Good morning, ladies and gentlemen, and welcome to the Wayside Technology Group Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. As a reminder, ladies and gentlemen, this conference is being recorded. I would now like to introduce your host for today's conference, Melanie Caponegro.
Ms. Caponegro, you may begin.
Thank you, and good morning. Welcome to Wayside Technologies Third Quarter 2017 Earnings call. Before turning the call over to Simon Ninen, the company's Chairman and CEO, I'll dispense with the customary cautionary language and comment about the webcast for earnings call. We released earnings for the third quarter at approximately 5 pm Eastern Time, Thursday, October 26, 2017. The earnings release is available at the company's investor relations website at waysidetechnology dot com.
Today's call, including all questions and answers, is being webcast live and a rebroadcast will be available at www.wacitechnology.com/site /content/webcast. This conference call and the associated webcast contains time sensitive information that is accurate only as of today, October 27, 2017. A detailed discussion of risks and uncertainties are discussed in our Forms 10 Q and also in greater detail in our forms 10 K. Wayside Technology Group, Inc. Sees no obligation to update and does not intend to update any forward looking statements.
Now, I would like to turn the call over to Simon Ninen.
Thank you, Melanie, and good morning to everyone. Despite intense market competition, we delivered factory results for Q3. Net sales increased 7% and earnings per share increased $0.01 to $0.30 per share for the quarter. On a year to date basis, our earnings per 87% of our gross margin and 91 percent of segment income in the third quarter. Our cash, prepayments and long term receivables amounted to $21,800,000 or 57 percent of our equity.
I would also like to share and thank Bill Botai, who announced his intention to retire from his position as Executive Vice President, Effective, December 31, 2017. Bill will continue in his current role till the end of the year as he transitions his responsibilities to other team members. And I'd like to thank Bill on behalf of Wayside Technology Group for his great contributions during his tenure as a member of our team. Now I'd like to hand it over to Bill Bill?
Thank you, Simon. Net sales for the quarter ended September 30, 2017 increased 7% to $107,000,000 compared to $100,000,000 for the same period in 2016. Lifeboat Distribution segment net sales for the quarter ended September 30, 2017 increased 10 percent to $100,000,000 compared to $91,000,000 for the same period in 2016. TechExtend segment net sales for the quarter ended September 30, 2017 decreased 24 percent to $6,500,000 compared to $8,500,000 the same period in 2016 due to a decline in extended payment term transactions, which typically vary significantly from quarter to quarter based upon the timing of IT spending decisions by our larger customers. Gross profit for the quarter ended September 30, 2017 decreased 2 percent to $6,200,000 compared to $6,400,000 for the same period in 2016.
Lightboad Distribution segment gross profit for the quarter ended September 30, 2017 2016 was consistent with the prior year at 5,400,000 TechExtend segment gross profit for the third quarter 2017 decreased 11 percent to $800,000 compared to $900,000 in 2016. Gross profit margin, which is gross profit as a percentage of net sales, for the quarter ended September 30, 2017 decreased by 0.5 percentage points to 5.9 compared to 6.4 for the same period in 2016. Lightboat Distribution segment gross profit margin for the quarter ended September 30, 2017 decreased by 0.6 percentage points to 5.4% compared to 6% for the same period last year. Tech Xtend segment gross profit margin for the quarter ended September 30, 2017 increased 1.8 percentage points to 12.8 compared to 11% for the same period in 2016. We continue to face margin pressure from the very large distribution companies we compete within the market.
This is reflected in the 0.6 points in our gross profit margin and lifeboat business. We continue to be excited about our future as we manage our expenses, and build our product portfolio to help achieve our growth targets. As Simon stated earlier, I have announced my planned retirement at the end of this year. I had very much enjoyed working with Simon, the Board of Directors, the leadership team, and the staff of our wayside Lightboat and tech extend teams. I'm very confident in the leadership that we put in place for Lightboat and Brian Gilbertson and for tech extending Kevin Askew.
Both have been running sales operations for their businesses for most of this year and have high expectations for their continued effect on our growth.
Thank you. Mike, Mike, Casey will now report in the financial numbers. Mike?
