Climb Global Solutions, Inc.

Previous wording

We sell in a competitive environment where gross product margins have historically declined due to competition and changes in product mix towards products where no delivery of a physical product is required. In addition, we grant discounts, allowances, and rebates to certain customers, which may vary from period to period, based on volume, payment terms and other criteria. To date, we have been able to implement cost efficiencies such as the use of drop shipments, EDI and other capabilities to be able to operate our business profitably as gross margins have declined. We evaluate the profitability of our business based on return on equity and effective margin (see discussions below).

Current wording

We sell in a competitive environment where gross product margins have historically declined due to competition and changes in product mix towards products where no delivery of a physical product is required. In addition, we grant discounts, allowances, and rebates to certain customers, which may vary from period to period, based on volume, payment terms and other criteria. To date, we have been able to implement cost efficiencies such as the use of drop shipments, electronic digital interchange and other capabilities to be able to operate our business profitably as gross margins have declined. We evaluate the profitability of our business based on return on equity and effective margin (see discussions below).

Previous wording

Dividend Policy and Share Repurchase Program. Historically we have sought to return value to investors through the payment of quarterly dividends and share repurchases. Total dividends paid and the dollar value of the shares repurchased were $0.8 million and $0.9 million, for the three months ended March 31, 2025, respectively, and $0.7 million and $0.4 million, for the three months ended March 31, 2024, respectively. The payment of future dividends and share repurchases is at the discretion of our Board of Directors and dependent on results of operations, projected capital requirements, and other factors the Board of Directors may find relevant.

Current wording

Dividend Policy and Share Repurchase Program. Historically we have sought to return value to investors through the payment of quarterly dividends and share repurchases. Total dividends paid and the dollar value of the shares repurchased were $0.8 million and $0.5 million, for the three months ended June 30, 2025, respectively, and $0.8 million and $0.3 million, for the three months ended June 30, 2024, respectively. The payment of future dividends and share repurchases is at the discretion of our Board of Directors and dependent on results of operations, projected capital requirements, and other factors the Board of Directors may find relevant.

Previous wording

Net sales increased 49%, or $45.6 million, to $138.0 million for the three months ended March 31, 2025 compared to $92.4 million for the same period in the prior year. Gross profit increased 37%, or $6.4 million, to $23.4 million for the three months ended March 31, 2025, compared to $17.0 million for the same period in the prior year. Selling, general and administrative (“SG&A”) expenses increased 34%, or $4.2 million, to $16.8 million for the three months ended March 31, 2025 compared to $12.5 million for the same period in the prior year. Depreciation and amortization expense increased 99%, or $0.9 million, to $1.7 million for the three months ended March 31, 2025 compared to $0.9 million for the same period in the prior year. Net income increased 35%, or $1.0 million, to $3.7 million for the three months ended March 31, 2025 compared to $2.7 million for the same period in the prior year. Diluted income per share increased 35%, or $0.21 to $0.81 for the three months ended March 31, 2025 compared to $0.60 for the same period in the prior year.

Current wording

Net sales increased 73%, or $67.2 million, to $159.3 million for the three months ended June 30, 2025 compared to $92.1 million for the same period in the prior year. Gross profit increased 42%, or $7.7 million, to $26.3 million for the three months ended June 30, 2025, compared to $18.6 million for the same period in the prior year. Selling, general and administrative (“SG&A”) expenses increased 26%, or $3.4 million, to $16.4 million for the three months ended June 30, 2025 compared to $13.0 million for the same period in the prior year. Depreciation and amortization expense increased 129%, or $1.1 million, to $2.0 million for the three months ended June 30, 2025 compared to $0.9 million for the same period in the prior year. Net income increased 74%, or $2.5 million, to $5.9 million for the three months ended June 30, 2025 compared to $3.4 million for the same period in the prior year. Diluted income per share increased 73%, or $0.55 to $1.30 for the three months ended June 30, 2025 compared to $0.75 for the same period in the prior year.

