Form 8-K Wayside Technology Group For: Feb 19



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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 19, 2020

 

 

WAYSIDE TECHNOLOGY GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Delaware

 

000-26408

 

13-3136104

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

 

 

 

4 Industrial Way West, Suite 300,

Eatontown New Jersey

 

 

07724

(Address of principal executive offices)

 

(Zip Code)

 

732-389-0932

(Registrant’s telephone number, including area code)

 

Not applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

☐      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

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. ☐

 

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

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On February 19, 2020, Wayside Technology Group, Inc. (the “ Company”) issued a press release announcing its financial results for the quarter and year ended December 31, 2019. A copy of this press release is furnished as Exhibit 99.1 to this report.

 

In accordance with General Instruction B.2. of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

WAYSIDE TECHNOLOGY GROUP, INC.

 

 

Date: February 19, 2020

By:

/s/ Michael Vesey

 

Name:

Michael Vesey

 

Title:

Vice President and Chief Financial Officer

 

 

Exhibit 99.1

Picture 2

 

Wayside Technology Group Reports Fourth Quarter and Record Full Year 2019 Results

 

– Record Annual Net Sales of $208.8 Million and Net Income of $6.8 Million –

 

– Annual Adjusted EBITDA (a non-GAAP financial measure defined below) of $10.5 Million and Return on Invested Capital (see calculation defined below) of 24.5% –

 

– Returned $3.1 Million of Capital to Shareholders in 2019 via Dividends –

 

Eatontown, NJ – February 19, 2020 – Wayside Technology Group, Inc. (NASDAQ: WSTG) (“Wayside” or the “Company”), an IT channel company providing innovative sales and distribution solutions, is reporting results for the fourth quarter and full year ended December 31, 2019, and is declaring a quarterly dividend of $0.17 per share.

 

Fourth Quarter 2019 Highlights vs. Same Year-Ago Quarter

·

Net sales increased 24% to $60.9 million.

·

Gross profit increased 9% to $7.9 million.

·

Net income increased 16% to $2.0 million or $0.45 per share.

·

Adjusted EBITDA (a non-GAAP financial measure defined below) increased 11% to $2.9 million.

Full Year 2019 Highlights vs. 2018

·

Net sales increased 15% to $208.8 million.

·

Gross profit increased 11% to $30.0 million.

·

Net income increased 92% to $6.8 million or $1.51 per share.

·

Net income excluding separation expenses, net of taxes (a non-GAAP financial measure defined below) increased 24% to $6.9 million.

·

Adjusted EBITDA (a non-GAAP financial measure defined below) increased 14% to $10.5 million.

 

Management Commentary

“Our strong fourth quarter and record full year results reflect the benefits of the various investments and initiatives we have undertaken since 2018,” said Dale Foster, CEO of Wayside. “We have become a sales-focused organization through our Lifeboat Distribution business, and the investments in our sales teams and processes have led to our first year of double-digit gross profit growth since 2011. In fact, during the fourth quarter, our sales team brought in what we believe to be the largest booking in Company history, further validating that our strategy to deepen customer relationships and expand our vendor network is working.

 

“As we look to 2020, we plan to carry this strong momentum through the year and drive sustainable, profitable growth through our Lifeboat Distribution business. Our financial goals focus on both gross profit and adjusted EBITDA, which is a new metric that we are introducing this quarter as a

 

Picture 3

 

supplemental measure of the profitability of our operations. With the scalability in our business model, we continue to believe that we can flow through a significant portion of our growth in gross profit to pre-tax income. We look forward to further executing on our strategy and delivering value for all Wayside stakeholders in 2020 and the years ahead.”

 

Fourth Quarter 2019 Financial Results

Net sales in the fourth quarter of 2019 increased 24% to $60.9 million compared to $49.1 million for the same period in 2018. Lifeboat Distribution segment net sales in the fourth quarter increased 30% to $57.4 million compared to $44.3 million, and TechXtend segment net sales for the fourth quarter were $3.5 million compared to $4.8 million.

 

Adjusted gross billings (a non-GAAP financial measure defined below) in the fourth quarter of 2019 increased 25% to $167.5 million compared to $134.3 million for the same period last year.

 

Gross profit in the fourth quarter of 2019 increased 9% to $7.9 million compared to $7.2 million for the same period in 2018. The increase was driven by the Company’s primary business segment, Lifeboat Distribution, which benefitted from the addition of multiple new technology vendors and strong organic growth with existing clients.

