Climb Global (CLMB) Q3 2026 Earnings Call Transcript

DATE

Thursday, Oct. 29, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Dale Foster
• Chief Financial Officer - Matthew Sullivan
• Investor Relations Advisor - Sean Mansouri

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TAKEAWAYS

• Gross Billings -- $706.4 million, increasing 40% due to organic growth from new and existing technology vendors.
• Net Sales -- $220.3 million, representing a 37% increase from $161.3 million in the third quarter of 2025.
• Net Income -- $7.9 million, growing 69% year over year from $4.7 million in the prior year period.
• Diluted EPS -- $0.43, an increase from $0.25 per share in the same quarter of the previous year.
• Adjusted EBITDA -- $14.7 million, rising 35% from $10.9 million in the third quarter of 2025.
• Effective Margin -- 44.6%, increasing 230 basis points reflecting cost-saving initiatives and operational efficiencies.
• Distribution Segment Gross Billings -- $680.5 million, reflecting a 41% increase driven by expansion in North America and Europe.
• Solutions Segment Gross Billings -- $25.9 million, growing 14% year over year due to organic contributions.
• Gross Profit -- $33 million, a 28% increase from $25.7 million in the third quarter of 2025.
• Selling, General, and Administrative Expenses -- $20.9 million, compared to $16.2 million, primarily due to the InterWorks acquisition and variable sales compensation.
• SG&A as a Percentage of Gross Billings -- 3%, compared to 3.2% in the third quarter of 2025.
• SG&A as a Percentage of Gross Profit -- 63.2%, representing a decline from 68.5% in the second quarter of 2026 and 76.7% in the first quarter of 2026.
• Cash and Cash Equivalents -- $66.9 million as of Sept. 30, 2026, compared to $36.6 million at the end of fiscal 2025.
• Revolving Credit Facility -- $50 million, with zero debt outstanding at the end of the third quarter.
• Vendor Performance -- 19 of the top 20 vendors, generating sequential growth during the period.
• New Vendor Evaluations -- one new brand agreement signed (Harmonic Security) out of 32 total brands evaluated during the quarter.
• Cybersecurity Revenue Mix -- 70% of the company's business, driven by demand for network and endpoint security solutions.
• Reseller Network -- 7,000 to 7,500 unique customers worldwide, used by the company to target specific market fits for vendors.
• Vendor Scale -- Darktrace, one of the company's newer relationships, reached a $100 million run rate according to management.
• Acquisition-Related Costs -- $118,000 for the quarter, compared to $594,000 in the prior year period.
• Provision for Income Taxes -- $2.9 million for the quarter, reflecting a higher effective tax rate compared to $1.6 million in the third quarter of 2025.

SUMMARY

Climb Global Solutions, Inc. (NASDAQ:CLMB) reported financial results for the third quarter of 2026, noting growth across its distribution and solutions segments. Management attributed the performance to momentum within its vendor portfolio and the integration of InterWorks. The company expanded its European footprint through the acquisition of NeoVAD and identified a new category of "challenger vendors" to target for future distribution. Investments in IT infrastructure, automation, and a proprietary cloud marketplace are intended to streamline global operations and increase productivity as the company scales.

• Management identifies "challenger vendors" as established technology companies seeking focused distribution partners to expand channel reach and reseller engagement.
• CEO Foster noted that 80% of the company's business is comprised of renewal annuity streams, which management expects to benefit from year-end budget cycles.
• The company is developing a proprietary cloud marketplace platform to allow managed service providers and resellers to purchase and manage cloud subscriptions directly.
• CEO Foster stated, "A portion of our business should be a self-service platform that we're building so our customers can interface and do it quickly."
• The acquisition of NeoVAD provides the company with exclusive vendor relationships in France that command margins typically double those seen in North America.
• CEO Foster noted a shift in the market where private equity-owned vendors are prioritizing channel distribution over direct sales models to improve operational efficiency.

