Climb Global Solutions (CLMB) 2021年年度報告「NASDAQ」.pdf

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1、Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934.For the fiscal year ended December 31,2021ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE AC

2、T OF 1934.For the transition period from toCommission file number:000-26408WAYSIDE TECHNOLOGY GROUP,INC.(Exact name of registrant as specified in its charter)Delaware13-3136104(State or other jurisdiction of incorporation)(IRS Employer Identification Number)4 Industrial Way West,Suite 300 Eatontown,

3、NJ07724(Address of principal executive offices)(Zip Code)Registrants telephone number,including area code:(732)389-0932Securities registered pursuant to section 12(b)of the Act:Title of Each ClassTrading SymbolName of Each Exchange on Which RegisteredCommon Stock,par value$0.01 per shareWSTGThe NASD

4、AQ Global MarketSecurities registered pursuant to section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 o

5、r Section 15(d)of the Act Yes No 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 Exchange Act of 1934 during the preceding 12 months(orfor such shorter period that the Registrant was required to file such reports),an

6、d(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 thischapter)during the preceding 12 months(or

7、 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,a smaller reporting company,or an emerging growth company.See thedefinitions of“large acceler

8、ated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the regi

9、strant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of

10、the effectiveness of its internal control over financial reporting underSection 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2

11、of the Act).Yes No The aggregate market value of the Common Stock held by non-affiliates of the Registrant computed by reference to the closing sale price for the Registrants Common Stock as of June 30,2021,which was the last business day of the Registrants most recently completed second fiscal quar

12、ter,as reported on The NASDAQ Global Market,was approximately$100.3 million(Indetermining the market value of the Common Stock held by any non-affiliates,shares of Common Stock of the Registrant beneficially owned by directors,officers and holders of more than10%of the outstanding shares of Common S

13、tock of the Registrant have been excluded.This determination of affiliate status is not necessarily a conclusive determination for other purposes).The number of shares outstanding of the Registrants Common Stock as of March 1,2022 was 4,450,062 shares.Documents Incorporated by Reference:Portions of

14、the Registrants definitive Proxy Statement for its 2022 Annual Meeting of Stockholders to be filed on or before May 2,2022 areincorporated by reference into Part III of this Report.Table of ContentsPART ISPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis report includes“forward-looking statements

15、”within the meaning of Section 21E of the Securities Exchange Act of 1934,asamended(the“Exchange Act”),and Section 27A of the Securities Act of 1933,as amended(the“Securities Act”).All statements,otherthan statements of historical or current fact,in this report are forward-looking statements,includi

16、ng but not limited to statements regarding the scope and duration of the novel coronavirus pandemic(“COVID-19”)and its impact on our business,future events or conditions,industry prospects and the Companys expected financial position,business and financing plans.These forward-looking statements may

17、beaccompanied by such words as“anticipate,”“believe,”“estimate,”“expect,”“forecast,”“intend,”“may,”“plan,”“potential,”“project,”“target,”“should,”“likely,”“will”and other words and terms of similar meaning.Although the Company believes that the expectations reflected in such forward-looking statemen

18、ts are reasonable,it can give noassurance that such expectations will prove to have been correct.These forward-looking statements are subject to certain known andunknown risks and uncertainties,as well as assumptions that could cause actual results to differ materially from those reflected in thesef

19、orward-looking statements.We strongly urge current and prospective investors to carefully consider the cautionary statements and riskscontained in this report,particularly the risks described under“Item 1A.Risk Factors”herein.Such risks include,but are not limited to,thecontinued acceptance of the C

20、ompanys distribution channel by vendors and customers,the timely availability and acceptance of newproducts,contribution of key vendor relationships and support programs,as well as factors that affect the software industry generally.The Company operates in a rapidly changing business,and new risk fa

21、ctors emerge from time to time.Management cannot predictevery risk factor,nor can it assess the impact,if any,of all such risk factors on the Companys business or the extent to which any factor,orcombination of factors,may cause actual results to differ materially from those projected in any forward

22、-looking statements.Accordingly,forward-looking statements should not be relied upon as a prediction of actual results and readers are cautioned notto place undue reliance on these forward-looking statements,which speak only as of their dates.The Company undertakes no obligation topublicly update or

23、 revise any forward-looking statements,whether as a result of new information,future events or otherwise.The statements concerning future sales,future gross profit margin and future selling and administrative expenses are forwardlooking statements involving certain risks and uncertainties such as av

24、ailability of products,product mix,pricing pressures,marketconditions and other factors,which could result in a fluctuation of sales below recent experience.Table of Contents1Item 1.BusinessGeneralWayside Technology Group,Inc.,a Delaware corporation,and its subsidiaries(the“Company,”“us,”“we,”or“our

25、”)is a valueadded information technology(“IT”)distribution and solutions company.The Company primarily operates through its“Distribution”segment,which distributes emerging technologies to corporate resellers,value added resellers(VARs),consultants and systems integratorsworldwide under the name“Clim

26、b Channel Solutions”.The Company also operates a smaller segment called“Solutions”,which is a cloudsolutions provider and value-added reseller of software,hardware and services for customers worldwide under the names“TechXtend”and“Grey Matter”.Across both segments,we offer an extensive line of produ

27、cts from leading software vendors and tools forvirtualization/cloud computing,security,networking,storage and infrastructure management,application lifecycle management and othertechnically sophisticated domains as well as computer hardware.The Company was incorporated in Delaware in 1982.Our common

28、 stock,par value$0.01 per share(“Common Stock”)is listedon The NASDAQ Global Market under the symbol“WSTG”.Our main web site address is ,and the otherweb sites maintained by our business include ,and .The informationcontained on,or otherwise accessible through,our websites is not part of,or incorpor

29、ated by reference into,this report.In our Distribution segment,which accounted for approximately 92%of our consolidated net sales and 80%of our consolidatedgross profit during the year ended December 31,2021,we distribute technology products from software developers,software vendors ororiginal equip

30、ment manufacturers(OEMs)to resellers,and system integrators worldwide.We purchase software,maintenance/serviceagreements,networking/storage/security equipment and complementary products from our vendors and sell them to our reseller customers.The large majority of products we sell are“drop shipped”d

31、irectly to the customers,which reduces physical handling by the Company andrequired investment in inventory.Generally,a vendor authorizes a limited number of companies to act as distributors of their product andsell to resellers of their product.Our reseller customers include value-added resellers,o

32、r VARs,corporate resellers,government resellers,system integrators,direct marketers,and national IT superstores.We combine our core strengths in customer service,marketing,distribution,credit and billing to allow our customers to achieve greater efficiencies in time to market in the IT channel in a

33、cost-effectivemanner.While our Distribution business is characterized by low gross profit as a percentage of adjusted gross billings,or gross margin,and price competition,we have been able to operate profitably by leveraging an efficient and scalable business model with low capitalinvestment require

34、ments.The large majority of the products we sell are either digital products such as license authorizations,third partymaintenance contracts,or hardware that is dropped shipped to the end customer directly by the vendor.We utilize electronic digitalinterchange(“EDI”)and other automation to fulfill t

35、hese orders on a cost-efficient basis.We also maintain relatively low inventorybalances relative to our gross billings and enjoy what we believe is favorable credit from our vendor partners,allowing us to deploy acapital efficient model as reflected by our return on equity and pre-tax income as a pe

36、rcentage of gross profit generated.In our Distribution segment,we are highly dependent on the end-market demand for the products we sell,and on our partnersstrategic initiatives and business models.This end-market demand is influenced by many factors including the introduction of new products,replac

37、ement and renewal cycles for existing products,competitive products,overall economic growth and general business activity.Adifficult and challenging economic environment may also lead to consolidation or decline in the industry and increased price-basedcompetition.We continually review the marketpla

38、ce to identify new and emerging vendors and products to potentially add to our vendorpartners.We also provide comprehensive IT solutions directly to end users through our Solutions segment,which accounted forapproximately 8%of our consolidated net sales and 20%of our consolidated gross profit during

39、 the year ended December 31,2021.Products in this segment are acquired directly from original equipment manufacturers(OEMs),Table of Contents2software developers or distributors and sold to end users.We provide customer service,billing,sales and marketing support in this segmentand provide extended

40、payment terms to facilitate sales.The Company operates a distribution facility in Eatontown,New Jersey.AcquisitionsWe view acquisitions as an important part of our strategic growth plan.In 2020,we completed two acquisitions to add scale,broaden ourgeographic footprint,expand partner relationships an

41、d add cloud support capabilities.Interwork Technologies Inc.(“Interwork”)acquired on April 30,2020,is a technology distributor specializing in cyber securityproducts based in Toronto,Canada.The acquisition added scale to our existing Canadian operation and brought key vendor partnerrelationships to

42、our portfolio.CDF Group Limited(“CDF”)acquired on November 6,2020,is a technology distributor and solutions provider with a specialty incloud enablement and support services.The acquisition expanded our sales presence in the United Kingdom and Europe,added akey vendor partner relationship for Micros

43、oft cloud products,and provided valuable technical expertise in cloud enablement andsupport.We plan to continue to evaluate acquisition opportunities as part of our strategic growth plan going forward.ProductsAn essential part of our ongoing operations and strategic growth plan in our Distribution s

44、egment is the continued recruitment ofsoftware vendors for which we become authorized distributors of their products.Through our Distribution segment,we sell a wide varietyof technology products from a broad range of software vendors and manufacturers,such as Bluebeam Software,Flexera Software,Intel

