Good morning, everyone, and thank you for participating in today's conference call to discuss Wayside Technology Group financial results for the First Quarter ended March 31st, 2022. 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 first-quarter 2022 earnings press release, which was issued yesterday 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 will also be available for webcast replay on the company's website. Following the management's remarks, we will open the call for questions. I would now like to turn the call over to Mr. Mansouri for introductory comments.

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 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 measures in accordance with SEC rules. You will find reconciliation charts and other important information in the earnings press release and Form 8-K we furnished to the SEC yesterday. I will now like to turn the call over to Wayside’s CEO, Dale Foster.

Thank you, Sean, and good morning, everyone. During the first quarter, we continued to build up our strong momentum from the end of last year. We grew our top-line double-digits in Q1, with our net income increasing to 79% and our Adjusted EBITDA was up over 60%, reflecting the inherent operating leverage in our business. These significant improvements are a testament to the execution of our core initiatives. More specifically, we're continuing to generate organic growth with our existing vendors and customers while adding new and disruptive vendors to our line card. This organic growth was most evident in our top 20 vendors, as we grew gross selling with this group by nearly 20% during the quarter to $171 million. This reflects the strength of our relationships with our most meaningful partners and it showcases both the value we are offering as well as the ability to evaluate and partner with the right companies that are bringing innovative products to the market. We've seen a significant increase in the sheer number of brands looking to partner with Climb this past quarter. While we remain committed to a purposefully limited line card, we did enter into a relatively high number of new partnership agreements in Q1. Climb evaluated over 50 new perspective brands and signed eight new agreements. One of the most notable partnerships we saw in Q1 was a partnership with Cato Networks. Cato Networks is a network security company that develops Secure Access Service Edge technology, which combines enterprise communication and security capabilities into a single cloud-based platform. While KDLE networks is a relatively new company established in 2015, they pioneered the convergence of networking and security into the cloud and created a highly differentiated offering that we know will be well-received by our bar and LSP partners. On…

Thank you, Dale, and good morning, everyone. As we review our financial results, I want to remind everyone that all of our comparisons and variance commentary refer to the prior year quarter, unless otherwise specified. Well, some might consider our first quarter of 2022 as a bit boring because it was a continuation of our team successfully executing on our business strategy. As reported in our earnings press release, adjusted gross billings, which we all realize is a non-GAAP measure, increased 13% to $238.7 million compared to $210.9 million in the year-ago quarter. This increase reflects continued organic growth from new and existing vendors. In addition, net sales in the first quarter of 2022 increased 13% to $71.3 million compared to $62.8 million in the prior year quarter. Gross profit in the first quarter of 2022 increased 11% to $12 million compared to $10.8 million for the three months ended March 31, 2021. Again, as Dale mentioned earlier, the increase in GP was driven primarily by organic growth from our top 20 vendors in both the U.S. and Canada, In addition to the on-boarding of new vendors. Our gross profit as a percentage of adjusted gross billings was 5% versus 5.1%, which represented 16.8% of net sales compared to 17.3% in the prior year quarter. Q1 of 2021 included a large sale in our solutions business that had a significant impact on our GP and was unusual on nature. Excluding that transaction, GP as a percentage of both AGB and net sales increased quarter-over-quarter. SG&A expenses in the first quarter were $8.6 million compared to $8.8 million. SG&A, as a percentage of adjusted gross billings, improved to 3.6% compared to 4.2% as we continue to emphasize lean operations and scale our infrastructure. Net income in the first quarter of 2022…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. [Operator Instructions] We will pause for a moment as callers join the queue. Our first question comes from Bob Sales of LMK Capital Management. Please go ahead.

Hi. Good morning. Congratulations on the quarter. It was excellent and the progress with agreements in the M&A front. I did have a bookkeeping question. When you think about your receivables. And I'm going to ask this simply because it would jump out potentially to an analyst in terms of just pure DSOS. How do you think about your receivables relative to gross billings revenue and then the offset payables so we can think better about your management of that particular figure?

You want to take that Drew?

Yes. Bob, thanks for participating and thanks for the question. Our receivable portfolio tends to turn fairly quickly. Most of our customers are on a net 30 billing and payment cycle. We do have agings that we'll get into the 45 and 60 day bucket from time-to-time based on the cyclicality of some of the treasury management functions of our customers, especially the larger DMRs. But at the end of the day, our DSOs are probably sub 45, on the payable side we normally have opportunities where we can garner rebates, or early payment discounts with our vendors. So we will take advantage of those and there may be a slight mismatch between the receipt cycle and the payment cycle on the vendor side, but normally, fairly closely aligned on any particular month or quarter-end. I think a number of our large customers probably participated in a little bit of window addressing at the end of year-end, so we did have enough longation, if you will, with some of those payment cycles, but normally fairly consistent month-to-month, quarter-to-quarter. And the cash flow as you know, very strong in any particular quarter.

