Climb Global Solutions, Inc.

Good morning, everyone, and thank you for participating in today's conference to discuss CLIMB Global Solutions financial results for the fourth quarter and full year ended December 31st, 2023. Joining us today are CLIMB CEO, Mr. Dale Foster, the company's CFO, Mr. Drew Clark, and the company's investor relations advisor, Mr. Sean Mansouri with Elevate IR. By now, everyone should have access to the fourth quarter and full year 2023 earnings press release, which was issued yesterday afternoon at approximately 4 or 5 p.m. Eastern time. The release is available in the investor relations section of the Climb Global Solutions website at www.climbglobalsolutions.com. This call will also be available for webcast replay on the company's website. Following management remarks, we'll open the call for your questions. I'd now like to turn the call over to Mr. Mansouri for introductory comments. Please proceed.

Thank you. Before I introduce Dale, I'd like to remind listeners that certain comments made on this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to revise, or publicly release the results of any revision to any forward-looking statements. Our presentation also includes certain non-GAAP financial measures, including adjusted gross billings, adjusted EBITDA, adjusted net income and EPS, and effective margin as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation charts and other important information in the earnings press release and form 8K we furnished to the SEC yesterday. I'd now like to turn the call over to CLIMB's CEO, Dale Foster.

Thank you, Sean, and good morning, everyone. Our fourth quarter performance capped off another exceptional year for CLIMB as we generated record results in all of our key financial metrics and delivered on our acquisition objectives. These results were driven by continued focus on our core initiatives and the integration of data solutions, which was acquired in October of 2023 and immediately benefited our top and bottom line. We also continue to generate organic growth in both the US and Europe as we deepen our relationships with customers, along with adding strategic vendors to our line card. As a brief reminder on our acquisition of data solutions, a leading distributor of cloud and security solutions in Ireland and the UK, Their team brings a longstanding network of relationships to CLIMB, such as Check Point, Citrix, HP Aruba, to just name a few. Data Solutions also carries a robust recurring revenue base with more than 90% of its fiscal 2023 revenue coming from existing reseller partners. We are actively identifying cross-selling opportunities and cost synergies and look forward to unlocking additional benefits as we further integrate Data Solutions into our financial and operating workflows. Throughout 2023, we evaluated a robust pipeline of emerging vendors as we were very thoughtful in selecting the right partners to add to our line cart. We are focused on targeting and signing vendors that fit into our ecosystem and bring disruptive technology to the marketplace. For perspective, in Q4, we evaluated 13 vendors but signed agreements with only four of them, quickly touching on a few of these wins. First, we launched a partnership with DNS Filter, a leading threat detection and content filtering application that redefines how organizations secure their largest threat vector, which is the Internet itself. DNS Filter utilizes machine learning to protect over 26 million monthly users from phishing, malware, and advanced security threats. Next, we partnered with KiteWorks, a compliance and security application that enables organizations to identify, track, control, and secure sensitive data content, communications under a single platform. Tightworks protects over 35 million end users for almost 4,000 global enterprise and government agencies. We are thrilled to kick off our partnership with each of these innovative technologies, and we look forward to building prosperous relationships with each of these vendors as we expand their reach throughout the channel. As we have often stated in the past, our goal is to build deep and meaningful relationships with our partners and vendors, It is a differentiator between us and our large competitors. As a testament to our commitment, in November, we were named one of CDW's 2023 Distributors of the Year for providing a customer-first relationship, as well as exemplary products, services, and solutions to support the CDW partnership and our customers. We have grown side-by-side with CDW for more than 20 years as partners as we look forward to building on our mutual success in the years to come. In addition to CW's Partner of the Year, CLIMB was awarded Wasabi's Technology Distributor of the Year Award in both North America and EMEA. We are honored to be recognized as Wasabi's Distributor of Choice and are excited to capitalize the momentum for 2023 into the year ahead. Turning to personal development, in November, we announced the appointment of Kim Stevens to Worldwide VP of Marketing. Kim assumed the global marketing responsibility for CLIMB, including the creation and execution of comprehensive marketing strategy strategy, branding, and also partner marketing. Kim's appointment is part of a long-term growth strategy to expand our reseller coverage, operations, and marketing presence. We are thrilled to have Kim to lead our global marketing efforts to align our branding as we further scale our footprint in the U.S. and overseas. Looking ahead to our strategy, it remains unchanged. leverage our global footprint and drive organic growth, expanding our line card to the most innovative companies in the market. We will also continue to pursue M&A opportunities in both the U.S. and overseas that can broaden our geographic footprint, expand our vendor reach, and also bolster our service and solution offerings. Between a robust balance sheet, a growing pipeline of prospective vendors, and a proven track record of accretive acquisitions, we are well positioned to continue driving shareholder value. With that, I will turn the call over to our CFO, Drew Clark, to take you through the financial results. Drew?