45、Software,Microsoft,Micro Focus,Mindjet,SmartBear Software,SolarWinds,Sophos,StorageCraft Technology,TechSmith,Trend Micro,Unitrends,CloudGenix,Tintri and Extrahop.On a continuous basis,we screen new vendors and products for inclusion in our line cardbased on their features,quality,price,profit margi

46、ns and current market trends.Developing a diverse vendor base is a key element of ourbusiness strategy.We focus on establishing deep relationships with our vendor and reseller partners by providing specialized producttraining to our sales force and the use of dedicated sales teams.We have also estab

47、lished an efficient ordering process with our key partnersthrough the implementation of electronic ordering and other processes adapted to their requirements.As a result,our relationships with ourkey vendor partners tend to be long-term in nature despite the absence of long-term contracts,with a sig

48、nificant portion of sales derivedfrom annually recurring renewals of software maintenance and subscription agreements related to our partners embedded base of customersutilizing their software products.Additionally,a key part of our strategic growth plan is to provide a high level of support to sele

49、ct emergingtechnology vendors through our Climb Elevate program to develop future relationships throughout the growth cycle of a vendor partner.In our Solutions business,an essential part of our strategic growth plan is to pursue opportunities with higher growth prospects andgross margin characteris

50、tics through the sale of specialty products,services and cloud offerings.Through the acquisition of CDF we addedcertain technical and administrative support capabilities to enable us to resell cloud and software as a service products(“SaaS”)includingMicrosoft products in the United Kingdom.Our strat

51、egic growth plan is to expand our cloud offerings by leveraging these support servicesto other markets and products.For the year ended December 31,2021,Sophos and SolarWinds accounted for 20%and 10%,respectively of our consolidatedpurchases.For the year ended December 31,2020,Sophos and SolarWinds a

52、ccounted for 20%and 12%,respectively of our consolidatedpurchases.The loss of a key vendor or group of vendors could disrupt our product availability and otherwise have an adverse effect on theCompany.The Company predominantly sells third party software,software subscriptions,and maintenance.Sales o

53、f hardware andperipherals represented 5%and 9%of our adjusted gross billings in 2021 and 2020,respectively.Table of Contents3CloudOur vendor and reseller partners are increasingly incorporating cloud and hybrid cloud products into their portfolios.An essentialpart of our strategic growth plan is to

54、provide value added services to our vendor partners and customers to enhance their ability to marketthese products.This includes maintaining infrastructure to facilitate licensing of cloud and SaaS products,providing technical support forcloud products,and providing integration and enablement servic

55、es.The acquisition of CDF provided us with the ability to provide supportfor these cloud services in the United Kingdom and Europe.We plan to continue to leverage these capabilities to provide cloud supportservices throughout our worldwide operations.Marketing and DistributionWe market products thro

56、ugh creative marketing communications,including our web sites,local and on-line seminars,events,webinars,and social media.We also use direct e-mail and printed material to introduce new products and upgrades,to cross-sell products tocurrent customers,and to educate and inform existing and potential

57、customers.We believe that our blend of electronic and traditionalmarketing and selling programs are important marketing vehicles for software vendors and manufacturers.These programs provide a cost-effective and service-oriented means to market and sell and fulfill software products and meet the nee

58、ds of users.We sell products to large,multi-national broad line resellers,sometimes referred to as direct market resellers(DMRs),as well asthousands of value added resellers(VARs),which tend to be smaller and focus on value added services to their customers.As part of ourstrategic growth plan,we exp

59、ect to continue diversifying our customer base by offering compelling products to the VAR community as wedevelop our vendor partner lineup.As a result,a higher proportion of our sales in 2021 were from VARs,driven by a focus on increasingsales to larger VARs with more than$1 million in annual sales.

60、The Company had two customers that each accounted for more than 10%oftotal consolidated net sales for 2021.For the year ended December 31,2021,CDW Corporation(NASDAQ:CDW)(“CDW”)and SoftwareHouse International Corporation(“SHI”),both of whom are considered DMRs,accounted for 18%,and 17%,respectively,

61、of consolidatednet sales and as of December 31,2021,18%and 22%,respectively,of total net accounts receivable.For the year ended December 31,2020,CDW Corporation(NASDAQ:CDW)(“CDW”)and Software House International Corporation(“SHI”),accounted for 24%,and14%,respectively,of consolidated net sales and a

62、s of December 31,2020,19%and 9%,respectively,of total net accounts receivable.Ourtop five customers accounted for 51%and 52%of consolidated net sales in 2021 and 2020,respectively.Net sales to customers in Canada represented 9%and 7%of our consolidated net sales in 2021 and 2020,respectively.Net sal

63、es inEurope and the rest of the world represented 13%and 5%of our consolidated net sales in 2021 and 2020,respectively.For geographicfinancial information,please refer to Note 13 in the Notes to our Consolidated Financial Statements.Customer SupportWe believe that providing a high level of customer

64、service is necessary to compete effectively and is essential to continued salesand revenue growth.Our account representatives assist our customers with all aspects of purchasing decisions,order processing,returnsprocessing,and inquiries on order status,product pricing and availability.The account re

65、presentatives are trained to answer all basicquestions about the features and functionality of products.Purchasing and FulfillmentThe Companys success is dependent,in part,upon the ability of its vendor partners to develop and market products that meet thechanging requirements of the marketplace.The

66、 Company believes it maintains good relationships with its vendors.The Company and itsprincipal vendors have cooperated frequently in product introductions and in other marketing programs.As is customary in the industry,theCompany has no long-term supply contracts with any of its vendor partners,and

67、 substantially all the Companys contracts with its vendorsare terminable upon 30 days notice or less,however,it is notable that the tenure of our relationships with vendor partners tends to extendover a longer term.WeTable of Contents4attribute this to the deep relationships we establish with our pa

68、rtners involving sales support,product and customer knowledge,and tailoredinfrastructure to facilitate efficient order processing.Most vendor partners or distributors will“drop ship”products directly to the customers,which reduces physical handling by theCompany.Inventory management techniques,such

69、as“drop shipping”allow the Company to offer a greater range of products withoutincreased inventory requirements or cost of carrying inventory.Inventory levels may vary from period to period,due in part to increases or decreases in sales levels,the Companys practice ofmaking advance purchases when it

70、 deems the terms of such purchases to be attractive,and the addition of new vendor partners and products.From time to time,we may make advance payments to vendors to apply against future purchases from the vendor.Moreover,theCompanys order fulfillment and inventory control systems allow the Company

71、to order certain products in time for next day shipping.TheCompany promotes the use of EDI with its vendor partners and customers,which helps reduce overhead and the use of paper in theordering process.CompetitionThe market for the technology products we sell is characterized by rapid changes in tec

72、hnology,user requirements,andcompetitive pricing.The way software products are distributed and sold is constantly changing,and new methods of distribution and salemay emerge or expand,including direct sales by technology providers to end users,and the introduction of cloud versions of their products

73、.As an IT channel solutions provider,a critical element of our strategic growth plan is to maintain our ability to offer an efficient route tomarket for emerging technology vendors.Additionally,a key element of our strategic growth plan is to capitalize on market changes byimplementing new value add

74、ed services such as cloud support and integration offerings.In our Distribution segment,we compete with other distributors to become an authorized distributor of products from softwaredevelopers and vendors.The Company competes to gain distribution rights for new products primarily based on its repu

75、tation forsuccessfully bringing new products to market and the strength of and quality of its relationships with software vendors and the resellercommunity.We also compete against other distributors to gain market share among authorized resellers for products we are authorized todistribute based on

76、price,and level of service.We compete against much larger broad-line distributors with more resources than we have,including Arrow Electronics Inc.(NYSE:ARW),Synnex Corporation(NYSE:SNX),Tech Data Corporation and Ingram,as well asspecialty distributors.We believe we offer a compelling solution for e

77、merging technology vendors seeking to establish the IT channel as aroute to market,by offering broad distribution capabilities with more flexibility than some of our larger competitors.In our Solutionssegment,we compete against a large variety of IT solutions providers including e-commerce sites,ser

78、vice organizations,value addedresellers,cloud solution providers and technology providers offering direct solutions.We believe that our ability to offer softwaredevelopers and IT professionals easy access to a wide selection of desired IT products at reasonable prices with prompt delivery and highcu

79、stomer service levels,along with our good relationships with vendor partners,allows us to compete effectively.Information TechnologyThe Company operates IT systems on several platforms including Windows and cloud-based platforms that control the full orderprocessing cycle.These IT systems allow for

80、centralized management of key functions,including inventory,accounts receivable,purchasing,sales and distribution and payment processing.We are dependent on the accuracy and proper utilization of our technologysystems,telephone systems,websites,e-mail and EDI systems.Our IT systems allow us to monit

81、or sales trends,real-time product availability,order status throughout the full order cycle,andautomates order transactions and invoicing transactions for our customers and vendors.The main focus of our IT systems is to allow us totransact and communicate with our customers and vendors in the most e

82、fficient manner possible.We provide various options to transactelectronically with our customers and vendors through EDI,XML and other electronic methods.Table of Contents5The Company recognizes the need to continually upgrade its IT systems to effectively manage and secure its infrastructure andcus

83、tomer data and to provide continued scalability and flexibility.In that regard,the Company anticipates that it will,from time to time,require software and hardware upgrades for its present IT systems.TrademarksThe Company conducts its business under various trademarks and service marks including Cli

84、mb Channel Solutions,TechXtend,Grey Matter and International Software Partners.The Company protects these trademarks and service marks and believes that they havesignificant value to us and are important factors in our marketing programs.EmployeesAs of December 31,2021,Wayside Technology Group,Inc.a