INDUSTRY GLOSSARY

• ALM (Application Lifecycle Management): The product lifecycle management of computer programs, including requirements, architecture, coding, testing, and maintenance.
• Effective Margin: A non-GAAP metric defined as adjusted EBITDA as a percentage of gross profit.
• Gartner's Magic Quadrant: A graphical market research methodology that categorizes technology vendors as leaders, challengers, visionaries, or niche players.
• Gross Billings: The total dollar value of customer purchases of goods and services during a period, including transaction values recognized on a net basis.
• HCI (Hyperconverged Infrastructure): An IT framework that combines computing, storage, and networking into a single system to reduce data center complexity.
• MSP (Managed Service Provider): A company that remotely manages a customer's IT infrastructure and end-user systems.
• VAR (Value-Added Reseller): A company that adds features or services to an existing product and resells it as an integrated solution.

Full Conference Call Transcript

Operator: Good morning everyone, and thank you for participating in today's conference call to discuss Climb Global Solutions' financial results for the third quarter ended September 30, 2026. Joining us today are Climb's CEO, Mr. Dale Foster, the company's CFO, Mr. Matthew Sullivan, and the company's investor relations advisor, Mr. Sean Mansouri with Elevate IR. By now, everyone should have access to the third quarter 2026 earnings press release, which was issued yesterday afternoon at approximately 4:05 P.M. Eastern Time. The release is available in the investor relations section of 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 will open the call for your questions.

I would now like to turn the call over to Mr. Mansouri for introductory comments.

Sean Mansouri: 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 key operational metrics and non-GAAP financial measures, including 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. I'll now turn the call over to Climb CEO, Dale Foster.

Dale Foster: Thanks, Sean, and good morning, everyone. Our team delivered an exceptional third quarter, achieving record results across our key financial metrics, demonstrating the strength and scalability of our global platform. Our strong performance was driven by growing momentum across our vendor portfolio and deepening our relationships with our partners. Within our line card, we generated sequential growth with 19 of our top 20 vendors during the quarter. We are seeing meaningful traction with several of our newer relationships that have added or expanded over the past year, underscoring our ability to identify innovative technology partners and develop into meaningful contributors over time.

During the quarter, we evaluated 32 new net brands but signed an agreement with only one, Harmonic Security, reflecting on our disciplined approach to our vendor selections. Harmonic is an innovative cybersecurity company focused on helping organizations securely adopt and scale AI technologies. As AI adoption accelerates, we believe solutions like Harmonic's will become increasingly important in helping business capture the productivity benefits of AI while mitigating the associated security risks. This partnership further strengthens our security portfolio and positions our resellers partners to address a growing area of customer demand.

As these partnerships scale, we are also seeing a growing opportunity to work with larger, more established technology companies that may not fit in the traditional definition of emerging technology. While these vendors have already built meaningful scale and market presence, many are still looking for a more focused distribution partner that can help them expand their channel, reach, strengthen reseller engagement, and accelerate growth. We refer to this segment of the market as challenger vendors, which aligns with the challenger category within Gartner's Magic Quadrant framework.

We believe this represents an attractive and underserved opportunity for Climb, as these companies can benefit from the same high-touch sales, marketing, and technical expertise that have helped us successfully scale our emerging vendor relationships. Importantly, this is a natural extension of our existing strategy rather than a shift away from our core focus. By leveraging our specialized teams, established reseller network, and proven go-to-market capabilities, we believe that we are well-positioned to attract a broader range of technology partners and further expand our growth opportunities. As we continue to expand our vendor portfolio and scale our global operations, we are equally focused on strengthening the infrastructure needed to support that growth.

A key part of this effort is improving operational efficiency and leveraging technology to streamline processes across the business. Our ERP systems serve as critical components of our global operating infrastructure, and we continue to focus on leveraging its capabilities to automate workflows and drive greater efficiencies across the organization. We are applying this approach to areas such as quoting various accounting functions along with digital connectivity to our vendors and partners, where we see opportunities to reduce manual processes, improve productivity, and support continued growth as we scale. Separately, we are investing in the developing of our own cloud marketplace, which will provide a centralized platform for MSP and reseller partners to purchase, provision, and manage cloud subscriptions.

