UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended September 30, 2021

☐

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

For the transition period from to

Commission File No. 000-26408

Wayside Technology Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-3136104
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

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

(Address of principal executive offices)

(732) 389-8950

Registrant’s Telephone Number

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


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common stock, $.01 par value	WSTG	The NASDAQ Global Market

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

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

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

Large Accelerated Filer ☐		Accelerated Filer ☒
		Smaller Reporting Company ☒
Non-Accelerated Filer ☐		Emerging Growth Company ☐

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

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

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

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

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


	September 30,		December 31,
	2021		2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	29,934	$	29,348
Accounts receivable, net of allowances of $940 and $892, respectively		98,413		93,821
Inventory, net		3,685		4,936
Vendor prepayments and advances		3,950		1,235
Prepaid expenses and other current assets		4,181		3,837
Total current assets		140,163		133,177

Equipment and leasehold improvements, net		1,999		2,308
Goodwill		17,133		16,816
Other intangibles, net		10,136		10,625
Right-of-use assets, net		1,610		1,933
Accounts receivable-long-term, net		97		304
Other assets		494		257
Deferred income tax assets		104		113
Total assets	$	171,736	$	165,533
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	118,272	$	116,692
Lease liability, current portion		441		490
Total current liabilities		118,713		117,182

Lease liability, net of current portion		1,818		2,167
Deferred income tax liabilities		1,738		1,467
Total liabilities		122,269		120,816

Commitments and contingencies

Stockholders’ equity:
Common stock, $.01 par value; 10,000,000 shares authorized; 5,284,500 shares issued: 4,385,785 and 4,361,997 shares outstanding, respectively		53		53
Additional paid-in capital		31,761		31,962
Treasury stock, at cost, 852,863 and 922,503 shares, respectively		(13,687)		(14,747)
Retained earnings		31,696		28,191
Accumulated other comprehensive loss		(356)		(742)
Total stockholders’ equity		49,467		44,717
Total liabilities and stockholders' equity	$	171,736	$	165,533

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

Table of Contents

Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(Unaudited)

(Amounts in thousands, except per share data)


	Nine months ended				Three months ended
	September 30,				September 30,
	2021		2020		2021		2020

Net sales	$	207,074	$	180,124	$	68,911	$	60,919

Cost of sales		173,934		157,609		57,592		53,682

Gross profit		33,140		22,515		11,319		7,237

Selling, general, and administrative expenses		24,312		16,866		7,761		5,993

Legal and financial advisory expenses, net - unsolicited bid and related matters		—		1,752		—		(81)

Acquisition related costs		—		982		—		344

Amortization and depreciation expense		1,177		403		381		164

Income from operations		7,651		2,512		3,177		817

Other income:

Interest, net		362		105		60		19

Foreign currency transaction (loss) gain		(107)		211		(41)		(67)

Income before provision for income taxes		7,906		2,828		3,196		769

Provision for income taxes		2,155		881		756		239

Net income	$	5,751	$	1,947	$	2,440	$	530

Income per common share-Basic	$	1.31	$	0.44	$	0.55	$	0.13

Income per common share-Diluted	$	1.31	$	0.44	$	0.55	$	0.13

Weighted average common shares outstanding — Basic		4,263		4,306		4,282		4,218

Weighted average common shares outstanding — Diluted		4,263		4,306		4,282		4,218

Dividends paid per common share	$	0.51	$	0.51	$	0.17	$	0.17

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

Table of Contents

Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands)


	Nine months ended				Three months ended
	September 30,				September 30,
	2021		2020		2021		2020

Net income	$	5,751	$	1,947	$	2,440	$	530

Other comprehensive income:
Foreign currency translation adjustments		386		(152)		(889)		127
Other comprehensive income (loss)		386		(152)		(889)		127

Comprehensive income	$	6,137	$	1,795	$	1,551	$	657

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

Table of Contents

Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(Amounts in thousands, except share amounts)


											Accumulated
				Additional							Other
	Common Stock			Paid-In		Treasury			Retained		Comprehensive
	Shares	Amount		Capital		Shares	Amount		Earnings		Income (Loss)		Total
Balance at January 1, 2021	5,284,500	$	53	$	31,962	922,503	$	(14,747)	$	28,191	$	(742)	$	44,717
Net income	—		—		—	—		—		1,520		—		1,520
Translation adjustment	—		—		—	—		—		—		1,039		1,039
Dividends paid	—		—		—	—		—		(750)		—		(750)
Share-based compensation expense	—		—		279	—		—		—		—		279
Restricted stock grants (net of forfeitures)	—		—		(883)	(52,190)		883		—		—		—
Treasury shares repurchased	—		—		—	2,990		(57)		—		—		(57)
Balance at March 31, 2021	5,284,500	$	53	$	31,358	873,303	$	(13,921)	$	28,961	$	297	$	46,748
Net income	—		—		—	—		—		1,791		—		1,791
Translation adjustment	—		—		—	—		—		—		236		236
Dividends paid	—		—		—	—		—		(749)		—		(749)
Share-based compensation expense	—		—		337	—		—		—		—		337
Restricted stock grants (net of forfeitures)	—		—		342	20,184		(342)		—		—		—
Treasury shares repurchased	—		—		—	5,228		(130)		—		—		(130)
Balance at June 30, 2021	5,284,500		53		32,037	898,715		(14,393)		30,003		533		48,233
Net income	—		—		—	—		—		2,440		—		2,440
Translation adjustment	—		—		—	—		—		—		(889)		(889)
Dividends paid	—		—		—	—		—		(747)		—		(747)
Share-based compensation expense	—		—		637	—		—		—		—		637
Restricted stock grants (net of forfeitures)	—		—		(913)	(53,932)		913		—		—		—
Treasury shares repurchased	—		—		—	8,080		(207)		—		—		(207)
Balance at September 30, 2021	5,284,500	$	53	$	31,761	852,863	$	(13,687)	$	31,696	$	(356)	$	49,467

