CLMB - NASDAQ

Good morning, everyone, and thank you for participating in today's conference call to discuss Climb Global Solutions financial results for the fourth quarter and full year ended December 31, 2023. Joining us today are Climb's CEO, Mr. Dale Foster; the company's CFO, Mr. Drew Clark; and the company's Investor Relations Advisor, Mr. Sean Mansouri, with Elevate IR. By now, everyone should have access to the fourth quarter and full year 2023 earnings press release, which was issued yesterday afternoon at approximately 4:05 p.m. Eastern Time. The release is available in the Investor Relations section of Climb Global Solutions website at www.climbgobalsolutions.com. This call will also be available for webcast replay on the company's website. Following management remarks, we'll open up the call for your questions. I'd now like to turn the call over to Mr. Mansouri for introductory comments. Please proceed.

Thank you. Before I introduce Dale, I'd like to remind listeners that certain comments made on this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements. Our presentation also includes certain non-GAAP financial measures, including adjusted gross billings, adjusted EBITDA, adjusted net income and EPS, as well as effective margin, as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation charts and other important information in the earnings press release and Form 8-K we furnished to the SEC yesterday. I'll now turn the call over to Climb's CEO, Dale Foster.

Thank you, Sean. And good morning, everyone. Our Q4 performance capped off another exceptional year for Climb as we generated record results in all of our key financial metrics and delivered on our acquisition objectives. These results were driven by continued focus on our core initiatives and the integration of DataSolutions which was acquired in October of 2023 and immediately benefited our top and bottom line. We also continue to generate organic growth in both the U.S. And Europe as we deepened our relationships with customers along with adding strategic vendors to our line card. As a brief reminder on our acquisition of DataSolutions, a leading distributor of cloud and security solutions in Ireland and the UK, their team brings a long-standing network of relationships to clients such as Check Point, Citrix, HPE Aruba to state a few. DataSolutions also carries a robust recurring revenue base with more than 90% of its fiscal 2023 revenue coming from existing reseller partners. We are actively identifying cross selling opportunities and cost synergies and look forward to unlocking additional benefits as we further integrate DataSolutions into our financial and operating workflows. Throughout 2023, we evaluated a robust pipeline of emerging vendors as we were very thoughtful in selecting the right partners to add to our line card. We are focused on targeting and signing vendors that fit into our ecosystem and bring disruptive technology to the marketplace. For perspective, in Q4, we evaluated 13 vendors but signed agreements with only four of them. Quickly touching on a few of these wins, first, we launched a partnership with DNSFilter, a leading threat detection and content filtering application that redefines how organizations secure their largest threat vector, which is the Internet itself. DNSFilter utilizes machine learning to protect over 26 million monthly users from phishing, malware and advanced security threats. Next, we partner with Kiteworks, a compliance and security application that enables organizations to identify, track, control and secure sensitive content communications under a single platform. Kiteworks protects over 35 million end users for almost or most 4,000 global enterprise and government agencies. We are thrilled to kick off our partnership with each of these innovative technologies and we look forward to building prosperous relationships with each of these vendors as we expand their reach throughout the channel. As we have often stated in the past, our goal is to build deep and meaningful relationships with our partners and vendors. It is a differentiator between us and our large competitors. As a testament to our commitment, in November, we were named one of CDW's 2023 Distributors of the Year for providing a customer first relationship, as well as exemplary products, services and solutions to support the CDW partnership and our customers. We have grown side by side with CDW for more than 20 years as partners as we look forward to building on our mutual success in the years to come. In addition to CDW's Partner of the Year, Climb was awarded Wasabi Technology Distributor of the Year Award in both North America and EMEA. We are honoured to be recognized as Wasabi's Distributor of Choice and are excited to capitalize the momentum for 2023 into the year ahead. Turning to personal development. In November, we announced the appointment of Kim Stevens to Worldwide VP of Marketing. Kim assumed the global marketing responsibility for Climb, including the creation of and execution of comprehensive marketing strategy, branding and also partner marketing. Kim’s appointment is part of a long-term growth strategy to expand our reseller coverage, operations and marketing presence. We are thrilled to have Kim to lead our global marketing efforts to align our branding as we further scale our footprint in the U.S. and overseas. Looking ahead to our strategy, it remains unchanged. Leverage our global footprint and drive organic growth, expanding our line card to the most innovative companies in the market. We will also continue to pursue M&A opportunities in both the U.S. and overseas that can broaden our geographic footprint and expand out vendor reach and also serve us in solution offerings. Between a robust balance sheet, a growing pipeline of prospective vendors and a proven track record of accretive acquisitions, we are well positioned to continue driving shareholder value. With that, I will turn the call over to our CFO, Drew Clark, to take you through the financial results. Drew?