The platform is designed to simplify transactions, consolidate billing, and provide greater visibility across the customer lifecycle. Over time, we see an opportunity to leverage this infrastructure across all of our global territories, enabling us to scale recurring cloud transactions, strengthen our partner relationships, and expand on new markets more efficiently. Subsequent to quarter end, we expanded our European presence through the acquisition of NeoVAD, bolstering our position in France with a highly complementary team, reseller network, and vendor portfolio. The transaction builds on the investments we've made in Europe and creates additional opportunities to deepen vendor relationships while broadening the solutions available to our channel partners.

Similar to our approach with InterWorks, which continues to perform on plan since closing the acquisition earlier this year, we believe Climb's infrastructure can support NeoVAD's growth while maintaining their local market expertise and customer relationships that have contributed to its success. We believe NeoVAD is a strategic and cultural fit and an important part of increasing our scale across European operations. Looking ahead, we will continue to identify cutting-edge technologies that can strengthen our line card and support organic growth. We will also selectively pursue acquisitions that fit our culture and operating model, with Europe remaining as an important focus area.

With the growing momentum we are seeing across our business, we believe we are well positioned to close out the year on a strong note and deliver another year of record performance for Climb shareholders. With that, I will turn the call over to Matthew Sullivan for financial results. Matt?

Matthew Sullivan: Thank you, Dale, and good morning, everyone. A quick reminder as we review the financial results for our third quarter, all comparisons and variance commentary refer to the prior year quarter unless otherwise specified. As reported in our earnings press release, gross billings in the third quarter of 2026 increased 40% to a quarterly record of $706.4 million, compared to $504.6 million in the year-ago quarter. Distribution segment gross billings increased 41% to $680.5 million, while Solutions segment gross billings increased 14% to $25.9 million. Net sales in the third quarter of 2026 increased 37% to a quarterly record of $220.3 million, compared to $161.3 million in the prior year period.

This increase reflects strong double-digit organic growth from new and existing vendors. Gross profit in the third quarter of 2026 increased 28% to a quarterly record of $33 million, compared to $25.7 million for the same period in 2025. The increase was driven by organic growth from new and existing vendors in both North America and Europe, as well as the contribution from InterWorks. Selling, general and administrative expenses in the third quarter of 2026 were $20.9 million, compared to $16.2 million in the prior year period. The increase primarily reflects SG&A associated with InterWorks and variable sales compensation attributed to the growth in organic gross profit.

SG&A in Q3 of 2026 was also impacted by our investments in IT infrastructure and automation initiatives designed to improve operating efficiencies. SG&A as a percentage of gross billings decreased to 3% for the third quarter of 2026, compared to 3.2% for the prior year period. SG&A as a percentage of gross profit for the third quarter of 2026 was 63.2% and represents a decline from the first two quarters of 2026, which were 68.5% for the second quarter of 2026 and 76.7% for the first quarter of 2026.

Net income in the third quarter of 2026 increased 69% to a quarterly record of $7.9 million, or $0.43 per diluted share, compared to $4.7 million or $0.25 per diluted share for the prior year period. Adjusted net income increased 34% to $8 million or $0.43 per diluted share, compared to $6 million or $0.33 per diluted share for the year-ago period. Adjusted EBITDA in the third quarter of 2026 increased 35% to $14.7 million, compared to $10.9 million in the same period of 2025. Effective margin, which is defined as adjusted EBITDA as a percentage of gross profit, increased 230 basis points to 44.6%, compared to 42.3% for the same period of 2025.

Turning to our balance sheet, cash and cash equivalents were $66.9 million as of September 30th, 2026, compared to $36.6 million on December 31st, 2025. The increase in cash was primarily attributed to the timing of receivable collections and payables. As of September 30th, 2026, we had no debt outstanding or outstanding borrowings under our $50 million revolving credit facility. We ended the quarter with a strong balance sheet, giving us the flexibility to support organic growth, invest in our operating infrastructure, and pursue strategic acquisition opportunities. We remain disciplined in our approach to capital allocation, focusing on investments that align with our long-term strategy, drive earnings growth, and create sustainable value for our shareholders. This concludes our prepared remarks.

Operator, please open the line for questions.

Operator: Thank you. If you would like to ask a question, please press star and one on your telephone keypad now. To leave the queue at any time, press star two. Once again, that is star and one to ask a question. Our first question is from Keith Housum with Northcoast Research.

