Wayside Technology Group, Inc. Stock

Good morning, everyone, and thank you for participating in today's conference call to discuss Climb Global Solutions financial results for the third quarter ended September 30, 2026. Joining us today are Climb's CEO, Mr. Dale Foster; the company's CFO, Mr. Matthew Sullivan; and the company's Investor Relations Adviser, Mr. Sean Mansouri with Elevate IR.

By now, everyone should have access to the third quarter 2026 earnings press release, which was issued yesterday afternoon at approximately 4:05 p.m. Eastern Time. The release is available in the Investor Relations section of Climb Global Solutions website at www.climbglobalsolutions.com. This call will also be 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. 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 key operational metrics and non-GAAP financial measures, including gross billings, adjusted EBITDA, adjusted net income and EPS and effective margin 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. I'll now turn the call over to Climb's CEO, Dale Foster.

Thanks, Sean, and good morning, everyone. Our team delivered an exceptional third quarter, achieving record results across our key financial metrics, demonstrating the strength and scalability of our global platform.

Our strong performance was driven by growing momentum across our vendor portfolio and deepening our relationships with our partners. Within our line card, we generated sequential growth with 19 of our top 20 vendors during the quarter. We are seeing meaningful traction with several of our newer relationships that have added or expanded over the past year, underscoring our ability to identify innovative technology partners and develop into meaningful contributors over time.

During the quarter, we evaluated 32 new net brands that signed an agreement with only one, Harmonic Security, reflecting on our disciplined approach to our vendor selections. Harmonic is an innovative cybersecurity company focused on helping organizations securely adopt and scale AI technologies.

As AI adoption accelerates, we believe solutions like Harmonic's will become increasingly important in helping business capture and productivity benefits of AI while mitigating the associated security risks. This partnership further strengthens our security portfolio and positions our reseller partners to address a growing area of customer demand.

As these partnerships scale, we are also seeing a growing opportunity to work with larger, more established technology companies that may not fit in the traditional definition of emerging technology. While these vendors have already built meaningful scale and market presence, many are still looking for a more focused distribution partner that can help them expand their channel reach, strengthen reseller engagement and accelerate growth.

We refer to this segment of the market is called as challenger vendors, which aligns with the challenger category within Gartner's Magic Quadrant framework.

We believe this represents an attractive and underserved opportunity for Climb as these companies can benefit from the same high-touch sales, marketing and technical expertise that have helped us successfully scale our emerging vendor relationships.

Importantly, this is a natural extension of our existing strategy rather than a shift away from our core focus. By leveraging our specialized teams, established reseller network and proven go-to-market capabilities, we believe that we are well positioned to attract a broader range of technology partners and further expand our growth opportunities.

As we continue to expand our vendor portfolio and scale our global operations, we are equally focused on strengthening the infrastructure needed to support that growth. A key part of this effort is improving operational efficiency and leveraging technology to streamline processes across the business.

Our ERP systems serve as critical components of our global operating infrastructure, and we continue to focus on leveraging its capabilities to automate workflows and drive greater efficiencies across the organization. We are applying this approach to areas such as quoting various accounting functions along with digital connectivity to our vendors and partners where we see opportunities to reduce manual processes, improve productivity and support continued growth as we scale.

Separately, we are investing in the developing of our own cloud marketplace, which will provide a centralized platform for MSP and reseller partners to purchase, provision and manage cloud subscriptions. The platform is designed to simply -- to simplify transactions, consolidate billing and provide greater visibility across the customer life cycle.

Over time, we see an opportunity to leverage this infrastructure across all of our global territories, enabling us to scale recurring cloud transactions, strengthen our partner relationships and expand on new markets more efficiently.

Subsequent to quarter end, we expanded our European presence through the acquisition of NeoVAD, bolstering our position in France with a highly complementary team, reseller network and vendor portfolio. The transaction builds on the investments we have made in Europe and creates additional opportunities to deepen vendor relationships while broadening the solutions available to our channel partners.

Similar to our approach with Interworks, which continues to perform on plan since closing the acquisition earlier this year, we believe Climb's infrastructure can support NeoVAD growth while maintaining their local market expertise and customer relationships that have contributed to its success.

We believe NeoVAD is a strategic and cultural fit and an important part of the increasing of our scale across Europe operations -- European operations. Looking ahead, we will continue to identify cutting-edge technologies that can strengthen our line card and support organic growth.

We will also selectively pursue acquisitions that fit our culture and operating model with Europe remaining as an important focus area. With the growing momentum we are seeing across our business, we believe we are well positioned to close out the year on a strong note and deliver another year of performance -- of record performance for Climb shareholders. With that, I will turn the call over to Matt Sullivan for financial results. Matt?

Thank you, Dale, and good morning, everyone. A quick reminder as we review the financial results for our third quarter, all comparisons and variance commentary refer to the prior year quarter unless otherwise specified.

As reported in our earnings press release, gross billings in the third quarter of 2026 increased 40% to a quarterly record of $706.4 million compared to $504.6 million in the year ago quarter. Distribution segment gross billings increased 41% to $680.5 million, while Solutions segment gross billings increased 14% to $25.9 million.

Net sales in the third quarter of 2026 increased 37% to a quarterly record of $220.3 million compared to $161.3 million in the prior year period. This increase reflects strong double-digit organic growth from new and existing vendors.

Gross profit in the third quarter of 2026 increased 28% to a quarterly record of $33 million compared to $25.7 million for the same period in 2025. The increase was driven by organic growth from new and existing vendors in both North America and Europe as well as the contribution from Interworks.

Selling, general and administrative expenses in the third quarter of 2026 were $20.9 million compared to $16.2 million in the prior year period. The increase primarily reflects SG&A associated with Interworks and variable sales compensation attributed to the growth in organic gross profit.

SG&A in Q3 of 2026 was also impacted by our investments in IT infrastructure and automation initiatives designed to improve operating efficiencies. SG&A as a percentage of gross billings decreased to 3% for the third quarter of 2026 compared to 3.2% for the prior year period.

SG&A as a percentage of gross profit for the third quarter of 2026 was 63.2% and represents a decline from the first 2 quarters of 2026, which was 68.5% for the second quarter of 2026 and 76.7% for the first quarter of 2026. Net income in the third quarter of 2026 increased 69% to a quarterly record of $7.9 million or $0.43 per diluted share compared to $4.7 million or $0.25 per diluted share for the prior year period.

Adjusted net income increased 34% to $8 million or $0.43 per diluted share compared to $6 million or $0.33 per diluted share for the year ago period. Adjusted EBITDA in the third quarter of 2026 increased 35% to $14.7 million compared to $10.9 million in the same period of 2025.

Effective margin, which is defined as adjusted EBITDA as a percentage of gross profit increased 230 basis points to 44.6% compared to 42.3% for the same period of 2025. Turning to our balance sheet. Cash and cash equivalents were $66.9 million as of September 30, 2026, compared to $36.6 million on December 31, 2025. The increase in cash was primarily attributed to the timing of receivable collections and payables.

As of September 30, 2026, we had no debt outstanding or outstanding borrowings under our $50 million revolving credit facility. We ended the quarter with a strong balance sheet, giving us the flexibility to support organic growth, invest in our operating infrastructure and pursue strategic acquisition opportunities.

We remain disciplined in our approach to capital allocation, focusing on investments that align with our long-term strategy, drive earnings growth and create sustainable value for our shareholders. This concludes our prepared remarks. Operator, please open the line for questions.

[Operator Instructions] Our first question is from Keith Housum with Northcoast Research.

Great job on the quarter. Guys, just a few questions on the NeoVAD acquisition. I guess any differences in terms of their margin profile versus Climb's? Or is it pretty similar?

It is -- and Matt can give the details, but it's in line with a lot of our European acquisitions, right? So the margins are typically double what we see in North America, and this one is actually higher than that. And it really is attributed to how they actually work with their customer base, where they bring on vendor lines, negotiate a higher margin upfront as they're going to take a new vendor line into the French territory. And then that will decrease over time as the resellers take on more of the burden. But those margins still stay in that double-digit range compared to what we see in the U.S. is single -- mid-single digit.

Great. Go ahead, I am sorry, Matt.

I was just going to say, like just to reiterate what Dale said, I mean, it's consistent margins with what we've talked about with the Interworks acquisition. So it is slightly higher than our existing European business, but it is in those low double-digit gross profit percentages.

Great. And in terms of their historical growth rates, are they growing in line with you guys as well?

Go ahead, Matt.

In recent years, they've signed a couple of strong vendor lines in France. So their growth has accelerated in the last 2 years even greater than the growth rates that we've seen historically.

Great.

Keith, what's unique? I mean, we've been talking for a while. We've had one sales representative in France, Kamel, and he was both selling in France, our product portfolio, but also prospecting for us. So it's the relationship that he built with Jerome, the owner of NeoVAD. But the uniqueness of NeoVAD is that they have majority exclusive relationships with their vendors for France.

And they also sell into other French-speaking countries, but really the focus in France, and they get the higher margins because they have exclusivity. And then we -- like I've said this in the past, how do you target potential acquisition targets? We use our vendor network, and we've done it in this case as well, just to check on and saying, okay, how is this distributor? -- what's the go-to-market? So you find out a lot about them before you even maybe have your first meeting with them. So it works out very well.

Great. I appreciate that. And is management going to be staying on?

It is. Their full team will be staying on. They're just in a suburb of Paris. Matt's been out there for a while. I'll be heading back out for another trip in a couple of weeks.

Great to hear that. And if I just look here at Climb's results for the quarter, obviously, outstanding results. Sales and billings growing faster than gross profits there. So was there a mix change versus prior quarters here or just kind of the lower profitable business? Or maybe just the mix of what you have there, if you can give a little bit of color on that, please?

Yes. It goes back to Q2 when we had 18 of our top 20 brands growing at a really good clip, and now we have 19 of our top 20 brands. And I'll just put it out there. I mean the 20th brand is Adobe. And Adobe, it's not that it's not growing. It's a little flat, but it's still a great relationship with us, but that's our 19.

So it's really the core piece of our vendors that are growing at this clip to make it there. We didn't have any big one-offs that we've had in the past. So it's just -- like I said, just a really good quarter. Teams are firing on all cylinders. And like I mentioned in the prepared remarks, we're just so focused, and I think I said this in Q1 that this is going to be the year that we really get off and get our efficiencies going and putting -- we're putting quite a few dollars into our systems and our technical teams.

Great. So there's nothing really onetime item in the quarter. It's all sustainable growth from here, correct?

It is. And when we talk about our top 20 brands, we still have brands going in and out of our top 20, the ones that are growing faster, the ones that are becoming large. We just got some ones that we signed over a year to 2 years ago. I'll mention Darktrace. They're on that $100 million run rate as a vendor, and we're just seeing more of them.

And as we said before, I mean, we're still getting a lot of inquiries for vendors for us to take a look at that are just much larger brands and that come with a much larger share shift either from their direct model that they need to get more efficient or a share shift from our competitors.

Great. And I guess last question for me, and I'll turn it over. But in terms of your reseller count, do you guys -- I'm sure you guys track it, but you guys discuss it publicly in terms of how many resellers you're working with and how it's growing over time?

We do. We do it in our investor deck. And we talk worldwide, I think we give a range of 7,000 to 7,500 resellers that are a unique customer of ours. But yes, we don't -- we track it because we're mining our database all the time, especially our vendors to get into the resellers that are the closest fit to where they think they can go to market. But -- so that's about the number worldwide.

Our next question is from Vincent Colicchio with Barrington Research.

Nice quarter. In terms of organic growth, it looks like it accelerated this quarter. Should we expect this level of growth to continue in coming quarters?

We mentioned right at the end, that we expect to have a record year. We're already into -- almost done with October. And we're on that same trajectory that we did with Q3, just being up in the right over last year's Q4. So we're trying to clean up our line card. It's important for us.

We talk about these top 70 brands, and that's what we go to market with. And then everything from 70 above goes to our Climb Elevate team. And that's a real focus that we've had over these last really 6 months to get transacting lines that just don't meet the criteria of a go-to-market, to push them to Climb Elevate, which that team is growing very quickly and the rest of them so we can do more focus.

But yes, I mean, at this rate, I mean, we had a great quarter. There's no doubt about it. At the same level, of course, I wanted to be there. I think that's going to be a tough one, but we don't see it slowing down as far as this is just one bump of a quarter.

We just have a lot of our vendors performing at a great clip. And I think it's due to a lot of the -- we're 70% in the cybersecurity space and a lot of it is because people have to secure the networks, and they're securing it in so many different ways and making sure they go from a firewall to an endpoint to everything in between with everything in the news you hear about an AI agent escaped and is doing and creating havoc on somebody's system. So everybody is looking for ways to make sure that they aren't the news.

Effective margin increased 230 basis points year-over-year. How much of that improvement is structural? Should we expect that level or better to continue?

Yes. The -- so we're tracking for the full year on an effective margin percentage that we've historically seen, right? So when you look at it on a full fiscal year basis, we're in that low 40% range. That's definitely where we're continuing to track for 2026. We did do some initiatives and some cost savings initiatives in Q3 that we executed upon. So that brought the -- as I highlighted in the call, that brought the SG&A expenses as a percentage of gross profit down even compared to not only the first 2 quarters of this year, but in line with where we were in Q3 of last year. So it's really -- it's continuing to trend in the positive direction kind of where we've seen our historical effective margin.

And then some of the investments you summarized in the ERP system and in the marketplace. Will we see the results of that in margin in '27?

It won't be in margin. it will be an effective margin, right, as we get more efficient. And if I was to take it overall, structurally, we're in a great place in the company, but we're fine-tuning different areas. And with that, Vince, it's all about the technology that I mentioned our different ERP systems.

We have -- with Vishal, our new CIO, that came on board over like 2 years ago, a lot of things have changed. We have more projects, and I've mentioned in Q1 than we've ever had before, and we're completing more projects in a short period of time than we've ever had before. So I mentioned the cloud marketplace. It's something that's always been our agenda.

We have -- and I mentioned at the end of Q2 or the Q2 earnings release that we've hired somebody to do that, and we are well on our way. So we'll have some announcements for you in Q1 on our cloud marketplace and what that really will mean. I've said it all along, a portion of our business should be a self-service platform that we're building so our customers can interface and do it quickly and how they want to interact with us versus how they have to interact with us right now vendor by vendor.

And then, Matt, what was the revenue contribution of NeoVAD in '25? And then what monthly contribution should we expect in the coming quarter?

Yes. We haven't put that information out in our press release when we announced the acquisition, we announced the adjusted EBITDA impact, but we'll have more to talk about on the NeoVAD contribution as we move forward here.

And Vince, our CRO, Gerard Brophy, that runs our EMEA operations, NeoVAD will go up through him. And just since we have the announcement last week, we already have 4 of our existing vendors that have reached out and said, "Hey, we want to do something in France." We've said this many times, the French buy from French and Germans buy from Germans.

We think that we are just so positioned with our larger portfolio of vendors with NeoVAD's limited portfolio that we'll do a combination and figure out which vendors fit best for us and best for the NeoVAD and then take it into the French market. That's the real opportunity here.

Our next question comes from Bill Dezellem with Tieton Capital.

I have a group of questions. First of all, relative to the larger vendors wanting to work with Climb, does this ultimately imply that your growth rate will be accelerating over time as a result of just a larger dollar volume of revenue that can be transacted with larger vendors?

Yes, Bill, you're spot on, right? So if you look at it, and this is an internal discussion we have a lot, and that is if we're a $2.2 billion company, and we signed a $20 million line that we think we can get up to speed in 6 months, $20 million, it's only 1% of our overall revs. So we're looking -- and we -- if you go back 3 years ago, we were talking about, "hey, we'll sign a vendor line if we think we can get to $10 million in the first 18 months." And now we're saying there's 2 components of that. Can we grow that vendor line in our ecosystem?

And what is the share shift opportunity? And I mentioned it, is that share shift opportunity from competitors that are just not serving the customers like they need to be serviced? Or is it from a direct go-to-market that these vendors have? And I was with a very large vendor yesterday and having this exact discussion.

And the discussion goes kind of like this. They have $200 million of business that is unmanaged, and they know they have to put in the channel, and here's the good part of PE firms. They're owned by a PE firm as most of our vendors are. And the PEs are saying, "you've got to be more efficient now because this is what the market will bear as far as cost, how do you become more efficient?" and going direct and hiring expensive people and hiring and keep continue to build your infrastructure doesn't work.

When a channel exists that's already super efficient, why aren't we doing that? So they're pushing these management teams to go find channel people versus direct sellers. And that's how the conversation goes. So if you look at a vendor like that and said, okay, we've got $200 million unmanaged. We want to run this through distribution. What is it going to cost us and we start playing the financial game.

So those are the conversations we're having as well as back on -- and this goes to our challenger brands. If you look at Gartner's Magic Quadrant in the top left, that's the challenger brand. So we have quite a few sitting in there. And then our emerging brands, that's not going to be something we're not going to continue to focus on because we -- if you look at who sits in our top 20, those are emerging brands that we signed 4 and 5 years ago. We see opportunity with existing larger vendors that need a solution, whether it's a direct to channel or a share shift because they're not being serviced.

That's very helpful. We look forward to hearing more on those vendors in the future. Relative to your comment that you made to the prior question, relative to your marketplace, is this something that we are going to see tied in with the Climb Elevate program and ultimately, finding a way for those vendors to be able to transact on your site, but ultimately, it's not going to require even the Elevate's time. Is that part of the strategy here? Or is it really more for a larger vendor, let's say, a Fortinet or an Adobe that's well known that the resellers can simply go on to your site and accomplish what they want to, and they already know what they need and what they're trying to accomplish and don't need a human assistance.

Yes. So the -- I'm going to use sort of referring to more of a platform because we're going to be doing a lot of things on this platform to service our customers and our vendors. And I talked about the connectivity that we have to have between our vendors and our customers. But it's the -- it's really our core, right? So Climb Elevate does a great job, but that's not what we're doing this for. Will that be an extension of the platform, 100%, right?

So we can transact and make it much more efficient as we work with that. But it's really for the core part of Climb. If you look at -- I could go vendor by vendor and you brought up Adobe, a great vendor that needs to be transacted on a marketplace platform because of what Adobe has done similar to Microsoft did with their licensing schemes.

So as vendors get to that size, they need to take out and make it more frictionless. And I've said this for years and years now, and now we have a leader that's doing that, and I have a CIO that's backing it and making sure that this is going to get completed.

And then we'll just continue to expand on it. But yes, the Elevate piece of it will be great in the future. But right now, it's really for the core part of Climb. And I could go vendor by vendor and tell you the ones that would be the first ones that would go on that make the most sense. And we're just going to pick them by size and the ones that we spend the most time in the back office trying to transact.

And Dale, this is -- this marketplace platform is something that I think that you have talked about for some time now. What has taken this long to get this accomplished -- sitting on the outside looking in, it seems pretty straightforward. Clearly, it's not as easy as it seems from the outside. But what's been the friction point?

So here's the inside baseball part of it, and that is we tried with a couple of development companies that already have platforms, and we were going to modify what they had and use that instead of reinventing the wheel.

And we went down the road with a couple and it just -- it gets too wide, right? So they want to do -- just like AWS, right? Their marketplace is super wide and it's like, you can go and get anything, but no one really uses that much in our space unless they have to retire some kind of spend.

And if you look at how much Amazon has sitting there on their books for people to still spend on the marketplace, whether it's compute storage or licensing. So the good thing for us is that the vendors weren't ready for that, and I'm talking about our vendors because you have to have the connectivity and they have to build out either an API, EDI or some kind of interface to your platform.

So we're getting the number of vendors coming to and say, okay, we're ready for this now. So it was a good timing for us to really kick this off. So with that, it's -- we weren't behind. I kept thinking we're way behind, we're way behind. I look at our competitors. If you look at what people call the gold standard out there for MSPs is Pax8, and Pax8 does it, but we don't even run into Pax8 in any of our vendors.

Our vendors sign Pax8. We don't run into them as far as a competitor. We might say we're not running into because we're not touching as many MSPs as they are. But the timing is now for us, and it's a good time for us with our vendors. And the amount of vendors we'll have on the platform this time next year, we'll -- will be how they want to transact. We don't want to ever tell somebody how to go to market, but if it fits with us and how we service our customers, then we're all in.

Thank you for that genuine response. I really appreciate that. And then one additional question here. Because you have tried a couple of approaches and because technology is advancing so quickly, whether it be due to artificial intelligence models or otherwise, do you believe today that when you do launch your marketplace, the characteristics that marketplace will have and capabilities is going to be better than what you had originally envisioned and therefore, what I was thinking may have been a delay or it sounds like what you may have been thinking was a delay ultimately is your benefit.

Yes. So a couple of things. It's purpose-built for how Climb goes to market. So we're not doing things that nobody wants just to be flashy and do some kind of marketing ploy. But it's what our vendors want, our customers want and how they want to actually transact with us. So there's -- we're never going to get away, and we can say that -- and I'll go back to just look at our numbers and where we're going.

The vendors, unfortunately, for them don't have a lot of choices, right, in North America. They have a lot of choices overseas. But in North America, they don't have a lot. They have the big 3 distributors that are $40 billion plus. And then there's a couple of small ones, but there's nobody else.

And so if they either have to keep that direct model, how are they going to do it? Are they going to build their own platform marketplace? The problem is VARs customers, resellers, MSPs they don't want to have to log into 40 different vendors just to get their licensing. And that's why it's a perfect fit for distribution to aggregate all those.

So -- and I'm a little off topic, but as far as back to your question on the platform, I've got Vishal, which Vishal coming from WWT, our CIO, he was involved in integration when WWT bought Softchoice. He's familiar with some of the platforms that they were using. Some of it was outsourced, some of it was built.

And then he brought a gentleman in that Ben Ryan, that's done this before, spent time at Ingram with some of their marketplace, and they've got quite a long history of that. And they -- the most time is spent in the architecture of it before we even write code. The coding part is the quick part. It's the architecture to make sure we're not building something somebody doesn't want.

And we're looking at the efficiencies of what my team does every day that's just monotonous on the inside sales team and that we can automate this where you can go to get your information very quickly and then get back -- our team can get back to actually selling and saying, okay, why is this emerging technology something that I need? And that is in my background, it's selling, selling, selling and getting that -- whatever that new technology is in front as many eyeballs as possible.

Our next question is from Howard Root with Fairhope Capital.

Congratulations on really an exceptional quarter. Most of my questions have already been asked, but 2 quick ones. One, on the gross billings, I mean, up 41% year-over-year or up $200 million. I mean it's almost -- to me, following for a long time, almost unbelievable. But can you break down kind of what -- on a rough basis, what of that came from Interworks, what came from new vendors, what came from -- and I'd put Fortinet into the new vendors category and what came from expansion of just the current line?

Yes. Thanks, Howard. The bulk of that -- the majority of that expansion is from existing vendor relationships. So we are on target with numbers that internally we've budgeted for, for Fortinet as an example, for 2026.

Interworks, as Dale highlighted in the call earlier, has performed on plan. But really that growth in the gross billings line and even gross profit on down is from our existing vendor relationships, and that makes up the majority of that growth there.

And Howard, I could go. Just real quick, Howard. We can go vendor by vendor and tell you, I'll just pick up Sophos because we talk about them as one of our top 3 vendors. They bought Secureworks, they're Thoma Bravo company. They've been flat for the last couple of years. And now they finally got those 2 companies integrated.

They kicked off the new Fusion play, and there's just so much more hype around them, and we've seen it in the market. We have people that are renewing their licensing. So I could go each vendor, like Matt mentioned, Fortinet, each one of our top 20, and there's some new thing that they did or they acquired a company or it's a share shift play where we're outservicing our competition, and we're getting that. And that's -- for a sales rep, that's the easiest thing they can do is give their customer why they're better and we get a share shift piece of it, but then you have to perform, right, or they'll shift back to your competitor.

Great. Great. And here I was told that AI was going to destroy your business. So Q4 is historically your strongest quarter. Is there any change to that?

It's not. And it goes back to the whole thing as far as people from way back, and we have an annuity stream of licensing that gets renewed by people extinguishing their budgets. So we'll see the same thing. I mean, 80-some percent of our business is renewals. We don't see that changing.

We've already -- we're quoting the vendors are pushing us to go after renewals 90 to 120 days, which I think is kind of ridiculous before the renewal is up. There's just a lot of maneuvering in the vendor market as far as how they want the renewals done. We're doing a lot of it for them. So we see a lot of that business already setting up for Q4. And then just on our lines, our vendor lines that we had in our top 20 are not slowing down into Q4.

Great. And then just on acquisitions. I mean, I know that you always are your lookout and you do acquisitions, but here we are at the end of the year, you do an acquisition and you end up with even more cash than you had at the beginning of the year. So you've got more ability to do larger ones. What's your -- what do you see out there in the acquisition field? What's your appetite? And how do you see things coming in the next 2 or 3 years in your M&A activity?

Yes. So right, the top on my list right now is 4 companies. And I've said this, I said at Investor Day that we're looking to acquire 2 to 3 companies per year, and it was great that we could get this one done. We have a couple already that we've put not LOIs in, but initial points in to say, okay, this is what it would look like. But yes, we can go larger.

We haven't taken any debt on this company, as Matt explained in his remarks, but it's going to be in Europe. And there are some other regions that we're actually prospecting in that have come to us by our vendors saying, "Hey, we need help here. This is a great distributor. You should take a look at them. We think the owner is going to retire.

So there's a lot of those. Outside of those 4 or 5 that are hot right now, there's another 10 right behind those. And that reaches into areas like the Middle East. We're going to invest more into the African market as we're getting going with our African team and the South African team. But it's a robust list, and it's not slowing down.

And the good thing for us is you have these -- like I said before, these 3 massive distributors that are worldwide, then you have some that are in that $4 billion to $5 billion range, but they think they already have those territories covered. So there's not as much competition on the acquisition side. It's more of me competing with a $30 million distributor trying to buy a $15 million or a $60 million trying to buy a $30 million in the European space.

Congrats again to everyone at Climb's for a great quarter.

At this time, there are no further questions in the queue.

Thank you, operator. And I just want to say to everyone that joins today. I'd like to thank the entire Climb team across all our regions. A big welcome to our French team. I can't spend more time with them in the upcoming weeks, and our teams are going to get more integrated as we go and putting on to our platforms. And then to our just core Climb team, great quarter. We'll continue to deliver that first-class experience to our customers and to our vendor partners. But thank you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Good morning, everyone, and thank you for participating in today's conference call to discuss Climb Global Solutions financial results for the second quarter ended June 30, 2026. Joining us today are Climb's CEO, Mr. Dale Foster; the company's CFO, Mr. Matthew Sullivan; and the company's Investor Relations adviser, Mr. Sean Mansouri with Elevate IR.

By now, everyone should have access to the second quarter 2026 earnings press release, which was issued yesterday afternoon at approximately 4:05 Eastern Time. The release is available in the Investor Relations section of Climb Global Solutions website at www.climbglobalsolutions.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 your 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 key operational metrics and non-GAAP financial measures, including gross billings, adjusted EBITDA, adjusted net income and EPS and effective margin 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.

I'll now turn the call over to Climb's CEO, Dale Foster.

Thank you, Sean, and good morning, everyone. We executed on several strategic initiatives in Q2 that are central Climb's long-term success. We generated double-digit organic growth with 19 of our top 20 vendors, benefited from our acquisition of Interworks and bolstered line card to make further investments and our systems need to support the larger and more efficient global platform. .

Our strong vendor performance is evidence of the momentum we are generating across the business. Rather than pursuing scale for its own sake, we focus on strengthening existing partnerships and identifying emerging technologies that offer a better value proposition for our reseller network and their customers.

During the second quarter, we evaluated 34 new brands and signed agreements with only 2 of them. Our first agreement was with Ivanti, a Utah-based global enterprise IT and security software company with more than 1,000 employees and approximately $1 billion in annual revenue. Ivanti provides an AI-powered platform designed to help organizations manage, automate and secure complex digital workplaces with a primary focus on cases spanning endpoint management, IT service management, patch and exposure management and Zero Trust security.

Through this relationship, Climb will expand channel access to Ivanti's autonomous endpoint management offering and enabling partners to help customers improve operational efficiency and strengthen security and reduce risk. We also signed a company called Check MK, a German-based provider of comprehensive IT infrastructure monitoring and observability solutions. Its platform helps organizations track and the health and performance and availability of their entire technology stack, including network servers, applications and cloud resources.