 

Total selling, general, and administrative (“SG&A”) expenses in the fourth quarter of 2019 were $5.3 million compared to $5.1 million for the same period in 2018. As a percentage of revenue, SG&A decreased 150 basis points to 8.8% compared to 10.3% in 2018, with the decrease driven by prudent cost management and improvements in operating efficiency.

 

Net income in the fourth quarter of 2019 increased 16% to $2.0 million or $0.45 per diluted share, compared to $1.7 million or $0.39 per diluted share for the same period in 2018.

 

Adjusted EBITDA in the fourth quarter of 2019 increased 11% to $2.9 million compared to $2.6 million in 2018, with the increase driven by the aforementioned organic growth with existing clients and new vendor additions, coupled with prudent cost management and operating efficiencies.

 

Effective margin, which is defined as adjusted EBITDA (a non-GAAP financial measure defined below) as a percentage of gross profit, increased 90 basis points to 37.1% compared to 36.2% in the prior year period.

 

Full Year 2019 Financial Results

Total net sales in 2019 increased 15% to $208.8 million compared to $181.4 million in 2018. Lifeboat Distribution segment net sales increased 18% to $193.6 million compared to $163.6 million in 2018, and TechXtend segment net sales were $15.2 million compared to $17.9 million.

 

Adjusted gross billings (a non-GAAP financial measure defined below) in 2019 increased 18% to $601.0 million compared to $510.0 million in 2018.

 

Gross profit in 2019 increased 11% to $30.0 million compared to $26.9 million in 2018.

 

Total SG&A expenses in 2019 decreased 6% to $21.5 million compared to $22.8 million in 2018. As a percentage of revenue, SG&A decreased 220 basis points to 10.3% compared to 12.5% in 2018. SG&A expenses included executive separation expenses of $0.1 million in 2019 and $2.4 million in 2018.

 

 

Picture 3

 

Net income in 2019 increased 92% to $6.8 million or $1.51 per diluted share, compared to $3.5 million or $0.78 per diluted share in 2018.

 

Net income excluding separation expenses, net of taxes (a non-GAAP financial measure defined below) in 2019 increased 24% to $6.9 million compared to $5.5 million last year.

 

Adjusted EBITDA (a non-GAAP financial measure defined below) in 2019 increased 14% to $10.5 million compared to $9.2 million in 2018. Effective margin increased 70 basis points to 34.8% compared to 34.1% in the prior year period.

 

Dividends per share declared in 2019 were $0.68, which is flat compared to the prior year.

 

Cash and cash equivalents were $15.0 million at December 31, 2019 compared to $14.9 million at December 31, 2018. The Company remained debt free at both December 31, 2019 and December 31, 2018.

 

Dividend

Subsequent to the quarter, on February 18, 2020, Wayside’s board of directors declared a quarterly dividend of $0.17 per share of its common stock payable on March 6, 2020 to shareholders of record on March 2, 2020.

 

Unsolicited Proposal

On December 10, 2019, Wayside received a preliminary unsolicited proposal from Shepherd Kaplan Krochuk, LLC and North & Webster SSG, LLC (together, the “N&W Group”) to acquire the Company for $16.38 per share, subject to certain conditions. Although the N&W Group’s offer expired on December 16, 2019, Wayside’s board of directors took extensive measures to evaluate their proposal, including engaging Stifel Financial Corporation (“Stifel”) to act as financial advisor to the board. Wayside management, members of the board of directors and Stifel engaged with principals of the N&W Group on multiple occasions to discuss their expired bid. After a thorough review of the inbound inquiry and in consultation with its advisors, the board determined that the expired bid was not in the best interest of shareholders and did not serve as a basis for further diligence or discussion. This was communicated to the N&W Group on February 11, 2020.

 

Conference Call

Wayside Technology Group will conduct a conference call today at 10:00 a.m. Eastern time to discuss its results for the fourth quarter and full year ended December 31, 2019.

 

Wayside management will host the conference call, followed by a question and answer period.

 

Date: Wednesday, February 19, 2020

Time: 10:00 a.m. Eastern time

Toll-free dial-in number: 1-844-683-0552

Conference ID: 7289306

 

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.

 

Picture 3

 

 

The conference call will be broadcast live and available for replay via webcast here, and on the investor relations section of the company’s website at www.waysidetechnology.com/site/content/webcasts. 