Previous wording

We consider gross profit growth and effective margin to be key metrics in evaluating our business. During the three months ended March 31, 2025, gross profit increased 37%, or $6.4 million, to $23.4 million compared to $17.0 million for the same period in the prior year while effective margin increased to 32.7% compared to 32.5% for the same period in the prior year.

Current wording

We consider gross profit growth and effective margin to be key metrics in evaluating our business. During the three months ended June 30, 2025, gross profit increased 42%, or $7.7 million, to $26.3 million compared to $18.6 million for the same period in the prior year while effective margin increased to 43.3% compared to 37.3% for the same period in the prior year. During the six months ended June 30, 2025, gross profit increased 40%, or $14.1 million, to $49.7 million compared to $35.6 million for the same period in the prior year while effective margin increased to 38.3% compared to 35.0% for the same period in the prior year.

Previous wording

On July 31, 2024, we completed the acquisition of DSS for an aggregate purchase price of approximately $20.3 million (subject to certain adjustments) plus a potential post-closing earnout payment. The operating results of DSS are included in our in our operating results from the date of acquisition within our Distribution segment.

Current wording

On July 31, 2024, we completed the acquisition of DSS for an aggregate purchase price of approximately $20.3 million (subject to certain adjustments) plus a potential post-closing earnout payment. The operating results of DSS are included in our operating results from the date of acquisition within our Distribution segment.

Previous wording

Net sales for the three months ended March 31, 2025 increased 49%, or $45.6 million, to $138.0 million compared to $92.4 million for the same period in the prior year. Gross billings, an operational metric, for the three months ended March 31, 2025 increased 34%, or $119.3 million, to $474.6 million compared to $355.3 million for the same period in the prior year. Net sales and gross billings increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of DSS. Gross billings increased at a lesser rate than net sales due to differences in the product mix between the two periods. During the three months ended March 31, 2025, gross billings included a greater percentage of hardware and software products, which are recorded on a gross basis, while during the three months ended March 31, 2024, gross billings included a greater percentage of security, maintenance and cloud products, which are recorded net of related cost of sales.

Current wording

Net sales for the three months ended June 30, 2025 increased 73%, or $67.2 million, to $159.3 million compared to $92.1 million for the same period in the prior year. Gross billings, an operational metric, for the three months ended June 30, 2025 increased 39%, or $140.8 million, to $500.6 million compared to $359.8 million for the same period in the prior year. Net sales and gross billings increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of DSS. Gross billings increased at a lesser rate than net sales due to differences in the product mix between the two periods. During the three months ended June 30, 2025, gross billings included a greater percentage of hardware and software products, which are recorded on a gross basis, while during the three months ended June 30, 2024, gross billings included a greater percentage of security, maintenance and cloud products, which are recorded net of related cost of sales.

Previous wording

Distribution segment net sales for the three months ended March 31, 2025 increased 52%, or $45.4 million, to $132.2 million compared to $86.8 million for the same period in the prior year. Gross billings for the Distribution segment for the three months ended March 31, 2025 increased 36%, or $119.0 million, to $453.6 million compared to $334.6 million for the same period in the prior year. Net sales increased at a greater rate than gross billings increased due to the impact of hardware and software sales recognized during the current period, which are recorded on a gross basis.

Current wording

Distribution segment net sales for the three months ended June 30, 2025 increased 74%, or $65.2 million, to $153.0 million compared to $87.8 million for the same period in the prior year. Gross billings for the Distribution segment for the three months ended June 30, 2025 increased 40%, or $136.9 million, to $477.0 million compared to $340.1 million for the same period in the prior year. Net sales increased at a greater rate than gross billings increased due to the impact of hardware and software sales recognized during the current period, which are recorded on a gross basis.

Previous wording

Solutions segment net sales for the three months ended March 31, 2025, increased 5%, or $0.3 million, to $5.9 million compared to $5.6 million for the same period in the prior year. Gross billings for the Solutions segment for the three months ended March 31, 2025 increased 2%, or $0.4 million, to $21.0 million compared to $20.6 million for the same period in the prior year. Net sales increased at a greater rate than gross billings due to differences in the product mix between the two periods.