Thanks, Simon. I'll review our operating expenses and some balance sheet highlights. Total SG and A expenses for the quarter increased approximately 2% from the same period last year to $4,500,000, The increase was mainly due to personnel related expenses to support our growth and professional fees. SG and A expenses as a percentage of net sales decreased to 4.2% compared to 4.4% for the same period last year, reflecting a modest increase in expenses in relation to the rate of sales growth. As Bill and Simon noted, net income for the 3rd quarter was down slightly from the 3rd quarter last year at $1,300,000 compared to $1,400,000 in the prior year.
While diluted earnings per share increased slightly due to a lower number of shares outstanding. We determined that we should be calculating our earnings per share using the 2 class method, which treats unvested shares of restricted stock granted under our stock compensation plan as participating securities. Because these securities have a non profitable right to dividends prior to vesting, Under this method, our distributed and undistributed net income is allocated between participating securities and common shares before calculating earnings per common share. While we do not consider the impact of the change in calculation method to be material, We did restate prior amounts in its earnings release so that historical information is on a comparable basis. The impact of restating the prior year to decrease third quarter 2016 diluted earnings per share by 0 point 0 $2 or about 4.2% and year to date diluted earnings per share by $0.03 or 4.3 percent.
Basic shares outstanding is the same under the 2 methods. And you will also note that under the 2 class method, the basic and fully diluted share count is the same since there are no other common stock equivalents other than participating restricted stock. A table comparing the previously reported and restated amounts is included in our earnings release, and we'll provide more detail in our 10 Q. It should be noted there was no adjustments to net income as part of this calculation. It's merely a, recalculation of the earning per share itself.
So on a restated and comparable basis, to $0.30 for the quarter compared to $0.29 in the same period last year. Weighted average diluted shares outstanding decreased about 5% from the same quarter last year, reflecting share repurchases we made over the past 12 months. On a year to date basis, our net income was relatively flat year over year at $3,900,000. And our diluted earnings per share is up about 5% reflecting the lower weighted average shares outstanding resulting from the share repurchases. Moving on to our balance sheet.
Cash and cash equivalents was $4,100,000 at the end of the quarter compared to $13,500,000 at the end of the year for 2016. You will also note that we utilized our revolving credit facility this quarter to fund some of our working capital needs. With $2,000,000 outstanding at the end of the quarter. Our use of cash was the result of an increased investment in working capital, and $5,100,000 returned to investors through dividends and repurchase of our common stock year to date. The increased working capital was primarily driven by vendor prepayment of approximately $8,000,000 that was made as part of a new vendor agreement.
And the impact of a higher than average level extended payment sales in Q4 2016. The products related to the Q4 sales were paid for in the first quarter of 2017, while the sales proceeds themselves will be collected over future periods, resulting in a net cash outflow in 2017. During the quarter, we paid to purchase approximately 20 8000 shares of our common stock. As of September 30, 2017, stockholders' equity stood at $38,100,000 compared to $37,600,000 at the end of last year. And total working capital, including cash $25,500,000 compared to $24,000,000 at the end of last year.
Additionally, we had about $10,200,000 in extended term receivables due after 1 year, compared to $11,100,000 at the end of 2016. We plan to continue to utilize our cash and available liquidity to invest in the growth of our business. October 24, 2017, the Board of Directors declared a dividend of $0.17 per share, payable on November 17, to shareholders of record on November 10, 2017. Now I'll turn it back over to Simon.
Thank you, Mike. I want to thank
Thank you. You. One moment please for our first question. And our first question comes from the line of Sam Saffer. Your line is now open.
Hi, thank you for taking my question today, guys.
You're welcome.
Phil, I'd like to congratulate you on the retirement Thank you for the help that you've given us over the past few years. I really appreciate the call. With that being said, Lifeboat has been growing top line, pretty consistently except for about the past four quarters, it seems to have flatlined, and that includes with a declining margin. With Bill leaving, how are how is his role going to be put on to in place internally, where we can continue to see the growth in Lifeboat moving forward?
Well, Tim, just by way of timing, we put Brian Gilbertson in the role of VP and General Manager in June of 2016. And so he took over the sales operation for that. And we continue to grow the top line, but are seeing margin pressure as we go through these cycles, right? So As we as we're driving that forward, Brian has been the driving force and has been, tuning, not necessarily protecting, but tuning the organization to, prepare ourselves for continued growth as we go forward. During much of this year, my role has been to help, mentor him and Kevin Askew, along with, customer and vendor relationships.
