WSTG...Revenue a push and EPS @ $0.35. Cash up huge YoY considering 2 acquisitions and up $4M sequentially to $33M. I was looking for a grand slam a bit early. Based on comments made in the last cc, the rest of the year will be strong. Looking forward to tomorrows cc...
Wayside Technology Group Reports First Quarter 2021 Results
EATONTOWN, N.J., May 05, 2021 (GLOBE NEWSWIRE) -- Wayside Technology Group, Inc. (NASDAQ: WSTG) (“Wayside” or the “Company”), a value-added IT channel company providing innovative sales and distribution solutions for emerging technology vendors, is reporting results for the first quarter ended March 31, 2021.
First Quarter 2021 Summary vs. Same Year-Ago Quarter
Net sales increased slightly to $62.8 million compared to $62.6 million.
Gross profit increased 33% to a record $10.8 million compared to $8.2 million.
Net income increased 82% to $1.5 million or $0.35 per share, compared to $0.8 million or $0.18 per share.
Net income excluding legal and financial advisory expenses, net - unsolicited bid and related matters and acquisition related costs, net of taxes (a non-GAAP financial measure defined below) was $1.5 million or $0.35 per share, compared to $2.1 million or $0.47 per share.
Adjusted EBITDA (a non-GAAP financial measure defined below) was $2.6 million compared to $3.1 million.
Management Commentary
“During the first quarter, we continued to execute on our growth strategy and lay a solid foundation for 2021,” said Dale Foster, CEO of Wayside. “Despite a tough comparable period in the prior year, we generated year-over-year growth across net sales, adjusted gross billings and gross margin, reaching a record $10.8 million in gross profit for the quarter. As we made further progress on our integration of CDF Group (CDF) and develop both existing partnerships and cross-selling opportunities, we are making key strategic investments ahead of our growth objectives. While the benefits of these investments have yet to fully flow through to our profitability, we expect to generate further bottom-line growth over time as we keep supporting our organic business and driving additional synergies with CDF and Interwork.
“Our three core growth drivers continued to be top of mind throughout the quarter, and they will underscore our strategy going forward. As part of our ongoing support to current vendors, we have helped them navigate a dynamic demand environment as their end customers continue building their IT infrastructures within an increasingly hybrid work-driven landscape. This new environment has shifted our product mix from quarter to quarter, with security, data center and cloud products garnering greater demand in Q1. Even as broader recovery from the pandemic progresses, IT needs will continue to evolve, and our diversified portfolio and line card remain poised to support these needs.
“We are expanding this diversification even further through adding new vendors with above-average growth potential. As we ramp-up collaboration among our US, Canadian and EMEA sales teams, we are already adding several emerging UK vendors to our line card. In addition, we are building relationships with larger international brands where we can distribute certain product lines within our core categories. The cross-selling opportunities we are identifying through Interwork and CDF’s networks will help us deepen our global footprint and bolster the strength of our combined sales team.
“Our work to develop our vendor network remains well-supported by our strong balance sheet and the added capabilities that our recent acquisitions have made possible. The cloud products and consultative services offered through Grey Matter and Cloud Know How (divisions of CDF), respectively, have accelerated our long-running development of an internal cloud marketplace. With the marketplace set to launch later this month, we expect to expand our support for new and incoming cloud vendors, as well as offer more comprehensive end-to-end services for consumers. The cloud is a mainstay of today’s remote and hybrid work environments, and we expect it to become an important and strategic element of both our portfolio and our long-term growth.
“As we look to the rest of 2021, we plan to continue leveraging our strong foundation to support the emerging vendors in our network and pipeline, as well as seek additional accretive acquisition opportunities in the IT distribution and solutions marketplace. These are still early days for our long-term growth trajectory.”
Dividend
Subsequent to the quarter, on May 4, 2021, Wayside’s board of directors declared a quarterly dividend of $0.17 per share of its common stock payable on May 21, 2021 to shareholders of record on May 17, 2021.
First Quarter 2021 Financial Results
Net sales in the first quarter of 2021 increased slightly to $62.8 million compared to $62.6 million for the same period in 2020. The modest growth reflects the positive impact of CDF and Interwork, partially offset by a change in product mix sold within the Company’s existing vendor network relative to prior quarters. It is important to note that the first quarter of 2020 had substantial uptick in growth attributable to a significant client win.
Adjusted gross billings (a non-GAAP financial measure defined below) in the first quarter of 2021 increased 22% to $210.9 million compared to $173.1 million for the same period in 2020.
Gross profit in the first quarter of 2021 increased 33% to $10.8 million compared to $8.2 million for the same period in 2020. The increase in gross profit was driven by the positive impact of CDF and Interwork. However, it is important to note that the Company’s gross profit performance during the quarter was impacted by multiple factors, including customer early pay discounts, reduced vendor rebates and increased customer rebates that the Company is working to mitigate and offset these costs in future quarters.
Total selling, general, and administrative (“SG&A”) expenses in the first quarter of 2021 were $8.8 million compared to $7.2 million for the same period in 2020. The increase was primarily driven by incremental costs related to the operations of CDF and Interwork, as well as a one-time severance expense incurred during the quarter. Further, these expenses reflect increased investments ahead of the Company’s growth objectives, which are expected to drive continued gross profit growth in the coming quarters. As a percentage of net sales, SG&A was 14.0% compared to 11.5% for the same period in 2020. Over time, the Company continues to expect SG&A margin to decline as a percent of revenue as it leverages the resources of the combined organizations.
Net income in the first quarter of 2021 increased 82% to $1.5 million or $0.35 per diluted share, compared to $0.8 million or $0.18 per diluted share for the same period in 2020. Net income excluding costs related to the unsolicited bid and related matters, as well as acquisition related costs, net of taxes, were $1.5 million or $0.35 per share, compared to $2.1 million or $0.47 per share for the same period in 2020.
Adjusted EBITDA (a non-GAAP financial measure defined below) in the first quarter of 2021 was $2.6 million compared to $3.1 million for the same period in 2020. The decrease was primarily driven by the impact of the aforementioned severance expenses, early pay discount programs, and increased customer rebates and decreased vendor rebates, which were elevated relative to the year-ago quarter.
Effective margin, which is defined as adjusted EBITDA (a non-GAAP financial measure defined below) as a percentage of gross profit, was 24.4% in the first quarter of 2021 compared to 38.2% for the same period in 2020. The decrease was driven by the aforementioned decline in adjusted EBITDA and the related mitigating factors on the Company’s profitability performance. Effective margin is expected to improve over the coming quarters as the Company works to offset these factors and drive greater benefits from its strategic investments.
Cash and cash equivalents increased 15% to $33.7 million on March 31, 2021, compared to $29.3 million at December 31, 2020. The increase was primarily driven by continued improvements in working capital, along with the liquidity benefits of the aforementioned early pay discount program. The Company remained debt free on March 31, 2021, and had no borrowings outstanding under its $20 million credit facility.
Financial results include operations of Interwork Technologies effective May 1, 2020, as well as operations of CDF Group effective November 6, 2020. The initial allocation of the purchase price of CDF Group is based on preliminary information and is subject to adjustments during a one-year measurement period following the close date of the acquisition. This may include adjustments to provisional balances including the fair value of tangible and intangible asset values, amortization and deferred taxes. More information will be available in the Company’s quarterly report filed on Form 10-Q with the Securities and Exchange Commission. https://finance.yahoo.com/news/wayside-technology-group-reports-first-201500002.html
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