Current wording

Solutions segment net sales for the three months ended June 30, 2025, increased 48%, or $2.1 million, to $6.3 million compared to $4.2 million for the same period in the prior year. Gross billings for the Solutions segment for the three months ended June 30, 2025 increased 19%, or $3.7 million, to $23.5 million compared to $19.8 million for the same period in the prior year. Net sales increased organically at a greater rate than gross billings due to differences in the product mix between the two periods.

Previous wording

The Company had two major customers that accounted for 26% and 13%, respectively, of its total net sales during the three months ended March 31, 2025 and 20% and 15%, respectively, of its total net sales during the three months ended March 31, 2024. The Company hadone major vendor that accounted for 13% of total purchases during the three months ended March 31, 2025 and 16% of total purchases during the three months ended March 31, 2024.

Current wording

The Company had three major customers that accounted for 24%, 20% and 13%, respectively, of its total net sales during the three months ended June 30, 2025 and 18%, 1% and 18%, respectively, of its total net sales during the three months ended June 30, 2024. During thethree months ended June 30, 2025 the Company hadno major vendors, compared to one major vendor that accounted for 10% of total purchases during the three months ended June 30, 2024.

Previous wording

Solutions segment gross profit for the three months ended March 31, 2025 increased 7%, or $0.2 million, to $3.0 million compared to $2.8 million for the same period in the prior year. This increase was driven by the aforementioned increase in gross billings compared to the same period in the prior year.

Current wording

Solutions segment gross profit for the three months ended June 30, 2025 increased 13%, or $0.4 million, to $3.3 million compared to $2.9 million for the same period in the prior year. This increase was organically driven by the aforementioned increase in gross billings compared to the same period in the prior year.

Previous wording

Customer rebates and discounts for the three months ended March 31, 2025 were $4.6 million compared to $3.3 million for the same period in the prior year. Customer rebates and discounts vary based on terms of rebate and early pay discount programs offered to customers and timing of payments ultimately received from our customers.

Current wording

Customer rebates and discounts for the three months ended June 30, 2025 were $6.3 million compared to $3.2 million for the same period in the prior year. Customer rebates and discounts vary based on terms of rebate and early pay discount programs offered to customers and timing of payments ultimately received from our customers.

Previous wording

Vendor rebates and discounts for the three months ended March 31, 2025 were$4.7 million compared to $1.9 million for the same period in the prior year. Vendor rebates are dependent on programs offered by our vendors and in some cases reaching certain volume targets set by our vendors or meeting certain early payment programs offered by our vendors. The Company monitors vendor rebate levels, competitive pricing, and gross profit margins carefully.

Current wording

Vendor rebates and discounts for the three months ended June 30, 2025 were $5.5 million compared to $1.6 million for the same period in the prior year. Vendor rebates are dependent on programs offered by our vendors and in some cases reaching certain volume targets set by our vendors or meeting certain early payment programs offered by our vendors. The Company monitors vendor rebate levels, competitive pricing, and gross profit margins carefully.

Previous wording

SG&A expenses for the three months ended March 31, 2025 increased 34%, or $4.3 million, to $16.8 million compared to $12.5 million for the same period in the prior year. This increase was primarily due to the impact of the acquisition of DSS as well as an increase in salaries, commissions and other employee related expenses in support of the increased gross profit. SG&A expenses were 3.5% of gross billings for the three months ended March 31, 2025 and 2024, respectively. The Company expects that its SG&A expenses, as a percentage of gross billings, may vary depending on changes in sales volume, as well as the levels of continuing investments to drive future growth.

Current wording

SG&A expenses for the three months ended June 30, 2025 increased 26%, or $3.4 million, to $16.4 million compared to $13.0 million for the same period in the prior year. This increase was primarily due to the impact of the acquisition of DSS of $0.9 million as well as an increase in salaries, commissions and other employees related expenses in support of the increased gross profit. SG&A expenses were 3.3% of gross billings for the three months ended June 30, 2025, compared to 3.6% for the same period in the prior year. The Company expects that its SG&A expenses, as a percentage of gross billings, may vary depending on changes in sales volume, as well as the levels of continuing investments to drive future growth.