Keith Housum: Great. Good morning, gentlemen, and great job on the quarter. Hey, guys, just a few questions on the NeoVAD acquisition. I guess any differences in terms of their margin profile versus Climb's, or is it pretty similar?

Dale Foster: It is, and Matt can give the details, but it is in line with a lot of our European acquisitions, right? So the margins are typically double what we see in North America, and this one is actually higher than that. It really is attributed to how they actually work with their customer base, where they bring on vendor lines, negotiate a higher margin up front as they are going to take a new vendor line into the French territory, and then that will decrease over time as the resellers take on more of the burden. But those margins still stay in that double-digit range compared to where we have seen the U.S. as mid-single digit.

Keith Housum: Great. Go ahead, I am sorry, Matt.

Matthew Sullivan: I was just going to say, just to reiterate what Dale said, it is consistent margins with what we have talked about with the InterWorks acquisition. So it is slightly higher than our existing European business, but it is in those low double-digit gross profit percentages.

Keith Housum: Great. In terms of their historical growth rates, are they growing in line with you guys as well?

Dale Foster: Go ahead, Matt.

Matthew Sullivan: In recent years, they have signed a couple strong vendor lines in France. So their growth has accelerated in the last two years even greater than the growth rates that we have seen historically.

Keith Housum: Great.

Dale Foster: Keith, what is unique, we have been talking for a while, we have had one sales representative in France, Kamel, and he was both selling in France our product portfolio, but also prospecting for us. So it is the relationship that he built with Jérôme, the owner of NeoVAD. The uniqueness of NeoVAD is that they have majority exclusive relationships with their vendors for France. They also sell into other French-speaking countries. Really the focus is in France and they get the higher margins because they have exclusivity. Like I have said this in the past, how do you target potential acquisition targets?

We use our vendor network, and we have done it in this case as well, just to check on and saying, "Okay, how is this distributor? What is their go to market? You find out a lot about them before you even maybe have your first meeting with them. It works out very well.

Keith Housum: Great. Appreciate that. Is management going to be staying on?

Dale Foster: It is. Their full team will be staying on. They are just in a suburb of Paris. Matt has been out there for a while. I will be heading back out for another trip in a couple of weeks.

Keith Housum: Great. Glad to hear that. If I just look here at Climb's results for the quarter, obviously outstanding results. Sales and billings growing faster than gross profits there. Was there a mix change versus prior quarters here, or just kind of the lower profitable business? Maybe just a mix of what you have there. If you can give a little color on that, please.

Dale Foster: Yeah, it goes back to Q2 when we had 18 of our top 20 brands growing at a really good clip, and now we have 19 of our top 20 brands. I will just put it out there, the 20th brand is Adobe, and Adobe, it is not that it is not growing, it is a little flat, but it is still a great relationship with us. That is our 19. So it is really the core piece of our vendors that are growing at this clip to make it there. We did not have any big one-offs that we have had in the past, so it is just, like I said, just a really good quarter.

Teams are firing on all cylinders, and like I mentioned in the prepared remarks, we are just so focused, and I think I said this in Q1, that this is going to be the year that we really get off and get our efficiencies going, and we are putting quite a few dollars into our systems and our technical teams.

Keith Housum: Great. So there was nothing really one time item in the quarter. It is all sustainable growth from here, correct?

Dale Foster: It is. When we talk about our top 20 brands, we still have brands going in and out of our top 20, the ones that are growing faster, the ones that are becoming large. We have just got some ones that we signed over a year to two years ago. I will mention Darktrace. They are on that $100 million run rate as a vendor, and we are just seeing more of them.

As we said before, we are still getting a lot of inquiries for vendors for us to take a look at that are just much larger brands, and that come with a much larger share shift, either from their direct model that they need to get more efficient or a share shift from our competitors.

Keith Housum: Great. I guess last question before I will turn it over. But in terms of your reseller count, I am sure you guys track it, but do you guys discuss it publicly in terms of how many resellers you are working with and how it is growing over time?

Dale Foster: We do. We do it in our investor deck. We talk worldwide, I think we give a range of 7,000-7,500 resellers that are a unique customer of ours. But yeah, we track it because we are mining our database all the time, especially our vendors, to get into the resellers that are the closest fit to where they think they can go to market. So that is about the number worldwide.