Thank you, Dale. Good morning, everyone. As I've noted before, Dale gets to share all the fun exciting aspects of our business and I'm stuck with discussing another boring record quarter in terms of our operating and financial results. Quick reminder, as we review the financial results for our fourth quarter, all comparisons and variance commentary referred to the prior year quarter unless otherwise specified. Okay, let's jump into the results. As reported in our earnings press release, adjusted gross billings or AGB, which we all know is a non-GAAP measure, increased 24% to $397 million compared to $319.8 million in the year ago quarter. Net sales in the fourth quarter of 2023 increased 20% to $106.8 million compared to $88.9 million which primarily reflects organic growth from new and existing vendors as well as contributions from our acquisition of DataSolutions in October of 2023. As we've often stated, we focus on AGB as the true metric of our top line growth as the calculation of net sales is influenced by product mix and the respective adjustment to convert AGB to net sales for financial reporting purposes under GAAP. In the fourth quarter, net sales grew at a lower rate because of the impact of DataSolutions, which sells HPE Aruba appliances in connection with Citrix and the aforementioned product mix quarter-to-quarter. Gross profit in the fourth quarter increased 31% to $21.1 million compared to $16.1 million. Again, the increase was primarily driven by organic growth from new vendors in our existing top 20 vendors in North America and Europe, as well as the contribution from DataSolutions. Gross profit as a percentage of AGB increased to 5.3% compared to 5% in the prior period and was positively impacted by DataSolutions and our vendor mix in the quarter. SG&A expenses in the 4th quarter were $12.4 million compared to $9.1 million in the same period in 2022. SG&A as a percentage of AGB was 3.1% compared to 2.9% in the year ago period. The dollar growth included $1.8 million from DataSolutions and expenses associated with sales performance in terms of increased commissions and our human capital, base salaries, benefits, bonuses and stock compensation, all of which were in line with our budget and expectations. Net income in the fourth quarter of 2023 increased 10% to $5.2 million or $1.15 per diluted share compared to $4.8 million or $1.06 per diluted share for the comparable period in 2022. As mentioned in our press release, earnings per diluted share in the fourth quarter of 2023 was negatively impacted by $0.09 in foreign exchange currency and $0.06 in fees associated with the acquisition of DataSolutions. Adjusted EBITDA in the fourth quarter increased 24% to $9.2 million compared to $7.4 million in the prior period. The increase, as previously noted, was primarily driven by organic growth as well as the contribution from DataSolutions. Adjusted EBITDA as a percentage of gross profit or effective margin was 43.7% compared to 45.9% in the year ago period. Our fourth quarter was impacted by the continued early pay discount taken by our key DMRs, which we expect to be the norm as we head into 2024, so future comparisons to the prior year will be comparable. Early pay in the quarter was $900,000 or 230 basis points, which would have generated a 46% effective margin on an apples-to-apples comparison. Again, as we move forward into 2024, we believe that the 2024 comparisons to 2023 will be comparable, so we will no longer have to discuss early pay discounts that were taken in excess of prior periods. Turning to our balance sheet, cash and cash equivalents were $36.3 million on December 31, 2023 compared to $20.2 million on December 31, 2022, while working capital decreased by $4.5 million during this period. The increase in cash was primarily attributed to the timing of receivable collections and vendor payments, partially offset by the cash paid for the acquisition of DataSolutions, net of cash acquired of $12.7 million. As of December 31, 2023, we had $1.3 million of outstanding debt with no borrowings outstanding under our $50 million revolving credit facility. Subsequent to quarter end and consistent with prior quarters, our Board of Directors declared on February 27, 2024 a quarterly dividend of $0.17 per share of our common stock payable on March 15, 2024 to shareholders of record as of March 11, 2024. As Dale mentioned earlier, our strong liquidity position continues to provide us with the flexibility to execute our organic and inorganic growth strategies while expanding our relationships with vendor networks and customers across the globe. We will remain active in the M&A front as we evaluate accretive targets in both domestic and international markets. We look forward to executing on our goals and delivering another year of record results in 2024. This concludes our prepared remarks. We'll now open it up for questions from those participating in the call. Operator, back to you.

Thank you [Operator Instructions]. Our first question comes from Vince Colicchio from Barrington Research.

