Good afternoon, everyone, and thank you for participating in today's conference call to discuss WESI Technology Group Financial results for the third quarter ended September 30, 2020. Joining us today are Rayeside CAO, Mr. Dale Foster, the company's CFO, Mr. Michael Vesey. The company's Michael, company's Vice President of Alliance And Marketing for live channel solution, Charles Pass, and the company's outside investor relations adviser, co decrease with Gateway Investor Relations.
By now, everyone should have access to the third quarter 2020 earnings release. Which mined out this afternoon at approximately 4:0:5 pm Eastern Time. The release is available in the Investor Relations section of Wayside Technology Group's website at veris@faceidetechnology.com. This call is available for webcast replay on the company's website. Following management remarks, we'll open the call for your questions.
I would now like to turn the call over to Mr. Klee for some introductory comments.
Thank you, Mary. Before I introduce Dale, I'd like to remind listeners that certain comments made in 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 reflected in these forward looking statements. These forward looking statements are also subject generally 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 speak only as of the date publicly release the results of any revision to any forward looking statements. Adjusted gross billings, adjusted EBITDA, net income, excluding separation expenses and non GAAP earnings per share, 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 release and Form 8 K we furnished to the SEC this afternoon. I would now like to turn the call over to Wayside's CEO, Dale Foster. Dale?
Thank you, Cody, and good afternoon, everyone. Our business has made solid progress in our recovery from the industry wide lows of pandemic of the pandemic from last quarter. We drove net sales and gross profit growth as we added new vendors to our line card and finalize the integration of InnerWork. Industry has slowly, but our operational resilience has allowed us to continue improving our position as a sales driven organization. Some of our vendors are still in the early stages of their sales recovery while others are seeing higher activity levels as we head into the 4th quarter.
Q4 is typically one of the stronger sales periods for industry, as we, as end customers, deplete their budgets and begin to plan their technology investments for the New Year. This momentum is expected to pick up further in 2021 with the research firm Gartner predicting the global IT spend will return to growth next year. Customers are extremely are increasingly optimizing their cloud infrastructure enterprise, software, data centers and other IT and communication solutions to more fully equip their businesses for a more flexible work environment. Our continued focus on emerging data center, cloud and security products puts us in a strong position to continue meeting these needs in the market. With this as context, the improvements we have made in our sales and vendor recruitment process over the past year give us the flexibility to support our existing network while driving growth with new and emerging vendors.
We have sustained the strength of our relationship based sales approach and are bolstering it even further as cohesive sales team across North America. As of October, we have officially completed the integration of our U. S. Sales team and Inner Works, Canadian sales team. And this combined sales force is driving valuable cross sell opportunities in both geographies.
Charles will be on the call shortly to provide further detail on Having this robust operational foundation in place puts us in a prime position to continue evolving our product and service offerings to keep pace CDF Group, a UK based cloud software and IT distributor and services provider. As I have mentioned on previous calls, we have some gap our go to market strategy in the form of true cloud offerings and a cloud marketplace to meet our vendor and customer demands. This acquisition CDF quickly fills that gap and will allow us to provide our customer base with a nimble platform to manage software subscriptions backed up by CDS cloud know how support infrastructure. CDS is made up of 3 divisions. Cigna distribution, providing software cloud solutions and support to its VAR customer base, gray matter a VAR that provides cloud solutions and software to independent software vendors and cloud know how, which is a services and division, leveraged by both Sigma and gray matter.
Cloud know how holds and maintains vendor certifications with marquee vendors like Microsoft, Quest, and Flexera to name a few. As a whole, CDS brings away to wayside an established brand presence in the UK and a robust suite of services within our core product categories, especially within the cloud services. I'll have more to share with the strategic about the strategic opportunities of the transaction later in the call, but first I'll like to turn it over to Charles Bass to share a perspective and provide color on our vendor initiatives this quarter. Charles?
