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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                   

Commission File No. 000-26408

Wayside Technology Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware

13-3136104

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

4 Industrial Way West, Suite 300, Eatontown, New Jersey 07724

(Address of principal executive offices)

(732) 389-8950

Registrant’s Telephone Number

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common stock, $.01 par value

WSTG

The NASDAQ Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Smaller Reporting Company

Non-Accelerated Filer

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No   

There were 4,385,785 outstanding shares of common stock, par value $.01 per share (“Common Stock”) as of November 1, 2021.

Table of Contents

Wayside Technology Group, Inc. and Subsidiaries

Table of Contents

 

 

Page

 

 

 

 

PART I FINANCIAL INFORMATION

 

 

 

 

Item 1

Financial Statements (unaudited)

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020

3

 

 

 

 

Condensed Consolidated Statements of Earnings for the three and nine months ended September 30, 2021 and 2020 (unaudited)

4

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020 (unaudited)

5

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (unaudited)

6

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)

7

 

Notes to Condensed Consolidated Financial Statements (unaudited)

8

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

32

 

 

 

Item 4.

Controls and Procedures

32

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

 

 

 

Item 6.

Exhibits, Financial Statement Schedules

33

 

 

SIGNATURES

35

 

2

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)

September 30,

December 31,

    

2021

    

2020

    

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

29,934

$

29,348

Accounts receivable, net of allowances of $940 and $892, respectively

98,413

 

93,821

Inventory, net

3,685

 

4,936

Vendor prepayments and advances

3,950

1,235

Prepaid expenses and other current assets

4,181

 

3,837

Total current assets

140,163

 

133,177

Equipment and leasehold improvements, net

1,999

 

2,308

Goodwill

17,133

16,816

Other intangibles, net

10,136

10,625

Right-of-use assets, net

1,610

1,933

Accounts receivable-long-term, net

97

 

304

Other assets

494

 

257

Deferred income tax assets

104

 

113

Total assets

$

171,736

$

165,533

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

$

118,272

$

116,692

Lease liability, current portion

441

490

Total current liabilities

118,713

 

117,182

Lease liability, net of current portion

1,818

2,167

Deferred income tax liabilities

1,738

1,467

Total liabilities

122,269

120,816

Commitments and contingencies

Stockholders’ equity:

Common stock, $.01 par value; 10,000,000 shares authorized; 5,284,500 shares issued: 4,385,785 and 4,361,997 shares outstanding, respectively

53

 

53

Additional paid-in capital

31,761

 

31,962

Treasury stock, at cost, 852,863 and 922,503 shares, respectively

(13,687)

 

(14,747)

Retained earnings

31,696

 

28,191

Accumulated other comprehensive loss

(356)

 

(742)

Total stockholders’ equity

49,467

 

44,717

Total liabilities and stockholders' equity

$

171,736

$

165,533

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

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Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(Unaudited)

(Amounts in thousands, except per share data)

Nine months ended

Three months ended

September 30,

September 30,

    

2021

    

2020

    

2021

    

2020

    

Net sales

$

207,074

$

180,124

$

68,911

$

60,919

Cost of sales

 

173,934

 

157,609

 

57,592

 

53,682

Gross profit

 

33,140

 

22,515

 

11,319

 

7,237

Selling, general, and administrative expenses

 

24,312

 

16,866

 

7,761

 

5,993

Legal and financial advisory expenses, net - unsolicited bid and related matters

1,752

(81)

Acquisition related costs

982

344

Amortization and depreciation expense

1,177

403

381

164

Income from operations

 

7,651

 

2,512

 

3,177

 

817

Other income:

Interest, net

 

362

 

105

 

60

 

19

Foreign currency transaction (loss) gain

(107)

211

(41)

(67)

Income before provision for income taxes

 

7,906

 

2,828

 

3,196

 

769

Provision for income taxes

 

2,155

 

881

 

756

 

239

Net income

$

5,751

$

1,947

$

2,440

$

530

Income per common share-Basic

$

1.31

$

0.44

$

0.55

$

0.13

Income per common share-Diluted

$

1.31

$

0.44

$

0.55

$

0.13

Weighted average common shares outstanding — Basic

 