85、nd its subsidiaries had 269 total employees,including 268 full-timeemployees.The Company is not a party to any collective bargaining agreements with its employees,has experienced no workstoppages and considers its relationships with its employees to be satisfactory.Available InformationUnder the Sec

86、urities Exchange Act of 1934,as amended(the“Exchange Act”),the Company is required to file annual,quarterlyand current reports,proxy and information statements and other information with the Securities and Exchange Commission(“SEC”).TheSEC maintains a web site at http:/www.sec.gov that contains repo

87、rts,proxy and information statements,and other information regardingissuers that file electronically with the SEC,including us.The Company also makes available,free of charge,through its internet web site athttp:/,its reports on Forms 10-K,10-Q and 8-K,and amendments to those reports,as soon as reas

88、onablypracticable after they are filed with the SEC.The Company will provide paper copies of its reports on Form 8-K free of charge as requested.The information contained on,or otherwise accessible through,our website is not part of,or incorporated by reference into,this annualreport.The Company has

89、 a Code of Ethics and Business Conduct that applies to all employees,officers and directors of the Company,including our Chief Executive Officer and Chief Financial Officer.We review the Code of Ethics and Business Conduct annually andconsider updates as necessary.The full text of the Code of Ethics

90、 and Business Conduct,is available at our web site,http:/.We intend to disclose any amendment to,or waiver from,a provision of the Code of Ethical Conductthat applies to its Chief Executive Officer or Chief Financial Officer on our web site.Table of Contents6Item 1A.Risk FactorsInvestors should care

91、fully consider the risk factors set forth below as well as the other information contained in this report.Any ofthe following risks could materially and adversely affect our business,financial condition or results of operations.Additional risks anduncertainties not currently known to us or those cur

92、rently viewed by us to be immaterial may also materially and adversely affect ourbusiness,financial condition or results of operations.Risks Related to our BusinessWe serve customers and have locations throughout the world and are subject to terrorist attacks,acts of war,natural disasters,global pan

93、demic and other similar risks,including without limitation,COVID-19,which could materially adversely affect our business,financial condition,and results of operations.Terrorist attacks,acts of war,natural disasters,global pandemics or other disasters or publichealth concerns in regions of the world

94、where we have operations could result in the disruption of our business.Such acts,includingRussias February 2022 invasion of Ukraine,have created,and continue to create,economic and political uncertainties and have contributedto global economic instability.Specifically,these acts,pandemics,disasters

95、 and health concerns can result in increased travel restrictionsand extended shutdowns of certain businesses in the region,as well as social,economic,or labor instability.Disruptions in affected regionsover a prolonged period could have a material adverse impact on our business and our financial res

96、ults.The COVID-19 pandemic has created significant volatility,uncertainty and economic disruption,which may adversely affect ourbusiness,financial condition,liquidity or results of operations.While we offer a full suite of solutions and services that address customerpriorities across the technology

97、landscape,it is not possible for us to predict the duration or magnitude of adverse results of the outbreakand its effects on our business,liquidity or results of operations at this time.As a result,many of the estimates and assumptions used inpreparation of our financial statements required increas

98、ed judgment and carry a higher degree of variability and volatility.As eventscontinue to evolve with respect to the pandemic,these estimates may materially change in future periods.Changes in the information technology industry and/or economic environment may reduce demand for the products andservic

99、es we sell.Our results of operations are influenced by a variety of factors,including the condition of the IT industry,general economicconditions,shifts in demand for,or availability of,computer products and software and IT services and industry introductions of newproducts,upgrades or methods of di

100、stribution.The information technology products industry is characterized by abrupt changes intechnology,rapid changes in customer preferences,short product life cycles and evolving industry standards.Net sales can be dependent ondemand for specific product categories,and any change in demand for or

101、supply of such products could have a material adverse effect onour net sales,and/or cause us to record write-downs of obsolete inventory,if we fail to react in a timely manner to such changes.We rely on our vendor partners for product availability,marketing funds,purchasing incentives and competitiv

102、e products tosell.We acquire products for resale both directly from manufacturers and indirectly from distributors.The loss of a vendor partner couldcause a disruption in the availability of products.Additionally,there is no assurance that as manufacturers continue to or increasingly selldirectly to

103、 end users and through the distribution channel,that they will not limit or curtail the availability of their products todistributors/resellers like us.For example,resellers and software vendors may attempt to increase the volume of software productsdistributed electronically through ESD(Electronic

104、Software Distribution)technology,through subscription services,and through on-lineshopping services,and correspondingly,decrease the volume of products sold through us.Our inability to obtain a sufficient quantity ofproducts,or an allocation of products from a manufacturer in a way that favors one o

105、f our competitors,or competing distribution channels,relative to us,could cause us to be unable to fill clients orders in a timely manner,or at all,which could have a material adverse effect onour business,results of operations and financial condition.We also rely on our vendor partners to provide f

106、unds for us to market theirproducts,including through our on-line marketing efforts,and to provide purchasing incentives to us.If any of the vendor partners that havehistorically provided these benefits to us decides to reduce such benefits,our expenses would increase,adversely affecting our results

107、 ofoperations.General economic weakness may reduce our revenues and profits.Generally,economic downturns,may cause some of ourcurrent and potential customers to delay or reduce technology purchases,resulting in longer sales cycles,slower adoption of newtechnologies and increased price competition.We

108、 may,therefore,experience a greater decline inTable of Contents7demand for the products we sell,resulting in increased competition and pressure to reduce the cost of operations.Any benefits from costreductions may take longer to realize and may not fully mitigate the impact of the reduced demand.In

109、addition,weak financial and creditmarkets heighten the risk of customer bankruptcies and create a corresponding delay in collecting receivables from those customers andmay also affect our vendors ability to supply products,which could disrupt our operations.The realization of any or all these risks

110、couldhave a material adverse effect on our business,results of operations and financial condition.The IT products and services industry is intensely competitive and actions of competitors,including manufacturers of productswe sell,can negatively affect our business.Competition has been based primari

111、ly on price,product availability,speed of delivery,credit availability and quality and breadth of product lines and,increasingly,also is based on the ability to tailor specific solutions to client needs.We compete with manufacturers,including manufacturers of products we sell,as well as a large numb

112、er and wide variety of marketers and resellers of IT products and services.In addition,manufacturers are increasing the volume of software products they distribute electronically directly to end-users and in the future,will likely pay lower referral fees for sales of certain software licensing agree

113、ments sold by us.Generally,pricing is very aggressive in the industry,and we expect pricing pressures to continue.There can be no assurance that we will be able to negotiate prices as favorable as those negotiated by our competitors or that we will be able to offset the effects of price reductions w

114、ith an increase in the number of clients,higher net sales,cost reductions,or greater sales of services,which service sales typically are delivered at higher gross margins,or otherwise.Price reductions by our competitors that we either cannot or choose not to match could result in an erosion of our m

115、arket share and/or reduced sales or,to the extent we match such reductions,could result in reduced operating margins,any of which could have a material adverse effect on our business,results of operations and financial condition.The way software products are distributed and sold is changing,and new

116、methods of distribution and sale may emerge orexpand.Software vendors have sold,and may intensify their efforts to sell,their products directly to end-users.There can be no assurancesthat software developers and vendors will continue using distributors and resellers to the same extent they currently

117、 do.Future efforts bysoftware developers and vendors to bypass third-party sales channels could materially and adversely affect the Companys business,resultsof operations and financial condition.In addition,resellers and software vendors may attempt to increase the volume of software productsdistrib

118、uted electronically through ESD(Electronic Software Distribution)technology,through subscription services,and through on-lineshopping services.Any of these competitive programs,if successful,could have a material adverse effect on the Companys business,results of operations and financial condition.T

119、he Companys business and results of operations may be adversely affected if the terms andconditions of the Companys authorizations with its vendors were to be significantly modified or if certain products become unavailable tothe Company.We offer credit to our customers and,therefore,are subject to

120、significant credit risk.We sell our products to a large and diversecustomer base.We finance a significant portion of such sales through trade credit,typically by providing 30-60-day payment terms.Inaddition,we offer extended payment terms to certain customers for terms of up to 2 years.As a result,o

121、ur business could be adverselyaffected in the event of a deterioration of the financial condition of our customers,resulting in the customers inability to repay us.This riskmay increase if there is a general economic downturn affecting a large number of our customers and in the event our customers d

122、o notadequately manage their business or properly disclose their financial condition.Also,certain of our larger customers require greater than30-day payment terms which could increase our credit risk and decrease our operating cash flow.We face substantial competition from other companies.We compete

123、 in all areas of our business against local,regional,national,and international firms.Some of our current competitors have substantially greater capital resources and sales and distribution capabilitiesthan we do.In response to competitive pressures from any of our current or future competitors,we m

124、ay be required to lower selling pricesin order to maintain or increase market share,and such measures could adversely affect our operating results.In addition,we facecompetition from vendors,which may choose to market their products directly to end-users,rather than through channel partners such ast

125、he Company,and this could adversely affect our future sales.Many competitors compete based principally on price and may have lowercosts or accept lower selling prices than we do and,therefore,our gross margins may not be maintainable.Our gross margins have declinedhistorically and may continue to de

126、cline in the future.Our competitors may offer better or different products and servicesTable of Contents8than we offer.In addition,we do not have guaranteed purchasing volume commitments from our customers and,therefore,our sales volumemay be volatile.Our business is substantially dependent on a lim

127、ited number of customers and vendors,and the loss or any change in thebusiness habits of such key customers or vendors may have a material adverse effect on our financial position and results of operations.Because our standing arrangements and agreements with our customers and vendors typically cont

