Climb Global Solutions, Inc. Q3 FY2025 earnings call

• In Q3, the company achieved double-digit organic growth and benefited from the acquisition of Douglas Stewart Software (acquired July of last year).
• Evaluated over 70 potential vendor partners in Q3, entering into agreements with 4, prioritizing innovation, market differentiation, and long-term alignment. Highlighted partnerships with Liongard (advanced attack surface management) and Halcyon (anti-ransomware).
• European team launched Climb AI Academy in the DACH region to equip partners with AI expertise, with over 700 participants and positive feedback. The program offers manufacturer-neutral training, certifications, and a structured curriculum.
• Actively evaluating acquisition opportunities in Western Europe to enhance offerings and expand presence.

In Q3 2025, gross billings increased 8% to $504.6 million. Distribution segment gross billings increased 9% to $481.9 million, while Solutions segment gross billings decreased 5% to $22.7 million. Net sales in Q3 2025 were $161.3 million, up 35% from the prior year. Gross profit was $25.7 million, up 6%. SG&A expenses were $16.2 million. Net income was $4.7 million or $1.02 per diluted share. Adjusted net income was $6 million or $1.31 per diluted share. Adjusted EBITDA was $10.9 million. Gross profit as a percentage of gross billings was 5.1%, and SG&A as a percentage of gross billings was 3.2%.

• Prioritize building on operational momentum and executing strategic initiatives.
• Actively evaluating acquisition opportunities that align with growth strategy, enhance capabilities, and strengthen presence in key markets.
• Confident in closing 2025 strong and setting the stage for record performance in 2026.

• Forward-looking statements subject to risks and uncertainties described in the company's SEC filings.
• Impact of tariffs and currency fluctuations on business, though not substantial in Q3.
• Seasonality and lumpy deals affecting receivables and payables levels.

Q: How would you characterize the quarter? Was growth broad-based across top 20? Any large lumpy deals?

A: No lumpy deals. Organic growth strong across majority of vendors, excluding specific large orders in prior quarters.

Q: In terms of industries, security still leads growth?

A: Yes, over 60% in the cybersecurity space, with many vendors in that space.

Q: Any early pay price discounts impacting margin?

A: No new relationships on early pay discounts, consistent as percentage of gross billings.

Q: Training program in Europe, any similar in US?

A: European program started with Unframe, will roll into US as vendors build AI capability into products.

Q: Impact of tariffs on business?

A: No substantial impact, FX fluctuations considered in quoting, but nothing significant.

Q: Accounts receivable and payable changes?

A: Ebb and flow with quarters, related to timing of receivables collection and payables, expect levels to return to prior year end.

Q: Seasonality of DSS business?

A: DSS sells mostly into education, with seasonality in May-October due to budget spending, impacted by Adobe's AI-related activities.

Q: Solutions segment gross billings down 5%, cause and outlook?

A: Blip due to small US team with large customers, not expected to repeat.

Q: M&A costs and acquisitions?

A: $600k acquisition-related costs for evaluating strategic acquisitions, looking at deals $10M-$40M, considering territory, vendors, team, culture, margin profile.

Q: Signs of slowdown in sales cycles?

A: No softness in markets seen, cyclical nature with license renewals, but confident in strong Q4.