3. Climb Global Solutions, Inc. (NASDAQ:CLMB)
2024 Performance: 21.45%
Number of hedge fund holdings: 4
Established in 1982, Climb Global Solutions, Inc. (NASDAQ:CLMB), is a value-added information technology distribution and solutions company that focuses on emerging and innovative technologies. Its distinct value proposition, YOY 15.66% revenue growth in 2023, and diverse products provide it a position among hedge fund managers despite the volatility of emerging technologies and competition. The company projected a growth rate of 14.70% for the upcoming year.
Headwaters Capital Management stated the following regarding Climb Global Solutions, Inc. (NASDAQ:CLMB) in its first quarter 2024 investor letter:
“Climb Global Solutions, Inc. (NASDAQ:CLMB): The Middle Man for the Middle Man Summary Investment: Thesis 1) Niche Cybersecurity and Data Center Software Distributor with Vertical Specific Expertise 2) Focus on Cybersecurity and Data Center End Markets along with Faster Growing Vendors Supports Double Digit Organic Billings Growth; Programmatic M&A Will Supplement Organic Growth 3) Attractive Financial Profile Given Capital Light Nature of Software Distribution and Minimal CAPEX Requirements 4) CEO with Impressive Industry Experience and Track Record.
Climb Global Solutions is a specialty IT distributor focused on cybersecurity and data center software. CLMB differentiates itself from broadline distributors such as Arrow, TD Synnex or Ingram Micro through deep expertise with the limited number of products it distributes. CEO Dale Foster orchestrated this focused distribution strategy when he took over as CEO, reducing the number of vendors on the company’s line card from 455 to 100. As a result, CLMB now serves as a more focused partner, dedicating all its sales and marketing expertise to a smaller list of vendors. CLMB acts as an outsourced sales force for its partners given their expertise with the products they distribute. Unlike many technology distributors, hardware only accounts for 6% of the company’s adjusted gross billings, which has positive working capital and ROIC implications (discussed below). While the top 20 vendors account for ~70% of CLMB’s sales, the company has a focused strategy of adding smaller companies with strong growth prospects to its line card. CLMB’s vendor expansion strategy is achieved through organic new partnership agreements as well as through acquisitions of distributors with high growth vendor relationships….” (Click here to read the full text)
