Good morning, ladies and gentlemen, 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. Callers, please note that you are limited to one question each. If anyone should require any assistance during the conference, please press the star, then the zero key on your touchtone telephone. As a reminder, ladies and gentlemen, this conference is being recorded. I would now like to introduce our host of today's call, Miss Melanie Caponigro. You may begin your conference at this time.
Thank you, good morning. Welcome to Wayside Technology's third quarter 2015 earnings call. Before turning the call over to Simon Nynens, the company's chairman and CEO, I'll dispense with the customary cautionary language and comment about the webcast for this earnings call. We released earnings for the third quarter at approximately 5:00 P.M. Eastern Time, Thursday, October 29, 2015. The earnings release is available at the company's investor relations website at waysidetechnology.com. Today's call, including all questions and answers, is being webcast live, and a rebroadcast will be available at www.waysidetechnology.com/earnings-call. This conference call and the associated webcast contain time-sensitive information that is accurate only as of today, October 30th, 2015. 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 Nynens.
Thank you, Melanie, good morning to everybody. Good results, passion, and execution. We are different, we are different exceedingly well. Good results. Whereas our much larger peers reported either anemic growth or declining sales, our revenue increased 8% to $98 million. Gross profit increased 11% to $6.9 million, income from operations increased 20% to $2.3 million. Our net income per share on a fully diluted basis increased 14% from $0.29 a share to $0.33 a share. These are GAAP numbers. GAAP and long-term receivables amounted to $25.7 million, representing 68% of equity as of the end of the quarter. Working capital amounted to $31.3 million or 82% of equity as of the end of the quarter. We started paying dividends in 2003, more than 12 years ago. We started at $0.10 per quarter, we have steadily increased our dividend.
It now stands at $0.17 per quarter. This dividend is subject to board approval on a quarterly basis. The last increase was in the third quarter of 2013 from $0.16 to $0.17 per share. In the last five years, we've paid out more than $15 million. We also bought back 235,000 shares this year for a total of $3.9 million. Passion and execution. We are excited about the prospect of more software publishers joining us. We continued to invest in our team in the third quarter, and we expect to continue to do so, all in order to manage the expected growth of our company. Our new sales office in Arizona is working well. In addition, on September 14, we announced the appointment of Jackie Nyborg as Vice President of Marketing. Mrs. Nyborg reports to our Executive Vice President, Bill Bataie.
She joins us with 20 years of sales and channel experience. Most recently, she served as Director of Global Channel Marketing for Perfecto Mobile, a mobile application software and testing company. Prior to Perfecto Mobile, she was at Dell Quest Software, Sophos, and Aspen Technology, Inc. We look forward to her contributions in aligning our marketing programs with business goals and building tools our salespeople, as well as our customers need. We are also in the final stages of finding a new home for our headquarters. It will not have a large impact on our financial results, and we don't have a definitive contract yet. So far, we have, in principle, agreed on the price for a building at the previous Army Fort Monmouth, a few miles away from here. $1.4 million for a 53,700 sq ft building, which equates to only $26 per sq ft.
There are some hurdles we still have to take, yet we are excited about the prospect of moving our headquarters to this new location a few miles away from our current headquarters. We applied for and received a tax grant. The final amounts depend on several variables. To be able to own our own headquarters at this price is exciting for employees and shareholders. This move is currently planned to take place early Q4 of next year. As stated before, we do not expect an increase in costs related to this move as compared to our current building of only 18,000 sq ft. I would like to hand it over to Bill Bataie, our Executive Vice President. Bill?
Thank you, Simon. As noted in our release, we had a good quarter overall, with revenue up 8% and gross profit up 11% year-over-year. Our Lifeboat business, 11% in Q3 to $86.1 million compared to $77.4 million in Q3 of 2014. Our TechXtend segment retracted 12% to $11.6 million when compared to the same period last year, which was $13.1 million, due to a continued decrease in our extended payment term transactions.