Previous wording

Depreciation and amortization expense for the three months ended March 31, 2025, increased 99%, or $0.8 million, to $1.7 million compared to $0.9 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the DSS acquisition as well as increased amortization for a vendor relationship acquired through a prior year acquisition. The Company received notice of termination of its distribution agreement from this vendor and therefore changed the amortization life of the intangible asset to a shorter period to reflect the expected period of benefits.

Current wording

Depreciation and amortization expense for the three months ended June 30, 2025, increased 129%, or $1.1 million, to $2.0 million compared to $0.9 million for the same period in the prior year, primarily due to the amortization of intangible assets acquired in the DSS acquisition as well asamortization of previously capitalized ERP costs, which amortization commenced in the fourth quarter of 2024 andincreased amortization for a vendor relationship acquired through a prior year acquisition. The Company received notice of termination of its distribution agreement from this vendor and therefore changed the amortization life of the intangible asset to a shorter period to reflect the expected period of benefits.

Previous wording

Gross profit for the three months ended March 31, 2025 increased 37%, or $6.4 million, to $23.4 million compared to $17.0 million for the same period in the prior year. Gross profit increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of DSS.

Current wording

Gross profit for the six months ended June 30, 2025 increased 40%, or $14.1 million, to $49.7 million compared to $35.6 million for the same period in the prior year. Gross profit increased due to both organic growth from our existing vendor partnerships as well as the impact of the acquisition of DSS of $4.4 million.

Previous wording

Distribution segment gross profit for the three months ended March 31, 2025 increased 44%, or $6.2 million, to $20.4 million compared to $14.2 million for the same period in the prior year. The increase in Distribution segment gross profit was due to the aforementioned organic growth from our existing vendor partnerships as well as the contribution from the acquisition of DSS, partially offset by higher early pay discounts and other rebates and discounts offered to our customers as a percentage of gross billings.

Current wording

Distribution segment gross profit for the six months ended June 30, 2025 increased 45%, or $13.5 million, to $43.4 million compared to $29.9 million for the same period in the prior year. The increase in Distribution segment gross profit was due to the aforementioned organic growth from our existing vendor partnerships as well as the contribution from the acquisition of DSS of $4.4 million, partially offset by higher early pay discounts and other rebates and discounts offered to our customers as a percentage of gross billings.

Previous wording

We compute interim period income taxes by applying an anticipated annual effective tax rate to our year-to-date income or loss from operations before income taxes, except for significant unusual or infrequently occurring items and discrete items. As a result, our estimated tax rate is adjusted each quarter. For the three months ended March 31, 2025 and 2024, the Company recorded a provision for income taxesof $0.6 million and $0.9 million, respectively. The effective tax rate for the three months ended March 31, 2025 and 2024 was 13.3% and 24.6%, respectively. The change in effective tax rate for the three months ended March 31, 2025 compared to the same period in the prior yearwas impacted by a discrete item for the recognition of excess tax benefits related to share-based compensation in income tax expense, changes in the mix of jurisdictions in which taxable income was earned, as well as limitations on the deductibility of certain executive compensation amounts during both periods.

Current wording

We compute interim period income taxes by applying an anticipated annual effective tax rate to our year-to-date income or loss from operations before income taxes, except for significant unusual or infrequently occurring items and discrete items. As a result, our estimated tax rate is adjusted each quarter. For the six months ended June 30, 2025 and 2024, the Company recorded a provision for income taxes of $2.3 million and $1.9 million, respectively. The effective tax rate for thesix months ended June 30, 2025 and 2024 was 19.5% and 23.6%, respectively. The change in effective tax rate for thesix months ended June 30, 2025 compared to the same period in the prior year was impacted by a discrete item for the recognition of excess tax benefits related to share-based compensation in income tax expense, changes in the mix of jurisdictions in which taxable income was earned, as well as limitations on the deductibility of certain executive compensation amounts during both periods.