Thank you, Dale. Good morning, everyone. As I've noted before, Dale gets to share all the fun, exciting aspects of our business, and I'm stuck with discussing Another boring record quarter in terms of our operating and financial results. Quick reminder, as we review the financial results for our fourth quarter, all comparisons and variance commentary refer to the prior year quarter unless otherwise specified. Okay, let's jump into the results. As reported in our earnings press release, adjusted gross billings, or AGB, which we all know is a non-GAAP measure, increased 24% to $397 million compared to $319.8 million in the year-ago quarter. Net sales in the fourth quarter of 2023 increased 20% to $106.8 million compared to $88.9 million, which primarily reflects organic growth from new and existing vendors, as well as contributions from our acquisition of data solutions in October of 2023. As we've often stated, we focus on AGB as the true metric of our top-line growth as the calculation of net sales is influenced by product mix, and the respective adjustment to convert AGB to net sales for financial reporting purposes under GAAP. In the fourth quarter, net sales grew at a lower rate because of the impact of data solutions, which sells HP Aruba appliances in connection with Citrix, and the aforementioned product mix quarter-to-quarter. Gross profit in the fourth quarter increased 31% to $21.1 million compared to $16.1 million. Again, the increase was primarily driven by organic growth from new vendors and our existing top 20 vendors in North America and Europe, as well as the contribution from data solutions. Growth profit as a percentage of AGB increased to 5.3% compared to 5% in the prior period and was positively impacted by data solutions and our vendor mix in the quarter. SG&A expenses in the fourth quarter were $12.4 million compared to $9.1 million in the same period in 2022. SG&A, the percentage of AGB, was 3.1% compared to 2.9% in the year-ago period. The dollar growth included $1.8 million from data solutions and expenses associated with sales performance in terms of increased commissions and our human capital, base salaries, benefits, bonuses, and stock compensation, all of which were in line with our budget and expectations. Net income in the fourth quarter of 2023 increased 10%, $5.2 million, or $1.15 per diluted share compared to $4.8 million or $1.06 per diluted share at a comparable period in 2022. As mentioned in our press release, earnings for diluted share in the fourth quarter of 2023 was negatively impacted by $0.09 in foreign exchange currency and $0.06 in fees associated with the acquisition of data solutions. Adjusted EBITDA in the fourth quarter increased 24% to $9.2 million compared to $7.4 million the prior period. The increase, as previously noted, was primarily driven by organic growth, as well as the contribution from data solutions. Adjusted EBITDA as a percentage of gross profit or effective margin was 43.7% compared to 45.9% in the year-ago period. Our fourth quarter was impacted by the continued early pay discount taken by our key DMRs, which we expect to be the norm as we head into 2024. So future comparisons in the prior year will be comparable. Early pay in the quarter was 900,000 or 230 basis points, which would have generated a 46% effective margin on the apples to apples comparison. Again, as we move forward into 2024, we believe that the 2024 comparisons to 2023 will be comparable. So we will no longer have to discuss early pay discounts that were taken in excess of prior periods. Turning to our balance sheet, cash and cash equivalents were $36.3 million on December 31, 2023, compared to $20.2 million on December 31, 2022, while working capital decreased by $4.5 million during this period. The increase in cash was primarily attributed to the timing of receivable collections and vendor payments, partially offset by the cash paid for the acquisition of data solutions net of cash acquired of $12.7 million. As of December 31, 2023, we had $1.3 million of outstanding debt with no borrowings outstanding under our $50 million revolving credit facility. Subsequent quarter end, and consistent with prior quarters, our Board of Directors declared on February 27, 2024, a quarterly dividend of 17 cents per share of our common stock, payable on March 15, 2024, to shareholders of record as of March 11th, 2024. As Dale mentioned earlier, our strong liquidity position continues to provide us with the flexibility to execute our organic and inorganic growth strategies while expanding our relationships with vendor networks and customers across the globe. We will remain active in the M&A front as we evaluate accretive targets in both domestic and international markets. We look forward to executing on our goals and delivering another year of record results in 2024. This concludes our prepared remarks. We will now open it up for questions from those participating in the call. Operator, back to you.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your call is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Vincent Cocchio from Barrington Research. Please proceed.

