Press release·03/11/2025 21:02:31

Overview

Our Company is a value added IT distribution and solutions company, primarily selling software and other third-party IT products and services through two reportable operating segments. Through our “Distribution” segment we sell products and services to corporate resellers, VARs, consultants and systems integrators worldwide, who in turn sell these products to end users. Through our “Solutions” segment we act as a cloud solutions provider and value-added reseller, selling computer software and hardware developed by others and provide technical services directly to end user customers worldwide. We offer an extensive line of products from leading software vendors and tools for virtualization/cloud computing, security, networking, storage and infrastructure management, application lifecycle management and other technically sophisticated domains as well as computer hardware.

Factors Influencing Our Financial Results

We derive most of our net sales though the sale of third-party software licenses, maintenance and service agreements. Our sales are impacted by the number of product lines we distribute, sales penetration of those products into the reseller channel, product lifecycle competition, and demand characteristics of the products. Our sales are also driven by sales force effectiveness, customer service, competitive pricing, and flexible payment solutions. External factors like IT spending and customer demand also impact our sales.

We operate in a competitive environment where gross margins have historically declined due to competition and product mix changes. We grant discounts, allowances, and rebates to customers which can vary period-to-period. We have implemented cost efficiencies to operate profitably as margins decline.

Gross profit is calculated as net sales less cost of sales. Selling, general and administrative expenses are mainly employee-related costs, facility costs, IT infrastructure, and professional fees. We monitor accounts payable, inventory turnover, and accounts receivable turnover to measure capital efficiency.

Our sales, gross profit and results can fluctuate quarterly due to factors like industry conditions, product demand, merchandise returns, weather, holidays, and changes in our product offerings.

Historically, we have returned value to investors through quarterly dividends and share repurchases. The technology, distribution and services sectors are subject to substantial stock market volatility, which can impact our stock price.

We have not been significantly impacted by inflation, as technology changes and product life cycles generally cause product prices to decline, requiring us to sell new products and increase unit sales to grow revenue.

Financial Overview

Net sales increased 32% to $465.6 million in 2024 from $352.0 million in 2023. Gross profit increased 42% to $91.1 million in 2024 from $64.2 million in 2023. SG&A expenses increased 27% to $56.5 million in 2024 from $44.3 million in 2023. Acquisition related costs were $2.3 million in 2024 and $0.6 million in 2023. Amortization and depreciation expense increased $1.5 million to $4.3 million in 2024. Net income increased 51% to $18.6 million in 2024 from $12.3 million in 2023. Earnings per diluted share increased 49% to $4.06 in 2024 from $2.72 in 2023.

Critical Accounting Policies and Estimates

The Company’s financial statements are prepared in accordance with US GAAP. Key estimates and judgments include:

Revenue recognition - Determining performance obligations, allocation of sales prices, and whether maintenance is distinct from software licenses.

Allowances for expected credit losses - Considering historical experience, aging of receivables, and customer ability to pay.

Business combinations - Valuing acquired assets and liabilities, including intangibles and contingent consideration.

Goodwill impairment - Assessing qualitative and quantitative factors to determine if goodwill is impaired.

Intangible asset impairment - Evaluating recoverability based on undiscounted future cash flows.

Income taxes - Assessing the realizability of deferred tax assets.

Foreign exchange - Entering into forward contracts to hedge currency exposures.

Recently Issued Accounting Pronouncements

The Company is evaluating the impact of new accounting standards related to expense disaggregation, income tax disclosures, and segment reporting.

Results of Operations

The following table shows key financial metrics as a percentage of net sales:

Metric	2024	2023
Net sales	100.0%	100.0%
Cost of sales	80.4%	81.7%
Gross profit	19.6%	18.3%
SG&A expenses	12.1%	12.6%
Acquisition costs	0.5%	0.2%
Depreciation and amortization	0.9%	0.8%
Income from operations	6.0%	4.7%
Other (expense) income	(0.6%)	0.1%
Income before taxes	5.4%	4.8%
Income tax provision	1.4%	1.3%
Net income	4.0%	3.5%

Key Business Metrics

The Company uses GAAP and non-GAAP financial measures to evaluate performance, including net sales, gross profit, net income, adjusted EBITDA, and effective margin (adjusted EBITDA as a % of gross profit).

Adjusted EBITDA was $39.6 million in 2024 compared to $24.6 million in 2023. Effective margin increased from 38.3% in 2023 to 43.5% in 2024.

Gross billings, an operational metric, increased 42% to $1,785.3 million in 2024 from $1,260.4 million in 2023. Gross billings margin was 5.1% in both years.

Year Ended December 31, 2024 Compared to 2023

Acquisitions:

• Acquired DSS on July 31, 2024 for $20.3 million
• Acquired Data Solutions on October 6, 2023 for €15.0 million

Net Sales:

• Total net sales increased 32% to $465.6 million in 2024
• Distribution segment net sales increased 36% to $441.9 million
• Solutions segment net sales decreased 12% to $23.7 million
• Relied on 3 key customers for 43% of total net sales

Gross Profit:

• Gross profit increased 42% to $91.1 million in 2024
• Distribution segment gross profit increased 47% to $78.3 million
• Solutions segment gross profit increased 18% to $12.8 million
• Customer rebates/discounts were $19.7 million in 2024 vs $12.8 million in 2023
• Vendor rebates/discounts were $6.1 million in 2024 vs $7.9 million in 2023

SG&A Expenses:

• Increased 27% to $56.5 million in 2024
• 3.2% of gross billings in 2024 vs 3.7% in 2023

Other Expenses:

• Acquisition related costs were $2.3 million in 2024 vs $0.6 million in 2023
• Foreign currency loss was $0.3 million in 2024 vs $0.6 million in 2023
• Change in fair value of contingent consideration was $3.6 million in 2024

Income Taxes:

• Effective tax rate was 25.6% in 2024 vs 26.6% in 2023

Liquidity and Capital Resources

• Cash and cash equivalents decreased $6.5 million to $29.8 million at December 31, 2024
• Net cash provided by operations was $33.7 million in 2024
• Net cash used in investing was $26.4 million, including $20.9 million for acquisitions
• Net cash used in financing was $13.0 million, including $4.2 million in net debt repayments
• Authorized to repurchase up to 545,786 shares as of December 31, 2024
• Revolving credit facility of up to $50 million, with no amounts outstanding as of December 31, 2024

The Company believes it has sufficient liquidity and capital resources to fund operations and investments for the next 12 months. Longer-term capital needs will depend on various factors including economic conditions and the Company’s ability to generate cash flow.