 

About Wayside Technology Group

Wayside Technology Group, Inc. (NASDAQ: WSTG) is an IT channel company and parent of Lifeboat Distribution, an international value-added distributor for Emerging Technology Vendors with solutions for Security, Data Management, Connectivity, Storage & HCI, Virtualization & Cloud and Software & ALM. Lifeboat provides vendors access to thousands of VARs, MSPs, CSPs and other resellers. Lifeboat holds an IT-70 GSA contract vehicle that provides resellers and vendors with a competitive edge within the Public Sector.

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

 

Non-GAAP Financial Measures

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

 

Forward-Looking Statements

The statements in this release concerning the Company’s future prospects are forward-looking statements that involve certain risks and uncertainties. Such risks and uncertainties include the continued acceptance of the Company’s distribution channel by vendors and customers, the timely availability and acceptance of new products, and contribution of key vendor relationships and support programs. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in our filings with the Securities and Exchange Commission (the “SEC”).

 

Important Additional Information

The Company, its directors and certain of its executive officers are participants in the solicitation of proxies from the Company’s shareholders in connection with the Company’s 2020 annual meeting of shareholders. The Company intends to file a definitive proxy statement and a WHITE proxy card with the SEC in connection with any such solicitation of proxies from the Company’s shareholders. SHAREHOLDERS OF THE COMPANY ARE STRONGLY ENCOURAGED TO READ SUCH PROXY STATEMENT, ACCOMPANYING WHITE PROXY CARD AND ALL OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. The Company’s soliciting material filed with the SEC on January 15, 2020 as DEFA 14A (the “DEFA 14A”) contains information regarding the direct and indirect interests, by security holdings or otherwise, of the Company’s directors and executive officers in the Company’s securities. If the holdings of the Company’s securities change from the amounts provided in the DEFA 14A, such changes will be set forth in SEC filings on Forms 3, 4, and 5, which can be found through the Company’s website at www.waysidetechnology.com or through the SEC’s website at www.sec.gov. Information can also be found in the Company’s other SEC filings, including its Annual Report on Form 10K for the year ended

 

Picture 3

 

December 31, 2018. Updated information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the company’s definitive proxy statement and other materials to be filed with the SEC in connection with the 2020 annual meeting of shareholders. Shareholders will be able to obtain the definitive proxy statement, any amendments or supplements to the proxy statement and other documents filed by the Company with the SEC at no charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge at the Company’s website at www.waysidetechnology.com.

 

Company Contact

Michael Vesey

Chief Financial Officer

1-732-389-0932

michael.vesey@waysidetechnology.com    

 

Investor Relations Contact

Sean Mansouri, CFA or Cody Slach

Gateway Investor Relations

1-949-574-3860

WSTG@gatewayir.com    

 

Picture 3

 

WAYSIDE TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2019

    

2018

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

14,984

 

$

14,883

 

Accounts receivable, net of allowances of $765 and $785, respectively

 

 

100,987

 

 

81,351

 

Inventory, net

 

 

2,760

 

 

1,473

 

Vendor prepayments

 

 

100

 

 

3,172

 

Prepaid expenses and other current assets

 

 

2,718

 

 

1,988

 

Total current assets

 

 

121,549

 

 

102,867

 

 

 

 

 

 

 

 

 

Equipment and leasehold improvements, net

 

 

1,215

 

 

1,588

 

Right-of-use assets, net

 

 

1,792

 

 

 —

 

Accounts receivable-long-term, net

 

 

1,358

 

 

3,156

 

Other assets

 

 

111

 

 

215

 

Deferred income taxes

 

 

256

 

 

145

 

 

 

$

126,281

 

$

107,971

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

78,364

 

$

66,653

 

Lease liability, current portion

 

 

383

 

 

 —

 

Total current liabilities

 

 

78,747

 

 

66,653

 

 

 

 

 

 

 

 

 

Lease liability, net of current portion

 

 

2,189

 

 

 —

 

Non-current liabilities

 

 

89

 

 

745

 

Total liabilities

 

 

81,025

 

 

67,398

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock, $.01 par value; 10,000,000 shares authorized; 5,284,500 shares issued: 4,505,693 and 4,496,494 shares outstanding, respectively

 

 

53

 

 

53

 

Additional paid-in capital

 

 

32,874

 

 

32,392

 

Treasury stock, at cost, 778,807 and 788,006 shares, respectively

 

 

(13,256)

 

 

(13,447)

 

Retained earnings

 

 

26,715

 

 

22,994

 