So the day to day decision making has already been in place. So we've internally, had what I consider to be a very smooth transition, because Brian's background, if you've, checked it when we did the release, he was managing a P and L, at ArrowECS in the virtualization segment running an $850,000,000 business and has very strong customer and vendor ties. So, I feel, as I stated, that we're in very good hands.
Great. That adds additional color and hopefully there's no hiccup internally as as that evolves. What does the company need to do to get back to the historic margins that are really closer to 6%, seems to be dropped a little bit. Is that even possible moving forward?
Yes. It is. It requires several factors to go together. First is new vendor acquisition that have higher margins. Is a critical component of that as we help, new technologies come to the market and introduce them into our VAR community.
That is a cornerstone. One of the things that, we're we we challenge from overly accelerating our revenue, if you will, is a lot of the bigger vendors that we've talked to and engaged with either aren't looking to expand their distribution model and or while they have great volumes, their margins are even a small percentage of what we're retaining. And if we add a big revenue line that's only going 1% or 2%. It's actually dilutive to everything else we're doing. So we're being very cautious of how we bring on and because we could over accelerate the new vendor ramp.
So, we have to focus on higher margin lower volume products. And so, if I have somebody at 2%, somebody at 8, it takes four times as much revenue, of course, to get to the same GP number. And I understand, without going into detail, it's difficult for you to get the overall color, but when I look at our revenue stream and look at some of the changes in customer, large customer purchases, along with declining margins from vendors who are changing their margin model. In 2 years, we've gone from 8 to 6 to 4 on one of our key vendors, And yet, we've made that up to retain flat. So I understand the flat line concern, but we're out here with swords and shields fighting it every day and making good progress.
Okay. And then lastly, just one more question from me. Over the past year and a half, the balance sheet has really changed. You're seeing cash go from about $25,000,000 to just under five in addition, we've seen a $2,000,000 drawn on the revolver, which I don't think we've seen in the past. How should we think about the use of cash moving forward as analysts?
Yes. So I just first want to address the cash portion of that. What we've stated as cash is cashing the bank to $4,000,000. The prepayment to a vendor is also we internally, we look at that as cash that we prepaid. So that's about a $7,500,000 out of the $8,000,000.
We just got started on that prepayment. So internally, we look at that as cash. And in addition, we've used our part of our excess cash to finance these long term deals. And we're changing those long term deals to using 3rd party services. Mike Vesey has been very busy in this quarter.
Exploring contracts with a third, with a bank outside of our company to utilize that as we use our cash to grow our live boat business as well as, by the way, the core tech extend business outside of these financing deals. And you see the large impact that these financing deals have on the, on the quarters, I want to stress that it's not techxtend's core business. In fact, techxtend's core business on a year to date basis to gross profit has gone up. It's outside of that. And, we have to make sure that we communicate that correctly is the fact that we have these large finance deals and you see that in accounts receivable long term, the payments that are due over a year, And then the short term accounts receivable, you see the payments that are due within the year.
All of that in all of that internally, we look at as cash. So we are winding down in terms of the use of our own cash. So we expect over the next year, to, to, and by the way, we also, you look at the dividend payments and at share repurchases, we expect the cash portion to go up. For instance, in Q4, I think the long term receivables payments for these large payment deals are expected to be, I think, about $4,000,000, $4,500,000? Yes.
Correct. So that's how we look at cash. So I just want to make sure that we're all looking at at the same number. So if you add those 3 up, the accounts receivable long term, the prepaid cash and the cash portion itself, you get to $21,800,000.
And that vendor prepaid. Is that, one vendor? And is this something we should expect to see moving forward? Or is this kind of a one time benefit that the companies take advantage of?
Yes, it's a one time benefit, that we've taken advantage of in this process. We do keep inventory and things, but we don't, typically prepay to this degree. We just simply buy a pay for inventory and typically we'll maintain a 30 to 45 day, run rate maybe a little stronger at the end of the quarter based upon any particular vendor. But we manage that very, very tightly. So like I say, this was a one time opportunity and we expect to pull through that here in the next several months.
Thank
And at this time, there are no further questions. Please continue with any closing remarks.
Thank you. We thank everyone for their interest in our company. We look forward to reporting our year end results at the beginning of February 2018.
This concludes today's conference call. You may disconnect at this time and thank you for your participation.