Check MK combines automated discovery, customizable dashboards and enterprise-grade scalability to support a broad range of IT environments and give customers greater visibility into increasingly complex infrastructures. In addition to those new agreements, we expanded 2 existing relationships. First, we broadened our relationship with Logic monitor from a few select customers to all of North America, giving our partners more access to its AI-powered hybrid observability platform.

We also launched Quantum on our primary line card. In Q2, Quantum's portfolio includes high-performance storage, AI-enabled workflow management and long-term data preservation solutions designed to help public and private sector end users manage data growth and storage constraints. These expanded relationships illustrate how we work with our vendors to build momentum over time. We begin with a focused go-to-market strategy, invest in the relationship as demand develops and expand our support as the opportunity grows.

Darktrace is an example of this strategy in action. Within 12 months of joining the Climb platform, Darktrace became 1 of our top 20 vendors and with the largest growth driver among our new vendor relationships during the quarter. Fortinet also continues to ramp meaningfully with gross billings increasing materially from Q1 as we expand our internal capabilities and work closely with Fortinet's leadership team to expand the channel. While the relationship is still developed, we are encouraged by the progress to date and believe Fortinet be 1 of Climb's largest vendor relationships over time.

We also are making progress on the development of our cloud platform, which is intended to create a more efficient way for customers and partners to purchase, manage and renew cloud-based software through the client platform. During the quarter, we hired an experienced platform architect who is developing the initial structure and technical blueprint, which we expect to complete soon. Adobe will be 1 of the first vendor prioritization priorities for the integration. And over time, we expect the same platform capabilities to support additional vendor lines.

Alongside these organic initiatives, we continue to integrate Interworks into our broader global platform. We will preserve the local expertise and relationships that have supported Interworks' success while identifying opportunities to leverage Climb's broader infrastructure across the region. These initiatives, aligned with the strategy we outlined earlier this month at our first Investor Day at the NASDAQ market site, where we provided a deeper look at Climb's unique model and long-term priorities. We also presented our goals to more than double our FY 2025 adjusted EBITDA by 2030 to organic growth, deeper vendor relationships, partner relationships and operating leverage and strategic M&A.

Thank you again to the investors that joined us in person and as well as those that joined us by webcast. As we position Climb for the next phase of growth, we strengthened our Board with the appointment of Peter Bell. Peter brings more than 35 years of experience across venture capital technology, operations and strategic advisory roles. His experience identifying disruptive technology, scaling technology business and navigating the M&A landscape is directly relevant to our long-term strategy and will be -- and will add operating investment, strategic perspective to our team as well as scale of our global platform.

Looking ahead, we are focused on driving organic growth, selectively expanding our line card and evaluating accretive M&A opportunities with Europe as our key focus area. Our strong balance sheet provides the flexibility to invest in these priorities while maintaining a disciplined approach to capital allocation. We believe these initiatives, coupled with our robust balance sheet will enable us to continue driving value to our shareholders.

With that, I will turn the call over to Matt Sullivan, our CFO, for the financial results. Matt?

Thank you, Dale, and good morning, everyone. A quick reminder as we review the financial results for our second quarter, all comparisons and variants commentary refer to the prior year quarter unless otherwise specified. .

As reported in our earnings press release, gross billings in the second quarter of 2026 increased 17% to $587.3 million compared to $500.6 million in the year ago quarter. Distribution segment gross billings increased 8% to $562.9 million while Solutions segment gross billings increased 4% to $24.4 million. Net sales in the second quarter of 2026 increased 9% to $174.2 million compared to $159.3 million in the prior year period. This increase reflects double-digit organic growth from new and existing vendors as well as the contribution from our acquisition of Interworks on February 24, 2026.

Gross profit in the second quarter of 2026 increased 15% to $30.2 million compared to $26.3 million for the same period in 2025. The increase was driven by organic growth from new and existing vendors in both North America and Europe as well as the contribution from Interworks.

Selling, general and administrative expenses in the second quarter of 2026 were $20.7 million compared to $16.4 million in the prior year period. The year-over-year increase primarily reflects SG&A associated with Interworks and variable sales compensation attributed to the growth in gross profit. SG&A in Q2 2026 was also impacted by higher legal and professional fees as well as increased investments in IT infrastructure designed to improve workflows, strengthen our operating infrastructure and drive efficiencies across our global sales organization to support future growth. SG&A as a percentage of gross billings was 3.5% for the second quarter of 2026 compared to 3.3% for the prior year period.

Net income in the second quarter of 2026 was $5.5 million or $0.30 per diluted share compared to $6 million or $0.33 per diluted share for the prior year period. Adjusted net income was $5.5 million or $0.30 per diluted share compared to $6.4 million or $0.35 per diluted share for the year ago period. Both net income and adjusted net income in the second quarter of 2026 were impacted by a higher effective tax rate to the prior -- compared to the prior year period.

Adjusted EBITDA in the second quarter of 2026 was $11.3 million compared to $11.4 million in the same period in 2025. The decrease was primarily driven by the aforementioned investments focusing on efficiencies to support long-term growth initiatives. Effective margin, which is defined as adjusted EBITDA as a percentage of gross profit was 37.5% compared to 43.3% for the same period in 2025.

Turning to our balance sheet. Cash and cash equivalents were $56.6 million as of June 30, 2026 compared to $36.6 million on December 31, 2025. The increase in cash was primarily attributed to the timing of receivable collections and payables. As of June 30, 2026, we have no debt or outstanding borrowings under our $50 million revolving credit facility.

Our strong financial position gives us flexibility to support working capital needs, invest in the business and actively pursue M&A opportunities. We will continue to deploy capital strategically and evaluate opportunities based on their fit and ability to strengthen the client platform while maintaining the discipline needed to advance our long-term objectives.

This concludes our prepared remarks. Operator, please open the line for questions.

[Operator Instructions] And we'll take our first question from Keith Housum with North Coast Research.

Appreciate the opportunity. As we kind of think about the results for this quarter, if I compare to last year, if I remember right, last year had some more onetime items related to vast data, how tough of comparable was that for you this quarter?

Yes, Keith -- go ahead, Matt.

No, you go head.

So Keith, number one, thanks for joining us investor in New York, it was good to see you. The -- we knew it was going to be a tough comp going into Q2 because we had a $30 million deal with Vast data and then another 1 that was going to be in Q3 got pulled into Q2. So we had a really tough comp to do that. But going into the quarter, 1 of our bigger vendors had a down Q1 and really came back in Q2. So that helped it out, but we really were thrilled by the teams. And like I mentioned in the opening remarks with Darktrace, really going to the next level, some of the other performers. And when -- if you remember when I first said, we had 19 of our 20 vendors outperformed and grew in Q2. So that tough comp, but good to see our top vendors taking off. .

No, absolutely. And you guys mentioned Fortinet having significant growth this quarter versus the first quarter. Is there a good opportunity for them to eclipse the speed or pace that Darktrace has achieved over the past year? How are you thinking about Fortinet's ability to climb, I guess, over the next 12 months?

For sure. I mean, it was a 10x factor from Q1 of this year to Q2 of this year. Of course, the bigger you get, it doesn't grow as fast. But we're hosting QBRs in our locations. Our teams are so much more integrated than they were even in Q1. We started this relationship in November. So it will continue. And I think I said it be 1 of our top 5 vendors probably this time next year. It continues to grow. And if you looked at their financial results this week, for a company that's $6 billion, $7 billion in size, they grew 14% in Q1. Q2, they were up double digits as well. So just a great relationship. And as your teams get closer and closer, everything gets faster, right, as far as getting more of our customers on board. And Fortinet's portfolio goes so wide, right? They go from firewalls all the way to access and security cameras. So just a good technology company that we're going to expand on.

Great. Good to hear it. And as I look at your SG&A expenses, I know you guys are held a lot of different fires going on right now in terms of some of the IT efficiencies, and so we're restructuring legal fees. As you look at that, how much would you say was onetime or nonrecurring? And how should we think about for the rest of the year? .

Go ahead, Matt.

Yes. So in the quarter, we had about $500,000 of what I would call nonrecurring type expenses. It relates to some of the legal and professional costs and then some of the investments in our IT infrastructure. So looking -- thinking about it from an effective margin perspective, we declined from -- our SG&A as a percentage of gross billings was declined by 20 basis points from Q1 to Q2, which was consistent with our trajectory from Q1 to Q2 of last year. So that's kind of how we're thinking about it that the consistent effective margin flow that we've historically experienced is what we expect to see in the future.

Great. And if you take up -- and Keith real quick, I mean, I hate talking about onetimers because it seems like every quarter, you have a 1 timer, right? Like it is 1 time, but it's something different. But if you look at -- we know we have our internal budget and stuff, and we are right on track for the investments that we put in. And then, of course, we're very opportunistic as a company. So when we say, "Hey, you know what, we should invest more in this piece of it, and it's going to be an expense that we didn't budget for it". We're still going to do it because the efficiency that we get for the rest of our next 10 years is what's doing now. So we're -- that's what we've done in both Q1 and Q2 and some of it will be in Q3. .

So in your head, Dale, in terms of like the investment in the cloud marketplace and the IT, how fast is your payback? Is that a payback you can get back in a year?

From the IT side, for sure. Yes. And we're doing -- so we've talked about our ERP went live 2 years ago, July. And now we're tweaking it, and we're trying to use the best tools for the job. So with Vishal coming on, he's been on board a year now. We have expected a lot from him. He's delivered getting the right team members in. So you're going to continue to see that piece of it. And we know -- I'm going to get the comments, I mean, on our SG&A side, we need to keep a very close watch on and continue to get the efficiency we can drive it down. .

Right. Okay. Guys, I appreciate the opportunity to look forward to seeing the growth going forward.

Our next question will come from Vincent Colicchio with Barrington Research.

Yes, Dale. I'm curious, are geopolitical factors have any impact on sentiment in Europe? And also, are you hitting your cross-selling objectives in Europe setting Interworks side given how recent that is?

Yes. On the cross-selling side, I'll take that first, not that big of an impact other than the teams are getting to know each other, and we're going to start seeing vendors getting loaded on to the platform that they're using over there. So we'll see that piece of it. But we're also getting the teams integrated together on just territory vendors because we both have the Microsoft agreement for all of Europe. So we now think about it we're in Southern Europe with Greece or in U.K., Ireland and we're going to just keep going to the middle of Europe on that side.

On the macro side, we had a Board meeting this week. It came up. We talked about macro environment. With -- I know it sounds -- we're $2 billion, we're still so extremely small in our market. And the companies that we carry in the pockets of -- that we go after resellers, we just haven't seen it. I mean, of course, it's going to be on the fringes, but nothing really impact. We're not in the hardware business. So logistics isn't an issue, just like it wasn't during COVID. So we just haven't seen it. And I think I say that a lot, we're still that small.

VAS data was good to you, I believe, in the year ago period. Does that pipeline there remains substantial?

It does. And as the people that have been on this call before, I mean, it's just going to remain lumpy because the deals are so large in size. A lot of it is a waiting game with data centers being built. That data is known for delivering data to AI engines and LLMs very quickly. That's their claim. And they have less than 100 customers worldwide. So it's going to be lumpy, and we have a pretty strong pipeline with them already.

And has the gross billings momentum you experienced in the quarter carry through in the early Q3?

We're just finishing up July. We'll have a strong July, some of it falling over from the quarter, which happens. But yes, we look at the percentage that is pretty traceable between first half and second half of the year. In our second half of the year is always stronger than our first half, and we have the same expectations for that. Fortinet is going to be a driver in Q3 and Q4. We'll talk about that again. But yes, we have good momentum going into it. .

And 1 for Matt. Could you remind us what the tax rate was so high in this quarter? .

Yes. So compared to Q2 of last year, our effective rate was higher this quarter than the Q2 of last year because there was a discrete item related to -- or there was a greater adjustment for a discrete item in Q2 of last year, for when restricted stock vests. So as we've had the run-up in the stock over the -- or stock value over the years, as awards vest from many years prior when the fair value was much lower the company receives a tax benefit.

Now, as those much prior year rewards become fully vested and the awards are more closer -- the award fair value or more closer than to our value of the stock today, we have less of a discrete favorable impact on our taxes, which is, therefore, driving our tax rate to be more consistent with where we would expect it going forward.

Our next question comes from Bill Dezellem with Tieton Capital.

I have a group of questions. First of all, Fortinet initially had restricted you from certain opportunities, and you referenced that at the analyst meeting. Would you update on where we sit today and what success you are seeing with Fortinet specific to that issue now?

Yes. So we were restricted until May 4 of this year. I think it was the top 50 customers. They didn't want disruption. The goal with Fortinet has always been for net new business. And if you look at -- like I mentioned, our technology stack goes extremely wide. And if you look at a lot of our vendors, our vendors are extremely narrow as far as where they go into security stack. So for us, it's just a great fit. .

So yes, it ended May, some share shift will happen. But it's -- and it's some of the customers, and what we like to say is let the customers choose where they want to acquire product from, some of it helped there. We have some really cool initiatives inside teams for generating net new business. And then, we're looking at where -- if you look at -- if you go to Fortinet's website and you look at their technology partnerships, there are so many that we have in common, the vendors we already had on our line card. So we're just doubling down on those. We're doing more events together and do truly cross-sellable stuff. So -- yes, you figure we had April and May, we still go touch the top 50. We're seeing some of the stuff come from those groups, and they'll continue the momentum.

And Dale, that's, I guess, part of where I was going is relative to those top 50, are you seeing -- to what degree are you seeing them making choices to move to Climb?

Yes. In region, in territory, and this goes back to what we are known for the company, right? We are a show up type of sales force with all of our -- and you got to meet a lot of them in New York, these sellers are in region in territory visiting their customers. They do not get that experience from any of our competitors, right? We don't do overlays in the company. So when you go and you talk to our field rep, that's the person that's going to deal with everything to do with Climb and what you're acquiring. So we're going to see more of it.

As we get more in line with their field sellers as well, that's when good things happen. There's -- the bigger resellers out there, those are bid opportunities that will come up over the next couple of years. But really, it's hand-to-hand combat in all the regions.

Great. So essentially, we should not think about this as a light switch turning on with these top 50 and more so that as the relationship with the Climb team builds, they're simply going to be -- it's just going to be a natural progression where they're going to get more business to the people that they see and like that are showing up every day.

For sure. And it's the buying experience, right? I mean, if we can make it more streamlined, we're going to get more customers. If we are giving them products that they can take to their end users that show a differentiator or they can build more of the technology, and we're mostly security in that stack, that's another positive. But if you look at just the North American sales for Fortinet, and they put it out there, it's about $2.5 billion, and that all goes through 4 or 5 distributor partners. So it's a big, big pond. We're trying to focus on our resellers what they want in that stack and then try to grow it to buy more Fortinet products. .

And speaking of a big pond, Dale, the Ivanti relationship -- we didn't talk a lot about that at the Analyst Meeting. Would you dive into that and go into some more detail how fast that it will ramp? And -- I mean to just ultimately, the size that you think this could be for line.

Yes. And the reason we didn't get into it too much because we're just getting launched. We just had our launch plan with them in all the territories. But let me just back up to -- when I talk about onboarding vendors and how Charles and his team go through picking vendors, and we are just continuing to look upstream at larger vendors because if we're going to move the needle, we can't sign a vendor that we're going to get to $5 million to $10 million to $15 million in a couple of years, right? It's not going to matter. If it's cross-sellable and it's easy, part of adding to a purchase order, hey, that's great. And we'll look at that.

But Ivanti, $950 plus million, great team. We get to meet the sea level guys a couple of weeks ago in New York with the Refresh program. So I only see good things, and we're getting more and more at bats with bigger vendors. We have another 1 we'll announce in a couple of weeks that is a $650 million vendor in the security stack space. So that we're going to continue to look at the bigger vendors that make sense for us that don't have the same go-to-market or technology that is -- it might be an overlap at 20%, but not more than 50%. But you'll see that relationship grow and grow, and Ivanti came to us and said, okay, you guys are out in the field. We're not getting that from our other channel players. And we're going to see more of that move over as well. As they've moved to, I don't know, how to put it nicely, cancel contracts with some of our competitors because they're just not getting out of what they want.

And ultimately, with Ivanti, do you see this as a top 20, top 10, top 5, where do you see them ultimately falling?

Top 20, definitely a top 20 vendor. And we -- like I said in the opening remarks, the Board meeting this week, went through some of the stuff, and we pulled some of the data, and I'll give the shareholders some of it. So in 2022, we had 48 vendors that made up about 90% of our of our adjusted gross billings. And today, 84 vendors make up 98%. So you can see we're much more diversified. Of course, I would like that number to be a little less because we're trying to continue to trim off vendors that are burning too much time of my core team and put them into our Climb Elevate group. But we're very diversified and then what makes up our -- we have 45 vendors that make -- that do more than $10 million in sales. And in 2022, we had only 22 vendors in 2022 that did $10 million or more. So better vendor portfolio that we're delivering and working on more focused vendors.

Great. And then 1 additional question, please. What additional details do you have on the marketplace? I think you mentioned that Adobe will be first and additional details beyond what you had earlier this month in New York.

So we've had a platform all along. And we've -- the issue with having a platform that you don't control is you don't control the road map of when you want a vendor added. So if I look at just back to the efficiency play, and I want a vendor added because it's going to save us so much time and money internally just transacting that vendor. I have to go into a road map of whoever I use as a platform and wait for that to come up. And even if we do some of the devs on ourselves, it still takes longer. So we're going to have kind of a hybrid. We're developing with the architecture that has already been pretty much set, and then, we'll have a committee as far as what we really need to that because we want the experience to be what the customer wants, right, how much of an online experience they can determine how much an individual in-person relationship they can determine we want to have both of those.

And right now, they have the personal experience but we need 1 that's more online that they can get answers a lot faster than waiting for their teams. So it will be a continued investment that we have. This is the first step bringing somebody that Vishal has had a history with. I've known the companies the work for. So we'll announce this and continue as we go. But we'll have some of our stuff done in Q4 of this year.

We'll take our next question from Howard Group with Far Hope Capital.

First, congratulations once again on a great growth in billings. I mean, you guys continue to do excellent work there. I just -- I have 2 questions. One, just a little follow-up on the SG&A line. Going up 26% year-over-year, looks kind of troubling, but obviously, we talked about that in Q1 because that was where the jump was and Q1 to Q2, you just -- you actually took it down from 3.7% to 3.5% of your gross billing. But kind of the target was always that 3% level, and it's kind of sticky here and going up a little bit Q1 to Q2. What do you see kind of as a percentage of gross billings, the SG&A? And what's your target over the rest of this year and into 2027? Can you get that down to 3%? Is that a reasonable target near term?

So I want to say yes, but a couple of things will happen, and we'll call them out, right? If we have some bigger bad deals. And if I look -- and that went through the last 8 quarters, and we had a couple of times we dipped below 3%. And some of the times, a couple of quarters are just above 3%. So of course, that is the goal. But it's the catch 22 part of it is if I invest in some of the technology that will make me efficient for years to come, I want to do that now and not wait. So that is some of what's being turned up in my SG&A. So I'm trying to be a good steward of it now because I know that we focus quarterly, but I don't want to sacrifice something that if I could do and put in place now for an efficiency that's going to give me 2027 at a much better rate, and I don't have to pay those dollars then, I'll do that. So yes, that's our goal.

And we know that our Q3 and Q4 are very strong. Our Adobe relationship really kicks off because it's the buying season. So we'll see if those numbers go up without putting extra resources on. We're making some cost-cutting measures inside. We'll talk about that in Q3 as well.

Just to reiterate what Dale was saying there. Historically, our effective margin grows from Q1 to Q4 of every year, ramps up from Q1 to Q4 of every year. There are fluctuations in it from given quarter-to-quarter. But if you -- and we've talked quite a bit about the large non-reoccurring at this point, vast transactions from Q2 of last year. And if you take the impact of that out, and take the impact of Interworks' contribution from Q2 of this year, who obviously wasn't in Q2 of last year, we still grew adjusted EBITDA at the strong double-digit organic growth or strong double-digit growth levels of gross billings and gross profit.

So yes, there's a couple of things to peel back there and a couple of things to continue to tweak, but still a strong quarter when you take those pieces out of it.

Right. So I guess the other -- the flip side of that, though, is from where you were like 3, 4 years ago, when I first started covering you guys, it you're adding so much more service to your offering. It's not just here's a product buy, your personal hands on. And if it does take 3.5% SG&A, is there a way of getting your gross margin on billings up from that 5% to 6% and capture it that way? Is that something you're looking at or something you think is possible? Or is this market just doesn't allow that?

Yes, Howard. And I would say North America, the market doesn't allow it, right? And that's the big piece of it, and I talked about it in New York. And that is some of the acquisition plans that we have overseas, they have double digits to triple what we are, right? So if we're doing 5%, they're doing 10% to 15% because the competition is less. And if you look at the territory of selling in the U.S., we're looking at that as in Europe as territory selling, but it's typically in country. So the margins are higher, less competition. And like I said, in New York, if we can mimic our size in the U.S., in Europe and beyond, we can move that because if we look at the margins, it's the contribution of my solutions team is 11%, 12%. It makes a big impact. It makes them look double the size. But the issue has always been, can we do it as efficiently in Europe and beyond as we do in the U.S., and that is what we're working on with our systems and platform, where we're cutting some of the costs out because we have been becoming more efficient.

So -- can we -- if you asked me this a couple of years ago without the acquisitions and where we're targeting, I would have said, it's really tough to do. And now I'm going to change that and say, we can do that. And you'll see us on some of our acquisitions, look at the Greek side of things, the margin profile is much better. They're small, so that's why we need to grow that. But we'll -- I think we can move that number.

Great. And my second question is on the M&A environment. And at the Investor Day, what I heard was you guys kind of are picking up the pace maybe on at least the evaluations and the targets and obviously increasing the size that you could do in an M&A. Can you comment on -- is that a correct interpretation? Or what do you see looking forward the rest of this year on your M&A target list and your ability to do bigger deals than you've done before?

You were spot on, Howard. And then -- and this was -- this meeting that we had with the Board this week was really just for me to lay out the strategy for the next 3 to 5 years and making sure that the Board and I are aligned on where we're going. And we're not afraid if we want to take on some debt. But yes, those 2 things you said, we're accelerating the targets. We've had them all along, and like I've said in the past, I've got to get comfortable with that target because our business is a relationship business. And what's the relationship with their vendors, what's the relationship with their customers, how well are they like in the market, do they have a lot of the same philosophy as go-to-market and culture that we do. So it takes some time, but I've been working on them for the last 2 to 3 years. And now, we are at the point where we've got some really good targets, ones that we want to get accomplished. And we've got 2 that are very large that we can do. We're not going to be able to do them with cash, but we'll use the best form of capital to do that, and that's probably in the form of debt. .

At this time, there are no further questions in queue. I will now turn the meeting back to Dale Foster.

Thank you, operator. Appreciate it, and thanks again for joining the call. I want to thank the Greater Climb team. And when we talk about relationships, we have to talk about it in the form of going to customers and going to our vendors. We're -- they're both our customers. Our teams are just doing a great job on both sides of that. We're halfway through 2026, a lot of momentum going into the second half, and we look to have a great year for 2026. So I appreciate it. Thank you, operator.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Good morning, everyone. Thank you for joining us today. Investors. Thanks for the Climb team to join us this morning with the opening bell as we rang it in the NASDAQ. So thanks for everybody coming up.

Just for everybody, there's some nervous people in the back. Our bus didn't show up in New Jersey. So everybody had to figure their own way to get here, so everybody was able to make it. So thank you again. I'd like to thank the marketing team for everything they do. And our teams inside Climb know this very well. For events that they perform, anything that we do, touching our customers, our vendors, they get involved and then events like this. So I appreciate that. NASDAQ was great to us, allowing us to do the opening bell and then setting us up for Investor Day where we could get you in. Investors, thank you, our bankers, thank you. And I know we have some PE firms in the room as well to just hear our story. A lot of you know the story, but you know the story from myself and Matt Sullivan, right? And now you get to get a bigger, broader part of the story from the rest of the exec team. So you're going to hear them for the first hour.

So on the first hour, I'll get through the safe harbor stuff. The first hour is going to be the team, and then we'll do lunch. The second hour is going to be about where we're going to take the company. I always like to say that if you want to know what's going to happen, take a look at the last 3 years. We're going to be a little bit more aggressive than we were 3 years ago on our acquisition play and also with our technology play as you'll meet Vishal, our CIO as far as what we're going to do as far as efficiencies go.

So with that, I'm going to kick off a couple of slides. And this is -- I started 8 years ago here. I took over 6 years ago. This is what we did as a company, and some pretty simple things, focus on being a sales-first company. That's the first thing. And part of the sales first company is compensation plans, change the compensation plan very quickly to the sales. So it actually aligned with our customer base and went line in our go-to-market. Vendor recruiting is a priority. It is the lifeblood of a distributor. So you're going to hear about -- a lot about distribution and how we go to market. So that is the lifeblood. So we went for vendors. We get questions a lot from investors as far as why did you only pick 2 when you interviewed 30 companies. And Charles will give you the details on that, but that is the lifeblood.

I talked about changing compensation plans, broad a field sales force. And this is something that our competitors have, but they typically have it in an overlay fashion where they have different layers for different technology segments inside their business. And Climb, you'll see that -- and you can meet some of the sellers that are here, it's one throat to choke when you're at a VAR, at a reseller, at a DMR, they know who to go to at climb to get anything done. Use of our balance sheet, we have done 6 acquisitions in 6 years. We plan to accelerate that. You'll see some targets on some of the presentations. And we've done them all with cash. We have no debt in the company. We're pretty attractive that way from a balance sheet. I think the argument back to us would be we're not good stewards of our capital. We probably should be putting some debt on the company to acquire faster if there's good targets. Headquartered in Eatontown, New Jersey and offices throughout the world and our latest one is South Africa, and you'll hear from Gerard in his background.

So here's what we say. Here's what we say to our vendors, our customers and our climb team. And that is we sell speed. How fast and how many eyeballs can we get on technology -- your technology products into the market and how fast can we transact it and how fast we collect. If you look into the numbers, our net working capital, we have a very strong negative net working capital because we are paying slower than we're collecting. Some of it has to do with our biggest customers that give us options to collect faster. So very important as we use our cash flow as far as we grow the company that way.

With that, this is our exec team that you'll get to see in person today, and I'm going to start off with Charles Bass, and he'll talk about vendors. Charles.

Lifeblood that was complementary.

Thank you, Dale. So again, Charles Bass, I'm responsible for vendor alliances. And what I hope to do in the next 10 minutes is talk about 3 things. Dale asked me to talk to you about what we're looking for in vendor partners and how I do that. And then I'll spend some time talking about how we actually do that. And then we'll talk about how we onboard before I pass it over to Vishal. But if you'll indulge me, what I wanted to do first is maybe take 2 minutes and give you the strategy behind it.

I actually got some really interesting questions before we started. And I want to try to answer why we're -- I kind of give you some context maybe for how we do that. And I need to kind of tell you about where we live and how we kind of came about to the strategy we're on. So it's going to be important to know kind of where we live, especially from a North American standpoint. When we -- when this management team came in 8 years ago, we were a sub-$400 million distributor undergrowing the market with no discernible strategy, right? And there were 3 players in North America that had consolidated and bought most of the players in the market. That was Ingram Micro, TD SYNNEX and Arrow Electronics.

And what those guys all had in common was some pretty impressive things. Number one, they were all over $30 billion in sales because they had consolidated and gobbled up a lot of the competition. Number two, and quite impressively, they were all transacting more than 30,000 VARs and MSPs. Number three, they're all transacting more than 1,000 brands, in some cases, more than 4,500 brands. But here's the hook. They have a very similar strategy. And all those guys were having the vast majority of their gross margin, the vast majority of their revenue come from a very small minority of their brands. They are all focused on these giant leaders like Cisco, Microsoft, HP, Dell. And look, it was a common theme for us to say to each other, we're not going to out Ingram Ingram today.