Gross profit for our Lifeboat segment, excuse me, in the third quarter was up 16% to $5.5 million, versus $4.7 million for the same period last year, due to an increase in sales volume and deeper account penetration into its strategic accounts. The TechXtend segment had a higher percentage of GP compared to last year and declined only 3% to $1.4 million due to the sales volume, but with higher margins. Gross profit margin for Q3 for Lifeboat was 6.4%, compared to 6.1% for the third quarter of 2014, which was caused by different product mix and marketing events. TechXtend profit margin for Q3 2015 was 12%, compared to 10.9%, due to the decline in extended payment terms transaction and a different product mix. Our Phoenix office expansion is complete and fully staffed to current staff plan levels, with room for expansion as needed in 2016.
The addition of Brian Gilbertson in Q2 is providing a return as we made a lot of progress in expanding our product portfolio during Q3, and have already announced a major new vendor relationship with Supermicro. This agreement is with their integrated solutions group and provides us access to both traditional server and storage products for the first time at Lifeboat. It also provides us with integrated solutions for VMware EVO:RAIL, VMware vSAN, and the vSphere Storage products, among others. Also announced this week was a new integrated product from Lifeboat, where we are using a custom Supermicro configuration and integrating in our backup vendors like Veeam into the box, adding installation services and providing our resellers an integrated appliance, which we call CBUS, standing for Converged Backup Solution.
There are several additional vendor announcements coming over the next few weeks as we prepare to bring them to market in 2016. We continue to manage our expenses and build our product portfolio to help achieve our growth targets. Thank you. Simon, back to you.
Thank you, Bill. Kevin Scull will now report on the financial numbers. Kevin?
Thank you, Simon, and good morning to our investors, analysts, and employees. I will discuss our third quarter financial results both on a consolidated basis as well as by segment. Net sales for the third quarter of 2015 were $97.7 million. This is compared to $90.5 million in the prior year, representing an 8% increase on a consolidated basis. Sales for our Lifeboat segment were $86.1 million and represent 88% of our total revenue. Lifeboat sales reflect a 16% increase compared to the prior year. The increase in sales in the Lifeboat segment was mainly the result of the addition of several key product lines and our ongoing strategy of strengthening our account penetration. Sales for our TechXtend segment were $11.6 million, compared to $13.1 million in the prior year, representing a 12% decrease.
The decrease in net sales in the TechXtend segment was primarily due to a decrease in extended payment term sales transactions and larger sales transactions as compared to the prior year. On a consolidated basis, our gross profit was $6.9 million, compared to $6.2 million in the third quarter of 2014, representing a 16% increase. Our gross profit margin for the quarter was 7%, compared to 6.8% in the prior year. Lifeboat's gross profit for the quarter was $5.5 million. This compared to $4.7 million in the prior year and represents a 16% increase. This increase in gross profit was primarily due to higher sales volume in the current year. Our TechXtend segment gross profit was $1.4 million and decreased by 3% compared to the prior year. Total selling general administrative expenses were $4.6 million, compared to $4.3 million.
This increase is primarily the result of an increase in sales-related expenses and employee-related expenses, salaries, commissions, bonus accruals, and benefits in 2015 compared to 2014. A large part of this increase is due to hiring the field sales team and a professional services team. Our net income for the quarter was $1.6 million, compared to $1.4 million in the prior year. Earnings per share on a fully diluted basis was $0.33 per share, compared to $0.29 in the prior year. Now, moving on to the balance sheet. Compared to our year-end balance sheet, the following key accounts had fluctuation. Cash was a healthy $19.6 million at the quarter end, compared to $23.1 million at year-end. This decrease is primarily cash used for stock purchases of $3.9 million, dividend payments of $2.4 million, offset in part by cash generated from operations.
