Wayside Technology Group, Inc. Reports 2019 Third Quarter Results and Declares Quarterly Dividend

	Q3 2019:	Q3 2018:
Net sales:	$52.4 million	$47.9 million
Income before provision for income taxes:	$2.0 million	$1.7 million
Net income:	$1.4 million	$1.3 million
Diluted earnings per share:	$0.32 per share	$0.29 per share
Dividend declared per share:	$0.17 per share	$0.17 per share

EATONTOWN, N.J., Nov. 06, 2019 (GLOBE NEWSWIRE) -- Wayside Technology Group, Inc. (NASDAQ: WSTG) today announced financial results for the third quarter ended September 30, 2019.  The results will be discussed in a conference call to be held on Wednesday, November 6, 2019 at 10:00 a.m. EST.  The dial-in telephone number is (844) 683-0552 and the pass code is “WSTG.”  This conference call will be webcast by West and can be accessed at Wayside Technology’s website at www.waysidetechnology.com/site/content/webcasts.

“We are pleased to report our second consecutive quarter of double digit growth in gross profit,” said Michael Vesey, Vice President and Chief Financial Officer. “This growth continues to be driven by our core strategy of investing in sustainable growth opportunities in our Lifeboat distribution business. The results demonstrate the scalability of the investments we began in 2018, with more than 40% of our gross profit growth in 2019 dropping through to our pretax income line.”

Operating Results Highlights:

Net sales for the quarter ended September 30, 2019 increased 9% to $52.4 million compared to $47.9 million for the same period in 2018. Lifeboat Distribution segment net sales for the quarter ended September 30, 2019 increased 11% to $48.8 million compared to $44.1 million for the same period in 2018. TechXtend segment net sales for the quarter ended September 30, 2019 decreased 6% to $3.6 million compared to $3.8 million for the same period in 2018.

Adjusted gross billings (non-GAAP) for the quarter ended September 30, 2019 increased 11% to $149.1 million compared to $134.0 million for the same period last year (see attached table for a discussion of adjusted gross billings).

Gross profit for the quarter ended September 30, 2019 increased 12% to $7.1 million compared to $6.3 million for the same period in 2018. Lifeboat Distribution segment gross profit for the quarter ended September 30, 2019 increased 13% to $6.4 million compared to $5.6 million for the same period in 2018. TechXtend segment gross profit for the quarter ended September 30, 2019 remained consistent with the same period in 2018 at $0.7 million.

Gross profit margin (gross profit as a percentage of net sales) for the quarter ended September 30, 2019 increased to 13.5% compared to 13.2% for the same period in 2018. Lifeboat Distribution segment gross profit margin for the quarter ended September 30, 2019 increased to 13.1% compared to 12.8% for the same period in 2018. TechXtend segment gross profit margin for the quarter ended September 30, 2019 increased to 18.9% compared to 17.6% for the same period in 2018. The overall increase in gross profit margin was primarily caused by an increase in the percentage mix of our products which are recorded net of the related cost of sales, or an effective 100% gross margin.

Total selling, general, and administrative (“SG&A”) expenses for the quarter ended September 30, 2019 increased to $5.1 million compared to $4.9 million for the same period in 2018, primarily due to increased salary and commission expense to support the increased sales on existing and new product lines. SG&A expenses were 9.7% of net sales for the quarter ended September 30, 2019 compared to 10.2% for the same period in 2018.

The Company reported income before provision for income taxes of $2.0 million for the quarter ended September 30, 2019 compared to $1.7 million for the same period in 2018.

The Company recorded a provision for income taxes for the quarter ended September 30, 2019 of $0.6 million compared to $0.4 million for the same period in 2018. The Company’s current period provision for income taxes was impacted by an increase in the provision for state income taxes for states which have enacted economic nexus statutes.

The Company reported net income of $1.4 million for the quarter ended September 30, 2019 compared to $1.3 million for the same period in 2018.

Diluted earnings per share for the quarter ended September 30, 2019 was $0.32 compared to diluted earnings per share of $0.29 for the same period in 2018.

On November 5, 2019, the Board of Directors declared a quarterly dividend of $0.17 per share of its common stock payable November 22, 2019 to shareholders of record on November 18, 2019.

Non-GAAP measures

As is further discussed in the attached tables, we use non-GAAP measures including adjusted gross billings as supplemental measures of the performance of our business.  Our use of these measures has limitations and you should not consider them in isolation or use them as substitutes for analysis of our financial results under generally accepted accounting principles in the United States of America (“U.S. GAAP”). The attached tables provide a reconciliation of each non-GAAP measure to the most nearly comparable measure under U.S. GAAP.