We, as a management team, had to look at ourselves and say, okay, what's the play that we're going to have to go be more successful than this company had been. And look, Ingram was selling more toner and printer cartridges than we were selling product, right? And so we decided we were going to go look at the market and figure out where Ingram was failing and go run a classic red ocean, blue ocean strategy where we're going to go where they aren't, and we're going to go try to get to the market that was the most underserved. And so in North America, the way to do that was to go to the challenger or the emerging part of the market. Now very different than Europe. There's probably between 50 and 70 distributors in Europe that run a limited line card service-enabled play. But in North American-centric, which we are fairly much today, that was the play that was left to us. So let me kind of describe what our strategy was using a 30-year-old slide from Gartner, probably the most used slide in the world.

If you're not familiar, Gartner would use this slide to describe markets. The X-axis for completeness of vision was usually a euphemism for do you solve a problem or problems and how well you do that. The Y-axis was typically the ability to execute was usually meant are you selling a lot or a little. And early on in our cycle, we were focused on selling niche players in some visionaries and some smaller guys because that's what was left for us. But as our brand began to grow, as we began to have more success, we climbed up the food chain, and we began to focus squarely on challengers. So while all of our competitors are focused on Gartner Upper right on the leadership quadrant, we're focused on the Gartner Upper left.

Everything we do all day every day is finding challengers who are taking bites out of leaders, and that's the play we're on. So when I look for a brand, I'm looking for a guy taking a bite out of Cisco, not Cisco I'm looking for a guy taking a bite out of NetApp, not NetApp. That's what our play looks like. So when you look at what our model looks like, again, it's a similar model. There's a common model. This is a fairly normal play. We're the only guy in North America running this play, not an uncommon play in EMEA. We went down -- I should give you a little bit of history. We started with about a little bit under 500 brands in 2018. We've squeezed our line card down from about 465 brands to about 100 brands. 70 of our brands make up 95% of our sales. And each year, I add between 12 and 18 brands to the line card. And each year, I remove between 18 and 36 brands from the line card.

So while we're refreshing our line card every year, we're also removing brands from the line card, adding them to our sister company called Climb Elevate and trying to find the next challenger successful brand like Ivanti or Darktrace or another successful brand. The success metrics that have been really tried and true for us, this will come as a surprise to some of you. I don't actually look for the next -- the best mousetrap. We don't actually make decisions based on how cool technology is. We're looking for brands that are successful in distribution. So what we found through success and failure is what really wins for us is companies that first are distribution first routes to market, channel mechanics and execution are the things that make the most sense for us in terms of picking a brand. So I look for companies that are more than 50% distribution. Our success rate with companies that are less than 50% distribution is close to 0%.

The second thing is I look for companies with really successful channel mechanics. And when I say channel mechanics, I typically mean a price model built for the channel, a margin model built for the channel and basic partner programs built for the channel, like how they treat their partners and how they interact with their partners. And then third and probably most important is how they plan to execute with their partners in terms of cross-selling and upselling with other brands on our line card. That's -- those are the metrics that have proven to us to be the most successful with our brands. And then as we went down from 500 brands to 100 brands, we picked 6 different brand categories. We could have picked 60, we could have picked 16. We picked a total of 6. Security has emerged as the most important. And they really haven't changed a great deal. A lot of people say, "Hey, when are you going to add AI as a brand or when are you going to change that? Candidly, AI has emerged as a piece of each one of these 6 categories. And so we probably aren't going to look to change our cross-sell brand categories over time.

When I look at the sources, our sources have candidly changed quite a bit over the last several years. Early on, we had to aggressively go find brands to consider for climb. And we had to cold call, we had to use the market to go find places. Today, far more brands come to us than we can even evaluate. I evaluate about 600 brands per year. Maybe 400 brands are net new evaluations each year. About 200 brands are reevaluations or companies we've evaluated in the past that come back through the cycle again because they've changed their routes to market or their management team or something like that. And of those 600, again, we'll pick about 12 to 18 that we onboard for climb. We also use existing relationships.

A lot of times, our joke is we'll bet on the jockeies, not the horses. If we're successful with the management team and they move to another company, we'll obviously look at those guys on the next time they come around, pretty common for us. We've developed a pretty tried and true methodology. We look at financials. We look at corporate questions, we look at marketing questions, we look at operational questions. But what we found is that our questions that go through, again, channel mechanics, routes to market and execution questions are far more correlated to success and failure than anything else than product. I would be happy to talk about some of those in details, but we ask the exact same 92 questions each and every time we evaluate a company. It's proven to be pretty successful for us. Final thing I'll talk about was the last thing Dale asked me to talk through is also a process-driven play that what we do when we onboard a net new brand.

The goal for us is to use the exact same onboarding process once a month. It doesn't work like that. We think that we're going to be able to do that each and every time and that we'll onboard one guy a month. But sometimes we try to digest a gigantic player like a Fortinet or a $1 billion player like an Ivanti, and we'll have to basically skip a month to get our sales guys time to actually digest or understand a particular brand. But the concept is the same each and every time. A lot of folks think that the -- so there's 4 points to what we do when we onboard. We do an operational onboarding. We do an educational onboarding called enablement onboarding. We do a marketing onboarding, and then we do field engagement.

The operational stuff can be done in hours, not days. It's everything that is required to be able to transact. It's loading SKUs. It's understanding the linkages between AP, AR, getting our system ready and being able to quote and ship product. It's pretty simple. And Vishal will talk about that when he's up next, but we do that in, again, hours, not days. It's fairly simple. It's one of the easiest things we do. It usually surprises people. From an enablement standpoint, we've actually got this down to a pretty -- we actually run the enablement play by our job descriptions. The most important folks for us, what every single vendor wants from me is access to our VARs and our MSPs. The guys that own the VARs and MSPs are our field sellers that you'll meet today.

So we do one training for our field guys that's focused on value proposition and how they go access our VARs and MSPs. We do a separate training for our inside guy that's focused on the quote-to-ship process, how to get resources. That usually takes days, not weeks to go do that part. The third piece is the marketing onboarding. Look, we have some brands that spend literally $100,000 a month with us and do quite a bit of things in marketing. There's a 4-part marketing onboarding. We have some brands that spend no dollars in marketing that are very successful with us. So it depends on what companies want from us. We have an excellent marketing organization that has a bunch of different offerings, but I won't spend time on that, but I will say it's a huge advantage for us. All of our competitors use marketing as a profit center. And many brands come to us because they feel like Ingram, Tech Data SYNNEX and Arrow are picking their pockets and force them to buy some terrible marketing as part of their distribution experience. They love coming to us with options on marketing, where we'll admittedly make some money on marketing, but it's not a forced play for them.

And then finally, the last thing we do is field engagement. Candidly, operations, marketing and enablement are all candidly table stakes for field engagements. We win or lose when we onboard a new brand by engaging with the brand that we're onboarding in front of a VAR. What everybody wants for me is to access -- Michael Taliercio is our guy in Colorado. They want Mike Taliercio to walk with their rep into Sandy Solutions and tell their value proposition to Sandy Solution, reach into Sandy Solutions end user population and find net new opportunities. That's the value they want from us. That's what they can't do from Ingram Micro because Ingram Micro has 4,500 brands, and we have 100, right? That's the value they see from us as climb. And that's what we're going to basically try to do 12x to 18 times a year. So that's what our play looks like. I know I went through that fairly quickly, but I'm going to go ahead and introduce Vishal. Hopefully, if some of you have questions on some of the plays that we run, how that looks, we'll get time during lunch to go through some of the details on that.

So Vishal, let me have you come up.

Thanks, Charles. Good morning, everyone. I'm Vishal Pushpa, CIO. I joined Climb just 1 year back. I mean, last year in June. So we didn't spend a lot of time, but enough to understand what we are doing, what challenges we are facing, where Dale wants to take the company and then what we can do from a technology perspective to help enable him, his leadership team, his sales team to get there.

From a technology standpoint, our strategy is very simple. It's three-pronged: focus on efficiency, drive experience, secure the environment. We spent almost 3 years, I think, probably 2022 to 2025 or late 2024, doing a large transformation with ERP. We had a lot of disjointed system, unclean data. Going through that exercise, what we did that we consolidated all the system of records together and ensure that we have one source of truth of everything. And that allowed us to look at the data differently. And that's what led into our next level of transformation is, okay, now we have data, how can we bring AI and other automation framework to drive more efficiency. So I'm going to talk a little bit more about what we are doing. But the intent there is overall from lead to cash perspective, how can we move faster?

Charles said that our quoting is easy. Our goal is how to make it further or easier than what it is right now. The second part of the focus area is driving experience. We do a lot of things. We have a lot of -- we are very focused with our vendor. But one complaint or one challenge with our resellers and customers are, they do not have access of information when they want. Our end-to-end operations runs on e-mail phone calls, which is great. I mean we are a relationship-driven company. But then when they need something, if they want information, they want opportunity, we want to give them on their end. So we'll talk a little bit more about what we are trying to do. And the last one is, of course, securing the environment. Everyone is nervous right now with AI and what's happening. Then we are trying to onboard larger vendors and larger customers. They are concerned, hey, what is your footprint? How you are going to ensure that our data is secure, you are not doing uncompliant stuff. So some of the focus there. When you talk about AI or what I call like AI-enabled process efficiency, first, like I explained, we put system of record. We did ERP transformation great.

Now the question was, what I can do with that system and the data what we have from all the way lead to cash and how can we ensure that we can do probably double the business what we are doing now with the same level of staff, and that's what our focus is. When it comes to the back-end operation, fulfillment and cash, we are being very intentional in figuring out where we have mundane task, putting agents, allowing people to use AI tools within the boundary of compliance, definitely discouraging any kind of intellectual tourism, doing that. But on the front end, and that's where our focus area is right now. On the front-end side, we are now transforming our overall CRM and marketing footprint. Charles just said that marketing is our profit center. Our vendors looks for that.

We're trying to bring better systems, better infrastructure for our entire marketing team so that they can do their job efficiently. But more importantly, they can connect their data from go-to-market from the lead to the opportunity all the way to the quoting. The other piece is coding. That is our biggest time consumption. Even it is easy, that's where in the operation, we spend the most amount of time. Just to give you a perspective, last year, we have produced probably almost 1.1 million quotes and 95% of them was created manually through an e-mail manually entering the data into the system. A lot of time consumed. The human elements still have to be there. That's what we do. We build relationship. But we can save all those time where we are spending like entering the data into the system, figuring out errors and everything. We are right now in process of building our own in-house AI-powered quoting system, which will be going live somewhere in the month of October or November, which will allow our entire insight team to get more efficient, potentially by 30% to 40%. That's our prediction right now.

So we are putting a lot of effort there. The overall goal is reduce the manual touch point and ultimately increase the deal velocity. The second piece is, which I want to touch is the experience sector, right? We -- as we speak, we started working on that. We are in the process of building our own customer experience platform, which should be up and running somewhere probably by Q1 next year. The intent is twofold. One, as we transact end-to-end, we want to give our customer every access of data they can have. Majority of our business is software. And if you look at that, we transact licenses. But we cannot tell our customer what are your licenses. It's actually not even in a format they can read right now.

Renewal is another part of the business where we struggle right now. When it's a struggle, like we do better than all of our competitors. But internally, when we look at our own efficiency, it's a long process from our customer figuring out what has to get renewed, then our internal team figuring out how it has to get done. Our intent here is that provide -- I want to say this, probably Amazon-like experience where our reseller can log in and see everything and then put a request of the quote, put a call out for an existing order, call a renewal and everything. But on top of that, also act as a marketplace for our MSP providers and everyone else. So our focus right now, and like I said, we already started working on this and potentially by Q1 of 2027, this should be up and running for at least some targeted vendor.

Last one, safeguarding the ecosystem. I think Dale said, right, we were $400 million or so in 2020. Now we are transacting around $2 billion or so. We are onboarding larger resellers. We are onboarding larger vendors, and they all are asking the same question, how should we trust you? How do we know that our data is safe, right? Now we can always tell, hey, we have great security protocols. We have all kind of firewalls and everything, that alone is not enough. So what we are trying to do is that we are trying to get into some of the difficult certification or industry standard certification. We are in process of getting certified on SOC 2.

We are also going after NIST 800-171, which will also allow us to sell or distribute to federal market, state, local education and all. We are focusing on ISO 27001. We are already certified in EMEA. We are now trying to get into North America as well as we are getting to CMMC because a lot of our resellers already serve federal and government, and we want to ensure that they are not in trouble because as a distributor, we are not certified. So we are going after all these things to ensure that our risk is reduced, but also open up the market access, right, from resellers' perspective as well as vendor perspective.

So just to conclude, our focus, again, focus on efficiency, ensure our margin footprint looks better, focus on experience to open up new market space, new channels, new customer base and also provide our MSPs and vendors a level of confidence that once we go to climb, our business is going to grow and then gain the trust for the industry.

So thank you, everyone.

Gerard and Carlos.

Good morning, everybody. Great to be here. My name is Gerard Brophy. I'm actually based in London. And my responsibilities are really to go after the international business really from a regional growth, vendor growth, different brands, portfolios in different regions. And really just the strategy throughout EMEA also assist Dale with targeting the right type of acquisition targets really in the different regions across EMEA.

Excellent. And good afternoon, everybody. Carl Rodrigues, President here for North America. I've been with Climb now just almost 6 years from their first acquisition of a North American distributor called Interwork Technologies, where I managed our North American go-to-market, came over to Climb to really help build out our sales team here in North America, both on the Canadian side as well as the U.S. side and get deeper with our vendor partners.

I just wanted to start really on the model of distribution, how it's been evolving over the last 3 years and where we think and we feel and certainly investing our focus into where the future of distribution is going to. I'm pleased to say it's all very positive in all the trends that we're doing. If you look on the left-hand side, that was more the traditional model on go-to-market just the usual vendor distributor channel and all the way through down to the end customer. But on the right-hand side, this is really how we believe the future is starting to look. And it's really powered by the likes of data services, digital platforms in the market. And it's really putting us as a distributor right at the epicenter, if you like, of the ecosystem. And that's been accelerated by things like hyperscalers, different marketplaces, consultants, AI agents, these types of things coming in.

We're investing our time and energy into building out the MSPs, larger resellers, et cetera. One thing that's really interesting is the end customer. If you look at it on the right-hand side, the end customer is always driven by the resellers. I think one of the biggest frustrations a lot of the vendors have at the moment or they can't get the access to the end customers as quickly as they can. And I think one of the reasons is the channel partners. There's a lot of selling existing to existing customers, so existing technology to existing customers. So for us, it really gives us an opportunity of helping the vendors. A lot of the vendors are actually investing a lot of MDF money into distribution to try and drive end-user demand. And one of the reasons they're doing that is really from a solution sell. So we can put a number of our vendors together into a solution and really fix end users' problems. So rather than trying to sell point product at this stage, selling solutions is a much easier and beneficial way of getting into the resellers and selling that. So just the next slide here.

The good news is it's putting us in a fantastic place. These numbers here up on stage really are -- I mean, up on the board is the Q1 revenue for the top 6 publicly quoted distributors. What you can see is 22% year-on-year growth from revenue, 60% up on profit. And most importantly, from a share price perspective, it's gone up 20%, not too dissimilar to our numbers and how we're growing through the year. So this is a very exciting figure for us, number and a future growth. This slide actually comes from Omdia. So I haven't just pulled it off the internet. It actually comes from Omdia. But there's a number of specific trends that are actually driving this behavior. These trends are the likes of digital and platform acceleration.

We heard from Charles earlier around consolidation of vendors, rationalization of vendors. Our competition are looking at -- we mentioned 4,000. There's often in EMEA, they're probably coming out at 12,000, 13,000, 14,000 vendors on the books. Why does a vendor want to be part of that? We rationalize down to 7 or consolidate down to 70 different brands, making up 95% of our revenues. Very exciting. One thing to actually do take note of, I think a lot of these numbers may be slightly skewed because of the shortage of hardware. So when you look at the bigger competitors with us, it doesn't really affect us as much because we're pretty much a software distributor. But if you look at the big guys shifting the likes of laptops, a lot of infrastructure piece, that hardware shortage, there's a lot of -- not prebuying, but forward buying, I guess, of this hardware, so the customers aren't stuck at the end of the year with a shortage of hardware. That may well be skewing these numbers, I think. But from our perspective, it's very exciting because we primarily are a software driver of distribution -- of the vendors. Covered that one [indiscernible].

Perfect. So I'll just jump into this next one, and this is really about what the Climb advantage is, right? And there's one thing I think everybody here needs to understand that we win when our partners win, both our resellers and our vendor partners in the channel. And we've built our team specifically to help our partners win faster. Dale talked about speed and what does that mean? So one, at the forefront, we have our partner-first mindset, really focused in driving partner success. And what that means is that we align both with our resellers' go-to-market as well as our vendors' go-to-market and make sure that we're going to market together as one unit, where a lot of times, different distributors and so forth will work with our vendor partners in different models instead of together jointly, and that's what we bring as well as building long-term relationships.

The second one is around the high-growth vendors. Charles mentioned this earlier. We strategically looked at our main line card, narrowed it down to 100 with 70 focused vendors. And that's so that we can get deeper with those vendors with our teams, have the expertise to be able to support our resellers the first time when we're engaged with them, when we're out in the market with them, when we're in the field. And as they're looking for new solutions, they can count on our teams to really be that trusted source for them so that they can come to distribution versus having to go directly to vendors individually.

The third one is really around our engaged sales team. And Charles mentioned this as well earlier. Our field teams have one of the best relationships out there in the regions with our reseller partners and our vendor -- and the reason for that is they're out in the field. They're on site at our resellers weekly. They're partnered with them. They're aligned with their go-to-market planning. And we find that's what's really helping us drive and grow business in these long-term relationships. The fourth one is really around new business initiatives. You heard this a little bit earlier, really using business intelligence to help grow our business. And what we've done and what we continue to do is look at our database, understand who our end customer base is, understand our vendors and their target vertical markets, understand our reseller strength, use that data to really align our vendors and resellers in the market to grow the business and move faster out there.

The fifth one here is really about fast and reliable support. This is the day-to-day. This is the quote to order. This is how we support our partners. And what we pride ourselves is industry-leading SLAs and supports. We support our partners within 4-hour SLAs from a response time, education time, really getting back to them so that they know where they stand and where their business is. And that's how we continue to win is bringing that speed to our partners. And then lastly, the technology enablement. You heard Vishal talk about that earlier. Everything right now is talking about platforms.

Our top partners are looking for integrations, APIs, EDI, renewal integration, quote automation, all of that integration is what we're building, and we're going to market fast with our partners. Now the next step, when you take a look at our field team and how we've built our field team and our sales team in general, it's purpose-built. It's really around relationships. We know relationships is what wins the business and builds the business. And frankly, I think relationships is the new competitive edge out there with technology going out there. So when you take a look at how we built our relationships in North America, we have 19 field sellers, and that's across 13 regions. We have 2 regional VPs that we just promoted last week to help drive and grow and mentor our territory teams.

Now what's special about these teams is, as I mentioned earlier, they're out in the field. They're engaged with the resellers. They're having real conversations. They're part of their go-to-markets. They're involved with our vendor teams. They're out in the field. They're bringing our vendor teams into our reseller partners talking about go-to-market. And I'll tell you, what we hear so much is, hey, we haven't had a disti rep in our account to visit us in forever, right? Even with our vendor partners, our latest relationship, when you take a look at Fortinet and our partnership with them, we've now gone to all their local offices where other distributors aren't present, and they are now hosting their QBRs, their business planning in our offices over the next 3 weeks. We have 5 of them.

So we're getting deeper and closer with teams aligning to their go-to-markets and really being strong. And that's the value that our field team brings in. The next step when you take a look at it, our vendor managers. So our vendor managers are essentially our funded vendor heads at our company. They are funded by our top vendors. If you take a look, we have 26 of our strategic vendors that fund that team. That team is roughly 90% funded. These guys are the specialists. They know the vendor solutions inside and out. Again, it's making Climb as a distributor, the first point of contact for our resellers versus our partners having to go directly to the vendors. And that's an important part of earning their trust and building their business. The second part about this team, and it's so large is that we're completely aligned with our vendors.

Our vendors are investing in us. They want us to be successful. They want to grow their business with us. We're aligned on their go-to-market. We take a look at our top reseller partners and gain the mind share of our vendors to focus on our partners, go-to-market, MDF, co-op, dollar funds, really figuring out how to drive new business through our group versus our competitors.

Yes. And I think just for me, I think it's important that we give our vendors parity and our resellers parity across the globe. So whether Charles and his team sign a vendor here in the U.S. or we sign one in Europe, and we obviously send them across the different continents. It's important that we've got the same model from a go-to-market and a sales perspective. And I think ever since the acquisitions have occurred, we've definitely modeled our sales teams to really mirror what they're doing in the U.S. And it helps our resellers, too. So we've got some global resellers likes the CDW, Insight, SHI, these types of resellers. It's important that they can have point of contacts right across the globe.

And when a vendor wants to go to market and really push it from a marketing perspective, we can actually give them a one-stop shop from a global perspective. And I know our competition can't do that because of the different P&Ls they run through Europe, where we are -- we'd like to think we're nimble enough that we can offer that service.

Yes. That's a great point. And then when you take a look at our 2 teams and how the teams work together, it's really how do we bring our field sellers, our vendor managers into one cohesive team to accelerate the business in the channel. So there's 4 key areas that we look at. One is around demand creation, right? We look at our field sellers. They're really on site, working with our reseller partners, working with their sales team, identifying end-user opportunities, doing account mapping and really driving that pipeline at that level. Then we back that up with our vendor team. They really bring in, they activate the vendor funding. They collaborate with our vendor sales reps, bring them into opportunities into our accounts, drive campaigns and launch a number of initiatives to keep the mind share with our partners and really just accelerate and build pipeline faster our company, right?

The second one is around account growth, right? And we really work with our field reps, and they work with our resellers. They do account planning, figure out where the gaps are in their portfolio, where they want to go to market, how they're going to market, different verticals that may be ideal for them to go after that they're strong in or that they lack in that we can help bring together. They team them up with our vendor managers and align our reseller strategies with our vendor strategies that are going after the same markets and really building the business in the same areas as our partners, and we go to market together with our reseller and our vendors. And that really just brings a stronger performance from our resellers. We're seeing double-digit growth when we truly align both go-to-markets.

The third one is really around deal execution. This is where our field teams are actively engaged with our resellers. They're driving deals forward. They understand where we are. They're negotiating credit terms, the deal size, moving forward, making sure that everything is aligned. They team up with our vendor managers that then track that pipeline, but track it alongside of our vendor sales reps as well. So it's in their forecast. It's at their end of quarter, end of month targeting. We're making sure we're an integral part, and that makes sure that no deals slip to a competitor of ours and that we know exactly what's coming in and closing, and that gives us higher win rates across the board when we do that with our vendor partners.

And then lastly, enablement. This is where our field reps are in the offices, working with our resellers, understanding their vendor portfolio, understanding their gaps, understanding the opportunity out there industry on our vendor portfolio, our emerging partners, our strong top partners that will really fill that gap for the resellers. They will then bring in our vendor managers that will come in, enable, do demos, do presale support, post-sale support, be that line item for that reseller to engage with and move their business further along, and that really helps us expand accounts further.

Now the next part is really around regional expansion. And if we take a look at where our focus is in North America, we've doubled down in a couple of areas. One, bringing in our regional VPs, right? We now have Mike Taliercio for the West, and then we have Jessica Lindlof for the East. They're really going to be managing our field teams, getting closer, getting into our top reseller building those relationships, identifying the opportunities and really driving forward with that. We've expanded into MSP division. We had our MSP teams managing over 1,500 of our MSPs throughout our territories in different regions. We've now built a dedicated team to go after the MSP business and continue to drive that growth and also bring a different level of service tied to with our platform as we start launching our marketplace and moving forward.

We also invested in our territories. I think one thing we consistently do is evaluate our territories that are out there, look for the highest opportunity for growth and where we can expand in different regions that have a high potential of opportunity for our teams. We've split out California into NorCAL into SoCal to really increase the business there, and we're starting to see an uptake in double-digit growth there with our partners, allowing us to get deeper with stronger reseller partners in those regions. And then lastly, this is where we're seeing a ton of success come from. It is really doubling down on those enterprise partners in the North American region. Really, when you take a look at it, WWT, also CDW, they're the top 10 solution providers that are here in North America. They have the highest opportunity within customers.

With WWT, we've built a strategic team around that. We brought in Kip Thompson, which is now managing that line, working with our inside teams. We're starting to see our sales double, triple as we move forward and tremendous growth. And the fact that we put that dedicated body around those lines allows us and allows our vendors to focus more around with us because our competition doesn't have that. CDW, this is our largest partner, one largest service providers in North America, led by probably one of the strongest field reps I've seen, Nathan Wysocki. He's been on that account for more than 10-plus years, really knows how to build and build relationships. We've now built out that team to a team of 4 to really go after and build out the different regions, the different verticals and really get deeper within those accounts. And as Charles mentioned earlier, our vendors are coming to us wanting to get into these large national accounts, CDW, SHI, Insight, and our relationships are getting them in the door to move faster.

Yes. I'll just move it across to EMEA. And I think it's important to take a step back -- sorry. I think it's important to take a step back and have a look at the strategy of the business. So when Dale did come in, the strategy was, yes, we talked about consolidation of vendors. But from an M&A perspective, North America, primarily quite consolidated. A lot of the big distis have been hoovered up. So EMEA was the market to really go after.

So originally, the Lifeboat business really had a business in Amsterdam, small internal, 3 or 4 people, and they just used to really procure some software products, the likes of Intel, et cetera to a number of different countries.

Since the strategy changed and the acquisition was key to growing the business, we've acquired 3 businesses in the U.K. and Ireland, you can see. So we've got 3 offices in the U.K. and Ireland. We -- this is a bit of a combination of a slide of acquisitions as well as organic growth. So a number of the regions we've actually invested ahead of the curve with an idea we're going to scale out the business from an organic perspective, while still keeping an eye on the targets for those regions.

We still got the Amsterdam business. We've actually grown that out quite significantly, and it now trades with all of Benelux and Nordics. We have a team in Paris. We've got an office in Paris as well. That market is one of the biggest opportunities. I think, for a lot of American vendors as well as Israeli vendors, they tend to try and stay away from that market because the French are quite persnickety in the way they work. So you need to have French people. You also got to hire teams and teams of people in France. It's very difficult to get rid them with their own people.

But we've also -- we opened up in Germany. We've got an office in Munich. That's very exciting for us. And obviously, the latest acquisition in Athens. Exciting for me, you can probably hear I've got a bit of South African accent. For me, it's exciting. We've actually -- we've organically grown. We set up a business 2 months ago in South Africa. We've got a team of 8 people out there. One of our key vendors in Sophos, our largest vendor from a revenue perspective, they've decided to really work with us in the region. And it's not just South Africa, all of sub-Sahara South Africa is key to it. We've hired some really strategic people in that region who've already worked distribution there. So we're looking for big things coming out of that market, very exciting market. I'm sure you're all aware, but the amount of cash that's being invested into East and West Africa, certainly from a data center perspective is through the roof. A lot of the governments are funding a lot of the IT start-ups and data centers.

So for us being in there and giving our vendors the opportunity to scale is very exciting indeed. We continue to look for the next target. Dale is obviously talking to a number of targets at the moment, and that's an exciting part of our growth. But from a regional perspective, key regions, obviously, the things like the Middle East for us. We definitely need to focus in on the Middle East, but there's a number of exciting conversations going on right across the board.

Excellent. And so when you take a look at everything we've been talking about, is really around building relationships, getting deeper with our resellers, aligning with our vendors. And is that really driving the growth that we want to see here in North America?

And when we take a look at our first half of the year, what does that mean for us? What have we accomplished? So really, you take a look at where did we win on RFPs, relationships, vendor partnerships. Alone in the first half, we did $350 million in large-scale RFP wins and also about vendor transitions and engagements in the channels. Those were primarily RFP wins and new relationships with CDW, SHI, WWT and Optiv. And I think one of our larger wins there was really around the Optiv account and taking that account to the next level. And we're talking about bringing account from a $20 million account to $120-plus million with us over this next year. And those are the large enterprise wins that we're really getting underneath and bringing our relationships to develop. We have another 10, 15 accounts that we're building those same relationships and going to market and bidding on those RFPs and so forth.