4,263

 

4,306

4,282

 

4,218

Weighted average common shares outstanding — Diluted

 

4,263

 

4,306

 

4,282

 

4,218

Dividends paid per common share

$

0.51

$

0.51

$

0.17

$

0.17

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

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Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands)

Nine months ended

Three months ended

September 30,

September 30,

    

2021

    

2020

    

2021

    

2020

    

Net income

$

5,751

$

1,947

$

2,440

$

530

Other comprehensive income:

Foreign currency translation adjustments

 

386

 

(152)

 

(889)

 

127

Other comprehensive income (loss)

 

386

 

(152)

 

(889)

 

127

Comprehensive income

$

6,137

$

1,795

$

1,551

$

657

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

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Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(Amounts in thousands, except share amounts)

Accumulated

Additional

Other

Common Stock

Paid-In

Treasury

Retained

Comprehensive

   

Shares

   

Amount

   

Capital

   

Shares

   

Amount

   

Earnings

   

Income (Loss)

   

Total

Balance at January 1, 2021

 

5,284,500

$

53

$

31,962

 

922,503

$

(14,747)

$

28,191

$

(742)

$

44,717

Net income

1,520

1,520

Translation adjustment

1,039

1,039

Dividends paid

(750)

(750)

Share-based compensation expense

279

279

Restricted stock grants (net of forfeitures)

(883)

(52,190)

883

Treasury shares repurchased

2,990

(57)

(57)

Balance at March 31, 2021

 

5,284,500

$

53

$

31,358

 

873,303

$

(13,921)

$

28,961

$

297

$

46,748

Net income

1,791

1,791

Translation adjustment

236

236

Dividends paid

(749)

(749)

Share-based compensation expense

337

337

Restricted stock grants (net of forfeitures)

342

20,184

(342)

Treasury shares repurchased

5,228

(130)

(130)

Balance at June 30, 2021

 

5,284,500

53

32,037

 

898,715

(14,393)

30,003

533

48,233

Net income

2,440

2,440

Translation adjustment

(889)

(889)

Dividends paid

(747)

(747)

Share-based compensation expense

637

637

Restricted stock grants (net of forfeitures)

(913)

(53,932)

913

Treasury shares repurchased

8,080

(207)

(207)

Balance at September 30, 2021

 

5,284,500

$

53

$

31,761

 

852,863

$

(13,687)

$

31,696

$

(356)

$

49,467

Accumulated

Additional

Other

Common Stock

Paid-In

Treasury

Retained

Comprehensive

   

Shares

   

Amount

   

Capital

   

Shares

   

Amount

   

Earnings

   

Income (Loss)

   

Total

Balance at January 1, 2020

 

5,284,500

53

32,874

 

778,807

(13,256)

26,715

(1,130)

$

45,256

Net income

836

836

Translation adjustment

(501)

(501)

Dividends paid

(775)

(775)

Share-based compensation expense

167

167

Restricted stock grants (net of forfeitures)

(1,080)

(63,810)

1,079

(1)

Treasury shares repurchased

2,059

(32)

(32)

Balance at March 31, 2020

 

5,284,500

$

53

$

31,961

 

717,056

$

(12,209)

$

26,776

$

(1,631)

$

44,950

Net income

581

581

Translation adjustment

222

222

Dividends paid

(740)

(740)

Share-based compensation expense

234

234

Restricted stock grants (net of forfeitures)

(813)

(48,068)

813

Treasury shares repurchased

264,039

(3,489)

(3,489)

Balance at June 30, 2020

 

5,284,500

53

31,382

 

933,027

(14,885)

26,617

(1,409)

41,758

Net income

530

530

Translation adjustment

127

127

Dividends paid

(742)

(742)

Share-based compensation expense

636

636

Restricted stock grants (net of forfeitures)

(298)

(17,605)

298

Treasury shares repurchased

3,465

(81)

(81)

Balance at September 30, 2020

 

5,284,500

$

53

$

31,720

 

918,887

$

(14,668)

