Executive Summary / Key Takeaways

• High-Growth Niche Player: Climb Global Solutions (CLMB) is rapidly expanding its footprint in the vast IT distribution and solutions market, particularly in high-demand areas like cybersecurity and data center technologies, demonstrating robust double-digit organic growth.
• Strategic M&A and Vendor Curation: The company employs a disciplined acquisition strategy, targeting accretive opportunities that expand its geographic reach and service offerings, while selectively partnering with innovative, emerging technology vendors to maintain a cutting-edge portfolio.
• Operational Efficiency Gains: Recent investments in a new ERP system are enhancing operational efficiency and scalability, positioning Climb to drive stronger operating leverage and improve profitability metrics.
• Strong Financial Momentum: CLMB delivered significant financial improvements in Q2 2025, with net sales surging 73% and net income increasing 74%, supported by effective gross profit management and improving SG&A efficiency.
• Competitive Agility: Despite being a smaller player compared to industry giants, Climb leverages its high-touch, fast-to-market approach and specialized expertise to effectively compete and capture market share in fragmented segments.

The Agile Ascent in a Trillion-Dollar Market

Climb Global Solutions, Inc. (CLMB) has evolved from its roots as Wayside Technology Group, Inc., incorporated in 1982, into a dynamic value-added IT distribution and solutions company with a growing global presence. Operating through its Distribution and Solutions segments, Climb specializes in bringing innovative third-party software, hardware, and technical services to market. This strategic focus positions CLMB within a massive IT market estimated at $1 trillion to $2 trillion, offering substantial headroom for growth despite its relatively smaller scale.

The company's core business revolves around enabling technology vendors to reach a broad network of resellers, consultants, and end-users, while simultaneously providing these partners with access to a curated portfolio of cutting-edge IT solutions. This dual-sided value proposition is foundational to Climb's strategy, emphasizing high-touch engagement and rapid market responsiveness.

Technological Edge: Curation as a Core Competency

Climb's technological differentiation lies not in developing proprietary software, but in its expert curation and channel enablement of innovative third-party technologies. The company focuses on high-growth, technically sophisticated domains such as virtualization, cloud computing, security, networking, storage, infrastructure management, and application lifecycle management. This strategic focus allows Climb to offer solutions that address increasingly complex challenges faced by its customers.

The company's disciplined approach to vendor partnerships is a critical aspect of its technological moat. In Q2 2025 alone, Climb evaluated 50 potential vendor partnerships but moved forward with only four, underscoring a commitment to quality over quantity. This selective process ensures the integration of differentiated, high-impact solutions. Recent additions to Climb's line card exemplify this strategy:

• Ignite: A leader in secure content collaboration, intelligence, and governance, offering a cloud-native platform that reinforces Climb's commitment to transformative technologies for SMB and enterprise environments.
• IGEL: An exclusive distribution agreement for secure endpoint OS solutions in the U.K. and Ireland, building on an existing partnership and validating Climb's channel reach.
• Darktrace (DARK): A cybersecurity company utilizing artificial intelligence to detect and respond to cyber threats. This partnership, initiated in Q1 2025, has already generated a pipeline topping $30 million in potential gross billings, with management anticipating Darktrace to become a top 3 or 4 vendor by Q2 2026. This highlights Climb's ability to identify and scale with AI-powered security solutions.
• Scality: A global leader in cyber-resilient storage software for AI environments, expanding Climb's offerings for scalable, secure, and high-performance data solutions.

These partnerships demonstrate Climb's strategic intent to align with technologies that are not only innovative but also address critical market needs, such as the surging demand for AI-driven data center solutions. By focusing on these areas, Climb enhances its competitive positioning, drives higher average selling prices (ASPs), and secures better margins, contributing significantly to its long-term growth strategy.

Financial Performance: Accelerating Growth and Efficiency

Climb Global Solutions has demonstrated impressive financial momentum, particularly in recent quarters. For the three months ended June 30, 2025, net sales surged 73% to $159.3 million, compared to $92.1 million in the prior-year period. This growth was underpinned by a 39% increase in gross billings to $500.6 million. The difference in growth rates between net sales and gross billings reflects a favorable shift in product mix towards hardware and software products, which are recognized on a gross basis, compared to more net-recognized security, maintenance, and cloud products in the prior year.

Profitability metrics also saw significant improvement. Gross profit for Q2 2025 increased 42% to $26.3 million, driven by organic growth and a $2.4 million contribution from the Douglas Stewart Software (DSS) acquisition. Gross profit as a percentage of gross billings rose slightly to 5.3% in Q2 2025, though management anticipates this ratio to normalize around 5.0%-5.1% due to the lumpy nature of high-margin deals like those with VAST Data. Selling, General, and Administrative (SG&A) expenses increased to $16.4 million, primarily due to the DSS acquisition ($0.9 million impact) and increased employee-related costs supporting higher gross profit. Crucially, SG&A as a percentage of gross billings decreased to 3.3% from 3.6% in the prior year, reflecting improved operational leverage. Management targets maintaining SG&A in the 3% range as a percentage of gross billings.