Dale, yeah, just a big picture. How are you feeling about the tech environment and the economic environment now versus a quarter ago? And also maybe you could talk about sales cycles and pricing, how that may have changed.

Yeah, thanks, Vince, and thanks for joining. You know, we often talk to the exec team as far as the macro environment. We get it from our vendors and some of our customers, and we still don't see, you know, you know the headroom that we have as far as the size of our company compared to some of our competitors. And the other advantage we have is, you know, we're 90% software, so we don't have the logistical issues that a lot of the different companies have in our market. But we just haven't really seen the softening. You know, we talk about the European market, you know, potentially going into a quasi-recession. Haven't really seen it with our teams over there because I think we have a diverse enough portfolio. And like I tell my sales teams, hey, if something's not selling, we have a lot of tools in our sales bag to sell that. You know, security is always going to be there. Data center is right behind that, and that's our two leading categories. And then we have, you know, four other self-declared technology sectors that we sell into. So, we just haven't seen it. I can tell you, you know, as I mentioned, robust pipeline of vendors still coming out of way past the startup phase, where they're getting their second and third rounds of funding. And the funding levels I look at are a lot more than we've seen in the past. You know, we just haven't seen that. We'll be open and up front if we see some real softening, but we have not seen that in our teams. And we have seen a true consolidation of some of the distribution partners as far as vendors picking different distribution partners. They're consolidating that, which is good for us because we're seen as a specialty and a lot of these vendors want to see a broad line distributor and then a specialty, which There's not a lot of choices in North America. There's quite a few choices overseas, so we'll capitalize on both of those.

The organic growth appears to have been solid in the quarter. Was it broad-based across vendors, or were there one or two large deals driving the quarter?

Yeah, there's always a couple of large deals that pop in there and we've had, you know, you look at quarter by quarter when something goes down, you know, VAS is going to be lumpy. We had some nice stuff going on with them in Q4. Q4 is always our largest quarter because, you know, companies are extinguished their budgets. So it kind of flows to the channel. It really depends on, you know, what happens in Q3 and falls over, you know, if it's a federal buying season. And then of course, you know, what we can, capture in Q4 before it goes into Q1. But, you know, there's some lumpiness in that. But overall, if I look at my territories, and we track by territories in the U.S., and we track by customers in the U.K. and Ireland, you know, we haven't seen any weakness in any of that business.

And the top 20 vendors, was there any notable weakness among them, or was it fairly strong across that metric, that group of vendors?

Yeah, you know, we totally talk about our top two, which would make up, you know, a couple hundred million is SolarWinds and Sophos. You know, Sophos went through an ERP change. There was some delays in some of that. They finished up their quarter. I'm sorry, they finished up their fiscal year at the end of March, so we'll see some of that picked up. But I think there was some hiccups in the November timeframe. But other than that, we haven't seen any of that. We've seen growth. I looked at my top 20 vendors. We were at FKO last week, Vince, and 18 of them grew in 2020 of the 20 top vendors, which make up 70%, 80% of our business.