The second part is around the strategic vendor momentum. These are our staple vendors and the growth. And if I take a look at these 5 vendors alone in the first half of the year, we grew almost $72 million with these vendors year-over-year. And that, again, comes from alignment, our vendor management team collaborating with it, our field team being out there in the field, bringing their vendor reps into new accounts, new resellers and moving forward. And that's the momentum that we're building here and taking forward into the second half.

Yes. And just from an EMEA perspective, I'll just put up 3 accounts there from a success perspective. The first one, Softcat. Softcat is the largest reseller in the United Kingdom. We have, over the last 3 to 4 years, have been successful in doing well over $100 million with them on an annual basis based around one of our vendors in Vast. That's obviously grown significantly through other vendors, that relationship. So things are going well there. I think we spoke a little earlier around end-user demand. This is a great example where distribution can get involved and open up some doors. So one of the large account there was actually opened up by us, by climb, which enables us to maintain higher margins on the larger deals and stay in the fight, if you like. So again, pushing that end user demand is pushing up our margin.

SCC, that's a French win for us. That's -- SCC is a massive account in France. There's a public platform, I guess, you could say, that it's called UGAP and all public spend goes through UGAP in France. So that's a $3 billion opportunity that all runs through SEC. We've managed to sign up with them and get the contract finalized, and we're starting to trade quite a lot of our vendors to that. So that's very exciting. First Distribution, I had to put that up because that's the biggest reseller. First Distribution is the name of the company, but they have a reseller called First Technology. They're the largest reseller in South Africa, and they've again signed up to give us -- effectively, it will be 1/3 of our income over the next 12 to 18 months, which is very exciting.

Perfect. Excellent. And then one more slide.

Yes. Myself and Carlos often go at 7 minutes, so bear with us.

I think I always put the word relevance to what we do. I believe us as an organization trust stay ahead of everybody else and remain relevant for our resellers. AI, 18 months ago, we sat down, we recognized there was a massive opportunity for us within AI. We looked at building out our own solutions. We realized we're not an AI company. You've obviously heard from Vishal earlier about what we're doing from an AI perspective on tooling. But what we looked at ourselves and said, what are we? What do we actually do? We're an enabler. We're a trainer of resellers effectively.

So what we put together was we put together -- we named it the Skywood project. And what it is, it's effectively 6 steps to AI readiness for all our resellers. Because the reality is even though AI is talked about everywhere, from an enterprise level, a lot of people don't know what they want to do with their data. So ultimately, it's achieving that outcome. People are on different levels and different steps. So we created our first step, which is effectively our AI academy. And that's training people from entry level to people who are geniuses in AI and sitting down with these enterprise and SMB companies and saying like what are you trying to achieve? It's a journey. We're actually on a journey. We need to get somewhere. It's not a quick fix product that you're going to stick in and it's going to work. So we want to take them on that journey.

So that's number one. We actually go in vendor neutral when we talk about the Skywood project. And ironically, what happens there, we get a lot of end user interest as well. So end users and resellers come to a lot of our events and webinars. Once we have them in there, then we open up the technology because we only really make money when we sell technology. So this is not a money earner. It's been relevant and given access to wherever we want. So really, secondly, we open up and we give them a true ISO certification that enables them to go to their resellers and discuss what their outcomes and bring them in. We also then, from a third perspective, we all know every use -- every AI opportunity is a new use case.

We partner with a third party called Unframe. They have a number of different use cases, hundreds and hundreds of different use cases, which are relevant to every individual case that we see. So we take them on that journey. Also got user group. We set up a user group. Remember, cloud came to market and the things like HCL and these types of things, we actually set up user groups for people to kind of push ideas against each other, put -- we're not selling anything. We're just having these conversations with peers at a certain level. We start to generate that interest. Risk and compliance, we spoke about it again, Vishal. Certainly in Europe at the moment, governance compliance is key to everything. You've got Cyber Resilience Act coming out on the 1st of September.

All our vendors, our American vendors and Israeli members have to be compliant. If they're not, even us as a distributor could face fine. So it's up to us to educate and make sure they compliant. It's a key part of that. And then obviously, sixth, our marketing team, I think we have one of the best marketing teams around, and we can help our resellers go to market from an AI perspective. So again, slightly over our 7 minutes. Sorry, I apologize for that. I don't know. We actually cut out 5 slides. I'm going to introduce Brian and Tim. Thanks.

So good morning, everybody. My name is Tim Popovich. I am responsible for sales and operations here in North America. I've been with Climb for the better part of 23 years.

We are still good morning. I just have to have to check after the guys run over. So good morning, everybody. Brian Davis, I'm VP of Sales for Climb in our U.K. and Irish region. I've been with the business since an acquisition in October of '23 and have 27 years in the industry.

Excellent. So Brian and I are here to talk to you guys about inside sales and operations. And as you can see from behind me, there are a lot of different groups of inside sales, right? So we have our national accounts that Carlos just spoke about in CDW, SHI, Insight and Worldwide Technologies. Everybody else kind of falls into this little VAR segment, and there's about 7,000 VARs that we do work with in territory.

We have our MSP team that we also mentioned. The 2 that I really want to point out are our Elevate team and our Basecamp. And we mentioned that we have about 100 brands on our mainline card. When we moved our line card from 400 plus or less than 500 vendors down to 100, we didn't just fire those vendors. They were revenue-generating vendors. So what we did is we had carved off Elevate, which is run by Michael Bernstein here. And we transact in a fulfillment fashion. So these fulfillment vendors do not get access to our field sellers. They don't get the ability to participate in our marketing and events, and we don't maintain their price books, right? They are truly a one-off vendor that we provide fulfillment for.

Many of these companies and especially the larger guys, they call it long-tail management. They also want to only focus on the lines that bring them money. But if they're participating in an RFP for one of their big end users, whether it be Exxon or Cisco or somebody else, Bank of America, they have to procure everything. They just can't procure some things. So they look to climb to procure all of those products, and that's what our Elevate group is for. The other group is base camp, and that is mostly our order entry group. We utilize EDI as a technology, and we have over 20 reseller partners that are on EDI. All of those orders are coming in based on quotes that the inside sales teams have created, and our base camp group are the ones that process those orders and send them off to our vendors. We put a few notes down here.

Fast response equals faster results. We are by far the quickest company in this industry to provide a quote back to any customer. You'll see on a future slide that we have a 4-hour SLA. However, we get most of our things done within 2 hours. As Vishal automates our system, that's probably going to become a shorter time frame. Our reps have been here for a long period of time. I've been here for almost 23 years, and I think I might be the fourth longest or have the fourth longest longevity in our company -- in this room, right? So we have people that have developed relationships with our partners, and those people have stayed at those resellers where we have really furthered the relationship because we've just known each other for that long, right?

We say that quoting is not hard, but it can be. We have 100 different vendors, and they all have different rules of engagement. They have standard pricing. They have deal registration pricing. They have special pricing. Some people require information periods of perform. There is a lot of data that goes into a quote. All that data will be shrunk and make us faster as we automate through Vishal. All of our inside sales reps are sales certified, and they're experienced within the groups that they exist. So Carlos mentioned, we have 19 field sellers. Each of those field sellers are backed by 4 to 5 and in some cases, 6 or 7 inside sales reps that support that speed. But our inside sales org is where the speed comes from, and that's part of the other reason why we win outside of relationships.

Thanks, Tim. So what we're looking at here is our EMEA inside sales footprint across 7 locally based teams in 7 markets. We have a team in the U.K., a team in Dublin, Ireland, a Benelux team covering the Netherlands, Belgium and Luxembourg. A France-based team, a DACH team covering Germany, Switzerland, Austria, but also into Poland and up into the Baltics, a Greece team covering that Southern Mediterranean region; and our most recent office, our South Africa team in Johannesburg, covering, as Gerard mentioned, all of Sub-Saharan Africa.

What's important to note is these teams are local to their customers. They're local to our vendor teams that are in those regions. And they understand the local buying cultures, which are very different across each country in this region. And by being local, we're able to drive speed. What a customer in this region wants is they want the distributor to come back quickly, accurately and knowledgeably with the information they need to win business from their customer. And Kim are the best distributor to deliver this. And that's why consistently, we're winning over reseller partners across the region. Like we've all heard that adage that people buy from people. Let me tell you, French people really do only buy from French people. But it's actually more than that. Our value to the market is we understand how to sell to the German mid-market. We understand if a vendor wants to access the public sector in France and how to get them into that market.

If one of our vendors wants to go sell to the NHS in the United Kingdom, we know which partners hold the right accreditations and are on the right framework agreements to give them access to those accounts. So using our teams and the knowledge within our teams accelerates our vendor partners' route to market locally. While our teams are local, our operations sits in a shared services engine centralized within our U.K. and Irish business. That encompasses our sales operations, our procurement and our vendor operations. That provides a consistency of experience to all of our vendors as we sell across the region. It also provides consistency for any partners we're working with in our North American business that want to access or service customers in the EMEA region. It's the same experience across EMEA as they get in our North American business.

When we moved into South Africa, we didn't scale out a new sales support team. We didn't scale out a new finance team, a new procurement team in the region. We just extended the capability what we already had. The cost for us or the marginal cost for us to enter a new region in EMEA is a fraction of the cost of what it costs us to enter our first region in EMEA. And that operating efficiency, the revenues generated from that flow straight to the bottom line. Within our shared services engine, we also have a lot of experienced people within the business, as Tim mentioned, tenure. Everybody has a very long tenure in the business. So they understand not only the buying culture, as I mentioned earlier, but the challenges with actually doing business in specific regions. That is exacerbated not too long ago by Brexit in the U.K., where all of a sudden became a lot more difficult for some of our vendor partners to manage the shipment of hardware into the U.K. or into the EMEA region. By having logistics facilities in both Dublin within the EU and in the U.K., we can facilitate both markets seamlessly without any disruption to our vendors or our customers.

Yes. I mean I'll just say it's easier to buy than it is to build, especially internationally. And our speed to market has been minimalized so greatly being on a unified global system. Okay. So these are just some stats. I really want to talk about the scalable commercial engine. But as you can see, we've processed almost 271,000 orders across the past trailing 12 months. And as Vishal noted, there's about 5 quotes for every order that we place, right? There's a lot of options that these customers are considering. We worked with more than -- or almost 800 different vendors, which means Michael Bernstein's Elevate Group is transacting with almost 700 of those.

But the commercial engine and the scalability, it's easy to add a new vendor and then plug them into a machine that's already running. We can sell things that are more than just software if we really wanted to, but we'll probably just stick to our specialization. We can plug them into a partner ecosystem that we've already shown and that we've already proved works. And as long as Charles is working through his vendor profile and signing those guys that have more than 50% of a distribution viewpoint, those guys are going to plug right in and be equally as successful, right? Our inside sales growth engine is simple. We add people as we do more business, right? And there's always a revenue threshold that tells us, hey, there's x amount of quotes, there's x amount of orders, there's x amount of revenue coming in, and this is the time that we go and we add. Take the bottom 2.

Yes. So very similar from the EMEA perspective. The numbers you're seeing here on orders processed, like these aren't projections. This is real throughput through our business, through our teams. And the teams that are there at the moment already in the territory can scale from almost 50,000 orders processed to the next 100,000 very efficiently. So we're not growing by just getting bigger. We're truly scaling our business in EMEA across the region. We transacted with almost 360 different vendor partners, very similar to the North American story, a focus within a small number of large vendors that we work with in each region. And that can be a very different picture when you move around the different regions within Europe.

We're working with different vendors in some countries, a wider number of vendors in others. So that's allowing us to develop bespoke localized go-to-market in each of the regions we're operating across the EMEA region, which is really important. From our reseller and MSP base, almost 3,500 customers we sell to. The hardest part is always acquiring a new customer. With the number of vendors we have, we're all about now monetizing repeatedly the customer base we have, then compounding that and driving that compounded growth in the region. Again, speed gives you share. So having a fast SLA, looking after the sellers within your customer base with a fast and accurate response will bring business to you repeatedly. And often what happens is the reps in those reselling partners just won't even bother going to our competitors because they know the service they get from Climb is far superior.

And effectively, what we've built is this scalable capital-efficient engine across all of our business, one where we can take one of the new vendors that Charles talked about earlier, take that vendor into our existing partner ecosystem, leveraging the field and vendor teams that Carlos and Gerard talked about earlier as well, putting our inside sales engine behind that, everybody putting their shoulder to the wheel and driving incremental growth for Climb, but also for our customers and our vendor partners.

Okay. So inside sales and operations is really blocking and tackling, right? It's the necessity behind how we go and we sell. So our entire thing is speed and accuracy. And even for as fast as we are, people would like us to be faster, right? The amount of e-mail that we have incoming is insane. The partner portal, the reseller portal that Vishal talked about, it's a self-service portal. It's going to help minimize the amount of things that we have coming in. We also like to utilize our own self-service portals when vendors offer them. We can go and we can grab quotations quicker. We can get that out to our reseller partners quicker, right, which leads to a quicker sale.

Our automation, and I'll tell you down here, we utilize XML, EDI, API and soon marketplace to get to our customers, right? This receiving a quote from a vendor in a PDF, copying it and paste it into your own quote tool is long. It takes a long period of time. If you have a 60 or 70 line item quote, it's going to take you an hour to do a quote, right? With XML, we can take that file, we can drag it and drop it into our quote tool and every line item automatically appears for us to do, right? Then our inside sales reps job changes from creating the quote to reviewing the quote for accuracy and sending it out. It allows us to upsell and cross-sell other products that we can now add to the quote. And that's really a key for us. Our bid wins.

Carlos had mentioned that we had already won $350 million worth of business across the CDW, Optiv and a couple of other bids. We're probably the sixth biggest distributor in North America. There's a reason why people choose to work with us, right? It's the relationships that we own. It's the speed in which we work on the inside, the accuracy of the quotes that we provide and how quickly we can help them close the sale. We win because of our relationships and because of our speed. We don't have the biggest rebates. We're not the biggest distributor out there, right? They probably have other technologies. They just don't do it better. For exclusivity?

Yes. I thought I'd give you a couple of examples of what's been happening in our region with vendor exclusivity. So one of our largest partners, Sophos in our North American business, made a decision this year in our Irish market to terminate the relationship that they had with 2 existing distributors in that region and replace them with Climb as a sole exclusive distributor in that region. And that was because, first of all, they've had an amazing experience working with Climb in our North American business.

Secondly, we have the same systems and platform globally. So we -- they trusted and knew that they would get the same operational experience with us. And thirdly, our go-to-market strategy in the EMEA region delivered what they needed from a growth point of view in new customer acquisition and new partner acquisition in that territory, which had kind of slowed with their existing model. This is something that we're seeing recurring over and over again now. And we're part of multiple conversations every month with vendors who are looking to talk to us, either they're dissatisfied with their current incumbent distributor in the region or one of the countries within the region or they're looking to enter a market and enter a market for the first time. And given the experience they've had with us in other markets, they choose us from the beginning to have an exclusive relationship. That allows us to continue to invest in -- or to expand our investment initially in those technologies. So we have more people from the get-go on the ground to support that vendor in region.

Yes. Exclusivity is hard to come by. There's very few vendors out there, whether they're selling direct or selling through a distribution model. Nobody wants to put all their eggs in one basket, right? And then if you think about that in North America versus internationally, they really don't want to do that because generally different distributors exist internationally. But we've managed to secure a bunch. And I think it's all of the things that Brian talked about, right?

You look at Ingram and TD SYNNEX and Arrow, we call those guys broadline because they offer so much. We're more specialty, right? And every vendor wants to have a broad line and a specialty distributor. But after working through specialty, they just kind of always want specialty because it delivers that much more. So we're able to accomplish that both in North America and internationally. So I think next, we'd like to bring up Matt Whitton, who's going to talk about our solutions in our marketplace.

So real quick. Yes, Carlos and Gerard went too long. That's why we're moving around. And they always do that. I want anybody else to understand what persnickety means. I don't know what that means on that side. So yes, we'll forget that busting on the French. So what we're going to do is we're going to go to lunch now. We'll come back. Matt Whitton will kick off, and then we'll get into the numbers. The second hour is going to be really where Climb's going to be going, which I know that is a lot of the reason you guys are here, understanding us where we are, but where we're going to go in the next 3 to 4 years. So let's go all good to lunch.

One thing that was mentioned as far as a lot of the sales teams here. And the last thing is Sandy DeVico got to be upset that she wasn't on that one slide, Carlos, I have no idea. I know I could feel the heat coming there. So please intermingle with our teams. We have vendor manager directors here, our field sellers, our operations, our credit, everybody, please get to know everybody and pick their brains on what we're doing internally in climb, but thank you. We'll be back in an hour.

[Break]

Awesome. Thank you very much. I hope you all had a nice lunch, and we've saved the best bit until now because -- yes, we thought that would. I'm going to talk a little bit about parts of the business that maybe some of you aren't quite as familiar with. So I'm Matt Whitton. I'm the COO in EMEA. And as part of that, I also run our Gray Matter brand globally. I joined the business about 5.5 years ago as part of the CDF acquisition over in the U.K. that happened. But I've been with the company now 26 years. So a long time, as Tim was talking about earlier on.

So what is our Solutions business? It is Gray Matter, which sells mainly to ISVs, so to developers that are building IP to sell on. We sell both to them and through them. And then there's Climb Global Services as well that I'll go into a bit more detail with now. So starting with the numbers. Our Solutions business, although in 2025, the AGB was about $90 million, so not a massive part of our business. From a revenue standpoint, from profitability, it punches above its weight. So yes, from 4.6% of our AGB drives about 13.5% of our gross profit. We're able to do that because of the way that we work. It's where you add more value, right, you can retain more margin. So Gray Matter, as I said, sells to ISVs, but what does it sell? So majority, about 86% of what Gray Matter does is Microsoft. But there's some niche areas of that where we work there. So where you've seen the vendors that the other guys have talked about earlier on.

In Europe, we are a Microsoft distributor. I'll go into some more details about that a bit later on. But Gray Matter essentially help developers to build an application, provide them the tools to do that. These are people that are adopting AI as fast as you can take it, right? They are people that are quick to adapt and adopt new technologies to see how they can build their business, but then they need somewhere for that to run. They need some people to help them secure that because when they're working -- software is their business. They really understand what they're talking about. And our salespeople, our marketing people working much the same way as the Climb team, the operations that you've seen earlier on, but they're working with these companies that are using the technology to help build their business and go forward.

Climb Global Services serves both Gray Matter and the Climb Channel Solutions part of our business, and it serves that with presale support. It serves that with post-sale support. So first and second line, whatever the vendor is needing, Climb Global Services can provide that into our major vendors. They also help drive license sales. That's what we're all here really to do. So they do migrations, optimization, in some circumstances, managed services, so helping MSPs adopt those technologies early stages before they build up that themselves. So we're training MSPs and resellers to scale that as they look to grow. And they also give us the technical certifications that we need that many vendors require. Certainly, yes, that's for Microsoft, but for many other vendors as well to either be a distributor to be a partner in some way or other and have increased margins. So that gives us our credentials.

One area with Microsoft that they now have a frontier distribution program, and we are very well placed to become a frontier distributor because of our services business that we have there. And what that will mean is that we're, again, able to retain more margin, get leads to build that business as we go forward. And then the third piece I'm going to talk about as well is the client marketplace. So again, you've seen some bits of that. In Europe, we already have a well-established marketplace that is in operation. This is again centered around our Microsoft business, but also with other vendors that we have there. And this is really helping us serve a market that otherwise would not be profitable for us to do so. So when we're working with MSPs where there's a low average sale value where the margins wouldn't otherwise support us putting headcount against that, having these partners self-serve, much like a Pax8 sort of model, if you want to look at it in that way. But then we have the support personnel around that. So we still have that personal touch, but we have those marketplaces there, too.

So delving a little bit more into Gray Matter and how we go to market. So we're working with ISVs, independent software vendors, vendors, we'd call them in Climb-land, right? So we're helping them to build their application, provide them the tools to do that, as we already said. And they're mainly go-to-market on the Microsoft Cloud. So they're building, they're deploying to Azure. We help them sell, then we grow from that consumption revenue that's going to come back from that. Also -- so the 2 things that come up in any conversation that we have, AI, AI, AI. I've already touched on the fact that developers are among the first people to adopt AI, and it turns out that everybody needs more code. They want to generate more software that they can take to market.

But then, okay, how are they going to scale that? Does it commercially make sense? And we can help them with that by going to market through the Azure marketplace. We then need to also help support them to manage their cloud spend. So what's their FinOps strategy? How can we support them to have a sustainable business going forward? Are they secure? So we have a 7-layer security assessment that we run these ISVs through as well, and that really looks at all areas of the security stack and bringing in different client vendors. It's a great cross-sell opportunity that we have there to open that up and help take our vendors into these ISVs as customers. A couple of stats on the bottom there. So Gray Matter' business, 65% of it is true recurring. So this is not just subscription renewals that you've got out there. This is 65% of the business as we come in is going to come through every year and 40% of that is monthly billing. So we're seeing a real shift to a recurring model that is -- it's moved to annual over the years, and now it's moving to monthly, and we're seeing that really drive growth.

And then I'd like to just touch on a couple of niches as well that we work in. So we are a mapping distributor. So that's Microsoft Bing Maps, that's HERE Technologies, that's TomTom. So some areas that you probably haven't heard of or touched on for some time, but this is where developers use APIs to bring location intelligence into their applications. They need a distributor to really serve that market. We fill that gap, and we're able to retain great margins because of the presales service that we offer around that, which really pushes up our GP. And then in other licensing areas as well. So a couple of examples on there is SPLA, which is a Microsoft licensing scheme for hosters and ISV Royalty, which is for -- if you're embedding SQL Server or some other Microsoft tool into an on-premise application, then we are distributors for that as well. It's not that exciting to other providers. So it's an area we've really been able to grow that across Europe and use that to bring more MSPs and more ISVs into our stack.

So stepping away from the Gray Matter part of our business and really focusing on Microsoft as a vendor that we work with, clearly not a challenger when we look at the -- where they stand in that Gartner matrix. However, the opportunity in Europe is huge, both for us all up, but especially with our Microsoft business there. So we are -- I'll say it again, we are Microsoft distributors in Europe, both originally, Climb already were and then through the Interworks.cloud acquisition that we've made, that's really bolstered our numbers there. Now where Microsoft use distribution under their CSP licensing scheme that they term it, it's really to serve the SME market. And so that is growing year-on-year, and it's looking like out to 2035, that's going to grow 20% every year.

Now that's exciting for us. And obviously, we are not a huge part of that market as it stands. There is -- our growth opportunity there is huge. Microsoft are looking to distis to serve more of that market as well. So they're already -- they've driven some consolidation by making resellers, which is this direct build threshold piece here. They've got to be transacting at least $1 million a year to be a direct partner with Microsoft. We know that's going to increase as time goes on as they move more and more of these smaller partners through distribution. So that's a great opportunity for us to pick up on this business. And what we're really offering to those partners is, yes, the marketplace, but then we're also -- as you look at the areas where Microsoft want to grow the business, which is where they put their largest rebates, that is very much around AI. It's around their copilot, it's around security. And that is where our Climb Global Services business really comes into place. That's how that's driving that extra margin back into our business.

And there are other areas as well where this partnership can help us take our existing vendors out to market. So the 2 more acronyms, unfortunately, to you, so ROO and MPO, so reseller-enabled offers and multiparty private offers are ways that Microsoft are offering traditional client vendors and obviously, many others as well, routes to sell to end users by Azure spend essentially. So they're getting enterprise customers to sign up for a Mac. So they get them sign up to -- they can have a certain amount of Azure spend. They can retire that using us and using client vendors to do that. So through this partnership and this understanding, not only is it in itself a good business opportunity for us, but it is for our vendors, too.

And again, in Europe, Microsoft really underpins our MSP messaging. So as we're going out to market, our MSP business, Microsoft is the cornerstone of that, and then we're able to add on margin add-on value but through the other more niche or more emerging technologies that we're able to cross-sell into those MSPs. Once we get them onto our platform, then doing that attach is a lot easier. And year-on-year, we've grown over the last 6 months against the previous 6 months, we've grown our AGB on Microsoft in Europe by 45%. That's excluding the Interworks acquisition. Interworks also growing at an accelerated rate since they've become part of our business. So it's an exciting place to be. It is different to the rest of our business, but it's going to grow, and I can see this being really a part of our acquisition strategy in Europe as we go forward and across the Middle East and Africa as well because as we have these tools, we have these platforms, we have these expertises in place. It's very easy for us to scale that. So a quick bit on interworks.cloud. They only sell via the marketplace. I feel like I'm saying marketplace far too often, but there you go.

So we already use the same technology to do that. So from an integration point of view, this is very easy for us. We're already integrating the teams. They're working together to add value there. So they don't quote. They think it's crazy that we do 5 quotes for every sale that we do. They're like, why do you do that? Why don't you just sell for a marketplace? So we're also educating them on the wider client business. So across Southern Europe, there is a good cross-sell opportunity for us there, taking the existing client vendors through their sales team and through their marketplace as well. All of their business is recurring, and they retain about 5% EBITDA. So it's a good profitable distribution business that they have there. The fact that they're in Greece, they're in Malta, they're in Cyprus, they're in Bulgaria. These are not areas that have high penetration for the more broad line distributors.

So again, we're able to retain more of the margin that we make there. And yes, 74% of their business is Microsoft. The next biggest is Acronis that's in there, which ties in nicely to our North American business. They're a certified Acronis training center and very well thought of by them. So they're going to help us take the Acronis brand right across the rest of Europe, help us build that out. I've covered marketplace enough, as I've already said, but I think the piece that I would like to pick out on that, it's a must. Every Disney needs a great marketplace, and we're already there. As Vishal covered earlier on, it's only going to get better, and we're going to add more value here to what our resellers and our MSPs really need.

I think an important part when you're working in countries where language is different, where tax rules are different, where there are more complications around that, having a consistent marketplace infrastructure that you can then localize, it's really going to help us go to market a lot quicker as we add new regions or expand across existing ones. And it lowers the cost of entry for us because we just need a few salespeople, and we use the existing client and the Interworks go-to-market that we have there, a great MSP lead generation and conversion system, the stats there, which I won't quite quote now as part of this, but we're looking to make sure that, that's driven by the Greek team because they're already doing a fantastic job of that, and we think we can drive great growth as we move through the rest of 2026 and beyond.

And now it's time for lunch, right? Let's go. I'd like to bring Dale up. Thank you.

Matt's coming up here. We're getting into the finance side of things, but I want to recap from this morning just some things that I think you could see that were a strain through a lot of the presentations, and that is the distribution is becoming way back -- much more in vogue. As we were going through different cycles, it's coming back where we are seeing private equity companies, we're seeing investment companies pushing their teams to get more efficient. The channel already exists out there, both the distribution channel and the VAR channel, why would you go direct to the end user and spend all those dollars? They look at it from every nickel and dime, and it's good for us because we are seeing so many more targets.

Charles, could probably use a team or 2 or 3, just to look at the incoming vendors and then us trying to vet through them as fast as possible. So that's the strain that is exciting to us as we continue to grow in these next 6 -- 4 or 5 years that we're going to talk about.

And I'll let Matt kick off.

Good afternoon, everyone. So the next few slides, we'll talk about 2026 and beyond going out as far as 2030. Just to level set for those who follow along are very well aware of the key metrics that we track to, but those are gross billings, gross profit and adjusted EBITDA. And then further down from that, we track gross profit percentage, which is the gross profit dollars as a percentage of gross billings and effective margin, which is the adjusted EBITDA dollars as a percentage of gross profit dollars. From a perspective, we filed this presentation with an 8-K earlier today. So included in there is the appendices that reconcile the gross billings, which we call a key operational metric to net sales. and also reconciles adjusted EBITDA to net income, similar to how we do in our earnings releases and in our quarterly filings.

So just starting with 2025, we did $2.1 billion in gross billings, $105.3 million in gross profit and $42.9 million in adjusted EBITDA. Breaking down those gross billings and gross profit numbers a little further, $1.75 billion of those gross billings were generated in North America, while $350 million were generated in EMEA, which breaks down to 83% in North America and 17% in EMEA. As far as gross profit goes, about $77 million of that was generated in North America, while $28 million was generated in EMEA. So 73% for North America and 27% for EMEA. The difference is the higher margin profile, which is a key point to keep in mind as Dale gets to some of our future goals in the next couple of slides. But in 2025, we generated 4.5% gross profit margin in North America, where in EMEA, it was 8.1%.