Thank you, Dale, and good afternoon everyone. The dedication and high touch approach of our sales team has enabled us to continue executing and there are essentially 2 key elements. The first entails identifying, evaluating and onboarding high potential emerging tech partners And while we spend a great deal of time and effort to successfully onboard new vendor partners, we spend an equal amount of effort to evaluate our existing vendor base that we can continuously focus our sales efforts on our most successful brands. Our strategy has yielded both strong results and recognition from some of our key partners. In fact, Cronos, one of our shared partners with InnerWork recently recognized us as their U.
S. Site fit partner of the year in their global partner awards. So we're honored to maintain such strong partnerships across our vendor base. While adding some key security solutions to our U. S.
And Canadian partner base. Churn micro is a market leader in endpoint cloud and server security. This relationship was made possible by our integration of the inner work. And one of several valuable cross selling opportunities that have come out of the integration process thus far. And we look forward to making further progress to deepen our relationships with our combined vendor and VAR network.
At this point, we've now fully onboarded all of the inter work brands and are now focused on sales execution of the plans that we put in place this past quarter. In September, we announced we'd begin distribution of cloud savers AWS cost optimization solution. Cloud saver focuses on managing company's global network infrastructure costs by continuously monitoring their cloud environment, and implementing more efficient strategies and tools. This product complements other cloud products in our portfolio and creates true added value for our VAR partners. Subsequent to the quarter, we made another key addition to our security product portfolio through our agreement to distribute Illumio's end to end segmentation platform.
Olumio provides complete application visibility and control as it works to prevent the spread of breaches across any endpoint data center cloud, bare metal, virtual machine or even containers. We're proud to be working with this top tier security vendor and look forward to further expanding this partnership. As these additions demonstrate, we're making progress not only with our revamped sales processes and cross selling initiatives, but also with our refined strategic focus on emerging data center cloud and security products. Cloud products particular, have experienced accelerated demand tailwinds through the pandemic. As I mentioned on our second quarter call, Climb has been working to launch our own self-service cloud marketplace to further serve this urgent need in the market.
And our recent acquisition of CDF expedites this process considerably by enhancing our cloud capabilities and expertise. With that, I'd like to turn the call over to Michael Vzi to provide more details on our financial results. Michael?
Thanks, Charles, and good afternoon, everyone. Before we kick things off, I'd like to remind everyone that include the 1st full quarter of operating results from inter work. Now turning to our 3rd quarter results. Net sales in the 3rd quarter 2020 increased 16 formally lifeboat distribution segment net sales in the 3rd quarter also increased 17% to $57,100,000, while TechXtend segment sales increased 8 percent to $3,800,000 compared to Q3 2019. Adjusted gross billings and non GAAP measure for the third quarter increased 15% year over year to 171,100,000.
Gross profit in the 3rd quarter increased 3 percent to $7,200,000 compared to $7,100,000 for the same period in 2019. As a reminder, comparability of our results is impacted by the acquisition of inter work and an early pay discount program of one of our larger customers we implemented beginning in Q2. In exchange for reducing the customer's client cycle by approximately 60 days, we are conceding approximately $400,000 going forward under this program. Despite this slight offset to our short term profitability, we continue to view this program as a net positive, as it has driven improvements in our working capital and significantly increased our cash position to $40,300,000 this quarter. Total SG and A expenses in the 3rd quarter were 6,400,000 compared to 5,100,000 in the year ago quarter.
As a percentage of total net sales, SG and A was 10.5% compared to 9.7% in the third quarter of 2019. The increase was driven by SG and A expense also included approximately $200,000 of expenses from inter work for the 3 months ended September 30, 2020. Which we plan to phase out in the fourth quarter of 2020 as we complete the integration of our administrative functions. Net income in the third quarter of 2020 was $500,000 or $0.13 per diluted share, compared to $1,400,000 or $0.32 per diluted share for the same period in 2019. The decrease was driven by the aforementioned increase in SG and A Adjusted net income, which excludes the nonrecurring costs related to the unsolicited bid and the inter work and CDF acquisitions, was $800,000 or $0.19 per share compared to $1,400,000 or $0.32 per share for the same period in 2019.
