Climb Global Solutions, Inc.

Previous wording

This following information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K filed with the SEC on for the fiscal year ended December 31, 2025. In addition to historical information, the following discussion contains certain forward-looking information. See“Cautionary Note Regarding Forward-Looking Statements”* above for certain information concerning -forward-looking statements.*

Current wording

This following information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2026 for the fiscal year ended December 31, 2025.In addition to historical information, the following discussion contains certain forward-looking information. See“Cautionary Note Regarding Forward-Looking Statements” above for certain information concerning -forward-looking statements.

Previous wording

We have subsidiaries in the United States, Canada, Netherlands, United Kingdom, Ireland, Germany, and Greece through which sales are made.

Current wording

We have subsidiaries in the United States, Canada, Netherlands, United Kingdom, Ireland, Germany, Greece, and South Africa through which sales are made.

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 $0.0 million and $1.5 million, for the three months ended March 31, 2026 and 2025, respectively, and $0.8 million and $0.9 million, for the three months ended March 31, 2025, respectively. Following the end of fiscal year 2025, our Board of Directors determined to suspend quarterly cash dividends on our Common Stock beginning with the first quarter of 2026 in order to preserve financial flexibility and prioritize capital allocation objectives. The payment of future dividends and any share repurchases will be at the discretion of our Board of Directors and will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors the Board of Directors deems 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 $0.0 million and $0.1 million for the three months ended June 30, 2026, respectively, and $0.8 million and $0.5 million, for the three months ended June 30, 2025, respectively. Following the end of fiscal year 2025, our Board of Directors determined to suspend quarterly cash dividends on our Common Stock beginning with the first quarter of 2026 in order to preserve financial flexibility and prioritize capital allocation objectives. The payment of future dividends and any share repurchases will be at the discretion of our Board of Directors and will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors the Board of Directors deems relevant.

Previous wording

Net sales increased 32%, or $44.4 million, to $182.4 million for the three months ended March 31, 2026 compared to $138.0 million for the same period in the prior year. Gross profit increased 13%, or $3.1 million, to $26.5 million for the three months ended March 31, 2026, compared to $23.4 million for the same period in the prior year. Selling, general and administrative (“SG&A”) expenses increased 21%, or $3.5 million, to $20.3 million for the three months ended March 31, 2026 compared to $16.8 million for the same period in the prior year. Depreciation and amortization expense increased 18%, or $0.3 million, to $2.0 million for the three months ended March 31, 2026 compared to $1.7 million for the same period in the prior year. Net income decreased 10%, or $0.4 million, to $3.3 million for the three months ended March 31, 2026 compared to $3.7 million for the same period in the prior year. Diluted income per share decreased 10%, or $0.02 to $0.18 for the three months ended March 31, 2026 compared to $0.20 for the same period in the prior year.

Current wording

Net sales increased 9%, or $14.9 million, to $174.2 million for the three months ended June 30, 2026 compared to $159.3 million for the same period in the prior year. Gross profit increased 15%, or $3.9 million, to $30.2 million for the three months ended June 30, 2026, compared to $26.3 million for the same period in the prior year. Selling, general and administrative (“SG&A”) expenses increased 26%, or $4.3 million, to $20.7 million for the three months ended June 30, 2026 compared to $16.4 million for the same period in the prior year. Depreciation and amortization expense increased 5%, or $0.1 million, to $2.1 million for the three months ended June 30, 2026 compared to $2.0 million for the same period in the prior year. Net income decreased 8%, or $0.4 million, to $5.5 million for the three months ended June 30, 2026 compared to $5.9 million for the same period in the prior year. Diluted income per share decreased 8%, or $0.03 to $0.30 for the three months ended June 30, 2026 compared to $0.33 for the same period in the prior year.

Previous wording

The Company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product. In cases where the Company is not able to create a natural hedge by maintaining offsetting asset and liability amounts in the same currency, it may enter into foreign exchange contracts, typically in the form of forward purchase agreements, to facilitate the hedging of foreign currency exposures to mitigate the impact of changes in foreign currency exchange rates. These contracts generally have terms of no more than two months. The Company does not apply hedge accounting to these contracts and therefore the changes in fair value are recorded in earnings. The Company does not enter into foreign exchange contracts for trading purposes and the risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the Company minimizes by limiting its counterparties to major financial institutions. The Company recognized an unrealized gainof less than $0.1 million on contracts outstanding during the three months ended March 31, 2026 and 2025, respectively, which is included in foreign currency transaction loss in the Consolidated Statements of Earnings.