So a much higher profile as you're competing against regional distributors in EMEA as opposed to here some of the larger broad lines for the most part. So the first step we kind of did as we're modeling this out is model out to 2026. And from an organic perspective, we've looked at the top and bottom line, all 3 numbers here, gross billings, gross profit and adjusted EBITDA growing at about 10% -- and then on top of that, we've layered in, which we'll get into a bit more again in future slides on the acquisition strategy, we've layered in an aspirational target on top of what we've already completed this year. And then the target profile that we used for that is similar to the Interworks acquisition that we completed earlier in 2026. So they have a much higher gross profit percentage than we do here in North America and even in our existing EMEA business.

And to get through to there, we ended up with $2.3 billion as our gross billings target for 2026, $119 million for gross profit and adjusted EBITDA of $48.5 million. And to sense check all of that to date -- year-to-date results with our top 15 vendors, are tracking at a higher growth percentage than that 10% that we used here in this model. And then looking ahead, we carry this out all the way through 2030. Again, we use that same top line growth rate of 10% on gross billings and gross profit. And we used a higher growth rate on adjusted EBITDA as we -- which the theme of today is we continue to get more efficient, gain operating leverages, our operations become more efficient, more of those gross profit dollars will flow through to adjusted EBITDA. And then highlighted here, we'll talk about acquisitions in a later slide. But how we get to those gross billing growth metrics in '27 through 2030 is we continue to -- a number of things.

We continue to deepen our relationships with existing vendors. So today, we have 45 vendors globally that we do more than $10 million in gross billings with. If we look back to 2022, that was about 22 vendors. So significant growth there. As of today, about 80 vendors represent 90% of our total consolidated gross billings. And looking back to 2022, that was about 50 vendors. So there's deepening the relationships with the existing vendors that we have. Also, we continue to sign disruptive vendors like we have over the past few quarters. Some notable ones there, Darktrace in early 2025, they now represent one of our top 20 vendors globally.

The Fortinet vendor relationship that we signed at the end of 2025 that we've talked a bit about on recent earnings calls. That relationship continues to ramp up today. And then lastly, the Ivanti relationship that we just announced a couple of weeks back. We're very bullish on what that can provide to us in 2026 and beyond. On top of that, we continue to maintain a very diligent focus on credit. Eva Pinto leads our global credit team. We've -- to date, we have $3.65 billion of credit extended to customers globally, whereas our bad debt expense is $100,000 to $200,000 annually. So we continue to keep a very diligent focus on that while we are growing with these existing vendors.

And then lastly, on top of all this, we have the acquisition activity that we plan to execute upon, which I'll pass it over to Dale here.

Thanks, Matt. So acquisitions, right? We've talked about them. We've done 6 in 6 years. We're going to get much more aggressive with this. We had a lot of things going on in the last couple of years with our ERP. We needed to have a platform globally that we could actually add acquired companies to and be able to platformize them in North America and Europe as our 2 bases and then grow from there because what we want to see is marketing and sales in regions like we talked about in regions in the U.S., we want them there, but we want our operations and all our back office in North America and Europe in those 2 spots.

So I can tell you with acquisitions, the M&A team is standing right here. It's Matt and I, right? We use our teams. We use our vendors, for picking targets, for looking at what's out there. Our teams run into different distributors or compete against them. We'll take a look at those, but we have a pretty robust target list. But what it takes the most of is the energy to actually do it, right? I mean once you get involved in it, it takes a lot of energy. We have consultants that we use from the legal side, from the financial side, tax side to make all this happen.

We want to just get this more into a repeatable exercise on some of these smaller distributors that we want to acquire. And we have a strategic plan for acquiring. And I'll take you through that. And if you -- just please remember Matt's first slide when he talked about how is it possible that 17% of the gross profit or 17% of the adjusted gross billings is overseas, but 27% of the profit is coming from overseas and we want to continue to double down on that. The acquisitions in the United States have already happened. There's very few targets left. The roll-up happened to 40 distributors over the last 20 years. If you look at Europe and beyond, there's probably hundreds that we could actually look at and target that fit us perfectly as far as software, security in our little ecosystem. So we do have the energy to do that. So why? We're an opportunistic company. The team knows, even though we have a budget set, if we see something like a Fortinet that's not in our budget, and we're going to have to spend dollars to get that or to spend dollars to take it to market, we will do that.

If we look at and say, "Hey, we want to split territories" because we got to a certain amount, we know the cost is going to come to climb first, and then we'll start seeing the results. So we'll split territories, and we're just a very opportunistic team. Vendors, they want faster expansion. And part of the acquisition play is that technology starts in North America and moves to the rest of the world is just how it is. If you talk to our vendors, the majority of them are 60% in North America all the time, and the rest is in, of course, the rest of the world. But what happens, and it's our life as many in this room were at Ingram, it took Ingram 18 months to 2 years to launch vendors in other areas, right?

They were just launching in the U.S. and then eventually go to their other teams. We think we can launch and we sign global agreements. Charles signs an agreement globally. We think we can launch. And if the team wants them in those regions, we can launch them within weeks of launching in the U.S. So much faster to market, much faster ahead of our competition. Reduced multiples. The reason I put this in there is because we want to buy companies at a reduced multiple that we're trading at. And we've been very successful at that. Our multiple, of course, has gone up and down, as you've seen. But our acquisitions are typically between 4 and 8 on a multiple scale. Margin expansion, I already talked about that. Distributors in region.

So here's what happens with the big 3. The big 3 are in regions around the world. But what they did is they set up shop some place and they sell in country, and they just do an okay job with it if you're selling Cisco or HP, but not when you get down the line card into vendors that we compete with them against. So we think we can do a good job with that. Solutions and services, Matt Whitton talked about that. We do our shared services between our Gray Matter technical team and the climb teams. So Matt heads up both of those. But that's on our radar. Should we look at a services company to get us stickier with our vendors, sticky with our customers? I just don't want to compete with my customers if they're doing the services already.

Where are we going to go? We're going to go into Europe as we already have. Matt showed a target on there that we're going after now. The DACH region, we have a team there. And if you remember, Gerard mentioned that sometimes we'll just invest in that territory, get to know the landscape, and then we'll look for an acquisition target there. The Nordics, France. And I'll just mention the groups, we acquired them. It was opportunistic for us to make sure we maintain our Microsoft relationship at a $30 million rate. We know that, that number is going up. What Matt didn't mention is that our trailing 12 months between our combined groups now is in the $40 million range. We'll continue to grow because we know that Microsoft is going to put another bar and everybody consolidate underneath probably $60 million. So anyway, we've already been prospecting in the Middle East. We have some targets in LatAm. We're nervous about the market. We'll be very careful there. And then APAC, we've looked at this years ago.

And now that John McCarthy, our Chairman is not in the room, I can say it out loud. I was shun from going there because I'd have to get on a plane to fix thing and I fix things. And I said, okay, I would have to fix something in Europe maybe and get on a plane. So that's back on the table. We'll look at those distributors there. And I'll go back to some things Charles tells our teams all the time. There could be 2 or 3 climbs that $2 billion to $4 billion each, and we still weren't running into each other or we'd still have that much more opportunity. There's that much to go after. There's that many vendors looking for a route to market that we provide, and we see it as just opportunistic that way. The first thing that almost every target that we've acquired or have talked to when they're not in the States, their #1 thing is it's so hard to sign vendors, right? The vendors are not coming to them in their regions. The vendors, they have to go find them. They have to spend time in the states. We're finding it easier and easier to sign in the states and move to a global contract. So that's another reason for our optimism.

I'll let you kick off the next one.

So then over here, we have our return on invested capital. So when you look back at the company historically before we started on our acquisition journey back in 2020, the return on invested capital was in the 8% to 10% range. As we've layered in here kind of where all the different acquisitions took place over time, and there's ebbs and flows depending on earnings in a given quarter, but every single one of these acquisitions have been accretive to the company's business for the 6 that we've completed to date.

Yes. And I was thinking about when the guys were speaking. So just real quick of the exec team. So Interworks, Carlos came from there, Matt Whitton from CDF, Gerard from Spinnaker and Brian from Data Solutions. And then we have Stathis in Greece on that side. So the exec team makes up, they become part of the Climb family. And that's, like I said this morning to the team, it's part of our culture that we build. We bring the team members in, make them part of our family and then we become a one Climb go-to-market.

That's part of the vetting process we do as we go through the M&A process as well. As we identify a target, not only do we want to make sure that they're a cultural fit for us, we want to make sure that they're a cultural fit -- that they fit in our culture as well. And Brian, Matt, Gerard and Carlos, they're the perfect examples to talk to as we go through that process.

Okay. And then if you look at the logos underneath the ROIC slide, those are vendors that we have acquired through acquisitions. And then the ones on the bottom are vendors that we've moved through territories, right? The goal is like we started with our acquisition plan is that we want to sign vendors in the U.S. and move them to the rest of our regions. We've had some come back to us. We've had some that Charles pushed over and then they came back. I think it was canonical, right, that you pushed over to the Europeans and they came back. So we want to see more of this cross-pollination between the different regions and eventually, of course, be one region.

So highly competitive. I talked about the big 3 distis. If you don't know them, Ingram Micro, SYNNEX data, they're both $60 billion plus, and then Arrow is in that $40 billion range. Margin is competitive, and that's why we're seeing the margin compression in North America has always been there. We have to compete with them and you're saying, wait a second, you're selling emerging tech. Sometimes they have it, sometimes they don't. But it's a mindset of the resellers in North America that -- or I'm sorry, the mindset of the vendors that are like, hey, we know the distribution should cost me between 3% and 5%. And it's just the pressure that we have just signing a new vendor line right off the bat that that's the expectations that are out there because they're factoring in what is it going to cost me to the reseller market and beyond. So that's why we have it here more than we have it anywhere else. And that's -- I think if you looked at that one time, the big 3, the majority of their sales is also in North America.

So this is a little messy slide, but I want to talk about it and go back to what Matt was saying before. As far as North America gross billings, 1.9 to 87%, gross profit is 76% of it. This is what the organic growth play is for us, the 2030 that Matt made up. So what do we want to do? We want to have an equivalent number of sales outside of America that we do in America. So if you think about it, right, I think you said 4.3%, right, is our gross margin in North America, 8.1%. Almost all of our targets are over 10% in margin that they have. So if I can play that game, I can almost 1.5x my margin as an overall company. Because if you think about it, if I can acquire companies and build outside of the U.S. at $1.9 billion, I'm going to move my margin profile up into the 7s and 8s, which is a definitely game changer for us as a company and the drop-through.

One thing I will caveat is that and Vishal is a very -- he just runs the same kind of mindset that I run as far as how can we do this more efficiently. We've got to stay as efficient as we are in North America as we expand to other regions. If not, we're just going to be basically on the hamster wheel. So here's what we're doing. So when Matt put the slide before, our forecast plan is we're going to acquire up to $100 million in companies from here on out, right, to 2030. There are some big targets out there that are way over $100 million a year. There are some that are smaller, and we're going to be opportunistic in territories. But if we look at it, they're going to be all outside of the U.S. There is still a couple of sleepers in the U.S. So I won't say that we can or can't get that done, but they would be strategic companies that we look to acquire.

We think this is doable to do $100 million in acquisitions a year. It might take 2 or 3 acquisitions to do that to get to $100 million or we'll have 1 year on some targets that could be $400 million, $500 million. We talked about it before, and that is we have no debt in the company. We've done all acquisitions with cash. Should we take on debt, I would argue we probably should on certain acquisitions if it makes sense. Should we use equity, we're going to shy away from that. I mean we feel like we're underpriced right now. We wouldn't use that, but we would get a lot of input from Sean, team and a lot of you before we do things like that. But that is where we're going to go, and that's how we're going to forecast the numbers out.

So Matt showed you all the organic side. Now we're going to show you bolting on acquisitions and some efficiencies with that. So here's the back to the slide, the $2.3 billion in organic growth, 10% a year flatlined out, target 1 that we're working on right now. And this is what it looks like for 2030, right? So this is organic 10% growth and then putting on $100 million for the next 4 years. So we think that we can basically double our EBITDA by 2030. And I can tell you that we've made this pretty conservative for what our internal forecasts are, but we think this is something that you should see where we're going to go, kind of a mindset that our exec team has going forward and where we're going to take Climb. And we don't -- of course, there'll be headwinds along the way. We always deal with those, but this is our plan for the next 4 years.

With that, we are going to go right to Q&A. So with that, can I have the exec guys come up so that you guys can answer questions that Matt and I might miss out on? So go ahead. We're ready for them. Sir?

So it makes sense with where your stock is not to issue equity and debt and other options. But at the same time, the stock isn't that liquid. And to what extent are sellers interested in potentially rolling over their stake into your company in return for equity? And -- so have you considered those options?

So we've had a couple that we've looked at that wanted to roll. We just -- and back to what Matt said, we want to get to know the exec teams at the targets because sometimes we walked away because it's not a good fit for us, right? You can just tell culturally, we will not get along. I got to be careful. There's one specific target that we just hit it off, and I'm like, how is this possible? Because it was just a totally different region. And it's like this is so in our stream and culture, so we weren't going down the road much farther with them.

But back to that, we have a couple that looked to take an equity because they think we're underpriced. They would take the equity, thinking with that bolt-on, they were going to move our stock price up. So it really depends on the seller. Right now, we've never issued any equity. We've only done it with all cash and taking over, and we've done earn-outs on multiple deals.

But you're right, we are thinly traded. We got pushback, of course, by doing our stock split and killing the dividend. We wanted to get it out of the way and just get it behind us. But we think that -- we think we'll get back to where we were a year ago.

Let's get a mic for the webcast.

Oh, I'm sorry. If the webcast picked up anything on John McCarthy, I apologize.

Yes, Dale, you're talking about doing significantly larger acquisitions. And there's a lot of rationale to that, your scale business, et cetera. You've had success in your past acquisitions. But the risk will go up, right, if you're doing bigger deals. So maybe you could tell us what are some of the lessons learned from previous deals that should give us comfort?

So my -- you know what, I can ask some of these guys who have been acquired, right? I mean, we can talk about that. I think some of some of it, we need to get to know that team and backfill how we do vetting. It's pretty easy for us to do it because we can talk to our vendors and ask them about a distributor in a region. We can learn more about them than you can imagine through a distributor. Then we go to our sales teams and find a reseller that buys from them and see what the experience is there.

But then it really depends on what that exec team looks like. Is the -- like for -- in Brian's instance, we knew that the owner was going to move on. How good are his next lieutenants down? Are they good? Do they have the same philosophy we do, go-to-market? What's their vendor relationships? You can vet that out pretty quickly in the marketplace.

So are we going to make a mistake? We're going to do our damndest not to make that mistake on acquiring somebody. But you're right, there's 2 targets that are plus-$500 million that are on our list that would be more transformative to us. We'll take more time with that.

Okay.

I don't know if you guys want to talk about being acquired and how bad it was?

Well, I will. So real quick. We'll be careful on this one. When I think about the acquisitions and the acquisitions we made over the years and the successful ones and the ones that maybe took a little longer to integrate into our group, I think we've taken the right steps to build out a platform globally for our teams so that when we go and acquire companies moving forward, we quickly integrate them into our systems, into our culture, into our people and roll it out into our teams.

I think the faster we actually integrate our acquisitions into the rest of our teams and our management teams, the more successful we're going to be when we're launched. I remember when we first got acquired, we integrated instantly. Within a few months, we were already integrated. And our teams were amalgamated a little different in North America, but I think that is going to be where we'll succeed. And with the new platforms that Vishal is building out, it's going to make that much easier.

Yes. And when we have vendors in common, it's even better, right? Like Sophos doing stuff like that, the vendors that we're so tight with. For instance, Sophos, I mean, we have more market share in the U.S. than the other big distis almost combined, I think. So for us, when Sophos pushes us into a region, we -- they give us the targets and say, this one is good, this is bad. You'll see if you guys get along because they know our culture as well at Climb.

I can jump in. I met Dale in 2021. Charles and Dale came across to meet me in London. I was then a shareholder of Spinnakar, and I wasn't looking to sell the business at all because we've only been trading for 3.5 years. We did have a brand that was very attractive to Climb. And after meeting the guys, it felt like a really good fit, genuinely felt like a really good fit.

For me, obviously, being a smaller business, derisking future growth is really relevant. I think some of the -- well, one of the vendors that came with the Spinnakar business is now a global brand for us. It was just a U.K. brand at that stage. It's now a global brand, and it's a significant driver in the revenue. But the scale and the size of it, my business, which was Spinnakar, would have probably lost that brand because we didn't have the scale and the size or investment to go along with it.

So the attraction for Climb going into smaller distis is there just to derisk the growth, derisk the -- losing out on some of the key vendors. And I'm still here, 3, 3.5 years in, just because I'm allowed to speak more than 7 minutes on the stage. But I think when we're doing acquisitions, all of us who've been involved with it can genuinely go and speak to the owners of the business and talk about the culture. And it's a bit of a cliche from a culture perspective on many businesses, but genuinely within this business, that is very much the case.

And that is our IP, right? It's the relations we have with vendors, customers and each other is the IP of the company. We do not make anything.

But back to your thing -- your point, Vincent, that is you're right, small deals can be very expensive, right, because you still have legal and all the other things that go with it. So we are looking upstream, just like we're looking upstream in vendors that we want to bring on.

Charles and I argue a lot. Where are you? Because it's like, okay, is this vendor really going to move the needle? Will it move the needle in 10 months, 15, where is it going to be? And if it's not, then it's a tougher one. What's the margin profile? There's all those games.

We do the same thing on an acquisition. Is it strategic in a territory? Is it strategic for vendors that we could take those vendors, once signed, into other regions? So we play a lot of the numbers games before we go ahead with it. But we are looking significantly upstream at larger acquisitions.

And a quick one for Matt. Are you assuming better geographic cross-selling in your organic outlook today?

We're assuming consistent cross-pollination across the geographies that we have today.

Thank you for the target. I'm trying to gauge whether this 2030 target is a 2-foot hurdle, 4-foot hurdle or a 6-foot hurdle for you guys. Are you trying to clear -- is it something that is kind of relatively easy, you're pretty confident that it's -- or is it a pretty -- is it challenging? Is it pushing you? Could you do better?

Yes. I think it would be -- so as we mentioned earlier before, internally, we think it's a bit on the conservative side. We think we can achieve this strategy. It's our first jump of putting guidance out there, which we haven't done in the past. So we'll continue to fine-tune that as we move along. But internally, we do think it's a very achievable goal for 2030.

Because we talk about low double digits as far as organic growth. So that's why we flatlined at 10%, right? And then on the acquisition play, we just know the targets we're already talking to and the ones that are out there. And then we're getting so much income from -- like Gerard said, some of these smaller distributors that are going through some tougher growth stages that need more vendors, and they see that the combination with client that we can do that and not selling out.

If I look at it -- if you're Ingram, you're $60 billion, what is a $30 million distributor going to do for you? It's going to do nothing unless it's strategic. But somebody like a $30 million to $60 million distributor makes a lot of sense for us.

So we see the targets, and we still see the growth of the product mix of our vendor portfolio. And emerging vendors should be growing at that rate. But then if you look at some of our bigger vendors, they're not growing -- they're not going to grow. The bigger you are, the harder it is to double. But then I look at Fortinet, and Fortinet as a company is growing about 14% to 16% on that side. So we have a long way to go with them in that relationship.

The other thing is that we don't talk about -- and vendors don't like to hear this because they never want to say it, but it's share shift, right? Once we get to a more efficient model -- and we think we're halfway there -- we get more efficient than our competitors. We'll get more share shift of existing business. And it's the easiest, less expensive route to market to pick up business is just being better than everybody else, not going out to net new.

Do you think the challenge will be the organic part or the acquisition part for your target?

Good question. I haven't thought about that. I mean -- I would say organic will be -- on the inorganic, the acquisition will be the tougher piece because of the timing, how long it takes. Some of them, we think we can wrap in very quickly. Other ones are just going to take more time. The larger they get, they'll just take -- but there's a couple of big ones out there that could solve my $400 million in one fell swoop.

Let's go to Keith.

Appreciate the detail here. Matt, just one question for you, then I have a follow-up. You were talking about the top 15 vendors. I just want to make sure I understand that. You said top 15 vendors are growing above the 10% you were saying there, and that's gross billings right now, correct?

Gross billings, yes.

Okay. Great. Appreciate that. And just Carlos, maybe a little bit of color on the one slide you were talking about in terms of the -- I think it was trailing 12-month increase of like $35 million in billings. Maybe talk a little bit more about what was the drivers of that at those 4, I think, VARs that you had listed up there. Was it share shift? Is it taking up new vendors? But what was the driver of that significant growth there?

Yes. No, that's a good one. So it was a mix of both of those, right? So one was our relationships with our existing vendors and being able to go out to bid and bid on the business with the likes of Optiv, CDW, World Wide Technology and share shift that business over to us.

And that really came from twofold: our relationship with both that reseller partner, getting deep, building emerging vendors with them, helping them drive net new business, which is earning us a shot at the rest of the business; and then two, our relationships at our vendor levels, right? We've earned the trust that we can support their business. So in a lot of these wins that we've had, our vendors have backed us as their distribution of choice and primary distributor for their lines at these larger partners. And now we're in the lookout for bids that are coming up in the next 6, 8 months.

Okay. And if I could just clarify on that. When you see -- and I know the trend here is obviously, you're gaining share here. But when you gain that and you see the share shift, how unusual is it sometimes you actually would give back share, [ the pricing rarity deal ]? Or once you get it, is it pretty sticky and easier to keep it?

So far, we've been able to be sticky and kept the shift that we've had on the bids that we've done in the last 2-plus years that I've done on. Very rarely would we lose a vendor line on those bids. So we're very sticky with the vendors that we have, and that's because we bring that additional value-add.

So we're not just shifting the business. Yes, we're shifting the business over and gaining that, but we're helping our partners drive net new business. We're bringing our co-op funds and our funding from our vendors to their business to go out there and drive DRs, new logos, go-to-market strategy with them. And we're building the mind share higher with our vendors than they were getting from other distis. So that's keeping them loyal to us as we move forward.

So Gerard, you had mentioned the value-add that Climb brought to you as a small acquisition. Dale, you're talking about a couple of really large acquisitions out there. What's the value-add that Climb would bring to a $500 million acquisition?

So one of the targets I'm looking at, we would bring them -- right now, they are very concentrated with 4 or 5 vendors, and that's all they do. So we would bring them a bigger line card. And remember, they're not U.S.-based. So they're looking -- even though they have some Tier 1 vendors that are out there, they're looking at more vendors to do that.

And they don't have a vendor recruit team, typically. The ones that do -- and I'll give Exclusive Networks credit, they're very big in Europe. They brought more of a vendor recruit team that lived in the U.S. just to be in the U.S., do some transactions and just get to know the lay of the land and take those vendors to Europe.

I mean, back to my Australia comment, there was a really great target there, got to know the family very well. They were going to move on. But they had to spend 2, 3 months a year just in the U.S. to get the relationships to say, "Hey, I want to sign you in Australia." We're finding that with our vendors, if we have in-region, our vendors are very quick to at least have the discussion to bring them on in that specific territory.

But here's one thing that's kind of mentioned here. I mean, Matt mentioned marketplace, and we talk about platformizing and all the other things. That is the wave or a big percentage of our business that everybody is talking about. The hyperscalers that we thought we were going to crush all of our businesses, that never happened because they want to sell compute and storage and workloads. That's what they want to do. They don't want to sell software. They make no percentage on that.

But the goal for us is to continue to platformize for MSPs. And a lot of them don't have the resources to actually do that in-house. So they're going to pass by a competitor or have a lot of more margin or competition from a bigger player. We didn't talk about some of the distributors like [ also ] Infinigate. There are some big ones out there that are starting to chew up and take on acquiring companies in Europe.

And just back to that point on the vendor concentration, too. So using that one, the $400 million, $500 million one that has 4 or 5 vendor concentrations, think back to our largest acquisition as well, which was Douglas Stewart. They had a heavy vendor concentration, but that also drove the lowest multiple that we've paid to date. So that will also drive the pricing on the ultimate transaction, too.

All right. So that's helpful. And then relative to -- just using that example, $400 million, $500 million, 4 or 5 vendors, you have 100 vendors. Let's say the crossover is 5, so we have 95 remaining. Is that relevant to those acquisitions that we could then see significant organic growth from the 95 vendors that you bring them in the ensuing time period? Is this concept relevant?

It is. It's something that goes through because we didn't put the growth factors in the acquired targets because of the timing when we would acquire the targets and then putting it and pushing it out to 2030. But if you look at the targets we're looking to acquire, they're already in the double digits and sometimes high double-digit gross profit margin. So if we bring products over there, we are assuming that they're going to get a higher margin because there's just less margin pressure, right?

The groups do not have that much margin pressure in-region. It's a small -- why is the company going to go into a smaller region. But for us, it's very significant. Number one, it bolsters our Microsoft number. Number two, it bolsters our vision or value at Microsoft that we're handling an underserved region that they're trying to actually invest in. But yes, that is the play and some of the thought process that go into when we're looking at targets.

And if they're hardware -- I'm sorry, but if they're mostly hardware, it's not a target for us, right? Well, it's just not. Like there's a distributor called [ TIM ]. They do a lot of hardware. It's not a fit for us. We want software. We're 90% there. Even though we have some components with Fortinet and Sophos that are hardware components, we're still a software recurring revenue.

As Matt Whitton said, we're moving much more into a monthly. And you'll see more and more vendors, when they have the technical capability inside their company, move to a monthly subscription. And we want to make sure we can do that. And it's going to be have to be a platform and a technology play.

[indiscernible].

Thanks for taking my...

You'll ask all your questions at lunch.

So given that you're targeting a higher exposure in Europe, looking at the long-term guide here, the gross margin numbers, you've kept it basically flat. What are the potential offsets?

From the acquisition strategy?

Well, European margins seem to be higher. And if that becomes a higher percentage of mix?

Yes. So our organic growth, we've kind of just left flat that the geographic mix would remain the same between North America and EMEA.

Is that what you were looking for?

We could take it offline.

Anything else? Go ahead.

Back to acquisitions, you talked about what you're looking for. But I mean, is it competitive? Or are there other things that you bump into when you go into a region? And particularly as you go increasingly into Europe and beyond, I mean, what are you finding in terms of the challenges with France and employment regulations and other factors?

So that's a concern, right? And we've had to deal with that in our -- because Amsterdam is a tough one. We have a small office there, and we've had to deal with the employee concerns because there's different contracts. And we have to be very -- we have to be on top of it. When the contract is up, are you giving a year contract? I think we give 90-day contracts when we started in the U.K. that way.

We -- the Greeks are the first non-primary English-speaking company we acquired, right? So we've gone through that. And it went pretty smooth because they decided in the transaction to go through U.K. law, pretty easy. Of course, if it's French or German, it probably won't be that way.

But that -- we take all those into consideration, right, how they go to market, what is their turnover rate, what have they done in the last 4 years with employees. If they lose them, what's the cost factor. We're still extremely small in the small of the targets we're looking at, so the impact will be minimal at that, but it is a consideration for sure.

Do you see competitors [indiscernible] talking to them whether they sell or not?

I can't verify it 100%. I know we weren't the top bidder of the Greeks, but we acquired them because of relationships and because where their team wanted to go, right? I mean, Stamatis is with us today. He was not a majority ownership in the company, but he had a lot of say to the owners that he was with and said, "Hey, this is a much better fit for me and my team." They're going to take a little discount to allow us to acquire them.

But we were competing with PE firms, at least one of the distributors. We know we're right now in competition with another distributor for a target. So yes, it's a combination of those two. And sometimes there's just some roll-ups that are happening underneath the radar on the size.

So we have to -- there's a lot of factors, right, especially how much is it going to cost us. What is a German law firm versus one in the U.K., and now we have a couple of choices. Venable is our law firm. They've been great hooking us up with targets that they've worked with in the past. So we do some vetting there. Just one second. Go ahead.

You touched on return on invested capital, and there's a chart there floating around mid-teens, 20%. For -- how does that look like for organic growth versus inorganic growth? And also, is there an internal hurdle, like -- I don't know, it used to be 12.5%, 13% a long time back, but is still that the case? Like, what does it look like on both sides of the business? And is there an internal hurdle for both sides?

