Good afternoon everyone and thank you for participating in today's conference call to discuss Wayside Technology Group's financial results for the third quarter ended September 30, 2020. Joining us today are Wayside's CEO, Mr. Dale Foster, the company's CFO, Mr. Michael Vesey, the company's Vice President of Alliances and Marketing, Climb Channel Solutions, Charles Bass and the company's outside Investor Relations Advisor, Cody Cree, with Gateway Investor Relations. By now, everyone should have access to the third quarter 2020 earnings release, which went out this afternoon at approximately 4:05 pm Eastern Time. The release is available in the Investor Relations section of Wayside Technology Group's website at waysidetechnology.com. This call is also available for webcast replay on the company's website. Following management remarks, we will open the call for your questions. I would now like to turn the call over to Mr. Cree for some introductory comments.

Thank you Mary. Before I introduce Dale, I would like to remind listeners that certain comments made in 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 actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject generally 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 speak 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, adjusted EBITDA, net income excluding separation expenses and non-GAAP earnings per share as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with the SEC rules. You will find reconciliation charts and other important information in the earnings release and Form 8-K we furnished to the SEC this afternoon. I will now like to turn the call over to Wayside's CEO, Dale Foster. Dale?

Thank you Cody and good afternoon everyone. Our business has made solid progress in our recovery from an industry-wide low of the pandemic from last quarter. We drove net sales and gross profit growth as we added new vendors to our line card and finalized the integration of Interwork. Our industry has slowly but surely began to stabilize since the initial impact of the pandemic. While we still see challenges in our market, our operational resilience has allowed us to continue improving our position as sales-driven organization. Some of our vendors are still in the early stages of their sales recovery while others are seeing higher activity levels as we heard into the fourth quarter. Q4 is typically one of the stronger sales periods for our industry as end customers deplete their budgets and begin to plan new technology investments before the New Year. This momentum is expected to pick up further in 2021 with research firm Gartner predicting that global IT spend will return to growth next year. Customer are extremely or increasingly optimizing their cloud infrastructure, enterprise software, data centers and other IT and communications solutions to more fully equip their businesses for a more flexible work environment. Our continued focus on emerging data centers, clouds and security products puts us in a strong position to continue meeting these needs in the market. With this as context, the improvements we have made in our sales and vendor recruitment process over the past year give us the flexibility to support our existing network while driving growth with new and emerging vendors. We have sustained the strength of our relationship based sales approach and are bolstering it even further as impressive sales team across North America. As of October, we have officially completed the integration of our U.S. sales team…

Thank you Dale and good afternoon everyone. The dedication and high touch approach of our sales team has enabled us to continue executing on our vendor alliance strategy at very high levels. Our alliance strategy has remained consistent and there are essentially two key elements. The first entails identifying, evaluating and onboarding high potential emerging tech partners. And while we spend a great deal of time and effort to successfully onboard new vendor partners, we spend an equal amount of effort to evaluate our existing vendor base so that we can continuously focus our sales efforts on our most successful brands. Our strategy has yielded both strong results and recognition from some of our key partners. In fact, Acronis, one of our shared partnerships with Interwork, recently recognized us as their U. S. CyberFit Partner of the Year in their Global Partner Awards. So we are honored to maintain such strong partnerships across our vendor base while adding some key new vendors to our line card. At the end of August, we launched an agreement to begin distributing Trend Micro's cybersecurity solutions to our U. S. and Canadian partner base. Trend Micro is a market leader in endpoint cloud and server security. This relationship was made possible by our integration of Interwork and one of several valuable cross-selling opportunities that have come out of the integration process thus far. And we look forward to making further progress to deepen our relationships with our combined vendor and VAR network. At this point, we have now fully onboarded all of the Interwork brands and are now focused on sales execution of the plans that we put in place this past quarter. In September, we announced we would begin distribution of CloudSaver's AWS cost optimization solution. CloudSaver focuses on managing companies' global network…