Accumulated other comprehensive loss

 

 

(1,130)

 

 

(1,419)

 

Total stockholders’ equity

 

 

45,256

 

 

40,573

 

 

 

$

126,281

 

$

107,971

 

 

Picture 3

 

WAYSIDE TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

( Amounts in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended

 

Three months ended

 

 

December 31,

 

December 31,

 

 

2019

    

2018

    

2019

    

2018

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

Lifeboat segment

 

$

193,558

 

$

163,564

 

$

57,369

 

$

44,256

TechXtend segment

 

 

15,201

 

 

17,880

 

 

3,493

 

 

4,799

Total net sales

 

 

208,759

 

 

181,444

 

 

60,862

 

 

49,055

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

Lifeboat segment

 

 

166,785

 

 

140,123

 

 

50,304

 

 

37,914

TechXtend segment

 

 

12,007

 

 

14,401

 

 

2,699

 

 

3,917

Total Cost of sales

 

 

178,792

 

 

154,524

 

 

53,003

 

 

41,831

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

Lifeboat segment

 

 

26,773

 

 

23,441

 

 

7,065

 

 

6,342

TechXtend segment

 

 

3,194

 

 

3,479

 

 

794

 

 

882

Total gross profit

 

 

29,967

 

 

26,920

 

 

7,859

 

 

7,224

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

Selling costs

 

 

11,629

 

 

10,627

 

 

2,985

 

 

2,854

Share-based compensation

 

 

759

 

 

1,108

 

 

139

 

 

149

Separation expenses (1)

 

 

100

 

 

2,446

 

 

 –

 

 

 –

Other general and administrative expenses

 

 

9,013

 

 

8,584

 

 

2,202

 

 

2,068

Total selling, general and administrative expenses

 

 

21,501

 

 

22,765

 

 

5,326

 

 

5,071

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

8,466

 

 

4,155

 

 

2,533

 

 

2,153

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest, net

 

 

500

 

 

907

 

 

84

 

 

162

Foreign currency transaction gain

 

 

82

 

 

55

 

 

42

 

 

15

Income before provision for income taxes

 

 

9,048

 

 

5,117

 

 

2,659

 

 

2,330

Provision for income taxes

 

 

2,261

 

 

1,579

 

 

637

 

 

591

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,787

 

$

3,538

 

$

2,022

 

$

1,739

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share – Basic

 

$

1.51

 

$

0.78

 

$

0.45

 

$

0.39

Income per common share – Diluted 

 

$

1.51

 

$

0.78

 

$

0.45

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – Basic

 

 

4,421

 

 

4,358

 

 

4,439

 

 

4,397

Weighted average common shares outstanding – Diluted

 

 

4,421

 

 

4,358

 

 

4,439

 

 

4,397

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid per common share

 

$

0.68

 

$

0.68

 

$

0.17

 

 

0.17

 

(1) Includes $1,661 of stock compensation during the year ended December 31, 2018.

 

Picture 3

 

Reconciliation of GAAP and Non-GAAP Financial Measures (unaudited)

(Amounts in thousands, except per share data)

 

The table below presents net sales reconciled to adjusted gross billings (Non-GAAP):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended

 

 

Three months ended

 

 

December 31,

 

 

December 31,

 

 

2019

 

2018

 

 

2019

    

2018

Adjusted Gross Billings (Non-GAAP) (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

208,759

 

$

181,444

 

$

60,862

 

$

49,055

Costs of sales related to Software – security and highly interdependent with support and maintenance, support or other services

 

 

392,264

 

 

328,506

 

 

106,642

 

 

85,280

Adjusted gross billings (non-GAAP)

 

$

601,023

 

$

509,950

 

$

167,504

 

$

134,335

 

(1)

We define adjusted gross billings as net sales in accordance with U.S. GAAP, adjusted for the cost of sales related to Software – security and highly interdependent with support and maintenance, support and other services. We provided a reconciliation of adjusted gross billings to net sales, which is the most directly comparable U.S. GAAP measure. We use adjusted gross billings of product and services as a supplemental measure of our performance to gain insight into the volume of business generated by our business, and to analyze the changes to our accounts receivable and accounts payable. Our use of adjusted gross billings of product and services as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under U.S. GAAP. In addition, other companies, including companies in our industry, might calculate adjusted gross billings of product and services or similarly titled measures differently, which may reduce their usefulness as comparative measures.