No internal hurdle on both sides. So that chart was the consolidated return on invested capital of the company. That ebbs and flows as we have -- we've talked about it in the past. We have large past transactions in a given quarter or some other onetime drivers in a given quarter. So it can ebb and flow based on those results.

So when you acquire something, would you say okay, we want to make at least 15% or something like that? Or how do you think about it?

So we more track it from the income statement standpoint because we integrate those business lines right away into our operations. So it's difficult to track that balance sheet and income statement specifically to the acquired entity. So if it's a vendor line or whatever internal metric that we can peg it to, that's how we're monitoring the success of the acquisition.

Yes. When we acquire, we try to platform into our systems as quickly as possible. But if there's earn-out, we have to keep separate numbers all the way through to make sure that the targets are realistic and that we both agree, both the target and the acquirer, that we can track for the earn-out. We've paid earn-outs through half of our acquisitions, something like that.

And the multiples you just -- did you say 4x to 8x? I think it was -- used to be higher, like 8x to 10x just a few years ago.

For us being acquirer?

Yes, for acquisitions.

The highest we acquired was the Greeks, right? That would be...

Yes. That was about 8.5x of EBITDA.

That's the highest acquisition that we made. And the DSS was about 4.5x. And our multiple, as you've seen, between 7 and 12, depending on your math and taking cash out and things like that.

[indiscernible].

Vishal, there's a fair amount of conversation about the efficiencies that you all are bringing in today. There's approximately 5 quotes for 1 order. Is there anything about the technology advancements that's going to decrease the number of quotes per order, or in any other way, be revenue enhancing?

Absolutely. I think Matt touched -- or Matt Whitton touched in his presentation about marketplace. We right now do classic quote to cash because our resellers doesn't have a platform where they can find out what they want to buy and what -- how much it costs. So that's why they have to go through the quoting process.

Now everything will not move because there's still a big amount of stuff will still go through the conventional quoting process. But anything like MSP, monthly billing, those kind of stuff, they don't have to go to quote. If I have a platform, our resellers can log in, they can see what they have ordered, what is the price, what are the different terms and conditions, they can just call out from there. So it will reduce some quoting processes.

The other piece on the same line is we've talked about revenue generation. From an MSP perspective, we believe we might be leaving opportunities right now on the table because we don't have a good platform where our MSP can come and access those vendors. Putting that platform will allow more MSP vendors to get onboarded so the resellers and the MSP providers will have more options to purchase.

[indiscernible].

So I think in a lot of instances, we do provide one quote because the customer knows exactly what they want. And when you have a self-servicing customer, whether it's marketplace or whether it's anything else, they can absolutely go to you get their one quote.

The issue that we run into is at the vendor level. And as long as there's vendor reps, they don't know the reseller as much. They don't know the end customer as much. So they'll throw out a bunch of different things on the wall to see what's going to stick, right?

I'm going to offer my product for a year. I'm going to offer my product with EDR for a year. And I'm going to offer it you for 3 years. I might offer it to you for 5 years. And then once you decide that you might be interested in one of those, then we'll start to get to a negotiation factor or phase, and we'll start negotiating.

And then there will be a new quote with special pricing, right? And that's generally kind of where we see the edifications of quotes and how we get lost in 8, 10 or 12 quotes. There are a lot of quotes that is just one quote. Those won't change. If we can teach our resellers to be better stewards of our time, it would work. I'm not sure that, that will ever happen.

Yes. The team members in the back that have been in that process of quoting, you know that -- they get their inbox, right? And it's coming through e-mail most of the time. We have -- and it is first in, first out instead of maybe an order that's -- or a deal that you know is going to be an order that's 15 [indiscernible]. So this is one of the things for efficiency.

We're not necessarily saying we're going to cut down the quote how many times we do a quote, but the speed that we can produce that quote. If we can do scraping off of e-mails that are coming in to produce a quote for the rep already and then verify it, look at the pricing and let's move on, we're going to do that. If we can dynamically look and say, "Hey, what's the propensity of this deal to go versus another deal," and we put some logic behind it, then the teams would see those first, right, in their inboxes and automatically shift. So this is some -- probably giving away the store, but this is some of the things we're thinking about to make this much more efficient.

We have some really good systems in with our vendors that have been legacy vendors with us that when the quotes are done, they get loaded into our system automatically. And this is one of the things that we talk about a lot, and that is where 80% to 90% is our recurring revenue, right? So it's reoccurring, as I say it right, that we're going to get a chance at every year as long as the vendor is still performing and lest customers are still happy with that.

So really, a lot of that is, hey, how can we do 30% growth on top of that to get into our 110% year-over-year. So once we have them -- and I think more of the vendors are coming to these incumbency programs. So if you're the incumbent, it's tough to switch you to another distributor or another reseller. So once we have them, we have them for a long time as long as they have [ underperformance ].

Let's go to [indiscernible].

I would love to get your insight on what you're seeing in terms of this death of software with AI talk that's going on, that's been going on. Would love to hear about what you're seeing, any impact, maybe with your folks? Yes.

My snide remark is it's such Q1. That's such Q1 back then.

Yes. We're still there.

I do think I might have said it earlier that the enterprise will pace the AI revolution, if you like. And I'm not sure enterprise customers -- all the CEOs have a remit for AI strategy at the moment, no different to 12, 15 years ago when they had a remit for a cloud strategy. They didn't really know what they were trying to achieve.

So it's going to take some time for, I think, enterprise customers to really adopt a full AI strategy. And they're learning along the way. They're trying to figure out what they're trying to achieve with their data. Because ultimately, that's what it is. They want to use their data to achieve a more efficient, more effective business. That's effectively what they're trying to achieve.

It's going to take time. We haven't really seen a mass difference. Even 2 or 3 of our products we sell, a couple of hundred million dollars, they are an AI company. The reality is they're selling storage. So if you look at the use cases, when you're going out to these big hedge funds, as an example, they're actually -- they're selling storage. And it's not true AI. A lot of it is masked around automation as well. Is it automation? Is it AI? What is it? So I don't -- it's certainly not affecting the EMEA business. I mean, Charles, I don't know if you want to talk about...

I think Matt was going to...

I was just going to touch on -- we're seeing -- AI is helping our vendors release more product more quickly, right? So that is helping them add more value and what's going out there. AI is also an opportunity for us. So how enterprises are going to control that spend, how they're going to make sure it's secure. But we're not seeing it replace security products, business productivity tools, those things that are embedded into organizations.

And I think enterprises are going to spend a whole lot of money on AI. I don't see it replacing those core tools that are already there in place at the moment, certainly in the short term. And when we're looking at are you going to build your own CRM or are you just going to buy one from Salesforce or something, that's already there. It's been tested. It works. You get user adoption, all of these different things, as we move forward. So I see it as a huge opportunity for Climb as we go forward. But certainly, in the short term, there's no immediate impact on our renewals or our businesses going through.

Yes. We were at the Ivanti LIVE! here last week, and they said -- they talked about that specific question. And one of the things they talked about was that -- and I agree with that, looking at a lot of vendors, I treat vendors with a ton of suspicion that think they're going to have a revolution with AI-driven products. Most of what I see in product offerings are there's something like a 10% to 15% change in their products' ROI, not an 85% change in their products' ROI.

And so I think those guys -- when I see companies that offer a modification with AI-driven offerings versus a revolution with AI-driven offerings, that's what I see most often in the products that I evaluate in our marketplace. So from a brand standpoint, I see more modifications to existing products than I see some kind of revolution in the marketplace with AI products.

Yes. I'll just add a little bit to that as well. So we're actually seeing some opportunity creation as well with the proliferation of AI, particularly in our cybersecurity portfolios. So with the proliferation of AI, you need to secure AI now within the enterprise. So whether that's from a data point of view or an identity point of view, so our vendors that serve those elements of the market are seeing significant pipeline generation. So I actually see the explosion of AI is a significant demand gen opportunity for our channel.

[indiscernible].

Brian, you may have just hit on this. But with AI also benefiting the bad actors, the question now is, does that accelerate the adoption of the security software simply because the bad actors now can move more quickly and more aggressively?

So my view is 100%, it accelerates it. I think the need for the enterprise to stay ahead of the bad actors means the refresh cycles have been dramatically pulled forward. Now whereas we might be looking at a 3-year or 5-year refresh cycle for some technologies, that could now be down to 6 months or 12 months. And who knows how fast it's going to have to be. So I totally agree with you. I would see the bad actors driving a lot more demand through our channel because we need to accelerate and pull forward, that spend.

There is some interesting development just from the technology perspective. As AI adoption is increasing, companies are now buying more and more defect simulation solutions. Earlier, it was a little bit an optional thing for a lot of companies. But now they know because of the AI, they can get attacked, so they are now buying more software.

Same with the SASE solution. That's another area on the cybersecurity where -- like small or medium businesses, they generally do not buy a SASE solution. Now most of those guys started buying those solutions because they know that if they don't have it, some AI player will come back and attack them and get the data from them.

So those are -- I mean, AI adoption is generating way more demand on the cybersecurity side right now. And potentially, more newer companies are going to come.

Anything else? Any more questions? Well, thank you. Thank you for showing up today. I know it's right in the middle of the day, but I appreciate you guys. Reach out to our IR firm, Sean Mansouri and Aaron D'Souza. If there's anything you guys need, please reach out [ and you'll get a call from them]. Appreciate it. Thank you.

Good morning, everyone, and thank you for participating in today's conference call to discuss Climb Global Solutions' financial results for the first quarter ended March 31, 2026. Joining us today are Climb's CEO, Mr. Dale Foster; the company's CFO, Mr. Matthew Sullivan; and the company's Investor Relations adviser, Mr. Sean Mansouri with Elevate IR.

By now, everyone should have access to the first quarter 2026 earnings press release, which was issued yesterday afternoon at approximately 4:05 p.m. Eastern Time. The release is available in the Investor Relations section of Climb Global Solutions website at www.climbglobalsolutions.com.

This call will also be available for webcast replay on the company's website. Following management remarks, we'll open the call for your questions. I'd 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 key operational metrics and non-GAAP financial measures, including gross billings, adjusted EBITDA, adjusted net income and EPS and effective margin 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.

I'd now like to turn the call over to Climb's CEO, Dale Foster.

Thank you, Sean, and good morning, everyone. In the first quarter, we generated double-digit organic growth in our core business and also had some benefit from our acquisition of Interwork cloud. We remained disciplined in our signing high-quality vendors to our line card, while moving slower performing vendors to our Climb division. Our performance underscores the momentum across the business, driven by the strength of our global platform and the depth of both vendors and partners.

During the quarter, we evaluated 39 net new brands and selected only 2 consistent with our strategy of cultivating strong high-impact vendor relationships across our platform. Notably, we signed Czech MK, an industry recognized innovator in comprehensive enterprise-grade monitoring and observability. As a strategic distributor, we provide channel partners with streamlined access to Czech MK's unified monitoring and servability platforms.

Delivering deep visibility across hybrid environments and key domains, including infrastructure, networks and applications from a single solution. Combined with enterprise-grade scalability, high automation and open core architecture, Czech MK enables partners to confidently position and sell and deploy unified monitoring platform at scale seamlessly across diverse customer environments and use cases.

We also launched a company called Logic Monitor during the quarter, following the successful pilot with a large customer in the fourth quarter of 2025. Logic Monitor is an AI-powered hybrid observability platform that provides unified visibility across cloud, on-prem and multi-cloud environments, enabling organizations to proactively identify and resolve issues.

Through this partnership, we are bringing Logic Monitors capabilities to our partner ecosystem, equipping VARs and MSPs with a differentiated solution, enhanced visibility, improves operational resilience and drives long-term customer value. We look forward to building our relationship with both Czech MK and Logic Monitor as we take their products to market.

Alongside expanding our vendor portfolio in February, we acquired Interwork a Greek distributor that brings over 600 cloud resellers and managed service provider relationships as well as strong vendor to our existing strong line card.

While early in the integration process, we are seeing meaningful opportunities to deepen our presence in Southeastern Europe by leveraging Interwork's established network as well as expanding cross-sell opportunities across our broader platform.

Overall, we are encouraged by this early progress we're seeing and look forward to generating additional synergies as we fully integrate the teams in the months ahead.

As we continue to scale our global platform, we are focused on driving greater alignment and efficiency across the organization. To support this effort, we promoted Cera Peters to Senior Director of Alliances to our EMEA team. there is working closely with regional leadership to replicate the process discipline and execution framework that we have produced -- that have produced strong results in North America.

Importantly, our underlying alliance strategy remains unchanged. We continue to take a highly selective approach to onboarding new vendors while prioritizing deep engagement with existing partners.

As our pipeline of opportunities expand, -- we are also seeing increased activity across both new valuations and reevaluations, which require a similar level of effort and reflect the deep growth and maturity of our vendor portfolio.

Looking ahead, we remain focused on driving organic growth while maintaining a disciplined approach to capital allocation. As we continue to scale the business, we are investing in infrastructure need to support that growth. including advanced automation and AI-enabled tools that enhance visibility, streamline our workflows and improve overall operating efficiencies.

We currently have over 41 IT projects in the works that have streamlined and will continue to stream line our workflows. We're using AI tools and agents to connect our partners that will help our team be more efficient as we grow. These initiatives are designed to increase throughput across the platform and enable us to support higher volumes of activity without the commensurate increase in head count.

At the same time, we continue to view M&A as a strategic lever to complement our organic growth. We are actively evaluating opportunities that align with our high-performance culture as well as our service offerings and in our geographic reach. We believe these initiatives will enable us to execute on our 2026 plan and deliver yet another year of strong results.

With that, I will turn the call over to our CFO, Matt Sullivan. Matt?

Thank you, Dale, and good morning, everyone. A quick reminder as we review the financial results for our first quarter, all comparisons and variance commentary refer to the prior year quarter unless otherwise specified. As reported in our earnings press release, gross billings in Q1 2026 increased 14% to $542.8 million compared to $474.6 million in the year ago quarter.

Distribution segment gross billings increased 15% to $520.9 million and Solutions segment gross billings increased 4% to $21.9 million. Net sales in the first quarter of 2026 increased 32% to $182.4 million compared to $138 million in the year ago period.

This reflects double-digit organic growth from new and existing vendors as well as contributions from our acquisition of Interwork on February 24, 2026.

Gross profit in the first quarter of 2026 increased 13% to $26.5 million compared to $23.4 million for the same period in 2025. The increase was driven by organic growth from new and existing vendors in both North America and Europe as well as the contribution from interworks.

Selling, general and administrative expenses in the first quarter of 2026 were $20.3 million compared to $16.8 million in the year ago period. The increase in SG&A expenses was primarily driven by onetime investments to drive organic growth from new vendors and in our infrastructure to support long-term growth initiatives.

More specifically, we expanded our IT capabilities to enhance system efficiencies and further aligned our sales organization across teams and geographies and continue to build out our Fortinet focused sales resources.

In addition, SG&A reflects higher legal and professional fees associated with strategic initiatives, including our stock split. SG&A as a percentage of gross billings was 3.7% for the first quarter of 2026 compared to 3.5% for the prior year period.

Net income in the first quarter of 2026 was $3.3 million or $0.18 per diluted share compared to $3.7 million or $0.20 per diluted share for the prior year period. Adjusted net income was $3.6 million or $0.19 per diluted share compared to $3.9 million or $0.22 per diluted share for the year ago period.

Both net income and adjusted net income in the first quarter of 2026 were impacted by a higher effective tax rate compared to the prior year period. Adjusted EBITDA in the first quarter of 2026 increased 4% to $7.9 million compared to $7.6 million for the same period in 2025.

The increase was primarily driven by organic growth from both new and existing vendors partially offset by the aforementioned investments in our infrastructure to support long-term growth initiatives. Effective margin, which is defined as adjusted EBITDA as a percentage of gross profit was 29.9% compared to 32.7% in for the same period in 2025.

Excluding the previously mentioned onetime investments and costs, effective margin for the first quarter of 2026 was higher compared to the prior year period.

Turning to our balance sheet. Cash and cash equivalents were $41.8 million as of March 31, 2026, compared to $36.6 million on December 31, 2025. The increase in cash was primarily attributed to the timing of receivable collections and payables.

As of March 31, 2026, we had no outstanding debt or borrowings outstanding under our $50 million revolving credit facility. As previously mentioned, our Board approved a 4-for-1 forward stock split effective in March to enhance liquidity and broaden access to our shares, while maintaining each stockholders' proportionate ownership.

We believe this action improves the accessibility of our stock and supports a more efficient trading environment for a broader base of investors. Looking ahead, our balance sheet remains a strategic asset with over $41 million of cash and no outstanding debt, we have ample liquidity and flexibility to execute on our growth initiatives in 2026.

We remain active in evaluating accretive M&A opportunities that can deepen our vendor portfolio, broaden our geographic footprint and enhance our operating platform. We believe these initiatives, coupled with our demonstrated track record of success will enable us to continue driving value creation for our shareholders.

This concludes our prepared remarks. We will now open up the line for questions. Operator?

[Operator Instructions]. We'll move first to Keith Housum with North Coast Research.

And thanks for the opportunity here. In terms of the extra spending here on the SG&A for the quarter, I noticed you guys had a number of onetime items, including IT and legal costs and investments like before in that. Can you perhaps bifurcate that a little bit more so we understand like I'm assuming increased costs before net will continue going forward, some of your onetime IT costs probably onetime in nature. Any way to bifurcate some that growth in SG&A to understand a little bit more going forward?

Keith, the buses go ahead, Matt. I'll fill in.

I was going to say the largest driver there or a big piece of the driver there was the Ford net investment. And the investment in that relationship has been -- is slightly different than the investment in the typical onboarding of a new vendor where we had increased cost, building out teams and additional onetime costs as we start that relationship here in Q1 of 2026.

So that really was about $0.5 million worth of costs that were in the first quarter that it was a driver -- negative reduction to adjusted EBITDA that we expect to turn the other direction as we move into the remainder of 2026.

Keith, this is 1 of the -- Keith, real quick. This is 1 of the things. We typically -- when we sign vendors, we'll do some small investments and a lot of times, it's paid by the vendors. If you take a look at Fortinet, it's a market cap $60 billion company, I think, $6 billion in annual sales. And the relationship was just a little different. We agreed and didn't have it in all of our budget to put this investment out there because we see it such an opportunity.

It's an anchor for us as we go forward. And it's 1 of the top 4 cybersecurity vendors in the world. So that's why we put this investment in there. the sales are coming along, and we'll be able to report those better in Q2 as we have been ramping those up along with the team that we've born on board.

Yes. That was my follow-up question. What's kind of the breakeven point for that? And how fast does it take to ramp up some like Fortinet. Will you see the return on investment here before the end of the year on that?

We will. I mean Q2 is already ramping up pretty quickly, but it will be Q3 when we'll see that return on investment. So yes, there'll be some of those SG&A costs in Q2 of that team and then covered in Q3.

Okay. Got you. And then the -- it looks like the mix between gross and net revenue here despite really on the gross side. I think the highest has been several quarters if not several years. Is that attributable to some of the new vendors? Or is there anything you can point to as we think about going forward, the split between gross and net revenue.

It's not an impact of the new vendors. It's really just the product mix of our existing vendors. And that can fluctuate from a given quarter, you're right, it is the highest this quarter of any quarter in recent time. But that's really driven by our existing vendors and what specific products we are selling to them.

Okay. Got you. And then the memory issue is wreaking havoc in the hardware world, in your realm in the software space, are you guys seeing a benefit as people prioritize some of their spending away from hardware with increased prices towards software? Is it too early to tell? What's your thoughts on that?

We did not see the impact, Keith. I mean some of the delays on potential people doing installs or if they're doing a hybrid cloud or going into a data center, we see some of that. But remember, 80% to 90% of ours are reoccurring revenue and renewal, so we just haven't seen that slow down. We haven't seen the seed licenses decrease like everybody got crazy in Q1 to talk about, I think, the adults are coming back and saying, "Hey, this is sophisticated software that people are selling where we've got 2 things going for us.

Number one, we have a strong renewal stream, and number two, we're 60-some percent in the cybersecurity world, which people are always going to protect their infrastructure first.

Got you. And maybe the last question for you. In terms of the targeted onetime investments that IT in the first quarter, what's your expected ROI on that? And I guess, are you satisfied with some of the progress you've made with those initiatives?

Yes. So our new CIO that's done on board to be coming up on a year in Q2. Just I wanted to point out, the first time I'd pointed out how many projects we have going because the list continues to grow. We went to our ERP over 1.5 years ago, and we've been streamlining it. But now we're using so many of the AI tools to just make our systems faster. And that is not only the ERP place of it, but all of the associated applications that we can use agents to do a lot of the work that we've had to do before manually.

So here's our goal that I have said, and that is we're throwing technology at it, so we don't have to increase headcount, as I mentioned in my remarks, and that is we need to be able to scale this business. our goal is to double it in the next 3 years but not double our head count because we would just be running on a treadmill at that point.

So that's -- our goal is using the technology, and it's out there to use we just keep putting the projects on the list to make it more efficient.

We'll move next to Vincent Colicchio with Barrington Research.

Yes, Dale, was the organic growth broad-based in the quarter across your -- and were there any lumpy deals that impacted the period.

Yes. It is our top 20 that happened. We had some fallover typically happens that from Q4, they come in, the deals didn't get closed on that side. But no, it was just a good quarter for us. when you look at just the vendor performances, we had some vendors that finished their fiscal year at the end of March. So there's going to be and some of our new members -- or new vendors that did that. But other than that, it's just across all of our vendors and decent performance.

And as gross billings momentum carried through April?

Yes. I mean we're closing in April. We don't want to talk too much about that. But Yes, we are not seeing a slowdown definitely in our workloads. So that's where our focus is right is how would it become more efficient with those workloads. But if you look at our adjusted gross billings, so the whole talk about AI, and it's going to take over this and it's going to take our receipts.

Here's my comment on that, and I've commented before on it. is that we're going to use AI more than we're going to sell it this year, including our vendors are going to use it more internally, to develop the products faster. That's the thing that gets talked about the most when we have all of our QBRs with our vendors. -- is how much faster they're being able to develop products.

AI does a great job with repetitive process, and that's how we're using it inside of con. But when it comes to sophisticated, somebody that's going to go and attack your network. We're seeing the tools that we're selling as important as ever, and we haven't seen that slow down.

And curious about VAST data. Does the pipeline remain substantial there?

Yes, it's still going to be lumpy with VAS, but it's still I mean if you look at best as a company, how much money they've raised, they only -- they appeal to the high-speed data pull for AI engines, and that's where they're claim to fame is, they're still on a good job. So you'll see throughout this year, some more lumpy deals that are coming in.

But it's just hard to predict because they're all based in back to Keith's comment about memory. They're going to be affected by that. Anybody that's going into data centers going to be affected by some of the chip stuff.

Is it -- are you able to give us some help in terms of when Interwork will provide meaningful cross-selling synergies -- or is that tough to talk about in terms of timing?

It's the cross-sell that we have, and this is our strategic plan when we acquire companies in various regions and the opportunities that typically start with vendors in the U.S. and move there. They have a big Microsoft practice, which goes right in line with our Microsoft practice in the U.K. And I mentioned that before that we meet the threshold to stay as a distributor.

We're working on becoming a frontier distributor, which is a new designator by Microsoft. We think that -- and here's the uniqueness about Interwork. They transact all of their business through a cloud platform, which we have a small portion of our business. So we want some of that DNA to come to our newly dedicated MSP team in the U.S. and then to the greater company in Europe as well that we can transact on a platform as we keep getting better and better with our systems.

So it's going to be going both ways. Then on -- from the Greek team to us on how they actually transact and from vendors to the great team that they're looking to add more vendors. So you'll see the cross-selling and really the onboarding of new vendors in Southern Europe with -- and as I mentioned, there Peter has taken that role and that was 1 of the reasons for it.

Move next to Howard Root with Fairhome Capital.

I want to follow up a little bit more on the SG&A line. So that -- if you look sequentially, I think it went up about $2 million and year-over-year, about a $3.5 million increase -- you kind of pointed out that Fortinet was about $500,000 of that. And then you called it primarily onetime investments.

Can you -- the other like $1.5 million sequentially. Can you kind of give us a little bit more detail on what that was and quantified. And then when you say 1 time, does that mean 1 quarter? Or is that going to continue into Q2 and for the rest of the year?

Yes. yes. So when we refer to that as onetime, I mean, specifically with the Fortinet relationship, that was a net cost of about $0.5 million to Climb as a company. We expect that to begin to turn to a positive contribution in the later part of 2026. And we start to see that in Q2 here and really see that ramp up in Q3 and beyond.

And like I said earlier, that was a different type of investment than our usual investment cycle. And then we had other onetime professional and legal type costs associated with the stock split and some other initiatives there. So like I mentioned in the prepared remarks, our -- if you exclude those items, our effective margin from Q1 of 2026 compared to Q1 of 2025, increased. And typically, Q1 is our lowest effective margin quarter of the fiscal year.

So even if you look back at 2025 that 32.5% or so, that continued to climb as the year progressed, and we expect no changes to that trajectory as we move forward here in 2026.

So just looking forward on Go ahead, Dale. -- sorry.

Yes, real quick, Howard. -- when Matt and I look at it as we're going through the quarter, we just have some mess, we say onetime things, but we had some legal stuff that we typically didn't have in the past for those quarters. So it was unfortunate, but a lot of those are onetime things as the quarter, as we pointed out.

If you look at the actual SG&A, I think it went from 3.5% to 3.7%. But yes, we got to get that in the other direction. And as you often point out, can we get to the and I talked about it now with some of our investors and of course, our Board how do we get our 5% to more of a 50-50 on our SG&A and our effective margin. So that is the goal that we have. And we do not see -- and our vision has not changed on that.

Okay. So the -- I wish you guys would start giving a little bit of guidance. But just looking at this line, generally, it's around a little $20 million, $20.5 million for the quarter. Do you see Q2 on a dollar basis being I've decreased from that, an increase from that are relatively the same?

Well, it all depends -- we'd have to go by percentages, Howard, because it all depends on our Q2 is going to be typically higher than Q1. We're going in with our education that's where all the buying starts happening and all the quoting starts happening. So -- and that's how our gross profit is affected by the commissions that we put out there. So I can't give you a hard number that way. But percentage-wise, we're going to see that drop.

Okay. So then you mentioned the 532, which we talked about before, I mean, 5% gross profit off of your gross billings, which is kind of the way to look at your business, I think, then 3% for SG&A, leaving 2% roughly for income from operations via depreciation as well. And you said that's still kind of your target, but is that a goal? Is that an expectation? Or is that just kind of -- what is that an.

Yes, our gold, Howard, and we -- and our executive meetings, we kicked off this year, including presenting to the Board is to get that to a 50-50. And this -- we had our sales kickoff both in the U.S. and overseas, and it's to get the 5 to 2.5%, 2.5%. I mean, we know where our competitors are. We know we can get there, but it's an efficiency play for us to get to split that 5% in half and drop that through.

So that is our hard target to get to. that we have set for ourselves as a management team.

And our expectation is that 532 doesn't change?

Okay. 532, but 2.5% would be what your real goal is here, not just to better than that.

That's where we have our site set is to take the $5 and just put it in half and half of it is going to our SG&A, the other Hasco dropping through.

Okay. All right. Then just bigger picture, and I don't want to get too nitty I mean, congrats on the revenue growth, you guys are still doing a great job. On the M&A environment, though, the Interwork, it was kind of 1 of these new things where it was kind of acquire or go out because of the Microsoft vendor that you talked about before and they had to get bigger or they just weren't going to have that card. Do you see that continuing in the environment? Or how do you see more generally the M&A environment in terms of the opportunities and the valuations today?

Yes. So the valuations are still stayed and this is targeting mostly in Europe, a little bit in the Middle East that we're looking at we'll prospect 2 years out into some territories. But yes, it was opportunistic that we did it with this company because we already had a relationship with them from the cloud platform piece of it. So yes, we're doing it that way.

But -- right now, there's still a lot of opportunities on my list, a lot that I've met with when I was -- Matt and I were over in Greece with the team. and did a stop by to talk to some other potential targets out there. So it's good -- it all depends, and everything is depends on what that company internally does -- are they reliant on 1 vendor, 1 territory.