Accounts receivable, current and long-term, decreased by 8%. This decrease is primarily due to fewer extended payment term transactions in 2015 as compared to 2014, and a decrease in DSO over the year-end. Accounts payable and accrued expenses decreased by 12% due to lower sales volume compared to the year-end and an increase in early payment discounts taken by the company in the current year. The company has no debt. We do, however, have a $10 million revolving credit facility that can be used for working capital purposes and to finance large transactions. As of the quarter end, we had no outstanding balance under the credit facility. Working capital at quarter end was $31.3 million. During the quarter, we repurchased approximately 65,000 shares of our common stock. The company has a 10b5-1 plan in effect until February 2016 to repurchase shares.
We still have board authorization to buy back approximately 491,000 shares. Our stockholder equity now stands at $38.1 million. At our October 27th board of directors meeting, the board declared a dividend of $0.17 per share for its common stock, payable November 17th to shareholders of record on November 10th. In conclusion, the company continues to have solid operating results, a strong balance sheet, and is adequately capitalized to support our continued growth. Simon, I turn it back to you.
Thank you, Kevin. Before starting the Q&A session, I would just like to state again that we remain focused on adding new publishers, providing our customers with excellent customer service, and providing our employees with a great and rewarding working environment. With a price-earnings multiple of just over 14 times, our current dividend yield of about 3.8%, and over $26 million, or almost a fifth of our market cap in cash and long-term receivables, we are confident in the performance of our stock price. Thank you, operator. We can now start the Q&A session.
Certainly. Ladies and gentlemen, if you do have a question at this time, please press star then one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. If you are using speakerphone, please pick up the handset before asking a question. One moment, please. Our first question comes from Peter Locks. Your line is open, Peter.
Good morning, guys. How you doing?
Good morning, Peter.
Although I'm not around the corner anymore, I still keep an eye on you guys. Good quarter. I want to ask you to characterize your company. Would you consider yourself a value company or a growth company?
I'd say we are growing to provide more value. I would not grow for growth's sake. I would only grow in the areas that we're growing in, such as adding field sales reps, director of professional services, Jackie Nyborg in marketing. We make those moves in order to provide value to our customers. We are not a volume player. Look at our peer competitors. They're all doing $ billions. That would be foolish trying to compete with them on volume. We are competing on value. We do so exceedingly well.
Just further question, follow-up on that. As a value company, was it time, you expressed that the last time you raised your dividend was 2013. Was it on the table that perhaps it was time, given the earnings momentum, to increase the dividend at all?
Yeah, something we discuss on a quarterly basis. Again, with our current investments this year, significant investments in the growth of our company and the significant stock buyback of $3.9 million this year, we're next to being a value player. As you know, as a long-term investor in our company, we are a conservative company, and I think we've done quite well over the last 12 years. Again, we've paid out over $15 million in 5 years. We're not a fly-by-dividend declaring company that declares a large dividend for one quarter to get a spike in PR. We're all long-term investors, and we're conservative, and we expect to increase the dividend as we grow our company.
Just one more question and I'll let you go. If you do go ahead with the Fourth Monmouth purchase, is that going to be outright cash, or are you going to take a mortgage back?
That is under consideration. We do have to see how the numbers add up and what the mortgage rates are going to be, et cetera.
Well, good luck. Thanks.
Thank you.
Our next question comes from Richard Gritham. Your line is open.
Yes. It's a dividend-related question. Are you going to be offering a dividend reinvestment program? We have looked into that. It's something under consideration with our broker. It seems to be of slight interest only. We've received anemic interest in that program. That is something that we've recently heard that that was of interest. Kevin Scull will look into that. Thank you.
Our next question comes from Jeff Gagan. Your line is open.
Thank you. Good morning. Nice quarter. Simon, I'm a little curious. You hired Bill Bataie and then Brian Gilbertson and now Jackie Nyborg, if I'm saying that right, and clearly, Bill and Brian have had noticeable impacts on the business. What should we expect from Jackie? Do you have other potential recruits in mind? Of course, without mentioning names, but just to give us a little color in terms of how the personnel side of your business might change.
