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 Capinigro.
Ms. Capinigro, you may begin your conference at this time.
Thank you and good morning. Welcome to Wayside Technology's second 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 comments about the webcast for this earnings call. We released earnings for the second quarter at approximately 5 pm Eastern Time, Thursday, July 27, 2017. The earnings release is available at the company's investor relations website at waysidetechnology.com.
Today's call, including all leysidetechnology.com/siteforward/content/webcast. This conference call and associated webcast contains time sensitive information that is accurate only as of today, July 28, 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 Nineen.
Thank you, Melanie, and good morning to everyone. We are pleased to report solid financial results. Our LIFO distribution segment continued to deliver year over year sales growth, while our tech extend division was down as compared to an exceptionally strong quarter last year. On a year and 86% of segment income in the 3rd in the second quarter. Our international sales were 13% of our overall revenue equal to the second quarter of 2016.
Now I would like to hand it over to Bill Bautai, our Executive Vice President.
Thank you, Simon. As stated earlier by Simon, we had a solid quarter when compared with Q2 2016. In Q2 2017, light boat grew year over year. However, ChickXtend was down year over year due to a strong quarter last year, based upon a very large extended payment compared to $105,000,000 in dollars in Q2 of 2016. Teck extend sales for the quarter decreased 53 percent to 7,000,000 compared to $16,000,000 in Q2 of 2016.
This decrease was primarily due to a single $7,300,000 in enterprise sale in Q2 of 2016. Gross profit for the quarter decreased 6 percent to $6,600,000 compared to $7,000,000 for the same period in 2016. Lite Bose, Life Bose gross profit increased 1 percent to $5,600,000 compared to $5,500,000 in the same period in 2016. Tech extends quarterly gross profit decreased 34 percent to $1,000,000 compared to $1,500,000 in Q2 of 2016. Gross profit margin, which is growth profit as a percentage of net sales, for the quarter decreased by 0.3 percentage points to 6.4 compared to 6.7% for the same period in 2016.
Lifeboats grew gross margin percentage decreased by 0.3 percentage points to 5.9 compared to 6.2% for the same period last year. Tech extends gross profit margin increased 3.8 percentage points to 13.1 compared to 9.3 for the same period in 2016. We introduced 3 new vendors into the channel through light vote, including the return of a key partner that left us at the end of 2015 to go to an exclusive distribution arrangement with a large volume distributor. While that went well for them, they recognized they were missing a key part of the market that they had through light vote and elected to return to our portfolio. We continue to be excited about our future as we manage our expenses and build our product portfolio to help achieve our growth targets.
Thank you. Simon, back to you. Thank you, Bill. Now I hand it over to Mike Stacy. Mike?
Thanks, Simon. I will now review our operating expenses and balance sheet highlights. Total SG and A expenses for the quarter increased slightly from the same period last year to $4,800,000. The increase was mainly due to salary commission and incentive payments to support our growth. SG and A expenses as a percent of net sales increased to 4.7% compared to 4.5% for the same period last year, reflecting relatively flat expenses in relation to a lower sales decreased 16 percent to $1,300,000 compared to $1,500,000 last year, primarily due to a large enterprise sale we had in the 2016 results.
Diluted net income per share decreased 12 0.34 on a year to date basis, our net income is 7%, reflecting the lower weighted average shares outstanding resulting from the share repurchases. Moving on to the balance sheet. Cash and cash equivalents was $9,700,000 at the end of the quarter compared to $13,500,000 at the end of 2016. Our cash balance reflects an increased investment in working capital and $3,900,000 of cash utilized to pay dividends and repurchase The increase in working capital was mainly driven by higher receivables related to increased payment terms for one of our major resellers, and the impact of extended payment terms over the past several quarters, particularly in fourth quarter of 2016 in our Tech Extend segment. Therefore, we incurred the use of cash to purchase the goods sold during the 1st part of 2017 and will collect the proceeds from the customer over time.