 

Picture 3

 

The tables below present net income reconciled to net income excluding separation expenses, net of taxes (Non-GAAP) (2), net income reconciled to adjusted EBITDA  (3) and calculation of return on invested capital (4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended

 

 

Three months ended

 

 

December 31,

 

 

December 31,

 

 

2019

 

 

2018

 

 

2019

    

2018

Net income reconciled to net income excluding separation expenses, net of taxes (Non-GAAP):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,787

 

$

3,538

 

$

2,022

 

$

1,739

Separation expenses

 

 

100

 

 

2,446

 

 

 –

 

 

 –

Income tax benefits related to separation expenses

 

 

(24)

 

 

(438)

 

 

 –

 

 

 –

Net income excluding separation expenses, net of taxes

 

$

6,863

 

$

5,546

 

$

2,022

 

$

1,739

 

(2)

We define net income excluding separation expenses, net of taxes, as net income, plus separation expenses, less the income tax benefit attributable to the separation expenses. We provided a reconciliation of net income excluding separation expenses, net of taxes, to net income, which is the most directly comparable U.S. GAAP measures. We use net income excluding separation expense, net of taxes as supplemental measures of our performance to gain insight into comparison of our businesses profitability when compared to the prior year. Our use of net income excluding separation expenses, net of taxes has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. In addition, other companies, including companies in our industry, might calculate separation expenses, separation expenses net of taxes, or similarly titled measures differently, which may reduce their usefulness as comparative measures.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Picture 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended

 

 

Three months ended

 

 

December 31,

 

 

December 31,

 

 

2019

 

 

2018

 

 

2019

    

2018

Net income reconciled to adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,787

 

$

3,538

 

$

2,022

 

$

1,739

Provision for income taxes

 

 

2,261

 

 

1,579

 

 

637

 

 

591

Depreciation and amortization

 

 

488

 

 

482

 

 

108

 

 

124

Interest expense

 

 

58

 

 

37

 

 

10

 

 

13

EBITDA

 

 

9,594

 

 

5,636

 

 

2,777

 

 

2,467

Share-based compensation

 

 

759

 

 

1,108

 

 

139

 

 

149

Separation expenses

 

 

100

 

 

2,446

 

 

 –

 

 

 –

Adjusted EBITDA

 

$

10,453

 

$

9,190

 

$

2,916

 

$

2,616

 

(3)

We define adjusted EBITDA, as net income, plus provision for income taxes, depreciation, amortization, share-based compensation, interest and separation expenses. We provided a reconciliation of adjusted EBITDA to net income, which is the most directly comparable U.S. GAAP measure. We use adjusted EBITDA as a supplemental measure of our performance to gain insight into comparison of our businesses profitability when compared to the prior year and our competitors. Adjusted EBITDA is also a component to our financial covenants in our credit facility. Our use of adjusted EBITDA has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. In addition, other companies, including companies in our industry, might calculate adjusted EBITDA, or similarly titled measures differently, which may reduce their usefulness as comparative measures.

 

The following represents the components of interest, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended

 

Three months ended

 

 

December 31,

 

 

December 31,

 

 

2019

 

 

2018

 

 

2019

    

2018

Components of interest, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of discount on accounts receivable with extended payment terms

 

$

(457)

 

$

(869)

 

$

(68)

 

$

(135)

Interest income

 

 

(101)

 

 

(75)

 

 

(26)

 

 

(40)

Interest expense

 

 

58

 

 

37

 

 

10

 

 

13

Interest, net

 

$

(500)

 

$

(907)

 

$

(84)

 

$

(162)

 

 

 

 

 

 

 

 

 

 

 

 

Picture 3

 

 

 

 

 

 

 

 

Calculation of average invested capital:

 

As of December 31,

 

 

2019

 

 

2018

Stockholders’ equity

 

$

45,256

 

$

40,573

Less: cash

 

 

(14,984)

 

 

(14,883)

Invested capital

 

$

30,272

 

$

25,690

Average invested capital

 

$

27,981

 

 

 

 

 

 

 

 

 

Calculation of return on invested capital:

 

Year ended

 

 

December 31,

 

 

2019

Net income excluding separation expenses, net of taxes

 

$

6,863

Average invested capital

 

$

27,981

Return on invested capital

 

 

24.5%

 

(4)

We define return on invested capital as net income excluding separation expenses, net of taxes (a non-GAAP financial measure) divided by average invested capital. We define average invested capital as the average stockholders’ equity less cash.





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