Okay. I'll let Bill handle in terms of the addition of Jackie. She reports to Bill. On an overall basis, we've gone through a significant transition in terms of our internal employee pool. We are transitioning the company to even add more value and to really focus on that value-add play, and I think the CBUS announcement is a perfect example of that, the Converged Backup Solution. One device, plug-and-play kind of setup for our customers, significant margins to them, higher margins for us. These are products that are not a turn-on where we could switch, take market share from our competitors, and the millions flow in next week. These are higher margin lines, and there's a high demand for that. We focus on that. Brian has done very well so far. He's our Senior Director of Business Development.
He's really focused on bringing on new publishers. There's always churn in publishers. Some say goodbye to us. Some margins are starting to come under pressure as broadliners take over. We have to continue to keep that pipeline up and healthy, and he has done so. I'm extremely happy with that, and so is the board as well as Bill. In terms of Jackie Nyborg, in terms of marketing, we really want to focus on adding value in terms of our website and the interaction with our customers. I'll let Bill expand on that.
Thanks, Simon. Hello, Jeff. Good morning. One of the key elements in driving new publishers and providing a demonstrable ROI to existing publishers, which helps retention and earns greater margins, is by having very effective marketing programs, being able to provide them through the marketing efforts, a pipeline, and forecast using all the infrastructure tools we already have in place. More campaigns with multiple vendors simultaneously around the solution discussion that we've been talking about now for a few quarters. That dynamic change of the marketing direction required a new leader, and that's what we've accomplished. We're looking forward to both improving our web presence, our social media presence, and providing greater ROI to our publishers through this process.
Thanks. If I can follow up on that with regard to Brian's work in the marketplace, you've announced a few new publishers, and I thought I heard you say you had several announcements to make forthcoming. Can you put a little color on what makes a good publisher, what the qualities are? During that, can you also discuss potential margin expansion on the Lifeboat side of the business as the TechXtend business becomes less and less relevant?
A couple answers to that question. One, of course, without giving you forward-looking statements around the publishers we're bringing aboard, we have already signed four existing agreements with publishers to bring them to market, some during Q4, some during Q1, with an additional probably four or five agreements we'll get signed between now and the end of the year for launch into early next year. Those margins, because several of these are leading technology companies, vary from low to medium to high. Because what we're focusing on are where do they fit in our solution stack? How do we put product A, B, and C together to present solution D to our resellers that provide additional margin and GP on a per transaction basis? That ties back into engineering, that ties back into field sales, that ties back into marketing.
What Brian has been putting together is how do these things all go together to fill out voids in that parameter. It's an exciting time as we bring those on. Relevant to TechXtend, a lot of the decline on TechXtend has been around the large flexible payment option transactions, which tend to be lower margin. As you know, Jeff, last year we talked about realigning TechXtend to focus in New Jersey and the Northeast. Our New Jersey revenues from the team was up 27% over last year in this marketplace. The margins are going up. It's a slow process to change the selling cycles and the selling process of the team. They're still contributing very significantly to our overall growth strategies. We continue to realign and invest in TechXtend with staff.
When you make these kind of changes, some people don't want to embrace change and have that whole who moved my cheese kind of mentality, and they decide to leave, and we then bring on new people who are excited about the opportunity. We are all very personally excited about how that's evolving, though it is a slow process.
Thank you. I appreciate it. I'll ask Simon one more question, if I may, and then hop off here. Simon, you have a fair amount of cash. I view that as a positive. I think you've done an outstanding job over the years of managing your balance sheet. With the notion that TechXtend is more of a regional player, would it make sense to try and acquire some bolt-on acquisitions that could increase the TechXtend footprint in a targeted area?
In terms of acquisitions, I'll address both sides of our company. In terms of acquisitions, the main reason that we've realigned TechXtend is the fact that, again, it comes back to Peter's question in terms of do we add volume or value? What we have done, we were a volume player as Programmer's Paradise, over the years, that catalog business went away. We tried to continue to play that volume game with the larger players in that area. That did not work. In terms of acquisitions for TechXtend. One-on-one would be maybe two. Not necessarily though, because people will be anxious. A lot of our customers compete with TechXtend. The smaller VARs compete with TechXtend. Some of the smaller local VARs compete with TechXtend. I am excited about the growth opportunities for TechXtend.