And, Dale, one question for you. How sustainable are the really nice level of adjusted gross margin relative to AGB and adjusted S&A relative to AGB? Yeah.

Yeah, so a couple of things on the, you know, the solutions piece of our business overseas really helps out and maintains more of a stable margin profile. And that's the key. You know, the rest of it's all on us, you know, as far as what the actual drop through is. And also, you know, the European market, you know, the pressures or the competitiveness and what the two things, the competitiveness is not nearly what we have in the States with some of the big three. And then the other side of that, you know, there's just a higher margin profile because of the service you're delivering over there. So that's why, you know, we have, you know, still targeting some acquisitions in the U.S., but really it's overseas. We like the margin profile. We think that we can, you know, maintain that even as we scale the business.

Okay, I'll go in the queue. Thanks.

Our next question comes from Bill. Deslem from Titan Capital, please proceed.

Thank you. I appreciate that. Would you please discuss the vendors that you believe have the opportunity to have some real legs and potentially drive the business, essentially the potential home run vendors?

Yeah, I'll pick three of them, Bill. We talk about vast data quite a bit, and then we acquired Spinnaker, you know, in August of 2022. We talk about being lumpy because the deal size are very large, right? So we see, you know, them in Q1 of 2023. We saw some large deals in Q4 of 2023 as well. So that's one of them, and they continue to grow. We're now officially on board with them in the U.S. and we have got some good opportunities as they're rolling out. Three of our execs are in Vancouver with VAS and their sales kickoff in Canada this week. The next one I'll pick is SUSE, which is in the Linux operating system space. We are just doubling with those guys. They're taking advantage and we're taking advantage with them of IBM buying Red Hat. There was only two competitors in that space, Red Hat and SUSE, and SUSE was about 20% of the market share. IBM is you know, only going after their top customers, so there's a lot of greenfield that they're picking up, and we're right in that mix. And then the last one that I'll talk about is, you know, the group of security vendors that are just getting larger and larger in our portfolio. We used to say, hey, you know what, if we can do $1 million, $2 million in the first year, and now we have five that are down-the-card security vendors that we're starting at the $5 million range. So... You know, we just see a lot of upside from what we're signing. We're being more selective, like I mentioned, on who we sign. And, you know, we had our SKL last week, and we talked about the three pillars of the company, right? First, the employees, as far as the team that we have, what they're doing every day that really matters. Second is the vendors. If we don't have the vendors, you know, we don't have anything to sell. So that is, you know, one of the things we've transformed the company as far as really focusing on the vendors we bring in, focusing on the vendors we keep and then pushing the other vendors to our Climb Elevate team so it doesn't clutter our line card. And then lastly, our customers. And you say that's kind of strange. I mean, you're talking about your customers last. If we have the vendors, we will get the customers just by our service and support for them.

Great. That's very helpful. Thank you. And then the There was a question about kind of one-off or one-time revenue and that the fourth quarter is typically the largest quarter that way. What is it, Q1 through Q3, what is a typical level of one-time or non-recurring revenue? And then how does that number generally look in the fourth quarter or this quarter specifically, however you would like to answer it?

You know, we... It could pop up tomorrow. I mean, you know, if I looked at my pipeline, you know, we've got a couple large opportunities with some newer vendors in the, you know, the $10 million to $20 million to $30 million range per order. But, I mean, those, we can't predict those. The Q4 we can predict just because, you know, we have a history of the cyclical nature of that. And we also know our data solutions team in Ireland, what strong quarters they have. But other than that, we're diverse enough where we don't have these big ups and downs. And I don't know if you want to add to that, Drew. There's nothing that we see there other than a couple that we have in the pipe.