In the third quarter, adjusted EBITDA was $1,900,000 compared to $2,400,000 for the same period in 2019. Effective margin, which is defined as adjusted EBITDA as a percentage of gross profit, was 25.6 percent compared to 34.7% in the prior year period. To, gross profit and increased G And A. Cash and equivalents increased significantly to $40,300,000 in September 30, 2020, compared to $15,000,000 at December 31, 2019, and we remain debt free. Count program implemented with one of our large customers during the second quarter.
This strong liquidity position gives us enhanced flexibility to navigate the pandemic's effects on our industry, continue executing on our strategic growth initiatives, including the acquisition of CDF. Despite our investments we have maintained our ability to return a significant portion of our earnings to shareholders in the form of a dividend. On November 3, 2020, the Board of Directors declared a quarterly dividend of $0.17 per share of common stock payable November 27, 2020 to shareholders of record on November 23, 2020. Now to provide some as a strong opportunity to drive growth, enhance profitability and improve our strategic positioning in cloud services. We also see it as an effective strategic reinvestment of the working capital we recently freed up through the changes in the management of our working capital.
We acquired CDF for an aggregate purchase price of approximately 17,400,000 The acquisition is expected to by approximately 10% prior platform. This concludes my prepared remarks.
Thanks, Mike. Jumping back into our CDF acquisition, as I mentioned earlier, CVS Cloud Automation Platform provides cloud service optimization and end to end support and migration services. This is the cloud platform we've been striving to develop internally and we plan to immediately leverage this platform across our business and geographies. Our extensive vendor network and commitment to developing merging technology brands will increase CDS offerings, introduce them and introduce them to a broader customer base. CDS and wayside have limited geographic and vendor overlaps, which provides ample cross sell opportunities between U.
S, Canada and EMEA. This includes additional support and growth opportunities for our longstanding legacy business in the Netherlands. Climb, Sigma, and great matter will all leverage the cloud know how business, which has a highly skilled technical team of adoption and migration specialists that have a strong expertise in Microsoft 365 Azure, bringing the and Azure and bringing the cloud know how specialist onboard will enable us to serve as an outsource intelligence resource for our customers, offering everything from technical support to highly targeted consulting services. This allows us to not only provide a more comprehensive and high touch customer experience, but also capitalize on a key margin expansion opportunity as a value add service provider beyond IT distribution. Both gray matter and CVS distribution brands, Sigma, our Microsoft Gold Partners holding 9 competencies in various direct agreements with Microsoft.
Our merger will facilitate the for both wayside and CDF to further leverage Microsoft's strong global presence in the cloud and Bing map business, along with other strategic areas. Altogether, CDS brings to wayside more than a 1000 bars from its network and deeper relationships with notable vendors, including Microsoft, Amazon Web Services, Adobe, Manage Engine, SAP, and many more. I am also pleased to share that CVS current CEO, Andrew King, has joined Wayside as the President and General Manager of EMEA to lead our European operations. His leadership will be a key part of facilitating our expansion and ensuring a seamless integration the call for questions. I want to thank our team for their commitment to driving relationships with our vendors and cultivating new relationships with vendors that intermerck brought a board.
This cross sell opportunity will only strengthen as we work to integrate Sigma and gray matter and expand both the geographic footprint of our network in the comprehensive nature of our product portfolio and support services.
Your first question comes from the line of Ed Woo. Your line is now open.
Congratulations on the quarter and on the acquisition. Do you see yourself being tied up with this acquisition for a while or are you still going to be for other opportunistic deals currently.
Yes. Thanks, Ed. And we'll continue to look 2 acquisitions in 1 year. You can imagine our infrastructure has been working hard and we had a good gap between the two. So able to get the full integration of inner work done before this one started.
So yeah, this will take a little bit of a different flare to a because of the cloud platform piece of it, but that's our real focus. They're going to be running independent. They have a strong infrastructure as a company right now. So, they'll continue to run on their own and we'll take the pieces between the two companies that make the most sense. And it'll be over a period of time, but our eyes are always open, to what's out there.
Interwork was just a great acquisition as far as it fit very seamless to what we're doing in North America. And we have high hopes for this one as well. Just a great team in the CDF group. You can imagine the excitement of last couple of days with the teams getting to know each other on the exact level and then we'll be digging down deeper as this week and months progress. But yeah, looking forward to doing more with these with the teams.