There's some different factors that go into the valuation piece of it. From a where we acquired Douglas Stewart at 4.5% up to paying close to 8.5% for other companies, and it just depends on what their makeup is and where we see that we can effectively grow them and how quickly we can grow them is what we pay.

Great. All right. Congrats on the progress.

We move next to Bill Dezellem with Titan Capital.

After signing the Fortinet agreement, given the size of that organization, has that led to any follow-on effects with other large vendors that basically raise their eyes to what climb may be able to accomplish?

Thanks for the question, Bill. It actually has -- we've had this -- our talk track is we're going after emerging vendors. And if you look at our line card, and even our top vendors that we talk about solar wins and so forth have been great partners for us and continue to be that. But as far as looking at like a Tier 1 vendor like a Juniper, Fortinet, that are out there, we typically don't market toward that environment.

So when this 1 came up, it was not an immediate -- oh my gosh, this is going to be great. It's going to change Climb. -- for the better. I -- my first reaction to was, I don't want to change our culture where we become like a broad line distributor, right? Because I think there's so much value in what we do and what we take to market.

But to your point, after that happened, Charles Bass, which runs our alliances team, we've had some pretty large companies reach out to us say, "Hey, I didn't realize you guys did this. I didn't realize you win is wide in some of the markets that you do. And if you look at the North American market, you have the 3 large distributors, now all public with Ingram going public last year.

And then it's all the way down to where we see climb we're very small compared to these $50 billion, $60 billion companies. We don't want to be them, but we're having vendors that are coming to us and saying, "Hey, either we want to keep them honest or we want to do a targeted approach to a group of resellers that we think you touch much better than the broadliners do.

So -- the answer is yes. I won't give you names, of course, until we announce them. But yes, it's nice to have them coming to us instead of us going and trying to knock on every door.

So Dale, the implication then of what you just said is that there are other meaningful potentially needle-moving vendors that you are in discussions with now?

I'll leave it at that, yes.

And I'll try to not let you leave it at that. Would you anticipate that if these -- if any 1 of these come to fruition that it would happen this calendar year? Or are these discussions much more drawn out than that?

No, that would happen in this calendar year on the ones we're looking at. But I mean, it's just like -- we expected Fortinet to have a little faster start than we have. It always is you're putting energy and as we showed in Q1, we're putting resources and expenses into getting it going. But as I told my field sales team that I'm putting tons of pressure on, right, to launch this and getting into net new customers, and that's where we're really going after. -- is that is, hey, we're going to take advantage of this vendor line for the next 5, 10, 15 years, right?

Because I think we're just a better go-to-market play than our competitors. So that's why we're putting the energy in right now. I mean everybody has their day jobs to do, but we're pushing to our field teams to say, "Hey, this is important to us. It's going to drag along a lot of cross-sell opportunities.

If you take a look at Fortinet's technology partner page on their website, you'll see all the vendors that they work with. There's quite a few on the list. One number one, there are 7 or 8 that we already work with. So there's cross-selling and we do marketing programs together with them. But if you look at that list, it is big on the solar security side and associated platform side, even on the monitoring piece of it.

So yes, more new targets for us, but Yes, it's -- I see more and more of that coming our way.

And if you were to sign 1 more of them, the onetime investments that you've discussed here relative to Fortinet, would those scale to, let's just call them, vendor B -- or are these resources really dedicated to Fortinet and you would then have the same scaling that you would do for vendor B. Would you help us understand behind the scenes how that would work?

Yes. I'll give you an example that's real time. So when we acquired Douglas Stewart, Adobe was a big part of that relationship, and they had a separate team and that team being maintained separate until we put them to our ERP. Now the Adobe platform, the Adobe marketing, all that stuff is part of climb, right? We want a 1 climb approach to how we go to market. Same thing for net, it will eventually morph into our overall team and become part of the climb ecosystem.

But right now, we kept it separate so we can track it so we can show our progress. But every everybody -- we have 80 some sellers in North America. They're all selling for net products just like they're all selling Adobe. It wasn't that way to start with.

So it depends on the -- you're not going to like the sense, but it depends on the opportunity, right? If the vendor, if it already is in our same work stream like most of the vendors we sign are. It just goes right in. And as I mentioned in my remarks, we are pushing vendors that are not in our top 70 or that are drifting or don't have the investment to our Climb Elevate team, which is really a transactional team.

It doesn't get marketing, it doesn't get sales support, but just transactional. And I'm trying to continue to move vendors off so we can focus on our core. I would like -- we started 100 vendors, we're down to 70 in our core. I would like that number to go down to 50 because -- if you look at our top 20, they represent 90-some percent of our business, we want to keep doing that focus, and that's what our vendors want on the top side, and that's what our customers expect to be able to deliver the message.

How many sales -- I mean how many vendors can a sales rep really represent, so we want to limit that. So we're really extension of the vendor sales force.

Great. Thank you for the additional perspective.

Thanks, Bill.

And there are no further questions at this time. I would now like to hand back to Dale Foster for any additional or closing remarks.

Thank you, operator. Again, thanks to the entire client team. Hard work this year. A lot of things going on, a lot of moving parts Also, I want to welcome the team members from our new acquired Greek team in both Semanie and Afton. Matt and I had a chance to go over and spend time with them. And it was just a doubling down on the culture that we produce that we have at Climb.

It's the same thing that same strand goes right through our team in Greece and just a great time. So they fit with not only our go-to-market, but they have the same type of values that we have as far as taking care of our customers and our vendors.

Last thing I want to mention is we will be doing an Investor Day on July 7 in New York City. And for our shareholders, we'll be sending out invoice for that I'd love to see you in New York. Thank you,operator.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Good morning, everyone, and thank you for participating in today's conference call to discuss Climb Global Solutions' financial results for the fourth quarter and full year ended December 31, 2025.

Joining us today are Climb's CEO, Mr. Dale Foster; the company's CFO, Mr. Matthew Sullivan; 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 2025 earnings press release, which was issued yesterday afternoon and approximately 4:05 p.m. Eastern Time. The release is available in the Investor Relations section of Climb Global Solutions' website at www.climbglobalsolutions.com. This call will also be available for webcast replay on the company's website. [Operator Instructions]

I'd 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 key operational metrics and non-GAAP financial measures, including gross billings, adjusted EBITDA, adjusted net income and EPS and effective margin 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.

I'd now like to turn the call over to Climb's CEO, Dale Foster.

Thank you, Sean, and good morning, everyone. 2025 was another exceptional year for Climb as we generated record results across all key financial metrics. These achievements reflect the continued execution of our teams that are driving organic growth by strengthening relationships with existing vendors and customers, selectively adding innovative technologies to our line card and while driving and delivering operational efficiencies throughout our business.

In the fourth quarter alone, we evaluated nearly 100 potential vendor relationships and signed agreements with only 2 of them. Notably, in December, we launched our partnership with Fortinet, a global leader in cyber security and securing secured network solutions serving enterprises. They also serve service providers, government customers worldwide. Fortinet is quickly becoming a primary onboarding focus, and we expect to ramp them up quickly and will become a meaningful contributor to both their business and client business. We look forward to building a long-term mutual beneficial relationship with Fortinet and their channel while delivering incremental value to our reseller network.

While we focused most of our efforts in Q4 on onboarding Fortinet, there were other positive achievements from the alliance perspective. The fourth quarter of 2025 was only the second full quarter since we kicked off our relationship with Darktrace. As a reminder, Darktrace is a cybersecurity company that uses self-learning AI to detect, investigate and respond to cyber threats in real time across the entire organization's digital infrastructure. In Q4, Climb had 70 partners transact over $13 million in Darktrace product offerings with significantly more quoted pipeline ahead of us. We continue to work closely with the Darktrace team to expand partner enablement and drive broader adoption across our channel, positioning the relationship for sustained long-term growth.

In addition to strengthening our vendor portfolio, earlier this week, we announced the acquisition of interworks.cloud, a Greece-based specialist cloud distributor serving the Southeastern Europe reseller market, including Greece, Malta, Cyprus and Bulgaria and more. Interworks brings an established regional platform with over 600 cloud resellers and managed service providers, along with a curated vendor portfolio that includes [ Cronos ], Google Workspace, AnyDesk, Blackwall, and most notably, Microsoft. I've had the pleasure of working alongside the Interworks team for nearly a decade now. And over that time, we've developed a strong alignment in our culture, strategy and partner focus. They bring an experienced management team, a well-established Microsoft CSP business and a multi-country footprint and deep expertise in cloud marketplace and MSP-focused distribution. Together, these capabilities enhance our ability to drive cross-sell opportunities, deepen our engagement with our vendors and reseller partners and further position Climb as a distributor of choice across the Southeastern Europe region.

A critical component of this transaction is that we are bringing the full Interworks organization into Climb, and this team will become part of our overall EMEA go-to-market structure. Maintaining this the strength of their local leadership and partner relationships was a priority for us, and we believe continuity at the operational level will be essential and sustaining momentum in the region. At the same time, by integrating Interworks into our broader infrastructure, we can provide additional resources, scale, strategic investment to accelerate their growth. We expect the transaction to be immediately accretive to our earnings and adjusted EBITDA and look forward to the unlocking synergies and cross-selling opportunities as we integrate Interworks into our global platform in the coming months.

Looking ahead, we remain focused on accelerating organic growth. And at the same time, we have our internal development team building generative AI solutions to make our entire team more efficient. We will also continue to pursue accretive M&A opportunities that can strengthen our vendor portfolio and expand our geographic footprint. We believe these initiatives, coupled with our disciplined execution and strong balance sheet, will enable us to deliver on our organic and inorganic growth objectives in 2026.

With that, I will turn the call over to our CFO, Matt Sullivan, and he will take you through the financial results. Matt?

Thank you, Dale, and good morning, everyone. A quick reminder as we review the financial results for our fourth quarter, all comparisons and variance commentary refer to the prior year quarter unless otherwise specified.

As reported in our earnings press release, gross billings increased 3% to $625.4 million compared to $605 million in the year ago quarter. Distribution segment gross billings increased 4% to $602.3 million, and Solutions segment gross billings remained flat at $23.1 million. Net sales in the fourth quarter of 2025 increased 20% to $193.8 million compared to $161.8 million, which primarily reflects organic growth from new and existing vendors. As we've mentioned in the past, the calculation of net sales is influenced by product mix and the respective adjustment to convert gross billings to net sales for financial reporting purposes under U.S. GAAP. In the fourth quarter, we had an increase in sales of products that were recognized on a gross basis and therefore, leads to a smaller adjustment from gross billings to net sales.

Gross profit in the fourth quarter was $29.8 million compared to $31.2 million. The decrease was primarily driven by a large vendor transaction in the year-ago period that carried a higher-than-average margin profile. Selling, general and administrative expenses in the fourth quarter of 2025 were $18.2 million compared to $17.1 million in the year-ago period. SG&A as a percentage of gross billings was 2.9% for the fourth quarter of 2025 compared to 2.8% in the year-ago period.

Net income in the fourth quarter of 2025 remained flat at $7 million or $1.52 per diluted share compared to the prior year period. Adjusted net income was $7 million or $1.53 per diluted share compared to $10.3 million or $2.26 per diluted share for the year-ago period. Adjusted EBITDA in the fourth quarter of 2025 was $13 million compared to $16.1 million for the same period in 2024. The decrease was primarily driven by a large vendor transaction in the year-ago period that carried a higher flow-through to adjusted EBITDA as sales compensation expense related to this transaction was paid through a contingent earn-out. And that was included in the change in fair value of acquisition contingent consideration add back with an adjusted EBITDA in the year-ago period. Effective margin, which is defined as adjusted EBITDA as a percentage of gross profit, was 43.6% compared to 51.5% for the same period in 2024.

Turning to our balance sheet. Cash and cash equivalents were $36.6 million as of December 31, 2025 compared to $29.8 million on December 31, 2024, while working capital increased by $27.7 million during this period. The increase was primarily attributed to the timing of receivable collections and payables. As of December 31, we had $200,000 of outstanding debt with no borrowings outstanding under our $50 million revolving credit facility.

Consistent with our capital allocation priorities, the Board has determined to suspend our quarterly cash dividend beginning in the first quarter of 2026. This decision allows us to retain additional capital to support organic growth initiatives and strategic acquisitions while further strengthening our financial flexibility. Based on the company's strong return on equity, the company plans to reinvest the capital for higher growth initiatives.

Looking ahead, our strong liquidity position provides us with the flexibility to pursue both organic and inorganic growth opportunities while expanding our relationships with vendors and customers worldwide. We will continue to be active on the M&A front as we evaluate accretive targets that can strengthen our vendor profile and expand our geographic footprint. With a disciplined approach to expansion and a continued focus on execution, we believe we are well positioned to deliver another year of growth and enhance profitability in 2026.

Dale, back to you.

Thanks, Matt. And before we open this up for questions, I'd like to address a couple of points on -- some of them have just come up over the last couple of days when -- everybody has seen some of the AI disruption in the market. First, on the dividend, a thoughtful decision made by our Board, and one that I fully support. As we evaluate the opportunities in front of us, we believe the best way to drive long-term shareholder value at this stage is through disciplined capital allocation and strategic reinvestments in the business. We operate in an ecosystem where many of our customers and vendors are backed by private equity firms, which has provided us kind of a unique perspective on how successful operators deploy capital and accelerate growth and also enhance the returns with our portfolio of companies.

We intend to take a similar tactic at Climb. And [ kindly ], we've already begun to do so in the way of our now 6 acquisitions in the last 6 years with the addition of interworks.cloud. With a strong balance sheet and liquidity position, our priority is to allocate capital toward initiatives that improve operational efficiency and strengthen our competitive position. That includes continuing to streamline processes, leveraging AI and automation tools where appropriate, utilizing prudent leverage when it enhances our returns and pursuing strategic acquisitions in our ecosystem that align with our go-to-market strategy. And we believe all this will create long-term shareholder value for our shareholders.

The second point, which is over the last couple of days on the AI disruption, these are the disruption of AI engines and large language models or LLMs that have come into our market. And more specific, they're going to interface with or take out SaaS vendors we currently are carrying or prospecting. So I've been around a long time in this business and remember a similar talk track around the cloud. I had to do a look up. But AWS announced in 2006 that cloud was open for business. That was 20 years ago. And just 20 years later, it was just last year that cloud workloads that were workloads in storage in the cloud just passed the 50% threshold versus on-prem or private clouds or private on-prem environments.

So the real world environment today for cloud is really a hybrid one. Do I believe -- [ or yes ], that AI will move much faster than 20 years is an adoption rate? For sure, that's going to happen. But we still believe it's going to be more of a hybrid environment, just like cloud is. I think it's 98% hybrid right now. So the AI environment will be a hybrid one. While we are very small and we're a very nimble company in our market, we are still connecting technology builders with users. We can pivot quickly, as we have done over the last 8 years. As the market moves, we will move and move at that same speed.

And whether we have a stand-alone AI systems, AI agents, hybrid SaaS that's out there or platform of service we will be selling emerging technology products that solve real-world problems. And regardless of the computing environment, we believe we will have a place as that connector of technology.

And this concludes our remarks, and we'll take it to the operator for questions.

[Operator Instructions] And we'll take our first question from [ Keith Housman ] with [ North Coast ] Research.

Congratulations on the acquisition here. just looking at that large acquisition that happened in the prior year, can you guys just give any scope in terms of how big that was in terms of we want to kind of think about what the year-over-year performance was without that? Any way to kind of scale it out?

Yes. So we talked a bit about it last quarter. And thanks, Keith, for joining and calling, dialing in. When you remove that large transaction in Q4 of last year, our recurring and organic growth still was in the high teens for Q4 compared to Q4 of last year.

Great. And that's both on a gross billings as well as EBITDA basis?

Correct. Yes.

Great. Appreciate that. And then you guys -- I think it was early last year, announced the departure of Citrix. And can you talk a little bit about the impact that had in the quarter? Or are you guys being able to completely offset that loss with other vendors?

Yes, I'll take it quickly. So we still had input from Citrix, and we still have it through 2029 at some residual stuff because of the nature of some of the agreements that go out with our customers, that's the year-over-year recurring. But -- so we had an impact, not as impactful in Q1 of 2025. But then the rest of the year, we looked at as a $50 million to $60 million hole.

And if you -- I was at our SKO at over in the U.K., and our team still with that big hole grew at 3%. So they made that entire $60 million up in the last 3 quarters, which is a testament to number one, picking up new vendors. They picked up vendors that we have on the U.S. side. And like I said, and we've continued to say that we're signing global contracts now. So it's the choice of the sales teams in their regions on what they want to sell, and some of them are pushed on them. Other ones are that they're prospecting on their own. So the team did an incredible job.

I mean, we kept -- and like I'd love to say, Keith, is that where salespeople will take the next product and take it out to market. And they filled that pretty quickly and expanded some relationships with vendors that actually compete with Citrix, and we took some of that over back that we lost.

Great. Impressive. Appreciate that. Turning over to the Interworks acquisition here. The 86% growth in EBITDA year-over-year

[Audio Gap]

how should -- is that roughly $1 million in EBITDA a good starting point for those guys?

Yes. That's a good starting point for them. But if -- there's a couple of things that we didn't get into detail on the call, but -- so Microsoft came up and said, "Hey, we're going to consolidate our distribution worldwide," and they set a threshold. So there was a lot of scrambling over the last 14 months that said if they don't meet the structural deal, lose your distribution agreement with Microsoft. And both us and interworks.cloud were in the same position on our Climb side.

And we want to keep that relationship because we believe Microsoft is a Tier 1 but it's also where people want to go. And so there's 2 reasons. Number one, we were -- to combine as a company, we get to that $30 million threshold of Microsoft. Number two, we are moving into a cloud environment, and we've talked about it for a while, and I'm going to have our CPC event with all of our top customers and vendors next week.

But I'm going to have a slide just on our failures. And 1 of the failures we've had is we haven't been able to get to our 2.0 of expedition of our cloud marketplace or platform. Well, Interworks is already there. They're transacting in a very eloquent way with our customers, almost like a self-service. And they do a lot with MSPs, hybrid VARs that we do this as well, but not as quickly as they do.

So it's going to be a learning curve in the DNA transfer between the 2 companies. Their parent company that we acquired them from is called [ Infotera ], which is the platform that we both use and actually all of our locations use that platform. So we see more and more of our vendors going on to the platform and marketplace. And the Greek team will help us and educate our teams on the U.S. side and the Europe side.

Great. I appreciate that. And then I guess, final question for me before I turn it over. The working capital increase and the timing of collections, has that already been worked through? Or how should we think about that going forward?

Yes. So that's -- it's a normal -- it's a usual timing difference. So with the large transaction at the end of last year, those receivables and payables have already been collected during 2025. And then it's been worked through here in early 2026.

We'll take our next question from Vincent Colicchio with Barrington Research.

Yes, Dale, congrats on beating the expectations this quarter. Was your growth broad-based across your top 20 on an organic basis? And were there any lumpy deals in the quarter?

So thanks, Vince, good to talk to you. So no lumpy deals in the quarter like we had before 2024 in Q4, but it was across our vendors. The ones I talked about, Darktrace continues to rise up. We talk about our top 2 vendors, Sophos and SolarWinds. SolarWinds, I think we talked about in the last release, acquired by [ Turn Capital ] or Turn/River. And -- so there was some disruption as they went through their pricing model changes, but we actually finished really strong with SolarWinds as they've gotten through some of their pricing structure and their go-to-market. But other than that, it's -- the top 20 make the biggest impact, and it's been very stable.

And has the revenue momentum that you've seen in the quarter carried through in '26?

You're always going to see Q4, and it's always been this way with us is always our biggest quarter because people going back to -- we have a reoccurring revenue with our annual subscription. So Q4 has always been large, so it will continue to be large because that's when the renewals come up.

We do -- the Douglas Stewart acquisition, and you'll see a rebranding kick off next week for all the Climb stuff on the slide and education side. But they typically have a down quarter in Q1 that we experienced last year because it's just flattened and all the buying picks up for that. But other than that, it's pretty cyclical like it has been for the last 5, 6 years.

On the AI side, have you identified use cases for internal use? Are you at that stage?

We have. So Vishal, our new CIO, has been on board now for 7, 8 months. He is the most popular person in our company because everybody is looking to him to solve efficiency issues, right? And we've -- he is front and center on our sales kickoff. So we have a tech guy kicking off, and people are asking. And it becomes quite the entertainment, having our CIO be the center of extension, which is great because we're just solving so many internal things that we need to work on.

We went live with our ERP almost 2 years ago. And now it's how to make that more efficient, what AI tools. And if you look at Vishal's background, right, so you came from WWT, which is a $30 billion reseller, 1 of our customers, 1 we have great relationships with. But he's already gone through a lot of this because of the -- they have the dollars to really spend on this and adopt it early. So he's really running kind of the same plan that he had at WWT. So he sees what needs to be done, and it's how fast we can implement it.

So we've done a couple of things. We have a bigger implementation and development team inside of Climb. We have outsourced some of the smaller connector products -- projects that we have, whether it's EDI or XML or API. So everything is moving faster. And he's identified so many different efficiencies because we still -- and what I'd like to say is we're the fastest of the turtles. So if you look at distribution has been done what we've been doing for 30 years. What we're doing is moving a license key from a vendor all the way to a user. And our goal is to do that much faster, but we're still doing things that we did 15, 20 years ago. So Vishal's saying, hey, we can do this much quicker and without the expense of the labor that we have right now.

What is the time line for when Interworks can provide cross-selling synergies?

So our teams -- because we have the Microsoft distribution agreement already and Microsoft is well aware of ahead of time with confidentiality of the agreement, we have it for all the EU countries. So we are going to -- if you take a look at it, just from just a mental geographic look, here, we have the U.K. and Ireland that we're very strong in. And now we have Southeastern -- or Southwestern Europe, Southeastern Europe. And between those 2, we have 20 countries in between there that we're going to attack with that Microsoft agreement and then all of the cottage industry products that go with that.

So Interworks, #1, will be onboarding vendors that they see as a great fit that we have because we have a big robust portfolio of vendors compared to them. And then on their side, they already have in the cloud on the marketplace vendors that are transacting that we will take advantage of. So you'll see those integrate very quickly. And the fact that we're already using the same platform, it's really getting those 2 interconnected so that the teams see pretty seamless and so to our customers.

Last question for me. In your conversations with resellers, what is the pulse in the market in terms of the health of the market versus the prior quarter?

Yes. I would be better to answer that next week as we have an open session with our resellers. But as far as -- and I'll take this from the vendor standpoint first, and that is, Vince, there are so many vendors coming at us, right? We have to say no, we have to say no. Because it's that many, and we have to keep moving our threshold up as far as what can we do in the first 18 months. It used to be $2 million or $3 million. Now, is it $15 million that we can do in the first 18 months before we can find them. What is the real go to market? Does it fit ours? So we're just asking a lot more questions because we know when Charles, our Chief Alliance Officer, says yes, that's when all the man-hours kick in for us. So we want to make sure that we have a good base to start with before we say yes to that vendor to onboard them.

On the reseller side, we haven't seen a slowdown. We've seen some consolidation between companies buying each other up, which is a natural occurrence for us. But for us, we're typically transacting with both parties anyway. So it's just a timing thing.

We'll take our next question from Bill Dezellem with Tieton Capital.

Would you please walk through the size of the Fortinet relationship and what the potential is for that to move the needle for Climb?

Yes. So Bill, thanks. So the -- take a look at Fortinet there on the NASDAQ, right? A great company. We -- the relationship started from the top. It usually starts in the middle and then moves up. But this one started at the top with the C-levels. They have some of the bigger distributors that are out there. They have 2 of the largest distributors in the world.

So why did they need Climb? It's really for what we do for companies that are just getting into the market, and that is to fill in a lot of the gaps and being that high-touch distributor that's going into a wider market than just Tier 1 or Fortune 500 companies. So if you look at what their overall sales -- and I think they break them down -- it's about a $2.5 billion addressable market in the U.S. that they're already selling into.

And who are they competing is, right? If you look up the stack, they're competing with Palo Alto, Juniper and Cisco. That's the 3 big above them. They're considered #4. And then below them, we carry some of the lines below them, but they said, wait a second, we have a targeted distributor. They have field sellers. And I think this would be the most important thing to take away, and that is when we're talking to their executives, they said wait a second. You mean we can fly into a region because we have regional sales people. And we can -- and your sales reps will take us into 3 new resellers that we've never met before. I'm like, that's what they do every day with vendors. They don't get that from Tier 1 or the top distributors because they can't take them in there when they're selling Cisco, Juniper and Palo Alto and those customers because they're like, hey, we're displacing 1 of our other vendors.

We don't have that issue at all. We don't have a really cross-competing product with Fortinet. We have a bunch of smaller ones, but nothing that goes as wide as Fortinet goes. And if you look at what they do, I mean, Fortinet goes all the way from firewall to cameras, right? I mean, they are such engineering-type company, so it's a good fit for us. And the acceptance -- so look at $2.5 billion, 10% of that is something that we're going after in the next 18 months, and we think we can get there. And I think Fortinet will be our top 3 vendor this time next year.

So Dale, if I do that math, 10% of $2.5 billion, are you saying that you're thinking that this could lead to $250 million of gross billings for you in, I guess, it would be '27 if we look out a year from now?

Yes, I think so. I think it's 18 months that we'll get on that run rate for them. It's a relationship the Fortinet team, the first thing that really happens -- and when I say this magic happens, it's when our field sellers get with their field sellers and go into new accounts and give the value pitch. It only takes a couple times to do that. And then our teams take it from them, and they don't have to do a 4-legged call. It's them delivering the Fortinet pitch as they get familiar with it. So we're getting closer and closer to them. They've been just a great partner [ audit ]. They feel like a small company touch to us, which is refreshing.

That's helpful. And then -- and congratulations, by the way. It's a great win. Actually, let me take that one step further. Do you see other companies that are in a similar situation, where all of a sudden, someone in their C-suite is saying the same thing that you heard from the Fortinet leaders?

I feel like you're reading my email, but yes, we were getting many inbounds from companies that are much, much larger. And I mean, I'll bring up Crowdstrike. We talked to them about 2 years ago. We were in a competitive with some of the other distributors. They decided to go in a different direction based on some of the -- just some of the support that some of these other [ sites ] would give them or potentially say that they would give them.

But if I go back 6 years, Bill, we were out there signing companies that would fog and mirror and just go after them because we needed to have more products for our sales teams to sell. Now the focus is curating the ones and the relationships that we currently have or almost ready to sign to make sure that they're really the right ones for us. But yes, we're getting larger companies and larger at bats with them without having to prospect them, for sure. There's some multi -- in the $500 million, $600 million range companies we're talking to on a regular basis.

And a lot of times, we say no because we're -- they're not ready for us or we're not ready for them. It could be a connection through systems that we don't think that we can -- we'll burn more cycles than it's worth. But we are getting a lot of those bets. And the other thing is we say we have a limited line card, but it keeps sneaking up on us, and then we push our vendors over to Climb Elevate just to transact. And I want to continue to limit our line card. We say it's 70. I want it to be 50, but really, it's 100 right now because we haven't pushed them over to our Climb Elevate where we'll still transact, but we -- it just burn cycles, and we want to focus our sales and marketing and service cycles on our top 50.

And a couple of more questions. Let me shift to Citrix. The implication then of the way that, that change took place last year is that the comparison that you all are going to have in Q2, Q3 and Q4 of this year could lead to very strong comps given that you last year simply had to fill in that hole, and now you're going to be building off of that. Is that the right way to think about that?

It is. I guess it feels like it's already been done with us, Bill, because we've been there, done there, forgot about it, right? We have already filled it in with other vendors. We know what our run rates are. And that's the nice thing about this recurring revenue model as we know that 80% to 90% of what we sold last year as long as we're doing a good job and the vendor is still producing a good product and good updates, that we're going to get that renewal. I mean, the goal is to have the renewal rate over 100%, which means they're picking up more licenses and seats going forward.

But yes, we don't -- we really haven't thought about it that way. We look at just what our run rate is. What is our piece with Citrix, we've already forgot about that. It's been in the news quite a bit, just on the different taxes Citrix has made. Their last one was kind of funny that they said that they are truly a channel company, even though they cut a big chunk of the channel a lot a year ago, I think they thought people forgot about it. But we've replaced it. We have 2 or 3 different lines. We're getting ready to sign a line that goes back to our Citrix customers. We were replacing it with some of the Microsoft business, which is a competitor of Citrix. And same thing with [ Parallels ], which is another 1 of our vendors that we replaced that hole with.