I don't see any reason that those cycles will change dramatically in any particular direction as if you turn the model a little bit to the cash flow and working capital requirements of the business. We do have that excess cash and we're diligently looking to deploy that into some acquisition activity that hopefully we can be sharing with the market in the not-too-distant future, but nothing definitive at this point. I will turn it back to you Bob if you have a follow-up question.

Yeah.

Real quick let me jump over. Real quick on the vendor's side of things we look at the contracts that we have with each one of the vendors, and we follow those stuff. But because of our relationships are so tight with these emerging vendors that are getting to market then they are very flexible with their terms in those contracts and then there's the terms per opportunity. So we're in lock step with them as far as our receivables go, and if there's extended terms, if we pass them on, but, yeah, it's important to us. It's each week as our executive team, we meet to talk about receivables because it's a big part of the company.

Yeah, and I only asked the question, your receivables were down sequentially. And also gross billings versus GAAP revenue distorts the absolute metric. And I ask it just to -- you're doing such as sensational job financially. I don't want to give you the ability to, in this conference call, to explain some perspective so that someone can't nit pick that down the road, because your cash flow looks great, right?

Yeah.

The second thing I want to ask about was -- I'm sorry, did you want to respond to that? I just missed it.

No I agree.

Okay. Help me out. What are your thoughts on the eight new agreements and looked at 50. Are you -- is it more the -- a conscientious expansion of the number of names that you want to deal with at this point or is it casting a wider net to understand over the course of time those vendors that will become additional strong top 20 players.

For this past quarter, it's really a bit about timing. With some of the new vendors hitting us at that period of time, and then we'd look at them pretty deeply, and we take our time vetting them. And it just happened to be a timing thing where we were looking and seeing quite a few of them come at us, we've got a couple of more in the pipe that are sizable and we wouldn't even entertain them as we're trying to onboard these eight if it wasn't the -- important to the management and also the sales teams. We get pretty much everybody involved when we look at a new vendor to say, hey, this fit, is this right in our portfolio, where does it fit into our six segments of technology, and then we sign from there. I'd like to think and we haven't been able to verify it, I'd like to think this is because we're becoming more prevalent in the marketplace and a little disruptive to our competitors that we're getting seen by more vendors, and emerging what's coming up, instead of us going after them. So we'll move that out over the next year than probably the continued process.

Okay. I'm going to keep going, I get a feeling there might be not many color since I was the first one on queue. On M&A front should we expect the continued nature of the size, and you mentioned the complementary aspects of it, but we -- should we expect the same size of ongoing acquisitions or do you think that you'll be looking at anything that will scale up bigger?

Well, I can tell you without disclosing too much that we've looked at very sizable transformative to the company. We still have some of the wings that are very small. And then I can't say too much but as far as the size range from very small tuck-ins to transformative in certain regions as I talked about, what our three strategies are as far as acquisitions go, and then some that -- they're just by the actual vendors that they hold that would help take that vendor across all of our different regions. And that's one of the things that we did with inter-regionally acquired them and they had turned micro. We haven't done a great job of getting them into the UK or the UK then U.S as much as we would like. So seeing that throughout the rest of this year, you'll start seeing just through the press releases that some of those vendors creeped into other regions. We feel like we're successful in one region, why can't we not be in the other? So it's a frustration that we have that we'll focus on the remainder of this year as well.

Okay, and the last question. What are you seeing with the challenges in Europe that we're hearing about, some of the supply chain issues, and I guess at this point, just the nervousness of the financial markets. Are you seeing any signs though that buyers are getting a little bit slower in making decisions or more cautious in spending?

So two things, I was on a call yesterday with Supermicro, Supermicro is a hardware supplier, they're like a Tier 2 for anybody that wants to buy servers that are in HP, IBM, or Lenovo. And that's the issue, it's the hardware piece. We're 80% software as far as our portfolio. The only thing that slows down with us would be if there's a big implementation going out that has hardware that goes with it, that our software, they might delay the buying cycle until they get everything ready to go on ship. Other than that, we are in the two hotter spaces. We are in security which everybody needs and everybody claims that they have a security product, I don't care for you're data storage, you still say that you have security to watch to make sure you are backing a brand somewhere. So that's the hotspot. And then the other one is data center. When I say data center, people are migrating, whether they're migrating to the Cloud, they're using a hybrid Cloud setup, or they're trying to do requests back off the cloud because of some of their workloads didn't work well enough in the Cloud. So we're in the two good spaces. We haven't seen that concern with the interest rates in the market slowing down in some spaces. We're going to watch our receivables and as we give credit to even more costing, we're used to this cyclical nature over the last 20-something years of our careers.