Previous wording

Our cash and cash equivalents as of March 31, 2025 increased 9%, or $2.7 million, to $32.5 million compared to $29.8 million as of December 31, 2024.

Current wording

Our cash and cash equivalents as of June 30, 2025 decreased 4%, or $1.2 million, to $28.6 million compared to $29.8 million as of December 31, 2024.

Previous wording

Net cash and cash equivalents provided by operating activities for thethree months ended March 31, 2025 was $8.5 million, comprised primarily of net income adjusted for non-cash items of $6.9 million, partially offset by changes in operating assets and liabilities of $1.5 million.

Current wording

Net cash and cash equivalents provided by operating activities for thesix months ended June 30, 2025 was $6.3 million, comprised primarily of net income adjusted for non-cash items of $16.3 million, partially offset by changes in operating assets and liabilities of $10.0 million.

Previous wording

Net cash and cash equivalents used in investing activities during the three months ended March 31, 2025 was $0.7 million purchases of fixed assets supporting our ongoing ERP project and new leasehold improvements.

Current wording

Net cash and cash equivalents used in investing activities during the six months ended June 30, 2025 was $1.4 million purchases of fixed assets supporting our recently completed ERP project and new leasehold improvements.

Previous wording

Net cash and cash equivalents used in financing activities during thethree months ended March 31, 2025 was $5.3 million, comprised of payments of contingent considerations of $3.6 million, purchases of treasury stock of $0.9 million, dividend payments on our Common Stock of $0.8 million and repayments of borrowings under term loan of $0.1 million.

Current wording

Net cash and cash equiv alents used in financing activities during thesix months ended June 30, 2025 was $6.8 million, comprised of payments of contingent considerations of $3.6 million, purchases of treasury stock of $1.4 million, dividend payments on our Common Stock of $1.5 million and repayments of borrowings under term loan of $0.3 million.

Previous wording

On April 8, 2022, the Company entered into a $2.1 million term loan (the “Term Loan”) with First American Commercial Bancorp, Inc. (“First American”) pursuant to a Master Loan and Security Agreement. The proceeds from the Term Loan was used to fund certain capital expenditures. The borrowing under the Term Loan bears interest at a rate of 3.73% per annum and is being repaid over forty-eight monthly installments of principal and interest through April 2026. As of March 31, 2025, the Companyhad $0.6 million outstanding under the Term Loan.

Current wording

On April 8, 2022, the Company entered into a $2.1 million term loan (the “Term Loan”) with First American Commercial Bancorp, Inc. (“First American”) pursuant to a Master Loan and Security Agreement. The proceeds from the Term Loan was used to fund certain capital expenditures. The borrowing under the Term Loan bears interest at a rate of 3.73% per annum and is being repaid over forty-eight monthly installments of principal and interest through April 2026. As of June 30, 2025, the Companyhad $0.5 million outstanding under the Term Loan.

Previous wording

In connection with the acquisition of Data Solutions, which was completed October 6, 2023, the Company acquired an IDF that was with recourse to the Company. Data Solutions had previously entered into the IDF with AIB Commercial Finance Limited ("AIB") pursuant to a Debt Purchase Agreement. The Company subsequently terminated the IDF during the year ended December 31, 2024. The proceeds from the IDF were used for working capital needs of Data Solutions. Borrowings under the IDF were based on accounts receivable up to 80% of the outstanding accounts receivable balance. The discount rate under the IDF was equal to 2.5% above AIB's applicable lending rates that varied based on the currency of the accounts receivable.

Current wording

In connection with the acquisition of Data Solutions, which was completed October 6, 2023, the Company acquired an IDF that was with recourse to the Company. Data Solutions had previously entered into the IDF with AIB pursuant to a Debt Purchase Agreement. The Company subsequently terminated the IDF during the year ended December 31, 2024. The proceeds from the IDF were used for working capital needs of Data Solutions. Borrowings under the IDF were based on accounts receivable up to 80% of the outstanding accounts receivable balance. The discount rate under the IDF was equal to 2.5% above AIB's applicable lending rates that varied based on the currency of the accounts receivable.