128、ain no purchase or sale obligations andare terminable by either party upon several months or otherwise relatively short notice,we are subject to significant risks associated withthe loss or change at any time in the business habits and financial condition of key customers or vendors.We have experien

129、ced the loss andchanges in the business habits of key customer and vendor relationships in the past and expect to do so again in the future.Sales of products purchased from our largest two vendors accounted for 30%of our 2021 purchases and sales from our largest fivevendors generated approximately 4

130、6%of 2021 purchases.As is the case with many of our vendor and customer relationships,ourcontractual arrangements with these large vendors are terminable by either party upon several months notice.If these contracts or ourrelationships with these vendors terminate for any reason,or if any of our oth

131、er significant vendor relationships terminate for any reason,and we are not able to sell or procure a sufficient supply of those products from alternative sources,or at all,our financial position andresults of operations would be adversely affected.Our vendors are subject to many if not all of the s

132、ame(or similar)risks and uncertaintiesto which we are subject,as well as other risks and uncertainties,and we compete with others for their business.Accordingly,we are at acontinual risk of loss of their business on account of a number of factors and forces,many of which are largely beyond our contr

133、ol.In 2021,our two largest customers accounted for 35%of our net sales and our largest five customers accounted for 51%of our netsales.If any of our significant customer relationships terminate for any reason,and we are not able to replace those customers andassociated revenues,our financial positio

134、n and results of operations would be adversely affected.Disruptions in our information technology and voice and data networks could affect our ability to service our clients and causeus to incur additional expenses.We believe that our success to date has been,and future results of operations likely

135、will be,dependent inlarge part upon our ability to provide prompt and efficient service to clients.Our ability to provide such services is dependent largely on theaccuracy,quality and utilization of the information generated by our IT systems,which affect our ability to manage our sales,client servi

136、ce,distribution,inventories and accounting systems and the reliability of our voice and data networks.Failure to adequately maintain the security of our electronic and other confidential information could materially adverselyaffect our financial condition and results of operations.We are dependent u

137、pon automated information technology processes.Privacy,security,and compliance concerns have continued to increase as technology has evolved to facilitate commerce and as cross-bordercommerce increases.As part of our normal business activities,we collect and store certain confidential information,in

138、cluding personalinformation of employees and information about partners and clients which may be entitled to protection under several regulatory regimes.In the course of normal and customary business practice,we may share some of this information with vendors who assist us with certainaspects of our

139、 business.Moreover,the success of our operations depends upon the secure transmission of confidential and personal dataover public networks,including the use of cashless payments.Although we did not have any material cybersecurity breaches in 2021,anyfailure on the part of us or our vendors to maint

140、ain the security of data we are required to protect,including via the penetration of ournetwork security and the misappropriation of confidential and personal information,could result in business disruption,damage to ourreputation,financial obligations to third parties,fines,penalties,regulatory pro

141、ceedings and private litigation with potentially large costs,and also result in deterioration in our employees,partners and clients confidence in us and other competitive disadvantages,and thuscould have a material adverse impact on our business,financial condition and results of operations.We depen

142、d on certain key personnel.Our future success will be largely dependent on the efforts of key management personnel forstrategic and operational guidance as well as relationships with our key vendors and customers.We also believe that our future success willbe largely dependent on our continued abili

143、ty to attract and retain highly qualified management,sales,service,finance and technicalpersonnel.We cannot assure you that we will be able to attract and retain such personnel.Further,we make a significant investment in thetraining of our sales account executives.OurTable of Contents9inability to r

144、etain such personnel or to train them either rapidly enough to meet our expanding needs or in an effective manner for quicklychanging market conditions could cause a decrease in the overall quality and efficiency of our sales staff,which,in turn,could have amaterial adverse effect on our business,re

145、sults of operations and financial condition.We may explore additional growth through acquisitions.During the prior year,we completed two acquisitions to add scale,broaden our geographic footprint,expand partner relationships and add cloud support capabilities.As part of our strategic growth plan,wem

146、ay pursue the acquisition of companies that either complement or expand our existing business.As a result,we regularly evaluatepotential acquisition opportunities,which may be material in size and scope.In addition to those risks to which our business and theacquired businesses are generally subject

147、,the acquisition of these businesses gives rise to transactional and transitional risks,and the riskthat the anticipated benefits will not be realized.When the Company makes acquisitions,it may take on additional liabilities or not be able to successfully integrate suchacquisitions.As part of the Co

148、mpanys history and strategic growth plan,it has acquired other businesses.Acquisitions involve numerousrisks,including the following:effectively combining the acquired operations,technologies,or products;unanticipated costs or assumed liabilities,including those associated with regulatory actions or

149、 investigations;not realizing the anticipated financial benefit from the acquired companies;diversion of managements attention;negative effects on existing customer and vendor partner relationships;andpotential loss of key employees of the acquired companies.Further,the Company has made,and may cont

150、inue to make acquisitions of,or investments in new services,businesses ortechnologies to expand its current service offerings and product lines.Some of these may involve risks that may differ from thosetraditionally associated with the Companys core distribution business,including undertaking produc

151、t or service warranty responsibilitiesthat in its traditional core business would generally reside primarily with its vendor partners.If the Company is not successful in mitigatingor insuring against such risks,it could have a material adverse effect on the Companys business.Our results of operation

152、s are subject to fluctuations in foreign currency.We have several foreign subsidiaries and conductbusiness in various countries and currencies.As result of these foreign operations,we have exposure to fluctuations in foreign currencyrates resulting primarily from the translation exposure associated

153、with the preparation of our consolidated financial statements.While ourconsolidated financial statements are reported in US dollars,the financial statements of our subsidiaries outside the US are prepared usingthe local currency as the functional currency and translated into US dollars.As a result,f

154、luctuations in the exchange rate of the US dollarrelative to the functional currencies of our subsidiaries could cause fluctuations in our results of operations.We also have foreign currencyexposure to the extent net sales and purchases are not denominated in a subsidiarys functional currency,which

155、could have an adverse effecton our business,results of operations,or cash flows.The Companys non-U.S.sales represent an increasing portion of its revenues,and consequently,the company is exposed torisks associated with operating internationally.In 2021 and 2020,approximately 22%and 12%,respectively,

156、of the Companys net salescame from its operations outside the United States.As a result of the Companys international sales and locations,its operations are subjectto a variety of risks that are specific to international operations,including the following:import and export regulations that could ero

157、de profit margins or restrict exports;the burden and cost of compliance with international laws,treaties,and technical standards and changes in those regulations;potential restrictions on transfers of funds;import and export tariffs,duties and value-added taxes;transportation delays and interruption

158、s;the burden and cost of compliance with complex multi-national tax laws and regulations;uncertainties arising from local business practices and cultural considerations;Table of Contents10foreign laws that potentially discriminate against companies which are headquartered outside that jurisdiction;s

159、tringent antitrust regulations in local jurisdictions;volatility associated with sovereign debt of certain international economies;the uncertainty surrounding the implementation and effects of Brexit;potential military conflicts and political risks;andcurrency fluctuations,which the company attempts

160、 to minimize through traditional hedging instruments.Legal and Regulatory RisksWe may be liable for misuse of our customers or employees information.Third-parties,such as hackers,could circumvent orsabotage the security practices and products used in our product and service offerings,and/or the secu

161、rity practices or products used in ourinternal IT systems,which could result in disclosure of sensitive or personal information,unauthorized procurement,or other businessinterruptions that could damage our reputation and disrupt our business.Attacks may range from random attempts to coordinated andt

162、argeted attacks,including sophisticated computer crime and advanced persistent threats.As our employees continue to work on a hybrid environment,which includes splitting time between working from the office andworking from home,as a result of the COVID-19 pandemic,we are highly reliant on the availa

163、bility and functionality of our informationsystems to enable for our operations.Working from home may increase risk of data loss,including privacy-related events.If ourinformation systems are not operational for reasons which may include cyber security attacks,data center failures,failures by teleco

164、mproviders to provide services to our business and to our employees homes,power failures,or failures of off-premise software such as SaaSbased software,our business and financial results may be adversely impacted.If third-parties or our employees are able to maliciously penetrate our network securit

165、y or otherwise misappropriate ourcustomers information or employees personal information,or other information for which our customers may be responsible and forwhich we agree to be responsible in connection with service contracts into which we may enter,or if we give third-parties or our employeesim

166、proper access to certain information,we could be subject to liability.This liability could include claims for unauthorized access todevices on our network;unauthorized access to our customers networks,hardware,applications,data,devices,or software;unauthorizedpurchases with credit card information;a

167、nd identity theft or other similar fraud-related claims.This liability could also include claims forother misuses of or inappropriate access to personal information.Other liability could include claims alleging misrepresentation of ourprivacy and data security practices.Any such liability for misapp

168、ropriation of this information could decrease our profitability.In addition,federal and state agencies have been investigating various companies regarding whether they misused or inadequately secured information.We could incur additional expenses when new laws or regulations regarding the use,safegu

169、arding,or privacy of information are enacted,orif governmental agencies require us to substantially modify our privacy or security practices.We could fail to comply with international anddomestic data privacy laws,the violation of which may result in audits,fines,penalties,litigation,or administrati

170、ve enforcement actionswith associated costs.Our operations are subject to numerous complex federal,state,provincial,local and foreign laws and regulations in a numberof areas,including labor and employment,advertising,e-commerce,tax,trade,import and export requirements,economic and tradesanctions,an

171、ti-corruption,data privacy requirements(including those under the European Union General Data Protection Regulationand the California Consumer Privacy Act),anti-competition,environmental and health and safety.The evaluation of,and compliancewith these laws,regulations and similar requirements may be