During the quarter, we paid $800,000 in dividends and utilized $700,000 about 34,000 shares of our common stock. As of June 30, 2017, we had no outstanding balances under our credit facility. Stockholders' equity was about $37,400,000 compared to $37,600,000 at the end of the year. And total working capital, including cash, was $22,800,000 compared to $24,000,000 at the end of last year. Additionally, we have about $12,000,000 in extended term receivables due after 1 year compared to about $11,100,000 last year.
We plan to continue to utilize our cash On July 25, 2017, the Board of Directors declared a dividend of $0.17 per share, payable on August 18, to the shareholders of record on August 11, 2017. In conclusion, our quarter was impacted by variability in sales, in our techxtend business, but our core Lifeboat distribution business continued its top line growth. Despite the challenging comparison with the prior Year's second quarter, our net income is even with last year on a year to date basis and earnings per share reflects the positive impact of our share repurchases. Simon,
I turn it back to you. Thank you, Mike. We are excited about the prospects of more software publishers joining us. And we look forward to growing our business.
You. Questions. Our first question comes from Bert Boeskin. Your line is open.
Hi, Simon. How are you?
Hi, good morning.
Good morning, Simon. Lifeboat over the years has been growing nicely steadily in a pretty difficult business. And I can measure on that, but this tech as a shareholder, this tech extend drives me nuts. 1 quarter, I think they're doing better. And I clearly, they use the company's balance sheet within the next quarter.
It's not there. And, you know, is this fixable? Is it, what's the long term prognosis for tech extend, other than occasionally getting a big order? I'm not I'm not
So here's the deal on tech extend. And to just explain it to you, the tech extend business, there's 2 parts to that. One is we have the flexible payment option deals. Those are, multi year or multi quarter kind of arrangements with clients. And they come to us for the software, but they also come to us for, spreading their payments to aligning that with their budgets.
That is a very, you know, flexible business. The core business of Tech Extend is that true value value added reseller part to our clients moving from a catalog company in the 90s to now, we're installing security cameras on court houses here locally in New Jersey. So that has really that business has transformed nicely. And you can see that as an increase in terms of gross margin, and that business in and of itself, we expect to grow. It is impacted, however, you see these flexible payment option deals by these large deals, enterprise deals that we try to get.
And we've used with our excess cash. We're working on, with a capital firm to use 3rd party cash to do this business, but I'm not going to say no to a $6,000,000 or $7,000,000 deal if it adds money into our pocket And it fluctuates there for, I think it's good for the bottom line. We ultimately manage down to the earnings per share. And like we said before, we're stewards of this company, and I'm in the same boat as you. I'm a large shareholder.
Our long term plan is for liable to start growing even more aggressively than it has been.
We believe we're in a
great position, the large mainstream distributors, either now in private hands or restructuring or, merging, we are we stay true to that core. We distribute software and the hardware appliances, if they tie into the software, And we we like I said, we're all right on track. Our customer service is really appreciated. We know where where we go there. In terms of the Pakistan business, I really think that the core business found its niche, and I'm actually pretty excited about that core business.
So that's where we are long term.
And how, clearly, these bigger deals are not that predictable. There's no way to manage them. Is that right? They just kind of come along at the whim of the customer?
Well, if we win them, there's also a competitive forces at work, where other companies, large companies suddenly have a have an incentive to for their sales reps to have these deals done in these two quarters to take any business that they can. And they come and go kind of mentality. So we see this as add on business. We try to emphasize that in the call as we did last year as well and saying, Hey, this was influenced by by a large FPO. It's more like on a year to date you can make or break that quarter.
In lightwood, it's just we continue to grow. And as that grows, the impact of this these kind of deals will lessen.
Give me over the years, you've never had an issue with the receivables on these deals? Give me some comfort that you won't have any issue going forward on these larger deals. How do you balance sheet on that?
Thank you. And I appreciate that. Yes. So our write off history, over yeah, over the over the 16 years that we've done it, I think it's less than Kevin scholars with me. I think it's less than $150,000 Yes.
So as a percentage, it's 0.001 percent of all the deals. Now, I got to tell you, we would have done the deal with Lehman Brothers. I would have done that. So, we try to restrict ourselves to high quality credit, but that's another reason that we're walking into. In terms of growing lifeboat now, we're using more and more capital to finance the growth in Lifeboat.