Keith Housum: Okay, great. Thanks, guys. I will turn it over. Appreciate it.

Dale Foster: Thanks. Thanks, Keith.

Operator: Thank you. Our next question is from Vincent Colicchio with Barrington Research.

Vincent Colicchio: Yeah. Good morning, Dale. Nice quarter. In terms of organic growth, it looks like it accelerated this quarter. Should we expect this level of growth to continue in coming quarters?

Dale Foster: We mentioned right at the end, Matt, that we expect to have a record year. We're already into almost done with October, and we're on that same trajectory that we did with Q3 just being up and right over last year's Q4. We're trying to clean up our line card. It's important for us. We talk about these top 70 brands, and that's who we go to market with, and then everything from 70 above goes to our Climb Elevate team.

That's a real focus that we've had over these last really six months, to get transacting lines that just don't meet the criteria of a go to market, to push them to Climb Elevate, which that team is growing very quickly, and the rest of it so we can do more focus. But yeah, at this rate, we had a great quarter, there's no doubt about it. At the same level, of course, I want to be there. I think that's going to be a tough one, but we don't see it slowing down as far as this is just one bump of a quarter. We just have a lot of our vendors performing at a great clip.

I think it's due to, we're 70% in the cybersecurity space, and a lot of it's because people have to secure their networks, and they're securing it in so many different ways and making sure they go from a firewall to an endpoint to everything in between. With everything in the news you hear about, an AI agent escaped and is wreaking havoc on somebody's system. Everybody's looking for ways to make sure that they aren't in the news.

Vincent Colicchio: Effective margin increased 230 basis points year-over-year. How much of that improvement is structural? Should we expect that level or better to continue?

Matthew Sullivan: Yeah. We are tracking for the full year on effective margin percentage that we have historically seen, right? So when you look at it on a full fiscal year basis, we are in that low 40% range. That is definitely where we are continuing to track for 2026. We did do some initiatives and some cost savings initiatives in Q3 that we executed upon. So that brought the, as I highlighted in the call, that brought the SG&A expenses as a percentage of gross profit down, even compared to not only the first two quarters of this year, but in line with where we were in Q3 of last year.

So, it is continuing to trend in the positive direction, kind of where we have seen our historical effective margin.

Vincent Colicchio: And then some of the investments you summarized in the ERP system and in the marketplace, will we see the results of that in margin in 2027?

Dale Foster: It will not be in margin. Well, it will be in effective margin, right, as we get more efficient. If I was to take it overall, structurally, we are in a great place in the company, but we are fine-tuning different areas. With that, Vince, it is all about the technology that I mentioned, our different ERP systems. With Vishal, our new CIO, that came on board over, what? two years ago, a lot of things have changed. We have more projects than I have mentioned in Q1 than we have ever had before, and we are completing more projects in a short period of time than we have ever had before. So I mentioned the cloud marketplace.

It is something that has always been our agenda. We have, and I mentioned it at the end of Q2, our Q2 earnings release, that we have hired somebody to do that. We are well on our way. We'll have some announcements for you in Q1 on our cloud marketplace and what that really will mean. I've said it all along, a portion of our business should be a self-service platform that we're building so our customers can interface and do it quickly and how they want to interact with us versus how they have to interact with us right now, vendor by vendor.

Vincent Colicchio: Then, Matt, what was the revenue contribution of NeoVAD in 2025, and then what monthly contribution should we expect in the coming quarter?

Matthew Sullivan: Yeah. We haven't put that information out in our press release. When we announced the acquisition, we announced the adjusted EBITDA impact. But we'll have more to talk about on the NeoVAD contribution as we move forward here.

Dale Foster: Yeah. And Vince, our CRO, Gerard Brophy, that runs our EMEA operations, NeoVAD will go up through him. Just since the announcement last week, we already have four of our existing vendors that have reached out and said, "Hey, we want to do something in France." We've said this many times, the French buy from French and Germans buy from Germans. We think that we are just so positioned with our larger portfolio of vendors with NeoVAD's limited portfolio that we'll do a combination and figure out which vendors fit best for us and best for the NeoVAD team, and then take it into the French market. That's the real opportunity here.