172、 onerous and expensive,and these laws and regulations may have otheradverse impacts on our business,results of operations or cash flows.Furthermore,these laws and regulations are evolving and may beinconsistent from jurisdiction to jurisdiction,further increasing the cost of compliance and doing bus

173、iness,and the risk of noncompliance.We have implemented policies and procedures designed to help ensure compliance with applicable laws and regulations,but therecan be no guarantee against coworkers,contractors or agents violating such laws and regulations orTable of Contents11our policies and proce

174、dures.As a public company,we also are subject to increasingly complex public disclosure,corporate governance andaccounting requirements that increase compliance costs and require significant management focus.The Company may be subject to intellectual property rights claims,which are costly to defend

175、,could require payment ofdamages or licensing fees and could limit the companys ability to use certain technologies in the future.Certain of the Companysproducts and services include intellectual property owned primarily by the Companys third-party vendor partners.Substantial litigation andthreats o

176、f litigation regarding intellectual property rights exist in the software and some service industries.From time to time,third parties(including certain companies in the business of acquiring patents not for the purpose of developing technology but with the intention ofaggressively seeking licensing

177、revenue from purported infringers)may assert patent,copyright and/or other intellectual property rights totechnologies that are important to the companys business.In some cases,depending on the nature of the claim,the Company may be ableto seek indemnification from its vendor partners for itself and

178、 its customers against such claims,but there is no assurance that it will besuccessful in obtaining such indemnification or that the Company is fully protected against such claims.Any infringement claim broughtagainst the Company,regardless of the duration,outcome,or size of damage award,could resul

179、t in substantial cost to the Company,divertmanagements attention and resources,be time consuming to defend,result in substantial damage awards,or cause product shipment delays.Additionally,if an infringement claim is successful the Company may be required to pay damages or seek royalty or licensearr

180、angements,which may not be available on commercially reasonable terms.The payment of any such damages or royalties maysignificantly increase the Companys operating expenses and harm the Companys operating results and financial condition.Also,royalty orlicense arrangements may not be available at all

181、.The Company may have to stop selling certain products or using technologies,whichcould affect the Companys ability to compete effectively.Our business could be negatively affected as a result of the actions of activist shareholders.Publicly traded companies haveincreasingly become subject to campai

182、gns by activist investors advocating corporate actions such as financial restructurings,increasedborrowings,special dividends,stock repurchases or even sales of assets or entire companies to third parties or the activists themselves.Responding to proxy contests and other actions by activist sharehol

183、ders can be costly and time-consuming,disrupt our operations and divertthe attention of our Board of Directors and senior management from the pursuit of business strategies,which could adversely affect ourresults of operations and financial condition.Additionally,perceived uncertainties as to our fu

184、ture direction as a result of shareholderactivism or changes to the composition of the Board of Directors may lead to the perception of a change in the direction of the business,instability or lack of continuity.These uncertainties may be more acute or heightened when an activist seeks to change a m

185、ajority of theBoard of Directors or ultimately desires to acquire the Company.Additionally,actions by activist shareholders may be exploited by ourcompetitors,cause concern to our current or potential customers,make it more difficult to attract and retain qualified personnel and maycreate adverse un

186、certainty for our employees.The interest rate of our credit facility is priced using LIBOR and is subject to risks associated with the transition from LIBORto an alternative reference rate that could adversely affect our business,operating results,and financial condition.LIBOR is the basicrate of in

187、terest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rateon loans globally.We typically use LIBOR as a reference rate in our credit facility.In July 2017,the U.K.s Financial Conduct Authority,which regulates LIBOR,announced th

188、at it intends to phase out LIBOR by the end of 2021 and while the transition period for many LIBORtenors has been extended to June 2023,the U.S.Federal Reserve advised banks to stop new LIBOR issuances by the end 2021.At this time,no consensus exists as to which reference rate or rates or benchmarks

189、 may become acceptable alternatives to LIBOR.The AlternativeReference Rates Committee,a steering committee comprised of U.S.financial market participants,has identified the secured overnightfinancing rate,or SOFR,as the recommended alternative rate for all LIBOR.At this time,it is impossible to pred

190、ict whether the SOFR oranother reference rate will become an accepted alternative to LIBOR.Any changes in the methods by which LIBOR is determined orregulatory activity related to LIBORs phaseout could cause LIBOR to perform differently than in the past or cease to exist.Further,theconsequences of t

191、hese developments,or any alternative reference rate that is adopted,cannot be entirely predicted but could include anincrease in the cost of our variable rate debt,which could adversely impact our interest expense,results of operations and cash flows.Table of Contents12Changes in accounting rules,or

192、 the misapplication of current accounting rules,may adversely affect our future financialresults.We prepare our financial statements in conformity with accounting principles generally accepted in the U.S.These accountingprinciples are subject to interpretation by the Financial Accounting Standards B

193、oard,the Public Company Accounting Oversight Board,theSEC,the American Institute of Certified Public Accountants(“AICPA”)and various other bodies formed to interpret and create appropriateaccounting policies.Future periodic assessments required by current or new accounting standards may result in no

194、ncash charges and/orchanges in presentation or disclosure.In addition,any change in accounting standards may influence our customers decision to purchasefrom us or finance transactions with us,which could have a significant adverse effect on our financial position or results of operations.We are req

195、uired to determine if we are the principal or agent in all transactions with our customers.The voluminous number ofproducts and services we sell,and the manner in which they are bundled,are technologically complex.Mischaracterization of theseproducts and services could result in misapplication of re

196、venue recognition polices.We use estimates where necessary,such as allowancefor doubtful accounts and product returns,which require judgment and are based on best available information.If we are unable toaccurately estimate the cost of these services or the timeline for completion of contracts,the p

197、rofitability of our contracts may be materiallyand adversely affected.Financial Risks and Market RisksOur quarterly financial results may fluctuate,which could lead to volatility in our stock price.Our revenue and operating resultshave fluctuated from quarter to quarter in the past and may continue

198、to do so in the future.As a result,you should not rely on quarter-to-quarter comparisons of our operating results as an indication of our future performance.Fluctuations in our revenue and operating resultscould negatively affect the trading price of our stock.In addition,our revenue and results of

199、operations may,in the future,be below theexpectations of analysts and investors,which could cause our stock price to decline.Factors that are likely to cause our revenue andoperating results to fluctuate include the risk factors discussed throughout this section.The Companys goodwill and identifiabl

200、e intangible assets could become impaired,which could reduce the value of its assetsand reduce its net income in the year in which the write-off occurs.Goodwill represents the excess of the cost of an acquisition over thefair value of the assets acquired.The Company also ascribes value to certain id

201、entifiable intangible assets,which consist primarily ofcustomer relationships and trade names,among others,as a result of acquisitions.The Company may incur impairment charges on goodwillor identifiable intangible assets if it determines that the fair values of the goodwill or identifiable intangibl

202、e assets are less than their currentcarrying values.The Company evaluates,on a regular basis,whether events or circumstances have occurred that indicate all,or a portion,ofthe carrying amount of goodwill or identifiable intangible assets may no longer be recoverable,in which case an impairment charg

203、e toearnings would become necessary.A decline in general economic conditions,a substantial increase in market interest rates,and increase in income tax rates,or thecompanys inability to meet long-term working capital or operating income projections could impact future valuations of the Companysrepor

204、ting units,and the company could be required to record an impairment charge in the future,which could impact the companysconsolidated balance sheets,as well as the companys consolidated statements of operations.If the Company were required to recognize animpairment charge in the future,the charge wo

205、uld not impact the companys consolidated cash flows,current liquidity,capital resources,and covenants under its existing revolving credit facility,North America asset securitization program,and other outstanding borrowings.The inability to obtain financing on favorable terms will adversely impact ou

206、r business,financial position and results ofoperations.Our business requires working capital to operate and to finance accounts receivable and product inventory that are not financedby trade creditors.We have historically relied upon cash generated from operations,revolving credit facilities and tra

207、de credit from ourvendors to satisfy our capital needs and finance growth.As the financial markets change,the cost of acquiring financing and the methods offinancing may change.Changes in our credit rating or other market factors may increase our interest expense or other costs of capital,orcapital

208、may not be available to us on competitive terms to fund our working capital needs.Table of Contents13We may not be able to continue to pay dividends on our Common Stock in the future,which could impair the value of ourCommon Stock.We have paid a quarterly dividend on our Common Stock since the first

209、 quarter of 2003.Any future declaration ofdividends remains subject to further determination from time to time by our Board of Directors.Our ability to pay dividends in the futurewill depend on our financial results,liquidity and financial condition.There is no assurance that we will be able to pay

210、dividends in thefuture,or if we are able to,that our Board of Directors will continue to declare dividends in the future,at current rates or at all.If wediscontinue or reduce the amount or frequency of dividends,the value of our Common Stock may be impaired.Risks related to our Common Stock.The exer

211、cise of options or any other issuance of shares by us may dilute your ownership ofour Common Stock.Trading volume in our Common Stock varies significantly based on a number of factors,which may be exacerbated byour repurchases of our Common Stock.As a result of the potentially low volume trading mar

212、ket for our stock,its market price mayfluctuate significantly more than the stock market as a whole or of the stock prices of similar companies.Without a larger float,ourCommon Stock will be less liquid than the stock of companies with broader public ownership,and,as a result,the trading prices for

213、ourCommon Stock may be more volatile.Among other things,trading of a relatively small volume of our Common Stock may have a greaterimpact on the trading price of our stock than would be the case if our public float were larger.Our Common Stock is listed on The NASDAQ Global Market,and we therefore a

214、re subject to continued listing requirements,including requirements with respect to the market value and number of publicly-held shares,number of stockholders,minimum bid price,number of market makers and either(i)stockholders equity or(ii)total market value of stock,total assets and total revenues.