About Wayside Technology Group, Inc.

Wayside Technology Group, Inc. (NASDAQ: WSTG) is an IT channel company providing innovative sales and distribution solutions to technology vendors, resellers and system integrators since 1982. Wayside operates Lifeboat Distribution, a value-added distributor for virtualization/cloud computing, security, application and network infrastructure, business continuity/disaster recovery, database infrastructure and management, application lifecycle management, science/engineering, and other technically sophisticated products. The company helps vendors recruit and build multinational solution provider networks, power their networks, and drive incremental sales revenues that complement existing sales channels. Lifeboat Distribution services thousands of solution providers, VARs, systems integrators, corporate resellers, and consultants worldwide, helping them power a rich opportunity stream and build profitable product and service businesses. The Company also offers specialty solutions to end user customers through its TechXtend business.

Additional information can be found by visiting www.waysidetechnology.com

The statements in this release concerning the Company’s future prospects are forward-looking statements that involve certain risks and uncertainties. Such risks and uncertainties could cause actual results to differ materially from those indicated by such forward-looking statements, and include, without limitation, the continued acceptance of the Company’s distribution channel by vendors and customers, the timely availability and acceptance of new products, product mix, market conditions, contribution of key vendor relationships and support programs, as well as factors that affect the software industry in general and other factors. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in our filings with the Securities and Exchange Commission. Except as otherwise required by law, the Company undertakes no obligation to update or revise these forward-looking statements.

–Tables Follow –

Investor Relations Contact:Michael Vesey, Vice President and Chief Financial Officer Wayside Technology Group, Inc.(732) 389-0932[email protected]

WAYSIDE TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except share and per share amounts)
		September 30, 2019				December 31, 2018
ASSETS
Current assets
	Cash and cash equivalents	$	10,157			$	14,883
	Accounts receivable, net of allowances of $720 and $785, respectively		86,436				81,351
	Inventory, net		2,356				1,473
	Vendor prepayments		187				3,172
	Prepaid expenses and other current assets		2,224				1,988
Total current assets			101,360				102,867
Equipment and leasehold improvements, net			1,308				1,588
Right-of-use assets, net			1,881				—
Accounts receivable long-term, net			2,040				3,156
Other assets			138				215
Deferred income taxes			98				145
Total assets		$	106,825			$	107,971
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable and accrued expenses	$	60,361			$	66,653
	Lease liability, current portion		397				—
Total current liabilities			60,758				66,653
	Lease liability, net of current portion		2,250				—
	Deferred rent and tenant allowances		—				745
Total liabilities			63,008				67,398
Stockholders' equity
	Common stock, $.01 par value; 10,000,000 shares authorized, 5,284,500 shares
	issued, and 4,507,215 and 4,496,494 shares outstanding , respectively		53				53
	Additional paid-in capital		32,735				32,392
	Treasury stock, at cost, 777,285 and 788,006 shares, respectively		(13,235	)			(13,447	)
	Retained earnings		25,458				22,994
	Accumulated other comprehensive loss		(1,194	)			(1,419	)
Total stockholders' equity			43,817				40,573
Total liabilities and stockholders' equity		$	106,825			$	107,971

 