Vincent Colicchio: Good to hear. Thanks, guys. We'll go back in the queue.

Dale Foster: Thanks, Vince.

Operator: Thank you. Our next question comes from Bill Dezellem with Tieton Capital.

Bill Dezellem: Thank you. I have a group of questions. First of all, relative to the larger vendors wanting to work with Climb, does this ultimately imply that your growth rate will be accelerating over time as a result of just a larger dollar volume of revenue that can be transacted with larger vendors?

Dale Foster: Yeah, Bill, you are spot on, right? If you look at it, and this is an internal discussion we have a lot, that is, if we are a $2.2 billion company, and we sign a $20 million line that we think we can get up to speed in six months, $20 million, it is only 1% of our overall revenue. We are looking, and if you go back three years ago, we were talking about, "Hey, we will sign a vendor line if we think we can get to $10 million in the first 18 months." Now we are saying there are two components of that.

Can we grow that vendor line in our ecosystem, and what is the share shift opportunity? I mentioned it, is that share shift opportunity from competitors that are just not serving the customers like they need to be serviced, or is it from a direct go to market that these vendors have? I was with a very large vendor yesterday and having this exact discussion, and the discussion goes kind of like this. They have $200 million of business that is unmanaged. They know they have to put in the channel. Here is the good part of PE firms. They are owned by a PE firm, as most of our vendors are.

The PEs are saying, "You have got to be more efficient now because this is what the market will bear as far as cost. How do you become more efficient?" Going direct and hiring expensive people and continue to build your infrastructure does not work. When a channel exists that is already super efficient, why are not we doing that? They are pushing these management teams to go find channel people versus direct sellers. That is how the conversation goes. You look at a vendor like that and said, "Okay, we have got $200 million that is unmanaged. We want to run this through distribution. What is it going to cost us?" We start playing the financial game.

Those are the conversations we are having, as well as back on. This goes to our challenger brands. If you look at Gartner's Magic Quadrant in the top left, that is the challenger brands that we have quite a few sitting in there. Our emerging brands, that is not going to be something we are not going to continue to focus on because if you look at who sits in our top 20, those are emerging brands that we signed four and five years ago. We see opportunity with existing larger vendors that need a solution, whether it is a direct to channel or a share shift because they are not being serviced.

Bill Dezellem: That's very helpful. We'll look forward to hearing more on those vendors in the future. Relative to your comment that you made to a prior question, relative to your marketplace, is this something that we are going to see tied in with the Climb Elevate program and ultimately finding a way for those vendors to be able to transact on your site, but ultimately it's not going to require even the Elevate's time?

Is that part of the strategy here, or is it really more for a larger vendor, let's say a Fortinet or an Adobe that's well known, that the resellers can simply go onto your site and accomplish what they want to, and they already know what they need and what they're trying to accomplish and don't need human assistance?

Dale Foster: Yeah. I'm going to start referring to more as a platform because we're going to be doing a lot of things on this platform to service our customers and or vendors. I talk about the connectivity that we have to have between our vendors and our customers. But it's really our core, right? Climb Elevate does a great job, but that's not what we're doing this for. Will that be an extension of the platform? 100%, right? So we can transact and make it much more efficient as we work at that. But it's really for the core part of Climb.

I could go vendor by vendor, and you brought up Adobe, a great vendor that needs to be transacted on a marketplace platform because of what Adobe has done, similar to what Microsoft did with their licensing schemes. As vendors get to that size, they need to take out and make it more frictionless. I've said this for years and years now, and now we have a leader that's doing that, and I have a CIO that's backing it and making sure that this is going to get completed. Then we'll just continue to expand on it.

But yes, the Elevate piece of it will be great in the future, but right now it's really for the core part of Climb. I could go vendor by vendor and tell you the ones that would be the first ones that would go on that make the most sense, and we're just going to pick them by size and the ones that we spend the most time in the back office trying to transact.

Bill Dezellem: Dale, this marketplace platform is something that I think that you have talked about for some time now. What has taken this long to get this accomplished? Sitting on the outside looking in, it seems pretty straightforward. Clearly it's not as easy as it seems from the outside. But what's been the friction point?