Yeah, no, I think in addition to Dale's comments, it's not necessarily one-off, non-recurring transactions. We've talked about, and Dale referenced DAS, which is an up-and-coming, super-strong vendor and partner of ours. very large transaction sizes. They tend to have longer sales cycles, to Vince's question earlier, because you're talking about significant seven-digit investments by their customers at the end of the day into the data center space. And so we did have a very nice transaction with VAST in Q4 of this year. We also had a similar transaction in Q4 of last year, and we have VAST activity that goes on throughout the year. We think as they continue to grow and refine their market channel strategy, that we'll have a little more consistency with that bill. But again, those transactions can take 18 months, six months, somewhere in between. We think we'll get to a more steady state and a run rate with VAST as we continue to grow with them over the next several quarters. But that's a significant variance to our average sales price of our normal vendors. So that's just one that does have a meaningful impact, and it's just not consistent right now until we get more traction with them in the marketplace around the globe.

Real quick, Bill, let me add to that. You know, as far as the – we have, you know, three, four big DMR customers. We call them direct resellers. Like we mentioned C2W and SHI in the past. But, you know, they have bid cycles that come up. They typically start at the beginning of the year. You know, we start bidding in October, November timeframe. If there was anything significant, we would let the shareholders know on that. But, you know, we've won pretty much all the bids that we've had in the past. We've picked up some smaller ones. But nothing that's earth-shattering, both in the positive and the negative side. So we'll have those for six months. They typically put them on a cycle for every six months, and they come up with a new group of vendors for us to bid out.

Thank you both. I'm going to ask one follow-up to that, and then I'll step back in the queue. In this day and age where many companies prefer to go down the SAS route so they don't have large capital outlay and instead pay by the quarter, what are the dynamics or reasons that these larger companies orders take place as opposed to the software simply being purchased in the SAS model?

Well, when we're talking about VAST data, they have a hardware component to go with that. And if you look at VAST, they're talking about AI every day. So it's going into data centers. These are large appliances that go in, and then they run all their software on that. They announced their relationship with Supermicro, which is a good thing. Supermicro has been taking off lately, if anybody's watched that. because they're going to use that as their underlying platform. But it's really, you know, they work every day on their teams as software. But, you know, we're in the middle ground where, you know, there's vendors that they're trying to sell yearly licenses and act like it's as a service, and then, you know, you're buying a three-year license. Of course, they want to get to more of a recurring, you know, monthly or quarterly revenue piece. And some of them are getting there. It's going to take a while because, They don't have the platforms or the marketplaces in place to really service that. So part of that is, you know, we're seeing that transformation with some of our software vendors, but not, you know, that's really going to affect a lot of, you know, what we're doing on a monthly or quarterly basis. Great.

Thank you both for the time. Congratulations on a great quarter. Thanks. Thanks, Bill.

Our next question is from Howard Root, who is a private investor. Please proceed.

Thanks, guys, and congratulations on the outstanding quarter. Drew, I do have to correct you on one thing. You call this a boring quarter, and I know I always say I love your boring quarters. This is not a boring quarter when you increase sales by 20%, and it's not just you. It's the whole Climb team. So I have two questions. One is on this growth and adjusted growth billings question. you know, 397 million in Q4, up 78 million, 24% up from the year ago, fourth quarter. If you could kind of, Dale, talk a little bit about the breakdown of, maybe on a percentage basis, I don't want you to get into talking about vendors specifically, but what part of that was acquisitions? That would be data solutions, I guess. What part would be new products? What part would be growth of existing products in new markets? And then the fourth bucket would be growth of existing products in existing markets if you look at it on a year-over-year basis?

Yeah, so if you look at, you know, we closed Data Solutions October 6th. We took advantage of their sales. They had a good quarter. They were down a little bit year-over-year because they had some lumpiness that fell in and, you know, fell out, whether it's coming into the quarter or out of the quarter from the year before. But, you know, and Drew can correct me, but I think it's, you know, if we're talking, say, you know, we're up 80 million, I think about half of that was data solutions. So we're still had organically up for the quarter on our teams. On the vendor side, you know, there's, you know, it's hard to, you know, to hold back some of the positives we have from the vendors coming at us, either reducing their go-to-market and Klein being one of the, you know, the leftover channel plays that they have. So we're seeing a lot of that. We had that happen at the end of Q3, started seeing helping in Q4, and we'll see it in 2024 pretty heavily. And we're talking about four vendors that I can just think of right off the bat that are saying, you know what, we're going to use a broadliner and a special distributor. Or in the case of SolarWinds, and we haven't made it totally public, but we're the sole distributor of SolarWinds, which is our number two brand. SolarWinds has had their difficulties in the past, but has recovered from that. They've got a great team. We have them globally now with both our UK and Ireland teams. So there's a lot of energy coming into that for 2024.

