthy, We, you know, that low double-digit growth rate that we talked about. Adjusted EBITDA, while it increased, it did not increase at the same level as the gross billings and gross profit, and that's because of those investments that we did to foster the beginning of the Fortinet relationship that we signed on at the end of Q4 of 2025. So normally when we sign on a new vendor relationship, typically we won't, you know, build out a dedicated sales team or you know invest heavy dollars at the beginning of the relationship this Fortinet relationship was was different than all the other ones you know usually it's once the gross profit and gross billings dollars warrant a heavily dedicated team as part of but as part of bringing on Fortinet into the client portfolio we committed to those heavy investments at the beginning of the relationship that we're confident will will pay off here in the latter part of Q2 and beyond. Here's just showing the net sales and gross billings growth. You know, the one thing, not to bore everyone with accounting fund here, but the one thing to think about is, you know, the true economics of the transaction are our gross billings metrics. Everything we talk about, gross profit as a percentage, gross billings, those are truly the economics that we're looking at in the transaction. That's the receivable amount that we're responsible for collecting from the customer that's you know that less five percent on average is the payable amount that we're responsible for paying to our vendor and therefore those are the receivable amounts and payable amounts that that remain on our balance sheet at any point in time whereas for u.s gap requires us to do a net sales adjustment we look at a number of things we look at every single skew that uh that we sell and every product that we sell and consider whether, you know, what the type of product is, whether it should be gross, meaning if I'm billing 100, I recognize net sales of 100, or if it should be net, if it's a security product that's requiring continued enhancements, continued updates from the vendor for that product to maintain its core functionality, then in those situations, you know, the $5 that I'm essentially recognizing as my margin would flow through in my net sales. So we try to avoid talking too much about net sales as it can fluctuate in a given quarter depending on what the product mix of our gross billings are for that period. And then coming here to gross profit and adjusted EBITDA, again, I kind of talked about the 5% is on average what our gross profit percentage is as a percentage of gross billings. We strive to increase that. Ways that we can increase that are continue to expand our business over in Europe. The gross profit margin profile over in Europe is higher than here in North America. On average, it's a little less than 5% here in North America, where it could be up to double that in Europe. So continuing to look at the M&A strategy, especially over in Europe, is a way we can continue to grow that. And then the other piece is adjusted EBITDA. So our adjusted EBITDA, some ad backs we include there are acquisition-related costs that we incur as we go and do diligence, legal diligence, financial diligence, tax diligence, whatever it might be on these potential acquisitions. Some other ad backs are in these transaction-related as well are fair value adjustments related to contingent earnouts. as those fair values increase, meaning those earn-out targets are achieved, which the earn-out targets in all of our acquisitions that we've done have been achieved, then there is incremental P&L component that gets recognized. So we include that as an add-back to adjusted EBITDA. And the way to kind of really, you know, think about, if anybody's ever listened to any of our investor calls, we talk about it a bit, where, you know, gross profit on average is 5% of the gross billings our sgna costs typically you know if you look at it over an annual period as as an example run at about 30 percent or three percent and then adjust what flows through to adjusted ebitda is is two percent um so that's typically how we ran as we continue to gain more efficiencies we've just rolled out a not well just seems like it was just but uh about two years ago now uh we We rolled out a new ERP system and we continue to push our teams, especially over in Europe to be more efficient. We strive to increase that drop through to adjusted EBITDA to a greater percentage than 2%. And then talking about capital allocation, we've historically funded all of our acquisitions that we've done to date, the six that we've done to date have all been funded utilizing cash on the balance sheet for the most part our adjusted EBITDA flows through to free cash flow there is not much additional capital requirements of the company we did incur a bit of cost associated with the ERP implementation which we have the bulk of is behind us from the from the prior years but there are not really any other significant capital requirements of the of the business investment highlights you know kind of just reiterating the things we've talked about we have 7,000 plus transacting customer and vendors so we have a big a big mix there we do focus on our you know 100 plus vendor relationships but our core line card is really our 50 to 70 main vendors that our field sales managers know inside and out are out there selling to the resellers in their market day in and day out and then once a vendor you know no longer fits into that 50 to 70 profile which those 50 70 profile not only are the field sales managers knowing those products inside and out but they're also getting marked dedicated marketing resources but once a vendor might fall out of that that doesn't mean we completely you know no longer transact with them we do have a piece of our business called climb elevate which is just purely transactional it's it's grown you know it started as as one person running that and in the past year uh the trailing 12 months it's a 100 million plus gross billing business but we'll continue to transact those those vendor lines it's ultimately really fulfilling if there's a vendor or a customer that needs a one-off uh product fulfillment that might not be on our core line card we'll go out there and source that from a vendor relationship to um help satisfied whatever