Current wording

The Company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product. In cases where the Company is not able to create a natural hedge by maintaining offsetting asset and liability amounts in the same currency, it may enter into foreign exchange contracts, typically in the form of forward purchase agreements, to facilitate the hedging of foreign currency exposures to mitigate the impact of changes in foreign currency exchange rates. These contracts generally have terms of no more than two months. The Company does not apply hedge accounting to these contracts and therefore the changes in fair value are recorded in earnings. The Company does not enter into foreign exchange contracts for trading purposes and the risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the Company minimizes by limiting its counterparties to major financial institutions. The Company recognized an unrealized gain of less than $0.1 million on contracts outstanding during the three months ended June 30, 2026 and 2025, respectively, which is included in foreign currency transaction loss in the Consolidated Statements of Earnings.

Previous wording

In July 2025, the FASB issued ASU No. 2025-05, “Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contact Assets”*.*The update amends the guidance in ASC 326-20 to introduce apractical expedient when estimating credit losses that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments apply to current accounts receivable and current contract assets arising from transactions under ASC 606 (Revenue from Contracts with Customers). The amendments are applied prospectively and are effective for annual reporting periods beginning after December 15, 2025, and interim periods within those years. Early adoption of ASU No. 2025-05 is permitted. The Company has evaluated the impact of ASU No. 2025-05 on its accounting policies and internal controls related to its credit-customer receivables. The Company has determined that, given (i) the nature of its receivables (primarily receivables from customers on credit terms), (ii) its historical credit-loss experience and collection patterns, and (iii) its allowance methodology, adoption of ASU No. 2025-05 is not expected to have a material effect on the Company's consolidated financial position.

Current wording

In July 2025, the FASB issued ASU No. 2025-05, “Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contract Assets”*.*The update amends the guidance in ASC 326-20 to introduce apractical expedient when estimating credit losses that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments apply to current accounts receivable and current contract assets arising from transactions under ASC 606 (Revenue from Contracts with Customers). The amendments are applied prospectively and are effective for annual reporting periods beginning after December 15, 2025, and interim periods within those years. Early adoption of ASU No. 2025-05 is permitted. The Company adopted this ASU for the three months ended March 31, 2026. The Company has evaluated the impact of ASU No. 2025-05 on its accounting policies and internal controls related to its credit-customer receivables. The Company has determined that, given (i) the nature of its receivables (primarily receivables from customers on credit terms), (ii) its historical credit-loss experience and collection patterns, and (iii) its allowance methodology, adoption of ASU No. 2025-05 did not have a material effect on the Company's consolidated financial position.

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, 2026, gross profit increased 13%, or $3.1 million, to $26.5 million compared to $23.4 million for the same period in the prior year, while effective margin decreased to 29.9% compared to 32.7% 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, 2026, gross profit increased 15%, or $3.9 million, to $30.2 million compared to $26.3 million for the same period in the prior year, while effective margin decreased to 37.5% compared to 43.3% for the same period in the prior year. During the six months ended June 30, 2026, gross profit increased 14%, or $7.0 million, to $56.7 million compared to $49.7 million for the same period in the prior year, while effective margin decreased to 33.9% compared to 38.3% for the same period in the prior year.

Previous wording

On February 24, 2026, we completed the acquisition of Interworks for an aggregate purchase price of approximately €8.0 million (equivalent to $9.4 million USD), adjusted upwards for $3.5 million in net working capital adjustment resulting in a final purchase consideration $13 million. The operating results of Interworks are included in our operating results from the date of acquisition within our Distribution segment.

Current wording

On February 24, 2026, we completed the acquisition of Interworks for an aggregate purchase price of approximately €8.0 million (equivalent to $9.4 million USD), adjusted upwards for $3.6 million in net working capital adjustment resulting in a final purchase consideration of $13.0 million. The operating results of Interworks 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, 2026 increased 32%, or $44.4 million, to $182.4 million compared to $138.0 million for the same period in the prior year. Gross billings, an operational metric, for the three months ended March 31, 2026 increased 14%, or $68.2 million, to $542.8 million compared to $474.6 million for the same period in the prior year. Net sales and gross billings both increased due to organic growth from our existing vendor partnerships. 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, 2026, 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, 2025, 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, 2026 increased 9%, or $14.9 million, to $174.2 million compared to $159.3 million for the same period in the prior year. Gross billings, an operational metric, for the three months ended June 30, 2026 increased 17%, or $86.7 million, to $587.3 million compared to $500.6 million for the same period in the prior year. Net sales and gross billings both increased due to organic growth from our existing vendor partnerships and the Interworks acquisition. Interworks contributed approximately $1.5 million of net sales during the quarter; excluding Interworks, net sales increased by approximately $13.4 million. Interworks contributed approximately $8.2 million of gross billings during the quarter. Gross billings increased at a higher rate than net sales due to differences in the product mix between the two periods. During the three months ended June 30, 2026, gross billings included a greater percentage of security, maintenance and cloud products, which are recorded net of related cost of sales, while 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.