Dale Foster: Here's the inside baseball part of it, and that is we tried with a couple development companies that already have platforms, and we were going to modify what they had and use that instead of reinventing the wheel. We went down the road with a couple, and it gets too wide, right? They want to do, just like AWS, right? Their marketplace is super wide, and it's like, "Hey, you can go and get anything." But no one really uses that much in our space unless they have to retire some kind of spend.

If you look at how much Amazon has sitting there on their books for people to still spend on their marketplace, whether it's compute storage or licensing. The good thing for us is that the vendors weren't ready for that, and I'm talking about our vendors, because you have to have the connectivity, and they have to build out either an API, EDI, or some kind of interface to your platform. We're getting the number of vendors coming to us and saying, "Okay, we're ready for this now." It was a good timing for us to really kick this off. With that, we weren't behind. I kept thinking we're way behind. I look at our competitors.

If you look at what people call the gold standard out there for MSPs is Pax8, and Pax8 does it, but we don't even run into Pax8 in any of our vendors. Our vendors sign Pax8. We don't run into them as far as a competitor. We might say we're not running into because we're not touching as many MSPs as they are. But the timing is now for us, and it's a good time for us with our vendors. The amount of vendors we'll have on the platform this time next year will be how they want to transact.

We don't want to ever tell somebody how to go to market, but if it fits with us and how we service our customers, then we're all in.

Bill Dezellem: Thank you for that genuine response. I really appreciate that. Then one additional question here. Because you have tried a couple of approaches and because technology is advancing so quickly, whether it be due to artificial intelligence models or otherwise, do you believe today that when you do launch your marketplace, the characteristics that marketplace will have and capabilities is going to be better than what you had originally envisioned? Therefore, what I was thinking may have been a delay, or it sounds like what you may have been thinking was a delay, ultimately is to your benefit.

Dale Foster: Yeah. A couple of things. It's purpose-built for how Climb goes to market. We're not doing things that nobody wants just to be flashy and do some kind of marketing ploy. But it's what our vendors want, our customers want, and how they want to actually transact with us. We're never going to get away, and we can say that, and I'll go back to just look at our numbers and where we're going. The vendors, unfortunately for them, don't have a lot of choices in North America. They have a lot of choices overseas, but in North America, they don't have a lot.

They have the big three distributors that are $40 billion plus, and then there's a couple small ones, but there's nobody else. If they either have to keep that direct model, how are they going to do it? Are they going to build their own platform marketplace? The problem is VARs, customers, resellers, MSPs, they don't want to have to log in to 40 different vendors just to get their licensing. That's why it's a perfect fit for distribution to aggregate all those. I'm a little off topic, but as far as back to your question on the platform, I've got Vishal, coming from WWT, our CIO. He was involved in integration when WWT bought Softchoice.

He's familiar with some of the platforms they were using. Some of it was outsourced, some of it was built. Then he brought a gentleman in, Ben Ryan, that's done this before, spent time at Ingram with some of their marketplace, and they've got quite a long history of that. The most time is spent in the architecture of it before we even write code. The coding part's the quick part. It's the architecture to make sure we're not building something somebody doesn't want.

We're looking at the efficiencies of what my team does every day that's just monotonous on the inside sales team, and that we can automate this where you can go to get your information very quickly and then our team can get back to actually selling and saying, "Okay, why is this emerging technology something that I need?" My background is selling. Getting whatever that new technology in front of as many eyeballs as possible.

Bill Dezellem: Great. Thank you for the perspective and taking all the questions. Great quarter.

Dale Foster: Thanks, Bill. Thanks.

Operator: Thank you. Our next question is from Howard Root with Fairhope Capital.

Howard Root: Good morning, guys, and congratulations on really an exceptional quarter.

Dale Foster: Thanks, Howard.

Howard Root: Most of my questions have already been asked, but two little quick ones. One, on the gross billings, up 41% year-over-year, or up $200 million. It is almost, to me, following this for a long time, almost unbelievable. Can you break down on a rough basis, what of that came from InterWorks, what came from new vendors, what came from, and I would put Fortinet into the new vendors category, and what came from expansion of just the current line?