those customers needs or ultimately their end user needs are that's really it I'll kind of pause here for uh any questions just just real quick a couple things I just want to leave you with as far as you know why climb um uh as you get to know us and you can take a look at our background and stuff the stuff we put out there in the marketing side of things so uh like Matt said strong balance sheet right no debt in the company uh one of the things and Bill's sitting here and we'll talk to him but he's got to know the team's uh just strong culture inside the company when we look at acquisitions we look at the culture there we we're not buying ip we don't have ip in the company so it's all based on relationships and the culture that that company has we walk away from companies that were like hey this their go-to-market doesn't fit ours their vendor interaction doesn't market with ours or work with ours uh so we spend a lot of time i mean it the the great company that we just acquired took three years right to acquire We just had to make sure there was a good fit for us. It was opportunistic. Other ones we look at and say, hey, this is such a good fit right off the bat, and then we've got to make the numbers work. As far as multiples, when we're acquiring companies that are less multiple than we're trading at, even though our stock has been up and down, we acquire in that 4.5% to 8% range or 8 times range that's out there, and we look at that very closely. Like we said, no debt. here's why you know we're still opportunist or bullish on where we're going as a company we have two things that are important we're extremely small we can double in size without being disruptive to any of the market number two we have that many vendors coming at us right 400 vendors that we looked at last year we only signed the relationships with 13 of them it is a it is the number one thing that we do as far as looking at vendors can we get to 50 to 100 million with them in a couple years. So we vet, vet, vet those vendors. And the last thing is acquisition targets. If you've been in this business or any business that you're acquiring companies, it takes a lot of energy. Matt and I are the M&A team because we want to be that close to who we're going to be working with and who we're going to acquire. We want to look at the targets and say, who's going to stay? Who's going to go? Is the owner of the company going to be moving on? Are the first lieutenants capable of running that company? I don't want to run it. I want it to be in that region with a sales and marketing and go-to-market similar to what we are and just give them more products. The number one thing that we hear from potential targets is that it takes so long to get vendor relationships. It's easy for us because they start in North America and move to the rest of the world. So we believe, and this is our strategic acquisition plan, is that we sign in North America, we sign a global contract, and we can take it to the rest of our regions very quickly when our competitors cannot. And that has worked in many cases. It hasn't worked as fast as I want it to. It's starting to speed up as we're getting larger vendors that want to get into other regions that they feel they're either underrepresented, poorly executing, and they think that CLIMB can do that for us. So with that, questions? Go ahead, Bill.

Dale, what's the divide?

Yeah, so the firms are not in North America. So the distribution consolidation happens. So there's three big ones that are typically, you know, Ingram Micro, I spent five years, they'll tell a vendor that's not a certain size, we want a exclusive and you want all these things, and you have to pay half a million dollars into our marketing fund or you don't get signed. They're like, we're just trying to get out of startup phase, right? We're only doing $10 million. I'm not going to spend half a million bucks. So that's number one. Number two is 60% of all IT in the world is still in North America. So any company that's sizable needs to get real in the U.S. because it's easy. It's a quicker route to market. Once they get there, they start expanding. Here's what they typically do. They typically hire, in region, a manager to start that region. And it just takes, you know, it took Ingram 18 months to launch a product that we launched in North America, any other region. And it takes these vendors to launch. We can launch in two weeks. So when we signed a global contract and we signed Canonical, we launched Canonical two weeks later because my European team wanted it. Well, a lot of these vendor teams don't even have representation in the countries or they in the distributor without representation won't take their products to market when my team will. We still believe people buy from people. And we're just seeing that that's it's moving. and what we're finding is vendors that we do take to the European market now and now to Southern Europe is that they're much quicker to accept because they're already buying other products from them. It just gives them a wider portfolio. I think we're almost out of time. Anything else? I appreciate all of our contact stuff is in the ideas notes. Reach out to us anytime. I'm based in Annapolis, Maryland, and Matt's in New Jersey where our headquarters is. So thank you.