Previous wording

The Company had two major customers that accounted for 26% and 17%, respectively, of its total net sales during the three months ended March 31, 2026 and 26% and 13%, resp ectively, of its total net sales during the three months ended March 31, 2025. The Company had no major vendors during thethree months ended March 31, 2026, compared to one major vendor that accounted for 13% of total purchases during the three months ended March 31, 2025.

Current wording

The Company had three major customers that accounted for 21%, 14%, and 13%, respectively, of its total net sales during the three months ended June 30, 2026 and 24%, 13%, and 20%, respectively, of its total net sales during the three months ended June 30, 2025. The Company had no major vendors during the three months ended June 30, 2026 and June 30, 2025, respectively.

Previous wording

Solutions segment gross profit for the three months ended March 31, 2026 increased 5%, or $0.1 million, to $3.1 million compared to $3.0 million for the same period in the prior year. This increase was driven by higher gross profit margins generated in both North American and Europe.

Current wording

Solutions segment gross profit for the three months ended June 30, 2026 increased 27%, or $0.9 million, to $4.2 million compared to $3.3 million for the same period in the prior year. This increase was driven by higher gross profit margins generated in both North American and Europe.

Previous wording

Customer rebates and discounts for the three months ended March 31, 2026 were $6.8 million compared to $4.6 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, 2026 were $6.4 million compared to $6.3 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.

Previous wording

Vendor rebates and discounts for the three months ended March 31, 2026 were $2.3 million compared to $4.7 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, 2026 were $5.2 million compared to $5.5 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, 2026 increased 21%, or $3.5 million, to $20.3 million compared to $16.8 million for the same period in the prior year. This increase was primarily due to an increase in salaries, commissions and other employee related expenses in support of the increased gross profit, as well as one-time investments to drive organic growth from new vendors and in the Company's infrastructure to support long-term growth initiatives. SG&A expenses were 3.7% of gross billings for the three months ended March 31, 2026, compared to 3.5% 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.

Current wording

SG&A expenses for the three months ended June 30, 2026 increased 26%, or $4.3 million, to $20.7 million compared to $16.4 million for the same period in the prior year. This increase was primarily due to an increase in salaries, commissions and other employee related expenses in support of the increased gross profit, targeted investments to drive organic growth from new vendors and in the Company's infrastructure to support long-term growth initiatives, and a $0.7 million contribution from the Interworks acquisition. SG&A expenses were 3.5% of gross billings for the three months ended June 30, 2026, compared to 3.3% 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, 2026, increased 18%, or $0.3 million, to $2.0 million compared to $1.7 million for the same period in the prior year, primarily due to 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 during the first quarter of 2025 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, 2026, increased 5%, or $0.1 million, to $2.1 million compared to $2.0 million for the same period in the prior year, primarily due to increased amortization for the vendor relationship intangible acquired through the Interworks acquisition.

Previous wording

Distribution segment net sales for the three months ended March 31, 2026 increased 34%, or $44.9 million, to $177.1 million compared to $132.2 million for the same period in the prior year. Gross billings for the Distribution segment for the three months ended March 31, 2026 increased 15%, or $67.3 million, to $520.9 million compared to $453.6 million for the same period in the prior year. Net sales increased organically 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 six months ended June 30, 2026 increased 21%, or $59.7 million, to $344.9 million compared to $285.2 million for the same period in the prior year. Gross billings for the Distribution segment for the six months ended June 30, 2026 increased 17%, or $154.9 million, to $1.1 billion, compared to $930.6 million for the same period in the prior year. Net sales increased organically 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, 2026, decreased 10%, or $0.6 million, to $5.3 million compared to $5.9 million for the same period in the prior year. Gross billings for the Solutions segment for the three months ended March 31, 2026 increased 4%, or $0.9 million, to $21.9 million compared to $21.0 million for the same period in the prior year. Net sales decreased despite the increase in gross billings due to differences in the product mix between the two periods in our Solution segment.

Current wording

Solutions segment net sales for the six months ended June 30, 2026, decreased 4%, or $0.4 million, to $11.7 million compared to $12.1 million for the same period in the prior year. Gross billings for the Solutions segment for the six months ended June 30, 2026 increased 4%, or $1.8 million, to $46.3 million compared to $44.5 million for the same period in the prior year. Net sales decreased despite the increase in gross billings due to differences in the product mix between the two periods in our Solution segment.

Previous wording

Distribution segment gross profit for the three months ended March 31, 2026 increased 15%, or $3.0 million, to $23.4 million compared to $20.4 million for the same period in the prior year. The increase reflects the previously noted organic growth from existing vendor partnerships, partially offset by higher 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, 2026 increased 14%, or $5.9 million, to $49.3 million compared to $43.4 million for the same period in the prior year. The increase reflects the previously noted organic growth from existing vendor partnerships and a $1.4 million contribution from the Interworks acquisition, partially offset by higher other rebates and discounts offered to our customers as a percentage of gross billings.