Dale, yes, just big picture, how are you feeling about the tech environment and the economic environment now versus a quarter ago? And also, maybe you could talk about sales cycles and pricing, how that may have changed?

Yes. Thanks, Vince, and thanks for joining. We often talk to the exec team as far as the macro environment we get it from our vendors and some of our customers, and we don't -- we still don't see you know the headroom that we have as far as the size of our company compared to some of our competitors. And the other advantage we have is that we're 90% software, so we don't have the logistical issues that a lot of the different companies have in our market. But we just haven't really seen the softening. We talk about the European market potentially going into a quasi-recession, haven't really seen it with our teams over there, because I think we have a diverse enough portfolio. And like I tell my sales team, hey, if something is not selling, we have a lot of tools in our sales bag to sell that. Security is always going to be there, data center is right behind that and that's our two leading categories and then we have 4 other self-declared technology sectors that we sell into. So, we just haven't seen it. I can tell you, as I mentioned, robust pipeline of vendors still coming out of way past the startup phase where they're getting their second and third rounds of funding. And the funding levels I look at are a lot more than we've seen in the past. So, we just haven't seen that. We'll be open and upfront if we see some real softening, but we have not seen that in our teams. And we have seen a true consolidation of some of the distribution partners, the sort of vendors taking different distribution partners, they're consolidating that which is good for us because we're seeing it as a specialty and a lot of these vendors want to see a broad line distributor and then a specialty which there's not a lot of choices in North America. There's quite a few choices overseas. So we'll capitalize on both of those.

The organic growth appears to have been solid in the quarter. Was it broad based across vendors? Or were there one or two large deals driving the quarter?

Yes. There's always a couple of large deals that pop in there. And we've had, you know, if you look at quarter-by-quarter when something goes down, VAS is going to be lumpy. We had some nice stuff going on with them in Q4. Q4 is always our largest quarter because companies are extinguishing their budgets, so it kind of flows through the channel. It really depends on what happens in Q3 and falls over, if it's a federal buying season and then, of course, what we can capture in Q4 before it goes into Q1. But there's some lumpiness in that, but overall, if I look at my territories, and we track by territories in the U.S., and we track by customers in the UK and Ireland, just we haven't seen any weakness in any of that in that business.

And the top 20 vendors, was there any notable weakness among them? Or was it fairly strong across that metric, that group of vendors?

Yes. We totally talk about our top two, which we make up a couple of $100 million of SolarWinds and Sophos. Sophos went through an ERP change, there was some delays in some of that. They finished up their quarter I'm sorry, they finished up their fiscal year at the end of March, so we'll see some of that picked up. But I think there were some hiccups in the November timeframe, but other than that, we haven't seen any of that. We've seen growth. I looked at my top 20 vendors. We are at SKL last week, Vince, and 18 of them grew in 2020 of the 20 top vendors, which make up 70% to 80% of our business.

And Dale, one question for you. How sustainable are the really nice level of adjusted gross margin relative to AGB and adjusted SG&A relative to AGB?

Yes. So a couple of things. On the solutions piece of our business overseas really helps out and maintains more of a stable margin profile and that's the key. The rest of it is all on us as far as what the actual drop through is. And also, the European market, the pressures or the competitiveness and what they -- two things, the competitiveness is not nearly what we have in the States with some of the big three. And then the other side of that, there's just a higher margin profile because of the service you're delivering over there. So that's why we have still targeting some acquisitions in the U.S., but really it's overseas. We like the margin profile. We think that we can maintain that even as we scale the business.

Our next question comes from Bill Dezellem from Tieton Capital Management.

So, would you please discuss the vendors that you believe have the opportunity to have some real legs and potentially drive the business, essentially the potential home run vendors?