Net income for Q2 2025 increased 74% to $5.9 million, or $1.30 per diluted share. Adjusted EBITDA, a key non-GAAP metric, grew 64% to $11.4 million, with the effective margin (Adjusted EBITDA as a percentage of gross profit) expanding to 43.3% from 37.3% year-over-year. For the six months ended June 30, 2025, net sales increased 61% to $297.3 million, and net income rose to $9.7 million, or $2.11 per diluted share. The company's Return on Equity (ROE) of 28.54% significantly surpasses the industry average, indicating strong efficiency in generating profits from shareholder capital.

Strategic Initiatives and Outlook

Climb's strategic roadmap is clear: sustain robust organic growth, pursue disciplined accretive acquisitions, and enhance operational efficiency. The company has successfully integrated Douglas Stewart Software (DSS), acquired in July 2024, which is contributing incrementally, particularly in the education market's peak buying season. The ERP system, now fully implemented across all acquired entities as of Q2 2025, is expected to drive further operational efficiencies, transactional speed, and data accuracy, positioning Climb for stronger operating leverage.

Management's M&A strategy for 2025 focuses on smaller, cash-funded acquisitions, specifically targeting services companies to enhance margin profiles and increase vendor stickiness. More sizable, needle-moving acquisitions are being considered for 2026 and 2027, with a consistent pace of one to two acquisitions per year. Geographically, Climb is actively building its presence in Germany (the DACH region), a key Western European market, with a dedicated local team.

Despite the public exit of Citrix from the channel, management views this as an opportunity to diversify its offerings and is confident in filling the resulting gap with new vendor relationships. The pipeline of potential vendors remains robust, with many $100 million ARR SaaS vendors yet to be fully tapped. Analysts project Climb to follow its impressive 32% revenue growth in 2024 with approximately 7% average expansion over the next two years, and the upbeat outlook has already led to a 19% increase in FY25 consensus earnings estimates since early March.
`

Competitive Landscape and Risk Factors

Climb operates in a competitive environment dominated by a few global giants like TD Synnex Corporation (SNX), Arrow Electronics (ARW), Avnet (AVT), and CDW Corporation (CDW). While these larger players command significant market share (e.g., SNX at 15-20%, ARW and CDW at 10-15%), Climb positions itself as an "emerging high-touch fast to market channel partner."

Compared to its larger peers, Climb exhibits higher revenue growth rates (10-15% recently vs. SNX's 5-7% or ARW's 3-5%). However, larger competitors often boast higher gross and operating margins (e.g., SNX's gross margins around 10-12% compared to Climb's 5.0-5.3% gross billings margin, and CDW's operating margins of 5-6% compared to Climb's 5.7%). This implies that while Climb is growing faster, its smaller scale can lead to higher operating costs as a percentage of revenue, potentially pressuring profitability. Climb's competitive advantages, or moats, include its niche distribution channels, which foster stronger customer loyalty and recurring revenue, and its expertise in curating and integrating specialized tools for technical domains, enabling faster innovation cycles.

Key vulnerabilities include its limited scale, which can result in higher operating costs compared to more efficient, larger rivals, and a relatively smaller investment in internal R&D compared to some peers, though its strength lies in distributing others' innovations. Indirect competitors, such as direct cloud providers like AWS (AMZN) and Microsoft Azure (MSFT), also pose a threat by bypassing traditional distribution channels, potentially eroding hardware reselling demand. However, Climb's focus on essential security and software solutions provides resilience, as these are critical for businesses regardless of broader economic conditions.

Risks to Climb's outlook include potential fluctuations in the software industry, shifts in product demand, and competitive pricing pressures. The company is also exposed to foreign currency transaction and translation risks, though it employs hedging strategies. While the ERP implementation is complete, the ongoing optimization process is critical to realizing full efficiency benefits. The loss of a significant vendor, such as Citrix, also presents a challenge, though management has demonstrated a proactive approach to mitigation.

Conclusion

Climb Global Solutions is executing a compelling growth story, leveraging its specialized expertise and disciplined strategic approach within the expansive and evolving IT distribution market. Its focus on high-demand areas like cybersecurity and data center solutions, coupled with a rigorous vendor selection process, underpins its ability to deliver double-digit organic growth. The successful integration of acquisitions like DSS and the full implementation of its ERP system are enhancing operational efficiency, setting the stage for improved profitability and operating leverage.

While operating in the shadow of larger industry players, Climb's agility, high-touch model, and strategic M&A initiatives allow it to carve out and expand its niche effectively. The company's robust financial performance, strong liquidity, and clear roadmap for both organic and inorganic expansion suggest a promising outlook. Investors should recognize Climb as a dynamic player poised to capitalize on the ongoing digital transformation, driven by its strategic vision and disciplined execution in a market where specialized value-added distribution remains critical.