Yeah, and Howard, I would just add on to Dale's comments just in terms of, and these are fairly accurate percentages, that the data solutions accounted for about 40, 45% of that gross growth in the quarter. And then obviously the rest of it was our organic growth with existing vendors. Not a big movement in terms of geography in revenue growth or in the vendor mix. It was fairly consistent with the prior quarter. Fairly consistent. Obviously, our line card does adjust quarter to quarter, but pretty consistent vendor representation in the growth, as Vince was asking earlier. So, no real shifts and meaningful shifts in either the vendor mix or the geography mix, but data solutions about 40-plus percent, and the balance of that growth was all organic.

Great. That's real helpful. So the second thing kind of leading on from that, I always like to ask about future guidance. And I'd love for you guys to talk more about it in your prepared remarks and to give guidance going forward. But if we look at where we are today and go forward, can you talk about what stage of market penetration you are in kind of general terms? And then more in specific terms, you know, 2022, you did, we crossed the billion dollar market adjusted gross billings. 2023, you did 1.3 billion. Is it, you know, are you on a linear ramp, you know, taking out all the bumps you go up and down within the quarters, but 1.0, 1.3, 1.6 this quarter, 1.7? I don't want to tie you to a number, but I just want to get a feel for where you are in the market penetration of the overall market and how long you can continue to have these 20% growth year over year, or if it's going to accelerate or taper from that.

So Howard, you know, and we talk about, you know, take a look at some of the distributors that I would, you know, we don't compete with them. And I'm going to jump around a little bit. We had our SKL last week, and we barely mentioned on stage, and this is me all the way through, anybody that had a microphone, our competitors. And in the past, we talked about them a lot. So when we talk about, you know, we've mentioned on some calls, Red Ocean, Blue Ocean, where we really are, we're going to Blue Ocean where we We're creating our own market. We don't see as much competition. We're not fighting it out every day over margin. So just the fact that our sales kickoff, 188 employees in the U.S., 60 vendor reps that showed up to support us, making up 25 vendors, it was just a lot of energy of what we're actually doing as a company and where we're going to go. So, you know, gross billings at $1.26 billion, and you look at a lot of the disties now saying in their earnings release, the public ones at least, are telling you what their gross billings are. TechData came out and said, hey, there are $80 billion in gross billings before the netting. You know how much headroom we have? We could double, triple the size of the business and not really run into them and not being seen because we're competing inside such a small fraction division inside of some of these big disties. You know, Charles, our CMO, was saying to our teams last week, saying there could be two or three competitors like Climb in our marketplace, and we still would have so much opportunity. So I'll leave that there, and then Drew can tone me down a little bit. But here's what our goal is, and that is our goal is to double the business by 2026. And can we do that? Yeah, we can do that. Through some acquisitions and organic growth like we're doing currently, it's going to be that combination. But if you want to know what we're doing, just look at what we've done in the last two years. We're going to do much of the same thing. There's still a lot of targets. There's still a lot of vendors. And there's still the vendors that are really climb vendors. They look like they're part of climb when you come to our meetings and stuff. They just act like they're strategizing with my team. So it's a very different look and feel that it was three years ago.