Thanks Charles and good afternoon everyone. Before we kick things off, I would like to remind everyone that our financial results include the first full quarter of operating results from Interwork. Now turning to our third quarter results. Net sales in the third quarter of 2020 increased 16% to $60.9 million compared to the same period in 2019. Climb Channel Solutions, formerly Lifeboat Distribution, segment net sales in the third quarter also increased 17% to $57.1 million while TechXtend segment net sales increased 8% to $3.8 million compared to Q3 2019. Adjusted gross billings, a non-GAAP measure, for the third quarter increased 15% year-over-year to $171.1 million. Gross profit in the third quarter increased 3% to $7.2 million compared to $7.1 million for the same period in 2019. As a reminder, comparability of our results is impacted by the acquisition of Interwork and the early-pay discount program with one of our larger customers we implemented beginning in Q2. In exchange for reducing the customer's client cycle by approximately 60 days, we are conceding approximately $400,000 of gross profit per quarter going forward under this program. Despite this slight offset to our short term profitability, we continue to view this program as a net positive as it has driven improvements in our working capital and significantly increased our cash position to $40.3 million this quarter. Total SG&A expenses in the third quarter were $6.4 million compared to $5.1 million in the year ago quarter. As a percentage of total net sales, SG&A was 10.5% compared to 9.7% in the third quarter of 2019. The increase was driven by sales related salaries and commissions, higher stock-based compensation expense and higher professional fees. SG&A expense also included approximately $200,000 of expenses from Interwork for the three months ended September 30, 2020 which we…

Thanks Mike. Jumping back into the CDF acquisition, as I mentioned earlier, CDF's cloud automation platform provides cloud service optimization and end-to-end support and migration services. This is the cloud platform we have been striving to develop internally and we plan to immediately leverage this platform across our businesses and geographies. Our extensive vendor network and commitment to developing emerging technology brands will increase CDF's offerings and introduce them to a broader customer base. CDF and Wayside have limited geographic and vendor overlap which provides ample cross-sell opportunities between U.S., Canada and EMEA. This includes additional support and growth opportunities for our long standing legacy business in the Netherlands. Climb, Sigma and Grey Matter will all leverage the Cloud Know How business which has a highly skilled technical team of adoption and migration specialists that have a strong expertise in Microsoft 365 and Azure. And bringing the Cloud Know How specialist onboard will enable us to serve as an outsourced intelligence resource for customers offering everything from technical support to highly targeted consulting services. This allows us to not only provide a more comprehensive and high-touch customer experience, but also capitalize on a key margin expansion opportunity as a value add service provider beyond IT distribution. Both Grey Matter and CDF's distribution brand Sigma are Microsoft Gold Partners holding nine competencies and various direct agreements with Microsoft. Our merger will facilitate the opportunity for both Wayside and CDF to further leverage Microsoft's strong global presence in the cloud and Bing Maps business along with other strategic areas. Altogether, CDF brings to Wayside more than 1,000 VARs from its network and deep relationships with notable vendors including Microsoft, Amazon Web Services, Adobe ManageEngine, SAP and many more. I am also pleased to share that CDF's current CEO, Andrew King, has joined Wayside as the President and General Manager of EMEA to lead our European operations. His leadership will be a key part of facilitating our expansion and ensuring a seamless integration process between CDF and Wayside. Before we open up the call for questions, I want to thank our team for their commitment to driving relationship with our vendors and cultivate new relationships with vendors that Interwork brought aboard. This cross-sell opportunity will only strengthen as we work to integrate Sigma and Grey Matter and expand both the geographic footprint of our network and the comprehensive nature of our product portfolio and support services. At this time, operator, we will open up the call for questions-and-answers.

[Operator Instructions]. Your first question comes from the line of Ed Woo. Your line is now open.

Congratulations on the quarter and on acquisition. Do you see yourself being tied up with this acquisition for a while? Or are you still going to be looking for other opportunistic deals currently?

Yes. Thanks Ed. We will continue to look. Two acquisitions in one year, you can imagine our infrastructure has been working hard and we had a good gap between the two. So we were able to get the full integration of Interwork done before of this one started. So yes, this will take a little bit of a different flair because of the cloud platform piece of it. But that's our real focus. They are going to be running independent. They have a strong infrastructure as a company right now. So they will continue to run on their own and we will take the pieces between the two companies that make the most sense. And it will be over a period of time. But are eyes are always open to look out there. Interwork was just a great acquisition as far as it fits very seamlessly to what we are doing in North America and we have high hopes for this one as well. It's just a great team in the CDF Group. You can imagine the excitement over the last couple of days with the teams getting to know each other on the exact level and then we will be digging down deeper as this week and months progress. But yes, looking forward to doing more with these with the teams.