Yes, I'll pick three of them, Bill. We talk about VAST Data quite a bit and then we acquired Spinnaker in August of 2022. We talk about it being lumpy because the deal size are very large, right? So, we see them in Q1 of 2023, we saw some large deals in Q4 of 2023 as well. So that's one of them and there's continued to grow. We're now officially on board with them in the U.S. And we have got some good opportunities as they're rolling out. Three of our execs are in Vancouver with VAST and their sales kick off in Canada this week. The next one I'll pick is SUSE, which is in the Linux operating system space. We are just doubling with those guys. And they're taking advantage and we're taking advantage with them of IBM buying Red Hat. There was only two competitors in that space, Red Hat and SUSE, and SUSE was about 20% of the market share. IBM is only going after their top customers, so there's a lot of greenfield that they're picking up and we're right in that mix. And then the last one that I'll talk about is the group of security vendors that are just getting larger and larger in our portfolio. We used to say, hey, you know what, we can do a $1 million --$2 million in the first year and now we have five that are down the card security vendors that we're starting at the $5 million range. So, we just see a lot of upside from what we're signing. We're being more selective, like I mentioned, on who we sign. And we had our SKL last week and we talked about the three pillars of the company, right? First, the employees as far as the team that we have, what they're doing every day that really matters. Second is the vendors. We don't have the vendors. We don't have anything to sell. So, that is one of the things we've transformed the company as far as really focusing on the vendors we bring in, focusing on the vendors we keep and then pushing the other vendors to our Climb Elevate team, so it doesn't clutter our line card. And then lastly, our customers, and you say that's kind of strange to me, you're talking about your customers last. If we have the vendors, we will get the customers just by our service and support to them.

Great. That's very helpful. Thank you. And then there was a question about kind of one off or one time revenue and that the fourth quarter is typically the largest quarter that way. What is it Q1 through Q3, what is a typical level of one time or non-recurring revenue? And then how does that number generally look in the fourth quarter this quarter specifically? However, you would like to answer it?

It could pop up tomorrow. I mean, if I looked at my pipeline, we've got a couple of large opportunities with some newer vendors in the $10 million to $20 million to $30 million range per order But I mean, those we can't predict those. The Q4, we can predict just because, you know, we have a history of the cyclical nature of that. And we also know our DataSolutions team in Ireland and what strong quarters they have. But other than that, we're diverse enough where we don't have these big ups and downs. And I don't know if you want to add to that, Drew. I don't there's nothing that we see there other than a couple that we have in the pipe.

Yes. No, I think in addition to Dale's comments, it's not necessarily one off non-recurring transactions we've talked about and Dale referenced VAST, which is an up and coming super strong vendor and partner of ours. Very large transaction sizes. They tend to have longer sales cycles to Vince question earlier, because you're talking about significant 7-digit investments by their customers at the end of day into the data center space. And so we did have a very nice transaction with VAST in Q4 of this year. We also had a similar transaction in Q4 of last year and we had VAST activity that goes on throughout the year. We think as they continue to grow and refine their market and channel strategy that we'll have a little more consistency with that Bill. But again, those transactions can take 18 months, 6 months somewhere in between. We think we'll get to a more steady state in the run rate with VAST as we continue to grow with them over the next several quarters. But that's a significant variance to our average sales price of our normal vendors. So that's just one that does have a meaningful impact and it's just not consistent right now until we get more traction with them in the marketplace around the globe.

And also, Bill, real quick, Bill, let me add to that. As far as the we have three, four big DMR customers, we call them direct resellers, like we mentioned CDW and SHI in the past. But they have bid cycles that come up. They typically start at the beginning of the year. We start bidding in October, November timeframe. If there was anything significant, we would let the shareholders know on that. But we've won pretty much all the bids that we've had in the past. We picked up some smaller ones, but nothing that's earth shattering both in the positive or the negative side. So, we'll have those for six months. They typically put them on a cycle for every six months and they come up with a new group of vendors for us to bid out.

Thank you both. I'm going to ask one follow-up to that and then I'll step back in the queue. In this day and age where many companies prefer to go down the SaaS route, so they don't have large capital outlay and debt paid by the quarter. What are the dynamics or reasons that these larger orders take place as opposed to the software simply being purchased in the SaaS model?

Well, when we're talking about VAST data, they have a hardware component to go with that. And if you look at VAST, they're talking about AI every day. So it's going into data centers. These are large appliances that go in and then they run other software on that. They announced their relationship with Supermicro, which is good thing. Supermicro has been taking off lately, if anybody has watched that because they are going to use that as their underlying platform, but its really they work every day on their teams as software. But, it's we're in the middle ground where there's vendors that they're trying to sell yearly licenses and act like it's as a service and then you're buying a three-year license. Of course, they want to get to more of a recurring monthly or quarterly revenue piece. And some of them are getting there, it's going to take a while because they don't have the platforms or the marketplaces in place to really service that. So part of that is -- we're seeing that transformation, with some of our software vendors, but not this really going to affect a lot of what we're doing on a monthly or quarterly basis.

Our next question is from Howard Root, who is a private investor.