215、If we fail tosatisfy one or more of the requirements,we may be delisted from The NASDAQ Global Market.If we do not qualify for listing on TheNASDAQ Capital Market,and if we are not able to list our Common Stock on another exchange,our Common Stock could be quoted onthe OTC Bulletin Board or on the“p

216、ink sheets”.As a result,we could face significant adverse consequences including,among others,alimited availability of market quotations for our securities and a decreased ability to issue additional securities or obtain additional financingin the future.General Risk FactorsGlobal and regional econo

217、mic and political conditions may have an adverse impact on our business.Weak economic conditionsgenerally,sustained uncertainty about global economic and political conditions,government spending cuts and the impact of newgovernment policies,or a tightening of credit markets,could cause our customers

218、 and potential customers to postpone or reduce spendingon technology products or services or put downward pressure on prices,which could have an adverse effect on our business,results ofoperations or cash flows.For example,there continues to be substantial uncertainty regarding the economic impact o

219、f the UKs exit fromthe European Union(EU),referred to as Brexit.The UK formally withdrew from EU membership on January 31,2020 and commenceda transition period during which the trading relationship between the UK and the EU will remain the same and the UK and EU will beginnegotiations to determine t

220、heir future relationship.Although the full effects of Brexit are uncertain and will be dependent on the outcome ofsuch negotiations,potential adverse consequences of Brexit include global market uncertainty,volatility in currency exchange rates,greaterrestrictions on imports and exports between the

221、UK and other countries,and increased regulatory complexities,each of which could have anegative impact on our business,financial condition or results of operations.These effects may be amplified if the UK and the EU fail toagree on a future trade relationship,which could result in significant market

222、 and economic disruption.We have established a presence in theNetherlands to help address future developments,as needed,for Brexit,which could add complexity to our European operations as well asresult in higher costs associated with serving our customers following the transition period.If the Compa

223、ny fails to maintain an effective system of internal controls or discovers material weaknesses in its internalcontrols over financial reporting,it may not be able to report its financial results accurately or timely or detect fraud,which could havea material adverse effect on its business.An effecti

224、ve internal control environment is necessary for the Company to produce reliablefinancial reports and is an important part of its effort to prevent financial fraud.The Company is required to annually evaluate theeffectiveness of the design and operation of its internal controls over financial report

225、ing.Based on these evaluations,the Company mayconclude that enhancements,modifications,or changes to internal controls are necessary or desirable.While management evaluates theeffectiveness of the Companys internal controls on a regular basis,these controls may not always be effective.There are inhe

226、rentlimitations on theTable of Contents14effectiveness of internal controls,including collusion,management override,and failure in human judgment.In addition,control proceduresare designed to reduce rather than eliminate financial statement risk.If the Company fails to maintain an effective system o

227、f internalcontrols,or if management or the Companys independent registered public accounting firm discovers material weaknesses in theCompanys internal controls,it may be unable to produce reliable financial reports or prevent fraud,which could have a material adverseeffect on the Companys business.

228、In addition,the Company may be subject to sanctions or investigation by regulatory authorities,such asthe SEC or the NASDAQ.Any such actions could result in an adverse reaction in the financial markets due to a loss of confidence in thereliability of the Companys financial statements,which could cau

229、se the market price of its Common Stock to decline or limit theCompanys access to capital.Changes in income tax and other regulatory legislation.We operate in compliance with applicable laws and regulations andmake plans for our structure and operations based upon existing laws and anticipated futur

230、e changes in the law.When new legislation isenacted with minimal advance notice,or when new interpretations or applications of existing laws are made,we may need to implementchanges in our policies or structure.We are susceptible to unanticipated changes in legislation,especially relating to income

231、and othertaxes,import/export laws,hazardous materials and other laws related to trade,accounting and business activities.Such changes inlegislation may have an adverse effect on our business.We may be subject to litigation.We may be subject to legal claims or regulatory matters involving stockholder

232、,consumer,antitrust,intellectual property and other issues.Litigation is subject to inherent uncertainties,and unfavorable rulings could occur.Anunfavorable ruling could include monetary damages or other adverse effects.Were an unfavorable ruling to occur,there exists thepossibility of a material ad

233、verse impact on our business,financial position and results of operations for the period in which the rulingoccurred or future periods.Item 1B.Unresolved Staff CommentsNot applicable.Item 2.PropertiesThe Company leases approximately 20,000 square feet of space in Eatontown,New Jersey for its corpora

234、te headquarters under alease expiring in April 2027.Total annual rent expense for this premise is approximately$420,000.Commencing in the first quarter of2022,the Company will be subleasing approximately 7,165 square feet of this space under a sublease expiring in April 2027.Total annualsublease inc

235、ome for this space will be approximately$135,000.The Company also leases 7,800 square feet of warehouse space in Eatontown,New Jersey under a lease expiring in December2023.Total annual rent expense for such warehouse space is approximately$60,000.The Company also leases office space in the UnitedKi

236、ngdom under a lease expiring in April 2026.Total annual rent expense for this premise is approximately$70,000.We believe that each of the properties is in good operating condition and that such properties are adequate for the operation of theCompanys business as currently conducted.We also rent smal

237、ler satellite offices on a short-term basis.Item 3.Legal ProceedingsWe are involved from time to time in routine legal matters and other claims incidental to our business.We review outstandingclaims and proceedings internally and with external counsel as necessary to assess probability and amount of

238、 potential loss.There are nomaterial legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.Item 4.Mine Safety DisclosuresNot applicable.Table of Contents15PART IIItem 5.Market for Registrants Common Equity,Related Stockholder Ma

239、tters and Issuer Purchases of Equity SecuritiesMarket InformationShares of our Common Stock,par value$0.01,trade on The NASDAQ Global Market under the symbol“WSTG”.DividendsIn each of 2021 and 2020,we declared dividends totaling$0.68 per share on our Common Stock.The payment of future dividendsis at

240、 the discretion of our Board of Directors and dependent on results of operations,projected capital requirements and other factors theBoard of Directors may find relevant.There can be no assurance that we will continue to pay comparable cash dividends in the future.Shareholder InformationAs of Februa

241、ry 15,2022,there were approximately 22 record holders of our Common Stock.This figure does not include anestimate of the number of beneficial holders whose shares are held of record by brokerage firms and clearing agencies.Table of Contents16Purchases of Equity SecuritiesDuring the fourth quarter of

242、 2021,we repurchased shares of our Common Stock as follows:Maximum Number of Total NumberShares That of SharesMay Yet Be Purchased asPurchasedTotalAveragePart of PubliclyUnder the NumberPrice PaidAnnouncedAverage Plans or of SharesPer SharePlans orPrice PaidPrograms PeriodPurchased(2)ProgramsPer Sha

243、re(3)October 1,2021-October 31,2021$547,288November 1,2021-November 30,2021 4,990(1)$29.92$547,288December 1,2021-December 31,2021$547,288Total 4,990$29.92$547,288(1)Represents 4,990 shares surrendered to the Company by employees to satisfy individual tax withholding obligations upon vesting ofprevi

244、ously issued shares of Restricted Stock.These shares are not included in the Common Stock repurchase program referred to infootnote(3)below.(2)Average price paid per share reflects the closing price of the Companys Common Stock on the business date the shares weresurrendered by the employee stockhol

245、der to satisfy individual tax withholding obligations upon vesting of Restricted Stock or the priceof the Common Stock paid on the open market purchase,as applicable.(3)On December 3,2014,the Board of Directors of the Company approved an increase of 500,000 shares of Common Stock to the numberof sha

246、res of Common Stock available for repurchase under its repurchase plans.On February 2,2017,the Board of Directors of theCompany approved an increase of 500,000 shares of Common Stock to the number of shares of Common Stock available for repurchaseunder its repurchase plans.The Company expects to pur

247、chase shares of its Common Stock from time to time in the market or otherwisesubject to market conditions.The Common Stock repurchase program does not have an expiration date.Item 6.ReservedItem 7.Managements Discussion and Analysis of Financial Condition and Results of OperationsThe following manag

248、ements discussion and analysis of the Companys financial condition and results of operations should beread in conjunction with the Companys Consolidated Financial Statements and the Notes thereto.This discussion and analysis contains,in addition to historical information,forward-looking statements t

249、hat involve risks and uncertainties.Our actual results may differmaterially from those anticipated in these forward-looking statements as a result of certain risks and uncertainties,including those set forthunder the heading“Risk Factors”and elsewhere in this report.OverviewOur Company is a value ad

250、ded IT distribution and solutions company,primarily selling software and other third-party IT productsand services through two reportable operating segments.Through our“Distribution”segment we sell products and services to corporateresellers,value added resellers(VARs),consultants and systems integr

251、ators worldwide,who in turn sell these products to end users.Through our“Solutions”segment we act as a cloud solutions provider and value-added reseller,selling computer software and hardwaredeveloped by others and provide technical services directlyTable of Contents17to end user customers worldwide

252、.We offer an extensive line of products from leading software vendors and tools for virtualization/cloudcomputing,security,networking,storage and infrastructure management,application lifecycle management and other technicallysophisticated domains as well as computer hardware.We market these product

253、s through creative marketing communications,including ourweb sites,local and on-line seminars,webinars,social media,direct e-mail,and printed materials.We have subsidiaries in the United States,Canada,Netherlands,United Kingdom and Ireland,through which sales are made.COVID-19We continue to closely