Got it. Okay, thanks. Congratulations. And I'll pass the time.

Thanks, Bob.

Our next question comes from Howard Root, a private investor. Please go ahead.

Thanks, guys, and congratulations on another great quarter. I've got two questions, one for Drew and then one for Dale. For Drew, I do everything based on adjusted gross billings which I think you guys do too, because the determination whether it's a sale or not it just in the accounting division. And then based on that I look at the gross profit and then the SG&A and your gross profit, thanks for the comment on what happened there from last year being a little aberration at the high, but Q4 to Q1 I think went from around 4.8% to 5% sequentially. Do you see that being, that 5% gross profit based on adjusted gross billings, as being your new normal, is it going to creep up from that? And then on the SG&A side too, the decrease of 200 grand from last year to this year surprised me. Great job on that on you're always have a great on cost management, but do you see that, $8.6 million, do you see that going up? What do you see on trends on the SG&A line and on the gross profit line?

Yes, so thanks, Howard, and good questions. On the gross profit line, if I were to provide directional guidance if you will, I would say that that's a steady-state for us, and we can move the needle slightly as Dale referenced when we bring on new vendors they tend to build over a period of time. They may have a more attractive economic value to us in terms of the contract that we negotiate and how we deliver and go-to-market on their behalf. I would say that 5% is a pretty good number on our Solution business. If that continues to grow with our Microsoft CSP relationship that we can incrementally move that in the correct ascending direction. I don't know how much stronger we can get above 5% to be honest in the next year, but that's something we think about every day and work on with our vendor relationships and how do we manage early pay discounts and rebates and all the things that go along with both on our customer side and our vendor side. Again, directionally I'd say that's a good trend for us and we expect to maintain that at least through the balance of this year. On the SG&A side, to Dale's credit and the sales and marketing team's credit, last year we really evaluated how do we compensate our sales folks, and we wanted to make sure that we are incentivizing them properly, but also ensuring that we can create the right metrics to drive the business. So Dale's created a really good infrastructure and organization with our sales teams that enable us to further leverage around either brand sales specialists and products or territories, so we're getting more efficient and therefore able to drive more adjusted gross billings with about the same type of headcount. So I think we'll continue to see SG&A improve incrementally, not significantly, but that will continue to improve as well as we move forward into the balance of 2022. Dale, if you have any thoughts or comments.

Yeah, let me comment real quick. Thanks, Drew. On the margin, we talk about it a lot. We're more in a margin business, as far as us doing margin expansion and where we can do that. So when we look to expand margins, we have to give more value. What that value is, you get certain -- paid a certain amount of margin just to do pick, pack, and ship, and then what do you do on top of that? What are you bringing to the marketplace? So we've talked about before doing solutions, much more service and technical things. That the issue is this, it's important to us internally, how can we scale that to the rest of the business and that's the job that we need to do. As we sign vendors, can we do more for them to garner a higher-margin? So that's what we look at constantly, and we do have some things in the works that we'll announce over the next six months.

Okay, and Drew, when you say improved SG&A, I mean you're not going to drive SG&A down on an absolute number. I assume that's going to tick up. It's just on a percentage number. It's not going to increase as high as your adjusted gross is going zero, is that what you're saying?

Correct, yes. On a gross basis, but on directional basis as a percentage of AGB, yes.

Okay, great. And then my question for Dale, just looking back I think you've been running the company for three-plus years maybe four years now, and from when you started you just had this focus on getting to your top 20 accounts, not taking every business that walked in the door and focusing and you've done a great job doing that, the results speak for themselves, and now you're doing a billion dollars in adjusted gross billings and growing double-digit to 13% increase. And as your CFO said, it's just another boring quarter, which begs the question for the next level of your visibility and everything is giving guidance. I think you're, when I look at it, you're company is now at a point where you can start talking more about the plan to get to two billion, three billion and adjusted gross billings or what the trend is for next four quarters. And it will give us investors and ability to really model this out and see what's happening. And I'll encourage you to do it in the next call, I'm not going to ask about specific numbers here, but maybe you could give some perspective now that you've gotten this thing really focused on your top 20 accounts and geographic expansion. Without accounting for acquisitions, do you see this double-digit revenue or AGB growth continuing? Its 15% your target, is 20% your target, is this a billion-dollar adjusted gross billing year getting to 1.2, but where do you see it and then when can you start giving guidance looking forward now that the business really is -- it seems to be in a really solid position?