Dale Foster: Yeah. Go ahead, Matt.

Matthew Sullivan: Thanks, Howard. The bulk of that, the majority of that expansion is from existing vendor relationships. We are on target with numbers that internally we have budgeted for Fortinet, as an example, for 2026. InterWorks is, as Dale highlighted in the call earlier, has performed on plan. But really that growth in the gross billings line and even gross profit on down is from our existing vendor relationships. And that makes up the majority of that growth there.

Howard Root: Great.

Dale Foster: And Howard, I could go. Just real quick, Howard. We could go vendor by vendor and tell you. I will just pick off Sophos because we talk about them as one of our top three vendors. They bought Secureworks, their Thoma Bravo company. They have been flat for the last couple of years, and now they finally got those two companies integrated. They have kicked off their new fusion play, and there is just so much more hype around them, and we have seen it in the market. We have people that are renewing their licensing.

I could go each vendor, like Matt mentioned, Fortinet, each one of our top 20, and there is some new thing that they did, or they acquired a company, or it is a share shift play where we are out servicing our competition, and we are getting that. For a sales rep, that's the easiest thing they can do is give their customer why they're better, we get a share shift piece of it, but then you have to perform, right? Or they'll shift back to your competitor.

Howard Root: Great. Here I was told that AI was going to destroy your business.

Dale Foster: Yeah, no.

Howard Root: Q4 is historically your strongest quarter. Is there any change to that?

Dale Foster: It's not, and it goes back to the whole thing as far as people from way back, and we have an annuity stream of licensing that gets renewed by people extinguishing their budgets. We'll see the same thing. I mean, 80-some percent of our business is renewals. We don't see that changing. The vendors are pushing us to go after renewals 90-120 days, which I think is kind of ridiculous, before the renewal is up. There's just a lot of maneuvering in the vendor market as far as how they want the renewals done. We're doing a lot of it for them. We see a lot of the business already setting up for Q4.

Then just on our lines, our vendor lines that we had in our top 20 are not slowing down into Q4.

Howard Root: Great. Then just on acquisitions, I know that you always are on your lookout, and you do acquisitions, but here we are at the end of the year. You do an acquisition, and you end up with even more cash than you had at the beginning of the year. You've got more ability to do larger ones. What do you see out there in the acquisition field, and what's your appetite, and how do you see things coming in the next two or three years in your M&A activity?

Dale Foster: Yeah. The top on my list right now is four companies. I said this, I said it in Investor Day that we're looking to acquire two to three companies per year, and it was great that we could get this one done. We have a couple already that we've put, not LOIs in, but initial points in to say, "Okay, this is what it would look like." But yes, we can go larger. We haven't taken any debt on this company, as Matt explained in his remarks, but it's going to be in Europe, and there's some other regions that we're actually prospecting in that have come to us by our vendors saying, "Hey, we need help here.

This is a great distributor. You should take a look at them. We think the owner's going to retire." There's a lot of those. Outside of those four or five that are hot right now, there's another 10 right behind those, and that reaches into areas like the Middle East. We're going to invest more into the African market as we're getting going with our African team and the South African team. But it's a robust list, and it's not slowing down. The good thing for us is you have these, like I said before, these three massive distributors that are worldwide.

Then you have some that are in that $4 billion-$5 billion range, but they think they already have those territories covered, so there's not as much competition on the acquisition side. It's more of me competing with a $30 million distributor, trying to buy a $15 million or a $60 million, trying to buy a $30 million in the European space.

Howard Root: Great. Very helpful. Thanks, and congrats again to everyone at Climb for a great quarter.

Dale Foster: Thanks, Howard.

Operator: Thank you. At this time, there are no further questions in the queue.

Dale Foster: Thank you, Howard. I just want to say to everyone that joined us today, I would like to thank the entire Climb team across all of our regions. A big welcome to our French team. I cannot wait to spend more time with them in the upcoming weeks, and our teams are going to get more integrated as we go and putting onto our platforms. To our just core Climb team, great quarter. We will continue to deliver that first-class experience to our customers and to our vendor partners. Thank you.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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