Great. And my last question is, you guys have had a pretty good results. Do you think that the business environment for software services have returned back to normal or do you still see that there's businesses that are still recovering?
Yes, I still see it recoverable. On the industry segment that we see. And I think we had the fatigue of, everybody trying to work from home in Q2 And then we had, everybody saying, okay, now can we get our productivity back up to where it was before? I think that we're getting closer to like I said, it's the industry specific areas. You know, we do, into the Fed and state local governments.
They seem to be coming back online. With some of our customers, so that's good. But we're one removed from the end user. So we kind of get it through kind of a hearsay method, but I think this is this, this quarter will tell, you know, what industries are back up, and running. And hopefully the ones that are back on top and along with our vendors, we'll continue to do so.
Great. Well, thank you and good luck.
Thanks Ed.
Next question comes from the line of Peter Lukes. Your line is now open.
Hi guys. How you doing? It seems, based on your gross margin, that you, in order to gain businesses, as you sort of had cut prices to retain business or grow business. Is that something that will continue?
And, you know, I don't think so, Peter, and we won't continue to do that. You know, when we have the uncertainty in the market, you know, we look by territory and sometimes we, we have to do that. We chose, which is is nice because a lot of companies didn't get to choose, right, what they could do or not do. The business was either gone, was either there or not. So again, some of our bigger competitors, we chose to take orders at a less margin to keep that business transaction flowing through because we didn't want to cut staff, right?
We wanted to continue to transact as we come back out of this. Of course, the recovery is a little longer than we all expected. I think that's goes across most industries, but, I feel comfortable in what we actually did And we'll see the margins come back as we continue to sell the customers and what they're actually working on as projects.
Are you guys still working mostly remotely or you have sort of Bivouac back for the office?
So, you know, not New Jersey because New Jersey has more of a lockdown. I'm in Maryland. We have some similar stuff coming on board. So it kind of ebbs and flows as the case rate goes up. But what we've been doing and I'm encouraged with my team as long as everything's everybody's being safe is to travel as much as they can.
So we have put in fewer fields, team traveling. And what they're doing is they're going to state that are not in near the lockdowns. So myself, Missouri, Wisconsin, New York, a few different places along with the field teams. I have vendors that are coming in. We needed airports to do face to face and everybody's looking forward to getting out.
So, yeah, does it still really hurt the sales force? I know my southeast rep, he's having a struggle because people are just, you know, moving around. So people go out, I think we'll see more of that face to face. And there's nothing better than relationship selling when you can get back to shaking somebody's hand.
So, Mike, this is a question for you. You're and I had asked you this question on the last call. It seems that it's even gotten income statement has even gotten more complicated with charges and one offs, etcetera. Is this something that you guys are going to try to clean up and have a more normalized statement going forward?
Yes, I'll let Mike answer that, but my take on that is, we had lot of events that have happened in the last 12 months from the proxy fight all the way through to acquisitions. And, so there's a lot of messiness way more convoluted than I wanted to be. I wanted to get back so much cleaner, but I'll see if Mike wants to put his $0.02 in there.
No, I think that's fine. Good answer.
Thanks, Peter.
At this time, this concludes our question and answer session. I would now like to turn the call over to Mr. Foster for closing remarks.
Thank you, Mary. So, just a couple of things I want to talk about. We have a on board of directors, very supportive of what we're going, do, you know, in the past and going to the future. A lot of input as we have people on our board that are from the industry. One of the things I want to do a shout out to the teams, 2 acquisitions, a lot of you can imagine with accounts and lawyers.
So, so Mike and his team, congrats. A lot of work was being done. We still have a lot more to do. I can tell you that, you know, our focus is on growth in the company. I think we've proved that in the, actually, the direction we're going if you look at some of the releases that we do with manufacturers, we're going upstream, with manufacturers.
And what I mean by that is some manufacturer names that are much more recognizable like if you sell the Seagate. And it's not Seagate disk drive, but it's into their solution side. So continue to watch us. We thank for your support. And look forward to giving an update after Q4.
Thank you, operator.
Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Thank you.