So we're looking, listen, we had a lot of excess cash on our balance sheet and we were and we still are looking for that right acquisition. And that has heated up. Like I said, we've hired an investment banker that, we're definitely reviewing more deals than we have in the past. But we had that excess cash. And years ago, we said, we're going to start paying some of that excess cash back to our shareholders, which we started doing with a dividend yield.
The excess cash that we had on our balance sheet was invested in very low interest deals. And then we found out that there are that we can do a multiyear deal with a client, a very, very high respected client. And we can enhance our sales that way. So we review the credit in much detail. We haven't had any major write offs to speak of.
So that's where we are.
All right. Thank you. Continued, good success.
Yes. But trust me, we fight as hard as we can to produce the number we have in the first quarter. That is our goal. Trust me.
Our next question comes from Peter Luxe.
Although I've moved away, I'm still watching.
You got the internet.
Well, that's true. A couple of things. You and I go back a long time. Maybe I'm one of the snocklers of a long standing. And as far as I know, we've been looking for an acquisition since the year 1.
So, although that sounds good, it never has happened. And hopefully at some point, it will be an accretive deal, but I don't have any hopes. But some of the excess cash we've been thinking about perhaps in addition to buying shares, bumping the dividend. And we talked about that item for an item quarter after quarter. And we tend to hoard our cash and have used it to buy shares, which is a way to give money back to the shareholders.
But, is it right now time to sort of bump the dividend in your and the board's feeling?
Peter, we have a lot of confidence in the future of our company. The dividend declared was definitely discussed at our meeting and something we will discuss again in the future. We keep a very close eye on the level of dividend. You and I talked and we were looking at acquisitions. I think our stock price was at $3 when we talked.
And I also think that over the 14 years that as you said, you've been waiting. I think we have paid out more than $50,000,000 in dividends We have a market cap of $90,000,000. And if you look at our extended receivables, which is basically excess cash that we've used, including our cash, We're still a very healthy level. So we've returned an enormous amount of cash to the shareholders. In addition, we've bought back shares We are a growth company that is also a cash cow, and that's rare.
And especially considering our stellar balance sheet. We are going to use our balance sheet to, to leap forward, but we have to build on a good basis And it's nice to do things sales and then dump the stock and leave. That was never our plan. We're building a real company here. And unfortunately, that takes time.
You know, I had spoken, I guess it's a Bill Body. One of the things you had talked about adding new publishers, and I had given him a significant lead, and he never followed up. If he wants to give me a call, I can refresh that with him. But this is a company that I know pretty well out here in Ohio, that he should be talking to, you guys should be talking to. So, perhaps you should have him call me.
Absolutely. And just so you know, that's adding publishers is our number one priority, and we manage that very closely. But definitely, I think we could take it off. And then Bill can explain to you why or why what progress or why there was no progress made. I'm sure there is an explanation, but I appreciate your support and passion, Peter.
Okay. And then one other thing, and I just want to let you go. Good luck. But, I noticed that there is an issue over the time, the liquidity factor the way the stock trades, the gaps in trading and so forth. And I did notice, that, Kevin, who we know, I know for a while, did liquidate some shares, and that's his prerogative during the year.
I think it was 3400 or something like that. Did Did the company buyback of shares or did he sell them in the market, which would be more difficult than selling 3400 shares in one time?
No, it's something in the market and I've sold shares over the years. And as of most people, I mean, there's not a lot of shares that we all sold. And those are minor amount of shares, what I feel, but that's I've talked to shareholders that the movement of those shares is pretty liquid if you have a large position, it's pretty liquid. It's just that there's not a lot of buying and selling them. We're not the only company in that predicament.
There's a lot of our companies. And enhance our desire for a more aggressive growth.
Okay. Listen, I'll keep watching, have Bill call me, and and we'll talk again. Good luck.
Great. Thank you, Peter. Have a good weekend.
Thank you. At this time, there are no further questions. Please continue any closing remarks.
Thank you. We appreciate everyone's support and attention to our interest in our company. We look forward to reporting our Q3 numbers at the end of October this year. Thank you so much.
This concludes today's conference. You may disconnect at this time. Thank you for your participation.