$

26,405

$

(1,282)

$

42,228

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

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Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

Nine months ended

September 30,

    

2021

    

2020

    

Cash flows from operating activities

Net income

$

5,751

$

1,947

Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:

Depreciation and amortization expense

 

1,177

 

403

Provision for doubtful accounts

 

33

130

Deferred income tax expense

 

272

 

(53)

Share-based compensation expense

1,253

1,037

Amortization of discount on accounts receivable

(50)

(136)

Amortization of right-of-use assets

359

280

Change in fair value of contingent earn-out consideration

24

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

 

(4,493)

 

36,608

Inventory

 

1,251

 

(235)

Prepaid expenses and other current assets

 

(327)

 

(225)

Vendor prepayments

280

(2,896)

Accounts payable and accrued expenses

 

2,647

 

(3,991)

Lease liability, net

(434)

(348)

Other assets and liabilities

 

(251)

 

(14)

Net cash and cash equivalents provided by operating activities

 

7,468

 

32,531

Cash flows from investing activities

Purchase of equipment and leasehold improvements

 

(190)

 

(20)

Vendor advances

(2,994)

Payment for acquisitions, net of cash acquired

(1,141)

Net cash and cash equivalents used in investing activities

 

(3,184)

 

(1,161)

Cash flows from financing activities

Purchase of treasury stock

 

(394)

 

(3,602)

Borrowings under revolving credit facility

6,800

Repayments of borrowings under revolving credit facility

(6,800)

Dividends paid

 

(2,246)

 

(2,257)

Contingent consideration

(863)

Payments of deferred financing costs

(61)

Net cash and cash equivalents used in financing activities

 

(3,503)

 

(5,920)

Effect of foreign exchange rate on cash and cash equivalents

 

(195)

 

(138)

Net increase in cash and cash equivalents

 

586

 

25,312

Cash and cash equivalents at beginning of period

 

29,348

 

14,984

Cash and cash equivalents at end of period

$

29,934

$

40,296

Supplementary disclosure of cash flow information:

Income taxes paid

$

1,917

$

2,167

Interest paid

$

31

$

23

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Table of Contents

Wayside Technology Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2021

(Unaudited)

(Amounts in tables in thousands, except share and per share amounts)

1.           Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements of Wayside Technology Group, Inc. and its subsidiaries (collectively, the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, as permitted by the rules and regulation of the Securities and Exchange Commission, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete audited financial statements.

The preparation of these condensed consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, intangible assets, income taxes, stock-based compensation, evaluation of performance obligations and allocation of revenue to distinct items, contingencies and litigation. The Company bases its estimates on its historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In the opinion of the Company’s management, all adjustments that are of a normal recurring nature, considered necessary for fair presentation of the results for the periods presented, have been included in the accompanying condensed consolidated financial statements. The Company’s actual results may differ from these estimates under different assumptions or conditions. The unaudited condensed consolidated statements of earnings for the interim periods are not necessarily indicative of results for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K filed with the Securities Exchange Commission for the year ended December 31, 2020.

The consolidated financial statements include the accounts of Wayside Technology Group, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

Immaterial Revision of an Error for Estimated Foreign Tax Liability

During the third quarter, management identified that the UK had finalized The Finance Act 2021 that went into effect June 10, 2021 and therefore should have been accounted for during the second quarter of 2021. While the Company did not account for the UK tax law change regarding tax rate changes, management believes that the impact is not material to the financial statements as of and for the three and six months ended June 30, 2021 and the financial statements as of and for the nine months ended September 30, 2021 as presented herein are correct as it relates to this matter. The effect of this error on the financial statements as of June 30, 2021 and for three and six-month period ended June 30, 2021 was as follows:

As of June 30, 2021

As Previously

As

Reported

Revision

Corrected

Condensed Consolidated Balance Sheet

Deferred income tax liabilities

$

1,462

$

353

$

1,815

Total liabilities

$

121,305

$

353

$

121,658

Retained earnings

$

30,356

$

(353)

$

30,003

Total liabilities and stockholders' equity

$

169,891

$

$

169,891

8

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