WAYSIDE TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands, except per share data)
			Nine months ended								Three months ended
			September 30,								September 30,
				2019				2018				2019				2018
Net Sales
	Lifeboat segment		$	136,189			$	119,308			$	48,815			$	44,145
	TechXtend segment			11,708				13,081				3,548				3,778
	Total net sales			147,897				132,389				52,363				47,923
Cost of sales
	Lifeboat segment			116,481				102,209				42,429				38,506
	TechXtend segment			9,308				10,484				2,879				3,114
	Total cost of sales			125,789				112,693				45,308				41,620
Gross profit
	Lifeboat segment			19,708				17,099				6,386				5,639
	TechXtend segment			2,400				2,597				669				664
	Total gross profit			22,108				19,696				7,055				6,303
Selling, general and administrative expenses
	Selling costs			8,644				7,774				2,797				2,657
	Share- based compensation			620				957				287				231
	Separation expenses (1)			100				2,446				-				-
	Other general and administrative expenses			6,811				6,517				2,003				2,015
Total selling, general and administrative expenses				16,175				17,694				5,087				4,903
Income from operations				5,933				2,002				1,968				1,400
Interest, net				416				744				118				296
Foreign currency transaction gain (loss)				39				40				(52	)			42
Income before provision for income taxes				6,388				2,786				2,034				1,738
Provision for income taxes				1,624				987				589				420
Net income			$	4,764			$	1,799			$	1,445			$	1,318
Income per common share - Basic			$	1.06			$	0.40			$	0.32			$	0.29
Income per common share - Diluted			$	1.06			$	0.40			$	0.32			$	0.29
Weighted average common shares outstanding - Basic				4,415				4,344				4,428				4,386
Weighted average common shares outstanding - Diluted				4,415				4,344				4,428				4,386
Dividends paid per common share			$	0.51			$	0.51			$	0.17			$	0.17
	(1) Includes $1,661 of stock compensation during the nine months ended September 30, 2018.
Supplemental Revenue Information (unaudited)
	The table below presents net sales by disaggregated revenue category:
			Nine months ended								Three months ended
			September 30,				September 30,				September 30,				September 30,
	Net Sales			2019				2018				2019				2018
	Hardware, software and other products		$	133,482			$	120,073			$	47,508			$	44,100
	Software - security & highly interdependent with support			5,417				5,029				1,798				1,433
	Maintenance, support & other services			8,998				7,287				3,057				2,390
	Net sales		$	147,897			$	132,389			$	52,363			$	47,923
Reconciliation of GAAP and Non-GAAP Financial Measures (unaudited)
	The table below presents net sales reconciled to adjusted gross billings (Non-GAAP):
			Nine months ended								Three months ended
	Adjusted Gross Billings (Non-GAAP) (1)		September 30,				September 30,				September 30,				September 30,
				2019				2018				2019				2018
	Net sales		$	147,897			$	132,389			$	52,363			$	47,923
	Costs of sales related to Software – security and highly interdependent with support and maintenance, support and other services			285,622				243,226				96,695				86,054
	Adjusted gross billings (Non-GAAP)		$	433,519			$	375,615			$	149,058			$	133,977
(1)	We define adjusted gross billings as net sales in accordance with U.S. GAAP, adjusted for the cost of sales related to Software – security and highly interdependent with support and maintenance, support and other services. We provided a reconciliation of adjusted gross billings to net sales, which is the most directly comparable U.S. GAAP measure. We use adjusted gross billings of product and services as a supplemental measure of our performance to gain insight into the volume of business generated by our business, and to analyze the changes to our accounts receivable and accounts payable. Our use of adjusted gross billings of product and services as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under U.S. GAAP. In addition, other companies, including companies in our industry, might calculate adjusted gross billings of product and services or similarly titled measures differently, which may reduce their usefulness as comparative measures.
	The tables below present net income reconciled to net income excluding separation expenses, net of taxes (Non-GAAP) and diluted earnings per share reconciled to diluted earnings per share, excluding separation expenses net of taxes (Non-GAAP) (2):
	Net income reconciled to net income excluding separation expenses, net of taxes (Non-GAAP):		Nine months ended								Three months ended
			September 30,				September 30,				September 30,				September 30,
				2019				2018				2019				2018
	Income before provision for income taxes		$	6,388			$	2,786			$	2,034			$	1,738
	Provision for income taxes			1,624				987				589				420
	Net income			4,764				1,799				1,445				1,318
	Separation expenses			100				2,446				-				-
	Income tax benefit related to separation expenses			(24	)			(438	)			-				-
	Net income excluding separation expenses, net of taxes		$	4,840			$	3,807			$	1,445			$	1,318
	Diluted earnings per share reconciled to diluted earnings per share excluding separation expenses, net of taxes (Non-GAAP):		Nine months ended								Three months ended
			September 30,				September 30,				September 30,				September 30,
				2019				2018				2019				2018
	Diluted earnings per share		$	1.06			$	0.40			$	0.32			$	0.29
	Separation expenses			0.01				0.55				-				-
	Income tax benefit related to separation expenses			-				(0.10	)			-				-
	Diluted earnings per share excluding separation expenses, net of taxes		$	1.07			$	0.85			$	0.32			$	0.29
(2)	We define net income excluding separation expenses, net of taxes, as net income, plus separation expense, less the income tax benefit attributable to the separation expenses. We provided a reconciliation of net income excluding separation expenses, net of taxes, to net income, as well as the related amounts per share, which are the most directly comparable U.S. GAAP measure. We use net income excluding separation expense as a supplemental measure of our performance to gain insight into comparison of our businesses profitability when compared to the prior year. Our use of net income excluding separation expenses, net of taxes has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. In addition, other companies, including companies in our industry, might calculate separation expenses net of taxes, or similarly titled measures differently, which may reduce their usefulness as comparative measures.

 

Source: Wayside Technology Group, Inc.

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