											Accumulated
				Additional							Other
	Common Stock			Paid-In		Treasury			Retained		Comprehensive
	Shares	Amount		Capital		Shares	Amount		Earnings		Income (Loss)		Total
Balance at January 1, 2020	5,284,500		53		32,874	778,807		(13,256)		26,715		(1,130)	$	45,256
Net income	—		—		—	—		—		836		—		836
Translation adjustment	—		—		—	—		—		—		(501)		(501)
Dividends paid	—		—		—	—		—		(775)		—		(775)
Share-based compensation expense	—		—		167	—		—		—		—		167
Restricted stock grants (net of forfeitures)	—		—		(1,080)	(63,810)		1,079		—		—		(1)
Treasury shares repurchased	—		—		—	2,059		(32)		—		—		(32)
Balance at March 31, 2020	5,284,500	$	53	$	31,961	717,056	$	(12,209)	$	26,776	$	(1,631)	$	44,950
Net income	—		—		—	—		—		581		—		581
Translation adjustment	—		—		—	—		—		—		222		222
Dividends paid	—		—		—	—		—		(740)		—		(740)
Share-based compensation expense	—		—		234	—		—		—		—		234
Restricted stock grants (net of forfeitures)	—		—		(813)	(48,068)		813		—		—		—
Treasury shares repurchased	—		—		—	264,039		(3,489)		—		—		(3,489)
Balance at June 30, 2020	5,284,500		53		31,382	933,027		(14,885)		26,617		(1,409)		41,758
Net income	—		—		—	—		—		530		—		530
Translation adjustment	—		—		—	—		—		—		127		127
Dividends paid	—		—		—	—		—		(742)		—		(742)
Share-based compensation expense	—		—		636	—		—		—		—		636
Restricted stock grants (net of forfeitures)	—		—		(298)	(17,605)		298		—		—		—
Treasury shares repurchased	—		—		—	3,465		(81)		—		—		(81)
Balance at September 30, 2020	5,284,500	$	53	$	31,720	918,887	$	(14,668)	$	26,405	$	(1,282)	$	42,228

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

Table of Contents

Wayside Technology Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)


	Nine months ended
	September 30,
	2021		2020
Cash flows from operating activities
Net income	$	5,751	$	1,947
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation and amortization expense		1,177		403
Provision for doubtful accounts		33		130
Deferred income tax expense		272		(53)
Share-based compensation expense		1,253		1,037
Amortization of discount on accounts receivable		(50)		(136)
Amortization of right-of-use assets		359		280
Change in fair value of contingent earn-out consideration		—		24
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(4,493)		36,608
Inventory		1,251		(235)
Prepaid expenses and other current assets		(327)		(225)
Vendor prepayments		280		(2,896)
Accounts payable and accrued expenses		2,647		(3,991)
Lease liability, net		(434)		(348)
Other assets and liabilities		(251)		(14)
Net cash and cash equivalents provided by operating activities		7,468		32,531

Cash flows from investing activities
Purchase of equipment and leasehold improvements		(190)		(20)
Vendor advances		(2,994)		—
Payment for acquisitions, net of cash acquired		—		(1,141)
Net cash and cash equivalents used in investing activities		(3,184)		(1,161)

Cash flows from financing activities
Purchase of treasury stock		(394)		(3,602)
Borrowings under revolving credit facility		—		6,800
Repayments of borrowings under revolving credit facility		—		(6,800)
Dividends paid		(2,246)		(2,257)
Contingent consideration		(863)		—
Payments of deferred financing costs		—		(61)
Net cash and cash equivalents used in financing activities		(3,503)		(5,920)

Effect of foreign exchange rate on cash and cash equivalents		(195)		(138)

Net increase in cash and cash equivalents		586		25,312
Cash and cash equivalents at beginning of period		29,348		14,984
Cash and cash equivalents at end of period	$	29,934	$	40,296

Supplementary disclosure of cash flow information:
Income taxes paid	$	1,917	$	2,167
Interest paid	$	31	$	23

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

Table of Contents

Wayside Technology Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2021

(Unaudited)

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

1. Basis of Presentation:

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

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

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

Immaterial Revision of an Error for Estimated Foreign Tax Liability

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


	As of June 30, 2021
	As Previously				As
	Reported		Revision		Corrected
Condensed Consolidated Balance Sheet
Deferred income tax liabilities	$	1,462	$	353	$	1,815
Total liabilities	$	121,305	$	353	$	121,658
Retained earnings	$	30,356	$	(353)	$	30,003
Total liabilities and stockholders' equity	$	169,891	$	—	$	169,891


		Page

	PART I FINANCIAL INFORMATION

Item 1	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	3

	Condensed Consolidated Statements of Earnings for the three and nine months ended September 30, 2021 and 2020 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32

Item 4.	Controls and Procedures	32

	PART II OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 6.	Exhibits, Financial Statement Schedules	33

SIGNATURES		35