254、monitor the impact of the COVID-19 pandemic on all aspects of our business.COVID-19 continues tocreate macroeconomic uncertainty,volatility and disruption,including supply constraints.The supply constraints are being caused primarilyby component availability,resulting in extended lead times and unpr

255、edictability.In 2021,customer top priorities have been digitaltransformation,security,hybrid and cloud solutions,client devices,and preparing for workers to return to the office and enhancing remoteenablement capabilities as hybrid environments become the future work model.We have orchestrated solut

256、ions by leveraging clientdevices,accessories,collaboration tools,security,software and hybrid and cloud offerings to help customers build these capabilities andachieve their objectives.Our employees continue to work in a hybrid environment,which includes splitting time between working from the offic

257、e andworking from home,as a result of the COVID-19 pandemic.While we did not incur significant disruptions to our operations during the year ended December 31,2021 as a result of theCOVID-19 pandemic,as the duration and ongoing economic impacts of the COVID-19 pandemic remain uncertain,we are unable

258、 topredict the future impact this will have on our business,liquidity or results of operations at this time.Technology trends could also changeas customers consider the impact of the COVID-19 pandemic on their operations.This situation is changing rapidly,and additional impacts may arise that we are

259、 not aware of currently.We will continue toactively monitor the situation and may take further actions that alter our business operations as may be required by federal,state or localauthorities or that we determine are in the best interests of our employees,customers and shareholders.Factors Influen

260、cing Our Financial ResultsWe derive most of our net sales though the sale of third-party software licenses,maintenance and service agreements.In ourDistribution segment,sales are impacted by the number of product lines we distribute,and sales penetration of those products into thereseller channel,pr

261、oduct lifecycle competitive,and demand characteristics of the products which we are authorized to distribute.In ourSolutions segment sales are generally driven by sales force effectiveness and success in providing superior customer service and cloudsolutions support,competitive pricing,and flexible

262、payment solutions to our customers.Our sales are also impacted by external factors suchas levels of IT spending and customer demand for products we distribute.We sell in a competitive environment where gross product margins have historically declined due to competition and changes inproduct mix towa

263、rds products where no delivery of a physical product is required.In addition,we grant discounts,allowances,and rebatesto certain customers,which may vary from period to period,based on volume,payment terms and other criteria.To date,we have been ableto implement cost efficiencies such as the use of

264、drop shipments,electronic ordering(“EDI”)and other capabilities to be able to operate ourbusiness profitably as gross margins have declined.We evaluate the profitability of our business based on return on equity and effectivemargin(see discussion below).Gross profit is calculated as net sales less c

265、ost of sales.We record customer rebates,discounts and returns as a component of netsales and record vendor rebates,discounts and returns as a component of cost of sales.Table of Contents18Selling,general and administrative expenses are comprised mainly of employee salaries,commissions and other empl

266、oyee relatedexpenses,facility costs,costs to maintain our IT infrastructure,public company compliance costs and professional fees.We monitor ourlevel of accounts payable,inventory turnover and accounts receivable turnover which are measures of how efficiently we utilize capital inour business.The Co

267、mpanys sales,gross profit and results of operations have fluctuated and are expected to continue to fluctuate on a quarterlybasis as a result of a number of factors,including but not limited to:the condition of the software industry in general,shifts in demand forsoftware products,pricing,industry s

268、hipments of new software products or upgrades,fluctuations in merchandise returns,adverse weatherconditions that affect response,distribution or shipping,shifts in the timing of holidays and changes in the Companys product offerings.The Companys operating expenditures are based on sales forecasts.If

269、 sales do not meet expectations in any given quarter,operating resultsmay be materially adversely affected.Dividend Policy and Share Repurchase Program.Historically we have sought to return value to investors through the payment ofquarterly dividends and share repurchases.Total dividends paid and th

270、e dollar value of shares repurchased were$3.0 million and$0.5million for the year ended December 31,2021,respectively,and$3.0 million and$3.7 million for the year ended December 31,2020,respectively.The payment of future dividends is at the discretion of our Board of Directors and dependent on resul

271、ts of operations,projected capital requirements and other factors the Board of Directors may find relevant.Stock Volatility.The technology,distribution and services sectors of the United States stock markets is subject to substantialvolatility.Numerous conditions which impact these sectors or the st

272、ock market in general or the Company in particular,whether or not suchevents relate to or reflect upon the Companys operating performance,could adversely affect the market price of the Companys CommonStock.Furthermore,fluctuations in the Companys operating results,announcements regarding litigation,

273、the loss of a significant vendorpartner or customer,increased competition,reduced vendor incentives and trade credit,higher operating expenses,and other developments,could have a significant impact on the market price of our Common Stock.Financial OverviewNet sales increased 12%,or$31.0 million,to$2

274、82.6 million for the year ended December 31,2021,compared to$251.6 millionfor the same period in 2020.Gross profit increased 38%,or$12.7 million,to$45.7 million for the year ended December 31,2021,compared to$33.0 million for the same period in 2020.Selling,general and administrative(“SG&A”)expenses

275、 increased 34%,or$8.2million,to$32.1 million for the year ended December 31,2021,compared to$23.9 million for the same period in 2020.There were nolegal and financial advisory expenses,net-unsolicited bid and related matters for the year ended December 31,2021 compared to$1.6million in expense for t

276、he same period in 2020.There were no acquisition related costs for the year ended December 31,2021 compared to$1.5 million in expense for the same period in 2020.Amortization and depreciation expense increased$0.8 million to$1.5 million for theyear ended December 31,2021 compared to$0.7 million for

277、the same period in the prior year.Net income was$9.2 million for the yearended December 31,2021 compared to$4.5 million for the same period in 2020.Income per diluted share was$2.09 for the year endedDecember 31,2021 compared to$1.01 for the same period in 2020.Critical Accounting Policies and Estim

278、atesManagements discussion and analysis of the Companys financial condition and results of operations are based upon theCompanys Consolidated Financial Statements that have been prepared in accordance with generally accepted accounting principles in theUnited States of America(“US GAAP”).The prepara

279、tion of these financial statements requires the Company to make estimates andjudgments that affect the reported amounts of assets,liabilities,revenues and expenses,and related disclosure of contingent assets andliabilities.On an on-going basis,the Company evaluates its estimates,including those rela

280、ted to product returns,bad debts,inventories,investments,intangible assets,income taxes,stock-based compensation,contingencies and litigation.Table of Contents19The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonableunder the circu

281、mstances,the results of which form the basis for making judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources.Actual results may differ from these estimates.The Company believes the following critical accounting policies used in the preparation

282、 of its Consolidated Financial Statementsaffect its more significant judgments and estimates.RevenueThe Company utilizes judgment regarding performance obligations inherent in the products for services it sells including,whetherongoing maintenance obligations performed by third party vendors are dis

283、tinct from the related software licenses,and allocation of salesprices among distinct performance obligations.These estimates require significant judgment to determine whether the softwaresfunctionality is dependent on ongoing maintenance or if substantially all functionality is available in the ori

284、ginal software download.Wealso use judgment in the allocation of sales proceeds among performance obligations,utilizing observable data such as stand-alone sellingprices,or market pricing for similar products and services.Allowances for Accounts ReceivableThe Company maintains allowances for doubtfu

285、l accounts for estimated losses resulting from the inability of its customers tomake required payments.Management determines the estimate of the allowance for uncollectible accounts receivable by considering anumber of factors,including historical experience,aging of the accounts receivable,and spec

286、ific information obtained by the Company onthe financial condition and the current creditworthiness of its customers.If the financial condition of the Companys customers were todeteriorate,resulting in an impairment of their ability to make payments,additional allowances may be required.At the time

287、of sale,werecord an estimate for sales returns based on historical experience,which is included in accounts payable and accrued expenses on theConsolidated Balance Sheets.If actual sales returns are greater than estimated by management,additional expense may be incurred.Accounts Receivable Long Term

288、The Companys accounts receivable long-term are discounted to their present value at prevailing market rates at the time of sale.In doing so,the Company considers competitive market rates and other relevant factors.Inventory AllowancesThe Company writes down its inventory for estimated obsolescence o

289、r unmarketable inventory equal to the difference between thecost of inventory and the estimated market value based upon assumptions about future demand and market conditions.If actual marketconditions are less favorable than those projected by management,additional inventory write-offs may be requir

290、ed.Business CombinationsThe Company accounts for business combinations using the acquisition method of accounting,which allocates the fair value of thepurchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.The excessof the p

291、urchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.When determining thefair values of assets acquired and liabilities assumed,management makes significant estimates and assumptions.The Company may utilizethird-party valuation specialists t

292、o assist the Company in the allocation.Initial purchase price allocations are subject to revision within themeasurement period,not to exceed one year from the date of acquisition.Acquisition-related expenses and transaction costs associated withbusiness combinations are expensed as incurred.Table of

293、 Contents20GoodwillWe test goodwill for impairment on an annual basis and between annual tests if an event occurs,or circumstances change,thatwould more likely than not reduce the fair value of a reporting unit below its carrying amount.The Company performs an evaluation ofgoodwill,utilizing either

294、a qualitative or quantitative impairment test.The annual test for impairment is conducted as of October 1.TheCompanys reporting units included in the assessment of potential goodwill impairment are the same as its operating segments.Goodwill isnot amortized but is subject to periodic testing for imp

295、airment at the reporting unit level.In a qualitative assessment,we assess qualitative factors to determine whether it is more likely than not(that is,a likelihood ofmore than 50 percent)that the fair value of a reporting unit is less than its carrying amount,including goodwill.If,after assessing the