Great. And then one final question, please. I think that yesterday, VAST and [ Super Micro ] signed or announced the deal. What are the implications, if any, for that with you?

Yes. And so the VAST Data, they have their user conference. We have people there in Salt Lake this week of our team members, both from the European side, which is a bigger number and then from the U.S. side. And I think it's a good thing. I assume they used the conference to announce that. But if you -- I think it's only good, right? VAST says they're a software company, but there's still -- it's a big piece of hardware that goes in its distributors or it's the OEMs like the [ Super Micro ] and we have a relationship with [ Super Micro ] we've had for the last 10 years. .

It's a good thing because right now, a lot of their bills were being done by a company called [ Telrad ] that Arrow bought. So that's the build. So what does it do? It just makes it faster because right now, VAST is dependent on this hardware GPUs, who has the GPUs, who have the metal to put their software on top of to run. So I think it will actually speed up the extra delivery cycle of all these big AI engines that need fast data storage because that's what that VAST does. I mean, they are -- it's about how fast they can deliver data up to an AI engine. So I think it's only a good thing. And [ Super Micro ] has some of the best products out there. I mean, that's how most of the -- if everybody remembers the HCI, the compute space with [ Nutanix ] and [ Rubrik ], that was all based on [ Super Micro ] for the longest time. So it's just a good alternative to what they currently had. So it's the #2, and I think it will be good.

We'll take our next question from [ Howard Root ], who is a private investor.

Sorry about that. Yes. Yes. Congratulations on a nice conclusion to the year. I'll try to be brief. I got 2 questions. One on M&A. It looks like the Interworks was kind of right within the middle of your playbook. It's a territory expansion. You've got synergies, you knew them very well. And then it's a 9.4x adjusted EBITDA. Is that -- how do you see that fitting in? Is that the way to look at it? Is that a little expensive? What do you see is the market out there for acquisitions going forward? Has it come down based on market turmoil? Or where are you right now?

So Bill -- I'm sorry, Bill. Sorry, Howard. So Howard, here's how we kind of think about it, and we go back to our early days of acquisitions, when we were trading in that 7 to 9 range, and that's kind of where we look to start. And it depends on 4 or 5 different things. And with these guys, number one, we knew them for a long time. We know their parent company very well. So is the comfort factor that way, plus the Microsoft piece of it as far as we want here, like why do you need relining Microsoft? And it's still just a great cornerstone to have in your platform marketplace and in your company because you can add some of your products around that to support it.

But the other piece of it is what is their margin profile? And their margin profile compared to us is double what we have in the U.S. So will we pay a little bit more than that -- and I don't know why. I was to say, hey, we're going to start at 8 and then what are the positives and negatives? If you look back to the DSS transaction, why was that a less multiple? Real simple. I mean, they were all focused on Adobe. So if you lose Adobe, there's just more risk involved in that. So that's how that negotiation happened.

On this side, their margins are higher. They're in a territory that we are not in and not have been selling into. And the nice thing about it, they're in a territory that's not that competitive that is starving for new vendors to get into. So that's how the negotiations went to get to that. But I'm still looking in that same range we start today, and we'll go up or down from there.

So just kind of looking on that and following up on that. To me, the only reason to eliminate the dividend is really to grow a pile to do bigger acquisitions. This is relatively smaller compared to, like, Douglas Stewart was bigger, and that was 18 months ago. I kind of look at -- is that a slow pace for you over these 18 months? I mean, it seems that you want to do at least 1 or 2 a year. And then is that the way you look at the dividend? Because to cut the dividend to spend money internally, where you're generating plenty of cash for your internal projects, it has to be using that cash. And we hate to see it pile up in treasury, but really to apply to buy synergistic targets, and you must be seeing plenty of them out there and maybe larger than this Interworks deal.

Without giving you specifics, Howard, you're spot on. Spot on. There's a lot of deals coming at us. We are going to use the capital. I mean, we talked that we are a very CapEx play and we are going to accelerate our acquisition interfaces. I have -- if you look at my travel, I've been in Western Europe more than I have been before because there's that many targets, there's that many ones coming at us. It's the roll-up that we have talked about that happened in the U.S. from 2006 to 2017 is happening in Europe, and we want to be part of it.

Here's the good thing for Climb. You have these 3 massive distributors we talk about all the time. They're $50 billion plus. The targets that we're looking at are so insignificant for them unless they were a real strategic reason. We're not competing with them. We're competing with other strategics that are similar in size. There's only 2 or 3 of them over there or they're doing a roll up between the 2 companies to get larger -- to make more of a significant impact or could be a regional expansion.

So right now, I can't tell you how many I've talked to, but how many that we're in discussions with is a lot more than a handful. So yes, the dividend will be going toward the M&A side of things that we think like we always say, is it going to be accretive to us? Is it going to be an expansion? Is it going to be a vendor acquisition that we can't get or it's going to take too long to get that vendor signed that we think we can take to other regions. But it's all those things lined up, it has not changed since we started this.

And the pace of acquisitions, you'd expect to do 1 or 2 in 2026?

I'm -- yes.

Okay. All right. Well, I don't want to make you uncomfortable answering stuff on that. But it just seems that we had 18 months since the last one, and that was not because of lack of effort, but just -- it didn't come together. And maybe now this is the breaking, and you get 3 here in the next year instead of 0.

Second question for me on profitability. And here, congratulations. You had a really tough comparable in Q4 and having to deal with that. So I'll kind of ignore that a little bit because of the large vendor transaction you had that affected billings and your gross profit. But if you look at it over a year, your gross billings were up 18%. Your gross profit was up a little bit less than that. Your margin on gross billings was -- slipped below 5% in your SG&A because of the Douglas Stewart, kind of up 20%. So your income from operations only went up about 4% for the year. And quarterly, your leverage is kind of slipping a little bit.

And where -- can you give us a quick -- how that happened and where you see that go from here? And does the Fortinet and Darktrace additions change your profile? And it looks like Interworks kind of helps you a little bit on that financial profile as well. But do you see that reverting back up or your gross profit on gross billings is above 5% and your SG&A rises less than your increase in gross billings in the year?

So we're holding -- and just look at that 5% range, and we slipped in a quarter. There are some other things in the background that have been happening that I won't get into some of that stuff. But I can tell you that the focus is -- and I wish I could share some of the slides that I shared with our Board. But it's showing how much manual stuff that we deal with in the company. And like I said on the earnings call, we're doing the same thing that we did 30 years ago in distribution.

And Vishal is helping us change that mindset. The first thing when the Board agreed to go into a new ERP system was the first prime mover to get more efficient. The second one is taking that ERP system and the associated applications with connectors and taking just a lot of cost out of the business, right? We are touching way too many, and I'll just give you some insight baseball. We do 12 quotes and perform 12 quotes for about every order that we get. The first move we had about 4 years ago was when we moved our average sale price per order up from $200 to $1,500. So we're doing the same work. We're just seeing the quote size is 7x bigger. So that's number one.

It's the efficiency that we think that we can get out of our systems to keep the same labor force that we have today and be 1.5x the size. And that is the real goal. And back to your -- Howard, that you love to point out, that [ 532 ]. And this is what I talked about, our SKOs, both in the U.S. and Europe and then say, how can I move my 3 to 2.5 and my 2 to 2.5, right, so that I can split the profit and the cost of the SG&A to a 50-50, which I think is our goal and has been our goal for the last couple of years.

But it is going to be about efficiencies. Of course, AI is heavy into our company right now doing that. But we look at it as a generative AI, which it just makes everybody more efficient so we can expand and do more with our top vendors.

Thank you. At this time, there are no further questions in the queue. I will now turn the meeting back over to Mr. Dale Foster.

Thank you to our shareholders, Board and all the Climb team members. And I just want to welcome our new Greek team on board. We had our first kickoff and town hall yesterday with the team. I look forward to everybody meeting each other like I have over the last couple of years. And with that, we'll conclude the call. Thank you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Good morning, everyone, and thank you for participating in today's conference call to discuss Climb Global Solutions' financial results for the third quarter ended September 30, 2025.

Joining us today are Climb's CEO, Mr. Dale Foster, CFO; Mr. Matthew Sullivan; Chief Alliances Officer, Mr. Charles Bass; and Investor Relations adviser, Mr. Sean Mansouri with Elevate IR.

By now, everyone should have access to the third quarter 2025 earnings press release, which was issued yesterday afternoon at approximately 4:05 p.m. Eastern Time. The release is available in the Investor Relations section of Climb Global Solutions website at www.climbglobalsolutions.com. This call will also be 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. Mansouri for introductory comments.

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 key operational metrics and non-GAAP financial measures, including gross billings, adjusted EBITDA, adjusted net income and EPS and effective margin 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'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 Climb's CEO, Dale Foster.

Thanks, Sean, and good morning, everyone. In Q3, we generated double-digit organic growth and continued to benefit from our acquisition of Douglas Stewart Software, which we acquired in July of last year. We continue to deepen our partnerships with existing vendors while signing new cutting-edge partners to our Line Card. Our team consistently delivers solid results, maintains operational discipline and continues driving growth even with the challenging comparables from last year.

Before diving into Q3 operational updates, I'd like to quickly pass the call over to our Chief Alliance Officer, Charles Bass, to take you through our vendor selection highlights for the quarter. Charles?

Thanks, Dale, and good morning, everyone. So throughout the third quarter, we evaluated more than 70 potential vendor partners and entered into agreements with only 4. This reflects our ongoing selective approach to vendor expansion, which prioritizes innovation, market differentiation and long-term alignment with our strategic objectives. Each potential partner undergoes a comprehensive vetting process that assesses product differentiation, market demand and integration potential within our go-to-market strategy. So our approach ensures that we continue to deliver cutting-edge solutions to our customers while maintaining the quality standards that have continued to drive sustainable growth and value creation across our business.

What I'd like to do is quickly highlight 2 cases -- 2 of these wins and how they position us for future success. So first, we launched a partnership with Liongard, they're a Houston, Texas-based company, providing advanced attack surface management and intelligent automation for managed service providers or MSPs. Liongard's platform delivers deep visibility across every asset in an MSP's environment, offering real-time intelligence and continuous change detection to proactively identify risk and maintain compliance. The addition enhances our ability to support MSP partners with tools that deliver really unmatched operational insight and control across increasingly complex IT ecosystems. So while the majority of our customers still consider themselves traditional VARs, more and more of our customers consider themselves service providers over time. So Liongard is exactly the type of product that they need to be successful and position us well for the future.

We also partnered with another Texas-based company called Halcyon, they're based in Austin, Texas. And they specialize in anti-ransomware and cyber resilience. Halcyon's product is designed to prevent, detect and neutralize ransomware threats, helping organizations eliminate the business impact of these attacks. Halcyon represents a strategic addition to our cybersecurity portfolio, enhancing our capability to deliver comprehensive protection and resilience for customers facing increasingly sophisticated cyber threats. In fact, Halcyon is already teamed with one of our largest and best manufacturer partners, Sophos, to enhance their security offerings by co-selling alongside them. So Halcyon can be sold as a stand-alone product, obviously, but also co-sold with several of our existing partners making them an ideal partner for Climb's future.

So with that, Dale, I'll push it back to you.

Thanks, Charles. I'd also like to highlight our operations overseas. Our European team continues to demonstrate strong execution as we expand our capabilities in one of the market's fastest-growing areas, which is artificial intelligence. AI has become a top priority for both our customers and partners, yet many are still defining practical strategies and identifying the right manufacturers to align with. To help bridge this gap, our team led by Martin Bichler launched Climb AI Academy in the DACH region earlier this year.

The Climb AI Academy was designed to equip our infrastructure partners with the tools and expertise to effectively position themselves in the AI space, while guiding AI consultants through a complexity of this rapid evolving market -- rapidly evolving market. The program offers manufacturer-neutral training, clear AI readiness guidelines and structured curriculum that spans the foundational -- from foundational to expert levels, ensuring every participant receives tailored applicable knowledge.

In addition to the AI Academy, it provides internationally recognized ISO and IEC certifications, such as Certified AI Manager course delivered by trainers with extensive real world experience. This hands-on approach enables our partners to better translate theory into practice, ultimately helping them deliver more impactful AI-driven solutions to their customers. With more than 700 participants to date and highly positive feedback, our initiative is proving to be a powerful differentiator in helping partners navigate and succeed in accelerating AI market.

Looking ahead, we'll continue to work through a healthy pipeline of strategic acquisition opportunities to enhance our offerings and expand our presence in Western Europe. We are seeing increasing interest in the European markets and believe our growing reputation as a trusted high-touch distribution partner positions us well to capture emerging opportunities across the region. These initiatives, coupled with other -- with our robust balance sheet and demonstrated track record of accretive M&A will enable us to close out 2025 strong and deliver another year of record results.

With that, I'm going to turn the call over to our CFO, Matt Sullivan, and he'll take you through the financial results. Matt?

Thank you, Dale, and good morning, everyone. A quick reminder as we review our third quarter financial results, all comparisons and variance commentary refer to the prior year quarter unless otherwise specified.

As reported in our earnings press release, gross billings in Q3 2025 increased 8% to $504.6 million, compared to $465.2 million a year ago quarter. Distribution segment gross billings increased 9% to $481.9 million and Solutions segment gross billings decreased 5% to $22.7 million. Net sales in the third quarter of 2025 increased 35% to $161.3 million compared to $119.3 million, which primarily reflects double-digit organic growth from new and existing vendors as well as contribution from our acquisition of DSS in July of last year.

Gross profit in the third quarter increased 6% to $25.7 million, compared to $24.3 million. Again, the increase was driven by organic growth from new and existing vendors in both North America and Europe as well as contribution from DSS. Gross profit as a percentage of gross billings was 5.1%, compared to 5.2% in the year ago period.

SG&A expenses in the third quarter were $16.2 million compared to $13.9 million for the same period in 2024. SG&A as a percentage of gross billings was 3.2% in Q3 2025, compared to 3% in the year ago period. Net income in the third quarter of 2025 was $4.7 million or $1.02 per diluted share, compared to $5.5 million or $1.19 per diluted share for the comparable period in 2024.

Adjusted net income was $6 million or $1.31 per diluted share compared to $7.1 million or $1.55 per diluted share for the year ago period. Adjusted EBITDA in the third quarter was $10.9 million compared to $11.1 million in the prior year quarter. The slight decrease was primarily driven by a large vendor transaction in the year ago period that carried a higher flow-through to adjusted EBITDA as sales compensation related to this transaction was paid through a contingent earn-out.

Adjusted EBITDA as a percentage of gross profit or effective margin was 42.3% compared to 45.7% in the year ago period.

Turning to our balance sheet. Cash and cash equivalents were $49.8 million as of September 30, 2025, compared to $29.8 million on December 31, 2024. While working capital increased by $18.3 million during this period. The increase in cash was primarily attributed to the timing of receivable collections and vendor payments. As of September 30, 2025, we had $300,000 outstanding debt with no borrowings under our $50 million revolving credit facility with JPMorgan Chase.

On October 28, 2025, our Board of Directors declared a quarterly dividend of $0.17 per share of our common stock payable on November 17, 2025 to shareholders of record on November 10, 2025.

As we look to the remainder of the year, our priorities remain clear: to build on our operational momentum and continue executing against the strategic initiatives that have driven our success to date. We're actively evaluating acquisition opportunities that align with our growth strategy, enhance our capabilities and strengthen our presence across key markets. With solid momentum across our business and a proven track record of execution, we believe we will close out 2025 on a strong note and set the stage for another year of record performance.

This concludes our prepared remarks. We will now open it up for questions from those participating in the call. Operator, back to you.

[Operator Instructions] We'll take our first question from Vincent Colicchio with Barrington Research.

Yes, Dale, congrats on another strong double-digit organic growth quarter. Curious, how would you characterize the quarter? Was the growth broad-based across your top 20? Also, were there any large lumpy deals in the quarter?

Yes, no lumpy deals. And then, hence, we've talked about it probably too much. We talked about in Q2 that we had one of the large orders pull into Q2 and we wouldn't see in Q3. And then as Matt mentioned, the comparable year-over-year, we had one large in Q3 of last year. And it's no secret, they're a vast data. The data center all focused on the AI market and going into data centers to deliver as much data as fast as an AI engine will take it in. So outside of those 2 things, definitely organic growth, strong in the majority of our vendors. We only typically talk about 2 vendors over the last so many years, Sophos and SolarWinds. Sophos is a little flat for us. SolarWinds is going in the right direction, they're acquired by Turn River, and we're seeing some positives come out of that.

And then in terms of industries, security, I assume, still leads growth. Is that right?

It does. We're over 60% in the cybersecurity space, and Charles can talk to it, but still that many companies coming at us to add to our Line Card and they're mainly in that security space. We have so many adjacent markets, but that's really the focus. We were attending the Canalys event last week. And it's good to look at some of the data collectors that we don't have any skin in the game or neither do they on our side. And that's the -- in the next 3 years, still one of the fastest growing markets if you look at all the different market segments in the IT space.

And then maybe one for Matt. Were there any early pay price discounts of any magnitude that impacted margin?

No. No new -- I mean, there were no new relationships on early pay discounts. Our similar customers continue to take advantage that have this offer to them, continue to take advantage of it. But as a percentage of gross billings, it's consistent period-over-period.

And then, Dale, the training program you had highlighted in Europe, did you -- have you had a similar program in the U.S.?

We don't. Martin is out of Germany, and he started it. We really what got us kicked off is one of the vendors we signed called Unframe, which is in the AI building blocks. So if you want to have a certain structure in your company that you want to use AI for. This is where you can actually go and get those building blocks. So it started with that and then expanded into some other vendors and he built it into a full academy. And we'll roll that into other regions. Of course, the European side first as Martin took the lead on then you'll see it come to the U.S.

As we talk about that, do we have another set of vendors that are AI vendors and it's still consistent with probably what we said a year ago, and that is our vendors are building AI capability into their existing products. So we're going to see it that way. And if there is different products, we'll pick it up and talk about them in a separate what we call in our different segments, our technology segments.

[Operator Instructions] We will move next with Howard Root, private investor.

Congratulations on really good quarter. I got a couple of little questions and then a more general one. Kind of first, no mention of tariffs, and I think nothing's changed there. But remind me, is there any impact on tariffs on your business?

There really isn't, and Matt can weigh in. We just don't see it. We -- I guess the biggest thing and we didn't mention it, Howard, because it was a nonissue in this quarter is just the FX with currencies because most of our vendors were buying in USD and then we're selling in either euros or Great British pounds and then Canadian dollars. So there's some there. The only one is the Canada side. So what we do is we look at it from a quoting standpoint and our quotes are that used to be 30-day quotes and now they're like 5 days to deal with both either a tariff issue or a currency issue, but nothing that's substantial.

Okay. Great. And then accounts receivable, accounts payable, you made some notable declines in that drop in AR by $65 million sequentially and AP down by $50 million. Is that -- kind of give me a rundown of how that's happening? And is that where it should be now going forward? Or what would you expect going forward on AR and AP?

Yes, that ebbs and flows with each of the quarters. So when comparing that to December 31 of last year, December -- our Q4 is historically our largest quarter just in the business. So -- and Q4 of last year was a record quarter to date for us. So it was -- it's really just a function of collecting those receivables and paying those payables subsequent to year-end. Those volume -- the levels that we saw at December 31 of last year from a receivables and payables perspective, as we expect to execute on our strategy here for Q4, I'd expect those levels to return to where they were in December of last year.

Howard -- the biggest point of that. I mean the main piece is just the timing of that. And it could be -- and Matt and his team do a good job that if we have a vendor that reaches out and said, "Hey, I want more cash at the end of this quarter." We'll pay them early with some kind of a condition, right, consideration. They'll pick up some margin that way.

Matt and I have these discussions internally all the time. I think we pay our vendors too fast and we probably collect too slow, but collecting is the tough part, right? Because we're going to the masses as a distributor. So we're collecting from thousands of resellers, vendors only collecting from 4 or 5 distributors. So it's always something that we watch because it's important on our working capital.

Okay. So do you see this -- I mean, $50 million swings quarter-to-quarter is kind of part of your business? Is that an aberration?

No. So -- and then if you're comparing it to June -- the June quarter, we had some -- as we talked about in the Q2 call, we had some larger transactions with a higher sales price and higher cost of sale amounts in Q2, which didn't necessarily repeat themselves. We collected them and paid the vendor payables in Q3. But as we have those larger transactions, that we've alluded to over time, that will cause a spike in the receivable and payable accordingly.

Yes. And Howard, those orders are $30 million orders, right? It's not it's just one order that's $30 million. So you'll see it all at one time, and that's what was pulled forward in Q2.

Okay. I get it. Now it's kind of the nature of the business with the large size of the orders...

[indiscernible] the ordinary.

Okay. On the gross billings side, nice to see it continue to go up. With DSS, is that -- is there more seasonality to it? Is the third quarter more soft with that business? Or what do you see as seasonality of your orders now with DSS making a part of it?

It is, right? So look at the -- there are about $190 million. There are adjusted gross billings when we acquired them, we did at the end of July of last year. So their seasonality is based on the state -- if you think about it, we're selling mostly into education, so K-12 and higher-ed. So they do all their buying in the summertime, all the states, 40 of the states get their budgets and their new money at the end of June. So they spend and get older products, software, hardware, everything in place for the new school years. So it's typically strong, really extinguishing budgets in May and then all the way through.

What we saw, though, is our biggest vendor, and we talked about it from the DSS side is Adobe. I'd like to also -- Adobe is probably one of the biggest AI companies out there that people don't realize of how much AI is in their products. If you've looked at their product suite, it's crazy how wide they go. And Adobe is doing the right thing. I mean, they're going in the education space. So if you're using Adobe product, when you go into the workforce, what are you going to do? Hey, I'm trained on Adobe. Of course, it's the biggest one out there, and everybody has to buy those licenses.

So we'll see seasonality from that May through really October. But it's really changes in how Adobe does things, and you'll see more gross profit sometimes with our adjusted gross billings going down, just do the rebates that we're able to garner. So we're taking advantage of that side of it.

Okay. And then the Solutions segment was kind of the one negative with the gross billings down by 5%. What was the cause of that? And what do you see going forward for that segment?

So my core Solutions piece is really in the U.K., right? And that's when we acquired CDF and had the split distribution and the Solutions piece. It's our U.S. side of it that has some fluctuations. And we just have a small team in the U.S. that has some very large customers. And sometimes they're renewing other times they're not. So that one's just a blip. You won't see that going forward like we saw in this past quarter.

Okay. Okay. The bigger area is M&A. And I guess a little thing there. I saw $600,000 of acquisition-related costs in the quarter. But no deal and the deal -- last deal was the DSS a year ago. What was the $600,000, what was that related to?

It's -- so we're prospecting more spending and the cost of it -- a lot of it is overseas stuff. And we're -- and I'll just talk in general, Howard, that we're looking at larger deals because we look at the cost of doing a smaller deal, even though we have some little ones out there, but we're going to try to streamline our M&A that it just doesn't make sense in some of the really small ones to use all the teams that we've used in the past. So we're going to try to get that much more efficient because we have a pretty aggressive track record -- pretty aggressive outlook for 2026.

Of course, I'd love to talk one in this year, but it's really going to go into '26. So there's a bunch of different costs in there. There's some other costs in there, and I can't talk about it now, but in the future, on some of our vendor acquisitions, there's -- it's kind of a collect all for some of that stuff.

But safe to say that's all forward-looking on deals, not related to past deals done?

That's correct. What's in there for this current quarter is -- what Dale and I have alluded to, just costs related to continuing to evaluate our pipeline of strategic acquisitions. And we have a deep pipeline that we continue to evaluate, and there's costs associated with obviously evaluating each of those.

Okay. So then as I always try to encourage you to talk future here. If you look at M&A and I think 2 different places you said a healthy appetite and actively evaluating, and it's been now almost a year now since your last acquisition. And now you got almost, well you have $50 million cash and a line of credit for $50 million. So you got $100 million of cash available. Can you talk about what you're seeing out there in terms of size of deal, you got into a little bit of it, but are we looking at $50 million deals, $100 million deals, cash deals, debt deals, equity deals, all of the above? What's your vision kind of as to how much the M&A is going to affect the company? And how much do you see your organic continuing to drive the growth of this company?

Yes. The organic piece of it, and this goes back to us bringing on vendors and trying to shed vendors that are taking up cycles as quickly as possible, and that is something that Charles and his team fight all the time, right? We have nonstop. I mean, if you look at 72 vendors and that goes to some of the investments we made. So we brought some other people on Charles' team to evaluate companies faster so we make sure we don't miss any. But with that goes, oh my gosh, we have that much more opportunity, our sales teams are like saying, "Hey, man, we are full up as far as our sales cycles go." So we try to shed some of the nonperformers to get it out of the Line Card to get rid of the clutter. So that's a process that just keeps going.

And I would be the first one to say, "Hey, man, we are starting to see some of the vendors." Not as many vendors by quarter, though we see some slowdown in the market. We don't see that, and we haven't seen that for the last 6 quarters. On the acquisition side, size-wise, we're looking at opportunities as big as $40 million and then some smaller ones that are strategic that are going to be sub-$10 million, but strategic to build in technical capability in the company that I think we're lacking, right? And I always love to tell people, the first thing -- the last thing you hire is in a distribution when you have low margins, is technical resources, right? to support your vendors. And the first thing to go when you're cutting is technical resources. So we're being just very good stewards of that and saying, okay, this is a good company. They have good developers. We need this kind of talent in the company. And these are the 5 vendors they can support, and we'll get more margin for that from our vendors. And we'll also become super entangled or sticky with the vendors and our customers.

So there's 2 or 3 of them on my list right now that are more of the technical rationale for acquiring. And then the other ones are strictly into distribution, right? And the 2 larger ones are overseas. And that's going to get -- we'll pick up not only vendors but also territories with that. We watch the markets. We're looking at the multiples. The multiples have come down a little bit overseas on some of the deals that have been done, so that's good for us. So yes, we're confident a bit to get some of these closed.

So then on multiples, I mean, it's $10 million to $40 million, that's your acquisition price. What type of gross billings? Or what type of multiples would you be looking at in those type of deals?

So we evaluate it this way, right? We firstly look at saying, "Hey, this is where our multiple is. " We think we're trading at a pretty high multiple to our competitors, and it's hard to define our competitors because we have the monster big ones and then we have some smaller ones that are not public, so you have to do the best you can in the private markets. But we look at them a couple of ways. What do they bring to Climb, right? And our strategic plan is, is it a territory? Is it vendors? How good is the team? And is the cultural fit for us?

I had one that I spent quite a bit of time with, and it just was not a cultural fit. It would have been a mess I think, just because we just weren't going to get along in how we went to market. But the real key piece for me is what is the margin profile, right? There's higher margin European space as we've seen with our acquisitions. So if that margin profile is a lot higher, and we think we can maintain that and add more vendors to that, then that would garner a higher multiple. And of course, they'd be typically asking for a higher multiple. Do they have a concentration on one vendor like Douglas Stewart. So hence, the multiple is much lower a year when we acquired them. So not a lot of factors, but those are the main core ones for that.

We do have a follow-up from Vincent Colicchio with Barrington Research.

Yes. Dale, just trying to assess if there's any signs of any kind of slowdown in sales cycles change, anything like that? Or based on your numbers, it looks like a pretty healthy environment.

Yes. We -- like I mentioned before, I mean, Sophos was kind of flat. We had a really good couple of quarters in the beginning of this year with Sophos. So we're looking to finish strong with them. Q4 is always -- and it's a cyclical nature because this could go back 5 years that we've still been doing license renewals. And a lot of people extinguished with budgets in Q4. So we look to have another strong quarter like we did a year ago. But we don't see the softness in the markets. And we're always going to have to talk about it, Vince, until we get twice our size. The vast data transactions will be lumpy and want to take advantage of them, and we'll talk about them and be really open with everybody when we don't have them coming in year-over-year.

Thank you. And this concludes our Q&A session. I will now turn the call back to Mr. Foster for closing remarks.

Thank you, operator. I'd like to thank everybody and the entire Climb team, including our shareholders for their commitment, providing just a great experience to our customers and to our vendor partners. And with that, we'll close the call. Thank you.

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at anytime.