Yeah, and I think Dale, as we said, Howard, we believe that between the organic growth and our acquisition strategy, we can double the size of this business and in theory continue to be more effective with leverage and then have increased drop through of that gross profit that we grow ourselves or we acquire and then continue to augment and grow. Ireland and the data solutions acquisition will be a really great case study for us to be able to share with the investors as we move forward throughout 2024 about how well we've integrated the sales teams, the cross-selling vendors, Citrix and Microsoft pair up really nicely. So we think, look, organically, again, you're correct, we're not providing guidance and we're not really even providing guardrails on sort of trends, but we think if you look at our historical results, We think we can continue to perform at those historical levels in terms of organic growth. On an annual basis, we are going to have some cyclicality in quarters. Data solutions, typically Q2 of the calendar year is their weakest quarter. So we'll expect that. We'll see some pullback on a consolidated basis in Q2. Growth over the prior year of Q2 most likely, but there is a little bit of cyclicality in the business based on geographies and vendors and partners. But As we look forward, as Dale said, lots of activity in the pipeline for us to continue to grow through the acquisition strategy and also organically. And at some point, we may provide a little bit more detail as we move into the quarters ahead, but hopefully that gives you a little bit of perspective and some level of indication of where we think the business will go.

And just to add to Howard, we've all talked about in the past, we haven't brought up on this call yet, and it's probably being overused inside the company, but our ERP is going to go live in Q2. We've talked about it for a couple years now. We are ready to do that. Our teams have been working double time because they've had to do their regular jobs every day and then do all the testing. So if you're a sales rep or you're sitting in finance, you're going to do all your stuff on our existing ERP, and then you've got to spend the hours doing it in the new system. We're comfortable with that. We know we can platform companies a lot faster. The data solutions team, you know, when we acquired them October 6th, we restructured all sales and marketing together. As I mentioned, Kim's on board and she did that on the marketing side. On the sales team, I just came back from Europe two weeks ago. We've got all the sales structures fully integrated with each other. And then phase two is when we go ERP live, all the inside teams will be integrated together as well. So look at us in the end of June. We'll have everybody on the same ERP system speaking the same language no matter where you live.

Great.

That's very helpful. And congrats again on the very exciting quarter that you had at the end of the year. Thanks.

Thanks, Howard.

Our next question comes from Vincent Colchio from Barrington Research. Please proceed.

Yeah, just one last one for me, Dale. I'm curious, security is obviously the key driver here for your business for some time. Has it been proven in any other segments in the quarter?

You know, the reason I'm going to, you know, the security, of course, it's there, it's strong, it's very diverse if you look at the top vendors. And this is something I didn't mention, Vince, that kind of triggered me, and that is as far as what I want to put out there, you know, so we look back three years. We've, you know, if you look at our top 70 vendors, they make up 96% of our overall sales. Of those top 70 vendors, 36 of them have been brought on since 2020. So, you know, you can see we have a very robust way to bring vendors in. They get into our top group. The 70th vendor with us transacts about $4 million in So that's kind of our limited threshold because we'd love to be able – I'd love to have 50 vendors doing, you know, 90% and really have more of a focus on our team and have our Climb Elevate team do the rest of it as far as the clutter piece of it goes. But, you know, so that's the one segment. The other segment that we're seeing more, of course, everybody's saying the word AI. But what our team – what our vendors are doing is they're building AI into their products. So – There's two or three that we're looking at that I think will probably start an AI division if their true application is going to be more than 50% of what they do, right? It can't just be, hey, we're a backup that uses AI to do some kind of hierarchical storage management of software or of your backups. So that'll be another pillar that we probably add or mount that we add to our group. Outside of that, it's really the Linux the SUSE business, the data movement, data management with Adobe, things like that. But it's always around security, data center, and then it's everybody that supports that.

Thanks, guys.

This concludes our question and answer session. I would like to turn the floor back over to Dale Foster for closing comments.

Thank you, Robert, and thank you for everybody for joining today. Just want to have a big thank you for 2023, all the stakeholders that are watching CLIMB, supporting CLIMB, and all the teams that we have internally. Just a lot of energy going into 2024. Like I said, we're coming off our sales kickoff. It's one of the best ones as we do our surveys with our teams and our vendors that we think CLIMB has ever had. And like I said, the opportunity to go into that, and we appreciate and keep... Everybody keep an eye on what we're doing in Q1, Q2.

Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.