Great. And my last question is, you guys have had pretty good results. Do you think that the business environment for software and services have returned back to normal? Or do you still see that there are business that are still recovering?

Yes. I still see recovery on the industry segment that we see. And I think we had the fatigue of everybody trying to work from home in Q2. And then we had everybody saying, okay, now can we get our productivity back up to where it was before? I think that we are getting closer to it and like I said it's the industry specific areas. We do into the Fed and state and local governments. They seem to be coming back online with some of our customers. So that's good. But we are one removed from the end user. So we kind of get it through kind of hearsay method. But I think this quarter will tell what industry will back up and running and hopefully the ones that are back on top and along with our vendors will continue to do so.

Great. Well thank you and good luck.

Thanks Ed.

[Operator Instructions]. Next question comes from the line of Peter Lux. Your line is now open.

Hi guys. How are you doing? It seems based on your gross margin that in order to gain business you sort to had to cut prices to retain business or grow business. Is that something that will continue?

I don't think so, Peter. And we won't continue to do that. When we have the uncertainty in the market, we look at territory by territory and sometimes we have to do that. We chose, which is nice because a lot of companies didn't get to choose, right, what they could do or not do. The business was either gone, was either there or not. So against some of the bigger competitors, we chose to take orders at a less margin to keep that business transaction flowing through because we didn't want to cut staff, right. We wanted to continue to transact as we come back out of this. Of course, the recovery is a little longer than we all expected. I think that goes across most industries. But I feel comfortable in what we actually did and we will see the margins come back as we continue to sell to our customers and what they are actually working as projects.

Are you guys still working mostly remotely? Or you have sort of double backed, back to the office?

So not New Jersey because New Jersey has more of a lockdown. I am in Maryland. We have some more staff coming onboard. So it kind of ebbs and flows as the case rate goes up. But what we have been doing and I am curious as my team, as long as everybody is being safe, as they travel as much as they can. So we have put in fewer field team traveling. And what they are doing is, they are going to states that are not near the lockdown. So myself, I have been to Missouri, Wisconsin, New York, quite a few different places along with the field team. I have vendors that are coming in. We needed airports to do face-to-face and everybody's looking forward to getting out. So yes, does it still really hurts the sale force. I have got my Southeast rep, he is having a struggle because people are just not moving around. So if people go out, I think we will see a more of that face-to-face. And you know there is nothing better than relationship selling when you can get back to shaking some of these hands.

So Mike, this is a question for you and I had asked you this question on the last call. It seems income statement has even gotten more complicated with charges and one-offs, et cetera. Is this something that you guys are going to try to clean up and have a more normalized statement going forward?

Yes. I will let Mike answer that but my take on that is, we had a lot of events that have happened in the last 12 months from the proxy fight all the way through to acquisition. And so there's a lot of messiness, way more complicated convoluted than I wanted it to be. I wanted it to get it back too much cleaner. But I will see if Mike wants to put his two cents in there?

No. I think that's fine. Good answer.

Okay. Guys, keep it up. See you later. Thanks.

Thanks.

Thanks Peter

At the time, this concludes our question-and-answer session. I would now like to turn the call over to Mr. Foster for closing remarks.

Thank you Mary. So here's a couple things I want to talk about. We have a strong Board of Directors, very supportive of what we are going to do in the past and going into the future. A lot of input as we have more people on our Board that are from the industry. I want to think I want to do a shout out to the teams. You know, two requisition, a lot of, you can imagine with accountants and lawyers. So Mike and his team, congrats. A lot of work has being done. We still a lot more to do. I can tell you that our focus is on growth in the company. I think we have proved that and actually the direction we are going. And if you look at some of the releases that we do with manufacturers, we are going upstream with manufacturers. And what I mean by that is, some manufacturers that are much more recognizable like if you saw the Seagate. And it's not Seagate disc drive, but it's into their solution side. So continue to watch us. We thank you for your support and I look forward giving update after Q4. Thank you operator.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Thank you.