One thing it really does for us, also on the Lifeboat side, is, A, we have a motivated team, a very motivated team. A good structure currently on TechXtend that is ready to expand. What it does for us, these are the early adapters. This is the new technology, so to say. If we see that happening on the TechXtend side, we know that will translate into, a little down the road, into larger volume with the larger players. Those are the guys that we handle on Lifeboat Distribution. For us, it's a perfect feeding machine in terms of, what is the new technology that is out there in a couple of months, quarters, or years. That's the reason we remain excited about TechXtend, it's a great team. If you talk about Lifeboat Distribution, yes, we are looking at acquisitions there.
Unfortunately, there are not many small focused distributors left. We've been looking for a couple of years. As a board and as a shareholder, I would be not doing my job if I not continue to look at acquisitions. One of the areas that we're also looking in terms of acquisition, is there a small software publisher, a focused software publisher with much higher margins that we could add to our offerings to our customers, something that they need, and that would bring us higher margins? That is something that we just reignited again at the last board meeting we continue to look forward to. I don't expect to be able to announce something in three months, but that is on our radar, we're actively expanding our radar to see if there are such opportunities.
Having that said, this company in 1995 went through a period of acquisitions. As many other companies, we noted that a large portion of acquisitions do not work out and do not achieve the expected results. We are also in that area, moving conservatively forward. The reason for that is, we have done extremely well over the last 10 years, over the last five years, over the last three years. We want to keep that going. With the number of our employees, there's only so much that we can focus on, and there's so much going on in our market. Software as a service that we're addressing, expanding our professional services, adding on new publishers. Our larger competitors are really churning. As I said before, they're declining. It's anemic growth. They're restructuring, mass layoffs. Old teams are restructured.
There's so much going on, and that affects customer service. We are looking at their customers in terms of software publishers and going, "Come to us. We're a steady ship. We're growing. We know what we do. We add value." That's what we expect to look forward. We're working hard every day. Sometimes we have some successes, sometimes we have some no wins. I don't want to call them losses, but no wins. That happens. Overall, I think we're really well positioned to take advantage of that market.
I appreciate your thoughtful answer. Just to clarify, has your company owned a publisher in the past?
Way in the past we have, yes. That was part of Dan Bricklin's Demo-it! This was in the late 1980s, early 1990s, I believe. Before my time and before we went public.
Bill? Yeah, Jeff, just real quick. The CBUS is kind of an integrated solution using two of our suppliers. If there are products that don't compete with existing suppliers that are software companies, that can be a part of an integrated solution that we can take software publisher margins on, that's one avenue. If it's very small and it's a great technology, and again, we don't have a major competitive product in our portfolio, and their only struggle is their route to market, there's a couple of ways for that to occur. One is for them to pay a lot of margin and try to get it. The other way is to partner with somebody who is an emerging technology value-added distributor to take them there more quickly.
Right.
It also improves us. It's just a matter of finding the right guys and change that dynamic. Obviously at that point, if we did find somebody, it would have a very positive impact on our margins.
Well, I appreciate that. As a shareholder, it's been a pleasure to watch you execute on your business plan. I know it hasn't really been reflected that well in the share price, but this will follow. My only thought, again, as a shareholder, is to encourage you to stick within your circle of competence. Obviously, you do what you do very well, and I wouldn't want you to stress for margin and potentially disrupt the great business that you have. Thank you for your time today, and good luck.
Thank you, Jeff. Really appreciate those words.
At this time, there are no further questions. Please continue with any closing remarks.
I'd like to thank our employees for their hard work this quarter. We look forward to Q4, and I would like to thank our shareholders for their interest in our company, and we look forward to reporting our Q4 and full year results early February of next year. Thank you.
This concludes today's conference. You may disconnect at this time, and thank you for your participation.