Previous wording

Acquisition related costs for the three months ended March 31, 2026 and 2025 were $0.3 million and $0.1 million, respectively. These expenses in the current period relate to costs incurred with the acquisition of Interworks, while these expenses in the same period in the prior year relate to a previously completed acquisition.

Current wording

Acquisition related costs for the six months ended June 30, 2026 and 2025 were $0.3 million and $0.1 million, respectively. These expenses in the current period relate to costs incurred with the acquisition of Interworks, while these expenses in the same period in the prior year relate to exploratory acquisition related initiatives.

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, 2026 and 2025, the Company recorded a provision for income taxes of $0.8 million and $0.6 million, respectively. The effective tax rate for the three months ended March 31, 2026 and 2025 was 20.1% and 13.3%, respectively. The effective tax rate for the three months ended March 31, 2026 compared to the same period in the prior year was primarily impacted by changes in the mix of jurisdictions in which taxable income was earned, as well as a discrete item for the recognition of excess tax benefits related to share-based compensation in income tax expense, and limitations on the deductibility of certain executive compensation amounts during both periods. The recognition of excess tax benefit related to share-based compensation in income tax expense resulted in a net tax benefit of $0.4 million, which reduced our effective tax rate by 10.5% during the three months ended March 31, 2026. The recognition of excess tax benefit related to share-based compensation in income tax expense resulted in a net tax benefit of $0.5 million, which reduced our effective tax rate by 10.7% during the three months ended March 31, 2025.

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, 2026 and 2025, the Company recorded a provision for income taxes of $2.9 million and $2.3 million, respectively. The effective tax rate for the six months ended June 30, 2026 and 2025 was 24.4% and 19.5%, respectively. The effective tax rate for the six months ended June 30, 2026 compared to the same period in the prior year was primarily impacted by changes in the mix of jurisdictions in which taxable income was earned, as well as a discrete item for the recognition of excess tax benefits related to share-based compensation in income tax expense, and limitations on the deductibility of certain executive compensation amounts during both periods. The recognition of excess tax benefit related to share-based compensation in income tax expense resulted in a net tax benefit of $0.5 million, which reduced our effective tax rate by 3.9% during the six months ended June 30, 2026. The recognition of excess tax benefit related to share-based compensation in income tax expense resulted in a net tax benefit of $0.7 million, which reduced our effective tax rate by 5.9% during the six months ended June 30, 2025.

Previous wording

Our cash and cash equivalents as of March 31, 2026 increased 14%, or $5.2 million, to $41.8 million compared to $36.6 million as of December 31, 2025.

Current wording

Our cash and cash equivalents as of June 30, 2026 increased 55%, or $20.0 million, to $56.6 million compared to $36.6 million as of December 31, 2025.

Previous wording

Net cash and cash equivalents provided by operating activities for the three months ended March 31, 2026 was $16.9 million, comprised primarily of net income adjusted for non-cash items of $6.7 million, partially offset by changes in operating assets and liabilities of $10.2 million.

Current wording

Net cash and cash equivalents provided by operating activities for the six months ended June 30, 2026 was $32.2 million, comprised primarily of net income adjusted for non-cash items of $7.0 million and changes in operating assets and liabilities of $16.4 million.

Previous wording

Net cash and cash equivalents used in investing activities during the three months ended March 31, 2026 was $8.7 million, comprised primarily of the payment for the Interworks acquisition.

Current wording

Net cash and cash equivalents used in investing activities during the six months ended June 30, 2026 was $9.2 million, comprised primarily of the payment for the Interworks acquisition.

Previous wording

Net cash and cash equivalents used in financing activities during the three months ended March 31, 2026 was $2.8 million, comprised of repayments under credit facilities of $10.1 million, purchases of treasury stock of $1.5 million, and repayments of borrowings under term loan of $0.2 million, partially offset by borrowings under credit facilities of $9.0 million. The Company had a short-term operating need during the three months ended March 31, 2026, that resulted in $9.0 million of borrowings under credit facilities, which was subsequently repaid in full during the three months ended March 31, 2026.

Current wording

Net cash and cash equivalents used in financing activities during the six months ended June 30, 2026 was $2.9 million, comprised of repayments under credit facilities of $10.1 million, purchases of treasury stock of $1.6 million, and repayments of borrowings under term loan of $0.2 million, partially offset by borrowings under credit facilities of $9.0 million. The Company had a short-term operating need during the six months ended June 30, 2026, that resulted in $9.0 million of borrowings under credit facilities, which was subsequently repaid in full during the six months ended June 30, 2026.

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 March 2026. As of March 31, 2026, the Company had no amounts 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 was repaid over forty-eight monthly installments of principal and interest through March 2026. As of June 30, 2026, the Company had no amounts outstanding under the Term Loan.