Thanks, guys, and congratulations on the outstanding quarter. Drew, I do have to correct you on one thing. You called this a boring quarter. I know I always say I love your boring quarters. This is not a boring quarter when you increase sales by 20% and it's not just you, it's the whole Climb team. So I have like 2 questions. One is on this growth and adjusted gross billings, $397 million Q4, up $78 million 24% up from the year ago fourth quarter. If you could kind of Dale talk a little bit about the breakdown of maybe on a percentage basis, I don't want you to get into talking about vendors specifically, but what part of that was acquisitions that would be DataSolutions, I guess? What part would be new products? What part would be growth of existing products in new markets? And then the fourth bucket would be growth of existing products in existing markets, if you look at it on a year-over-year basis?

Yes. So, if you look at we closed DataSolutions October 6th, so we got took advantage of their sales. They had a good quarter. They were down a little bit year over year because they had some lumpiness that fell in and fell out whether it's coming into quarter out of the quarter from the year before. But and Drew can correct me, but I think it's if we're talking we're up $80 million I think about half of that was DataSolutions. So, we still had organically up for the quarter on our teams. On the vendor side, there's it's hard to hold back some of the positives we have from the vendors coming at us, either reducing their go to market and Climb being one of the leftover channel plays that they have. So we're seeing a lot of that. We had that happen at the end of Q3, started seeing helping in Q4, and we'll see it in 2024 pretty heavily. And we're talking about four vendors that I can just think of right off the bat that are saying, you know what, we're going to use a broadliner and especially the distributor Or in the case of SolarWinds, and we haven't made it totally public and, but we're the sole distributor of SolarWinds, which is our number two brand. SolarWinds, you know, has had their difficulties in the past, but has recovered from that. They've got a great team. We have them globally now with our -- both our UK and Ireland teams. So, just there's a lot of energy coming into that for 2024.

Yes. And Howard, I would just add on to Dale's comments just in terms of and these are fairly accurate percentages. The DataSolutions accounted for about 40%, 45% of that gross growth in the quarter. And then obviously the rest of it was our organic growth with existing vendors, not a big movement in terms of geography in revenue growth or in the vendor mix. It was fairly consistent with the prior quarter fairly consistent -- obviously, our line card does adjust quarter-to-quarter, but pretty consistent vendor representation in the growth as Vince was asking earlier. So, no real shifts in -- meaningful shifts in either the vendor mix or the geography mix, but DataSolutions about 40% plus and the balance of that growth was all organic.

Great. That's really helpful. So, the second thing kind of a leading on from that, I always like to ask about future guidance and I'd love for you guys to talk more about it in your prepared remarks and to give guidance going forward. But, if we look at where we are today and go forward, can you talk about what stage of market penetration you are in kind of general terms? And then more in specific terms, 2022 you did a we crossed the $1 billion mark in adjusted gross billings, 2023, you did $1.3 billion. Are you on a linear ramp, taking out all the bumps you go up and down within the quarters, but $1.0 billion, $1.3 billion, $1.6 billion this quarter, $1.7 billion. I don't want to tie you to a number, but I just want to get a feel for where you are in the market penetration of the overall market and how long you can continue to have these 20% growth year-over-year, or if it's going to accelerate or taper from that?

So Howard, and we talk about take a look at some of the distributors that I would we don't compete with them and I'm going to jump around a little bit. We had our SKL last week and we barely mentioned on stage, and this is me all the way through anybody that had a microphone, our competitors. And in the past, we talked about them a lot. So, when we talk about, you know, we've mentioned on some calls, red ocean, blue ocean, where we really are, we're going to a blue ocean where we are creating our own market. We don't see as much competition. We're not fighting it out every day over margin. So just the fact that our sales kick off, 188 employees in the U.S., 60 vendor reps that showed up to support us, making up 25 vendors, it was just a lot of energy of what we're actually doing as a company and where we're going to go. So gross billings of $1.26 billion and you look at a lot of disties now saying in their earnings release, the public ones at least, just telling you what their gross billings are. Tech Data came out and said, hey, there are $80 billion in billings before the netting. You know how much headroom we have? We could double, triple the size of the business and not really run into them and not being seen because we're competing inside such a small fraction division inside of some of these big disties. Charles, our CMO, was saying to our teams last week saying, there could be two or three competitors like Climb in our marketplace and we still would have so much opportunity. So I'll leave that there and then Drew can tone me down a little bit. But here's what our goal is, and that is our goal is to double the business in by 2026. And can we do that? Yes, we can do that. Through some acquisitions and organic growth like we're doing currently, it's going to be that combination. But if you want to know what we're doing, just look at what we've done in the last few years. We're going to do much of the same thing. There's still a lot of targets, there's still a lot of vendors and there's still the vendors that are really Climb vendors. Like they look like they're part of Climb. When you come to our meetings and stuff, they're like, they just act like they're strategizing with my team. So, it's a very different look and feel than it was three years ago. Yeah.