Yes. On the guidance front, I'll talk about that. We've talked -- we had our Board of Directors meeting in this week, earlier this week, and we talked about it because we have a good board that comes from a lot of different backgrounds. So it gets discussed, it's becoming much more of a talking point. I think you'll see that in the next two quarters we'll talk more specifically about that. But to your question, as far as our growth and where we see it, we're trying to pick off, and I think I've said on the last call, we're trying to pick off more of a Tier 2, Tier 3 vendor approach because we have a good wide net on who we're calling on. I wanted some more products to that group of resellers. And with that, we need to have some vendors that are not just emerging, that can bring us $4 million or $5 million in gross sales per year, but we can move the needle to 10 to 20. It is transformative to the company. So that's what you're going to see. Like I said, we don't give guidance, but that growth rate, low double-digits, that's what we focus on internally, but we have some things to fix. We have a new ERP implementation that we're kicking off. Drew and his team have kicked it off a couple of months ago, that's going to be transformative to the company to continue to make sure that we we keep our SG&A at the right level so we can actually scale. And we -- I don't believe we're at the scaling point yet in the company or that we're at that real inflection point, we can feel it coming, but we still have to get our systems in line to be able to onboard vendors, onboard customers, and transact more efficiently. And right now great systems that we've built over the years, but not for the size that we are and we're going to.

So just to follow, what do you see as transformative growth size-wise, is this -- this market is huge, but your segment is the smaller end of that. Is this potentially a $5 billion adjusted gross billings company excluding acquisitions, do you see that in a five-year plan or is this getting up to a maximum where you've got to acquire to get the business to continue to grow at this rate.

It's a combination. Now we want to acquire just because we think what we're doing is good in the states and we can acquire and move those into different geographies. The targets are all gone, like I said before, in the State, so we're going outside of there. But yeah, $5 billion in five-years, I wouldn't say that's outside of the norm that we could do. And there's not going to be targets that are going to do -- just by acquisitions, get us there. It's going to be organic, it's going to be some other pockets or adjacent markets that we look into. But if you look at the smallest of the big three IT distributors, which is Aero at $30 billion, there's a huge gap between us and Aero and then you have Ingram and Tech Data's Synnex on top of that in the $40s and $50 billion. So there's a lot, but we just don't want to keep driving to adjusted gross billing, we do want to do both. We want to increase our sales and we want to try and expand our margins and areas that we can. It won't show up overall, but it'll show up in certain pockets that we become that more entangled with our customers because that's what we want. I want a customer for 10 years, not 10 orders. And we're going to keep that same mantra as we go no matter what.

Did that lose you Howard?

Yeah. You cut out there. Sorry about that but I think I caught most of it and I always listen to replays if there's anything I missed. Congratulations on a great quarter, and I just encourage you next call, spend a couple of minutes talking about the long-term, you know, the company and the guidance kind of going forward as much as you can.

You got it.

Howard, as Dale referenced, we did a deep dive with our board, sort of a strategic session and you must have been the fly on the wall because we absolutely we'll be starting to share some, I'd hate to say guidance, but sort of directional trends that we're looking forward to over the next two to three years, so at least you all will have a sense of some guideposts, but we won't be uber specific butt we absolutely will provide some directional thoughts and guidance to the market after our Q2 earnings call.

Thanks, guys. Great quarter.

Thank you.

Our next question comes from Bruce Lindermann, a private investor. Please go ahead.

Hi, me and my wife are shareholders for over 20 years. We want to thank you for the great job you've done with this company over -- since you've taken over. Our question is, there's very, very -- the liquidity is very problematic. Sometimes it could be $2 or $3 during the trading day. And even though it's not fashionable to split a stock at these levels, maybe it's possible that some stock split to at least get more shares into the market and make it more -- because to attract investors, especially institutions, they've got to be able to get a descent number of shares and they also have to be able to get liquidity, so that might give us some liquidity. What are your thoughts?

Thanks, Bruce. We talk about it in the various meetings as far as the exact comment you made as far as the 40 goes, we haven't come up with exact plan that the company is going to go forward, but I can tell you it gets discussed, it's not like we're bidding and saying, hey, it is what it is. We will look at different levers that we can pull, we think that our stock -- the people look at it and say, hey, this is a good value and where the company is going to go. So we need to do more work on that side. I can tell you just personally we're just -- we're so focused on driving the business and we need to look -- and that was part of our strategic meeting this week with the Board, as far as where we're going to go, what's important to our shareholders, and guidance came up and liquidity comes up in almost every meeting. So we hear you, we don't have answer for you today.

That's -- listen, thank you, guys, for everything. You've done a very nice job. Thank you.

You got it. Thanks, Bruce.

This concludes the question-and-answer session. I would like to turn the conference back over Mr. Foster for any closing remarks.

Thank you, Operator. I'd like to close this call thanking all of our stakeholders and especially thank you to our growing global employee book count. We just got a great team. Wherever we go, we are making a difference. You'll see more and more of our company's names out there. Climb is very prevalent and our new GrayMatter transformation in the U.S. is getting more and more attraction, so you'll see that. Thank you to all and all of our stakeholders.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.