296、totality of events or circumstances,we determine that it is not more likely than not that the fair value of a reporting unit is less than itscarrying amount,then the quantitative goodwill impairment test is unnecessary.If,after assessing the totality of events or circumstances,we determine that it i

297、s more likely than not that the fair value of areporting unit is less than its carrying amount,then we perform the quantitative goodwill impairment test.We may also elect theunconditional option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to perform

298、ing thequantitative goodwill impairment test.In the quantitative impairment test,we compare the fair value of a reporting unit with its carrying amount,including goodwill.Ifthe fair value of a reporting unit exceeds its carrying amount,goodwill of the reporting unit is considered not impaired.Conver

299、sely,if thecarrying amount of a reporting unit exceeds its fair value,an impairment loss shall be recognized in an amount equal to that excess,limitedto the total amount of goodwill allocated to that reporting unit.Determining the fair value of a reporting unit is judgmental in nature and requires t

300、he use of significant estimates and assumptions,including net sales growth rates,gross profit margins,operating margins,discount rates and future market conditions,among others.Anychanges in the judgments,estimates or assumptions used could produce significantly different results.Intangible AssetsIn

301、tangible assets with determinable lives are amortized on a straight-line basis over their respective estimated useful lives,which isdetermined based on their expected period of benefit.Intangible assets are reviewed for impairment when events or changes incircumstances indicate that the carrying amo

302、unt of such assets may not be recoverable.Determination of recoverability is based on anestimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition.If the carrying amount of an assetexceeds its estimated future undiscounted cash flows,an impairment los

303、s is recorded for the excess of the assets carrying amount over itsfair value.In addition,each quarter,the Company evaluates whether events and circumstances warrant a revision to the remaining estimateduseful life of each of these intangible assets.If the Company were to determine that a change to

304、the remaining estimated useful life of anintangible asset was necessary,then the remaining carrying amount of the intangible asset would be amortized prospectively over thatrevised remaining useful life.Income TaxesThe Company has considered future taxable income and ongoing prudent and feasible tax

305、 planning strategies in assessing the needfor the valuation allowance related to deferred tax assets.In the event the Company were to determine that it would not be able to realize allor part of its net deferred tax assets in the future,an adjustment to the deferred tax assets would be charged to in

306、come in the period suchdetermination was made.Table of Contents21Share-Based PaymentsUnder the fair value recognition provision,stock-based compensation cost is measured at the grant date based on the fair value ofthe award and is recognized as expense on a straight-line basis over the requisite ser

307、vice period.We make certain assumptions in order tovalue and expense our various share-based payment awards.In connection with our restricted stock programs we record the forfeitureswhen they occur.We review our valuation assumptions periodically and,as a result,we may change our valuation assumptio

308、ns used tovalue stock-based awards granted in future periods.Such changes may lead to a significant change in the expense we recognize inconnection with share-based payments.Foreign ExchangeThe Companys foreign currency exposure relates primarily to international transactions where the currency coll

309、ected fromcustomers can be different from the currency used to purchase the product.In cases where the Company is not able to create a natural hedgeby maintaining offsetting asset and liability amounts in the same currency,it may enter into foreign exchange contracts,typically in theform of forward

310、purchase agreements,to facilitate the hedging of foreign currency exposures to mitigate the impact of changes in foreigncurrency exchange rates.These contracts generally have terms of no more than two months.The Company does not apply hedge accountingto these contracts and therefore the changes in f

311、air value are recorded in earnings.The Company does not enter into foreign exchangecontracts for trading purposes and the risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties,whichthe Company minimizes by limiting its counterparties to major financial insti

312、tutions.The fair value of forward purchase contracts atDecember 31,2021 was not material to the consolidated financial statements.Recently Issued Accounting PronouncementsIn June 2016,the FASB issued Accounting Standards Update No.2016-13,“Financial Instruments-Credit Losses(Topic 326)”(ASU 2016-13)

313、.ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when suchlosses are recorded.Originally,ASU 2016-13 was effective for fiscal years,and for interim periods within those fiscal years,beginningafter December 15,2019,with early adoption permitt

314、ed.In November 2019,FASB issued ASU 2019-10,“Financial Instruments CreditLosses(Topic 326),Derivatives and Hedging(Topic 815),and Leases(Topic 842).”This ASU defers the effective date of ASU 2016-13for public companies that are considered smaller reporting companies as defined by the SEC to fiscal y

315、ears beginning after December 15,2022,including interim periods within those fiscal years.The Company is planning to adopt this standard in the first quarter of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No.2016-13 on its Consolidated Fina

316、ncialStatements,particularly its recognition of allowances for accounts receivable.Table of Contents22Results of OperationsThe following table sets forth for the years indicated the percentage of net sales represented by selected items reflected in theCompanys Consolidated Statements of Earnings.The

317、 year-to-year comparison of financial results is not necessarily indicative of futureresults:Year endedDecember 31,2021 2020 Net sales 100.0%100.0%Cost of sales 83.8 86.9 Gross profit 16.2 13.1 Selling,general and administrative expenses 11.4 9.5 Legal and financial advisory expenses,net-unsolicited

318、 bid and related matters 0.6Acquisition related costs 0.6Amortization and depreciation expense 0.5 0.3Income from operations 4.3 2.1 Other(expense)income 0.1 0.4 Income before income taxes 4.4 2.5 Income tax provision 1.1 0.7 Net income 3.3%1.8%Non-GAAP Financial MeasuresOur management monitors seve

319、ral financial and non-financial measures and ratios on a regular basis in order to track the progressof our business.We believe that the most important of these measures and ratios include net sales,adjusted gross billings,gross profit,netincome,net income excluding separation expenses,net of taxes,

320、adjusted EBITDA,gross profit as a percentage of adjusted gross billingsand adjusted EBITDA as a percentage of gross profit.We use a variety of operating and other information to evaluate the operatingperformance of our business,develop financial forecasts,make strategic decisions,and prepare and app

321、rove annual budgets.These keyindicators include financial information that is prepared in accordance with US GAAP and presented in our Consolidated FinancialStatements as well as non-US GAAP performance measurement tools.Year endedDecember 31,December 31,Reconciliation of net sales to adjusted gross

322、 billings(Non-GAAP):20212020Net sales$282,582$251,568Costs of sales related to sales where the Company is an agent652,396477,671Adjusted gross billings$934,978$729,239Table of Contents23We define adjusted gross billings as net sales in accordance with US GAAP,adjusted for the cost of sales related t

323、o sales wherethe Company is an agent.We provided a reconciliation of adjusted gross billings to net sales,which is the most directly comparable USGAAP measure.We use adjusted gross billings of product and services as a supplemental measure of our performance to gain insight intothe volume of busines

324、s generated by our business,and to analyze the changes to our accounts receivable and accounts payable.Our use ofadjusted gross billings of product and services as analytical tools has limitations,and you should not consider them in isolation or assubstitutes for analysis of our financial results as

325、 reported under US GAAP.In addition,other companies,including companies in ourindustry,might calculate adjusted gross billings of product and services or similarly titled measures differently,which may reduce theirusefulness as comparative measures.Year endedDecember 31,December 31,Net income reconc

326、iled to adjusted EBITDA:2021 2020Net income$9,198$4,474Provision for income taxes 3,166 1,746Amortization and depreciation 1,529 704Interest expense 68 116EBITDA 13,961 7,040Share-based compensation 1,546 1,278Legal and financial advisory expenses,net-unsolicited bid and related matters-1,586Acquisi

327、tion related costs-1,518Adjusted EBITDA$15,507$11,422We define adjusted EBITDA,as net income,plus provision for income taxes,depreciation,amortization,share-basedcompensation,interest,legal and financial advisory expenses,net unsolicited bid and related matters and acquisition related costs.Wedefine

328、 effective margin as adjusted EBITDA as a percentage of gross profit.We provided a reconciliation of adjusted EBITDA to netincome,which is the most directly comparable US GAAP measure.We use adjusted EBITDA as a supplemental measure of ourperformance to gain insight into our businesses profitability

329、 when compared to the prior year and our competitors.Adjusted EBITDA isalso a component to our financial covenants in our credit facility.Our use of adjusted EBITDA has limitations,and you should not considerit in isolation or as a substitute for analysis of our financial results as reported under U

330、S GAAP.In addition,other companies,includingcompanies in our industry,might calculate adjusted EBITDA,or similarly titled measures differently,which may reduce their usefulness ascomparative measures.Table of Contents24Key Financial MetricsYear endedDecember 31,December 31,20212020Net sales$282,582$

331、251,568Adjusted gross billings(Non-GAAP)$934,978$729,239Gross profit$45,716$33,040Gross profit-Distribution$36,526$29,136Gross profit-Solutions$9,190$3,904Adjusted EBITDA(Non-GAAP)$15,507$11,422Gross margin%-Adjusted gross billings(Non-GAAP)4.9%4.5%Effective margin%-Adjusted EBITDA(Non-GAAP)33.9%34.

332、6%We consider gross profit growth and effective margin to be key metrics in evaluating our business.During the year endedDecember 31,2021,gross profit increased 38%,or$12.7 million,to$45.7 million compared to$33.0 million for the same period in 2020while effective margin decreased 70 basis points to

333、 33.9%compared to 34.6%for the same period in 2020.Year Ended December 31,2021 Compared to Year Ended December 31,2020AcquisitionsOn April 30,2020 we completed the acquisition of Interwork Technologies Inc.(“Interwork”)for a purchase price of$3.6 million,subject to certain working capital adjustments,and a potential earnout of$0.8 million payable approximately one year after the acquisitiondate.T