And I think Dale's -- as we've said Howard, we believe that between the organic growth and our acquisition strategy, we can double the size of this business and in theory continue to be more effective with leverage and then have increased drop through of that gross profit that we grow ourselves or we acquire and then continue to augment and grow. Ireland and the DataSolutions acquisition will be a really great case study for us to be able to share with the investors as we move forward throughout 2024 about how well we've integrated the sales teams, the cross-selling vendors, Citrix and Microsoft pair up really nicely. So we think, look organically we -- again you're correct we're not providing guidance and we're not really even providing guardrails on sort of trends. But we think if you look at our historical results, we think we can continue to perform at those historical levels in terms of organic growth. On an annual basis, we are going to have some cyclicality in quarters. DataSolutions typically Q2 of the calendar year is their weakest quarter. So we'll expect that. We'll see some pullback on a consolidated basis in Q2, but growth over the prior year Q2 most likely that there is a little bit of cyclicality in the business based on geographies and vendors and partners. But as we look forward, as Dale said, lots of activity in the pipeline for us to continue to grow through the acquisition strategy and also organically. And at some point, we may provide a little bit more detail as we move into the quarters ahead, but hopefully that gives you a little bit of perspective and some level of indication of where we think the business will go.

And just to add to Howard, we've all talked about in the past, we haven't brought it up on this call yet and it's probably been overused inside the company. But our ERP is going to go live in Q2. We've talked about it for couple of years now. We are ready to do that. Our teams have been working double time because they've had to do their regular jobs every day and then do all the testing. So, if you're our sales rep or you're sitting in finance, you're going to do all your stuff on our existing ERP and then you're going to spend the hours doing in the new system. We're comfortable with that. We know we can platform companies a lot faster. The DataSolutions team, when we acquired them October 6th, we restructured all sales and marketing together. As I mentioned, Kim's on board and she did that on the marketing side. On the sales team, I just came back from Europe two weeks ago. We've got all the sales structures fully, integrated with each other, and then phase 2 is when we go ERP live, all the insight teams will be integrated together as well. So look at us in the end of June, we'll have everybody on the same ERP system speaking the same language no matter where you live.

Great. That's very helpful. And congrats again on the very exciting quarter that you had again for the year. Thanks.

Our next question comes from Vince Colicchio from Barrington Research.

Yes. Just one last one for me. Dale, I'm curious, securities, obviously, the key driver here for your business for some time. Has it been proven in any other segments in the quarter?

The reason I'm going -- the security, of course, it's there, it's strong. It's very diverse if you look at the top vendors. And this is something I didn't mention, Vince, that kind of triggered me, and that is as far as what I want to put out there, so when we look back three years, we've if you look at our top 70 vendors, they make up 96% of our overall sales. Of those top 70 vendors, 36 of them have been brought on since 2020. So, you can see we have a very robust way to bring vendors in. They get into our top group. The 70th vendor with us transact about $4 million. So that's kind of our limited threshold, because we'd love to be able -- I'd love to have 50 vendors doing 90% and really have more of a focus on our team and have our Climb Elevate team do the rest of it as far as the Clutter piece of it goes. So that's the one segment. The other segment that we're seeing more, of course, everybody is saying the word AI, but what our team what our vendors are doing is they're building AI into their products. So, there's two or three that we're looking at that I think will probably start an AI division. If their true application is gonna be more than 50% of what they do. Right? They can't just be, hey. You know, we're a backup that uses AI to do some kind of hierarchical storage management of software or of your backups. So that'll be another pillar that we probably add or amount that we had to our group. Outside of that, it's really the Linux, the SUSE business, the data management with Adobe, things like that. But it's always around security data center and then it's everybody that supports that.

This concludes our question-and-answer session. I would like to turn the floor back over to Dale Foster for closing comments.

Thank you, operator, and thank you for everybody for joining today. Just want to have a big thank you for 2023, all the stakeholders that are watching Climb, supporting Climb and all the teams that we have internally. Just a lot of energy going into 2024. Like I said, we're coming off of our sales kick off. It's one of the best ones as we do our surveys with our teams and our vendors that we think Climb has ever had. And like I said, opportunity going to that and we appreciate and everybody keep an eye on what we're doing in Q1, Q2.