ePlus (PLUS) 11 Aug 182019 Q1 Earnings call transcript

Good day, ladies and gentlemen. Welcome to the ePlus Earnings Results Conference Call.

As a reminder, that this conference call is being recorded. I would like to introduce your host for today's conference, Mr. Kley Parkhurst, SVP. begin. may you Sir,

thank joining and today. you you, us for Thank

statements the to and Mark Marion, Stoecker, On this XX, to want we risks is detailed no Securities release the statements future CEO uncertainties you our afternoon General a year and company estimates XXXX, may when are that this XX-Q Form information and of our certain filed. Commission, XX, and President; future results and that forward-looking remind responsibility I Exchange projections. materially periodic these Erica facts forward-looking the in based update due June call on undertakes deemed to Form any may the earnings make with and March Actual Marron, in afternoon are be we of Elaine statements light moment the Officer; Chief for Counsel. and ended take or new Financial filings management's for issued vary XX-K the including to our historical be not events. ended XXXX, and to and The quarter current plans, anticipated

the make non-GAAP measures financial section to the of reference Mark? we've www.eplus.com. now we addition, at financial I'd is GAAP call, call earnings like Marron. reconciliation turn included the to a release, our investor Mark information In and on over which during on may posted our to website

you, quarter outlook. thank participating and to first business XXXX Kley, Thanks, our our today's all, and for in call results discuss

and points XX.X%. We increase XXX metrics. start margin, quarter in fiscal results on the in a reported to key basis our improvement X% first increased a gross a solid year-on-year which significant to Our represented gross profit year

to enterprise compare declined IT maintain professional quarter on continued near market relationships year-over-year a the customers. consultative, broader very Our gross peer first basis, cloud, On expansion net customer managed this highly digital in and very customer infrastructure group, a that project base. and to product customer tough quarter of top and valuable year's our middle services base focus solutions quarter, a sequential X.X%. believe the for we outsized allows We net On an the delivered with remains of our us sales in favorable mix nurture positions approximately due our and supported continued share our and X%. capture within our ePlus was relevant sales at and by and that our to market and for increased last second margin and security or well

paradigm We are factor starting and of over revenue time. to in They a ePlus, to and and to operational gradual that effect visibility increasingly streams are few higher allow gross revenues that see subscription sales also notable us model. These for upsell recognize this new is solutions and business becoming revenue with better as closely benefits and service a telecom IT consume them over and and ongoing with it consuming on our engage as they and IT to cloud, a customers applications an provide more cross-sell Customers solutions. services consultative time. giving basis, additional to recurring the us our revenue financial types or how utilize opportunities provide ratably and consistently well margins prefer aligned

key our demonstrated managed professional base has market middle consistent across and offerings, maintenance, including customer services. enhanced growth Our all of

to Working care points gross vertical. adjusted health modern from products an engaged plan in of hospitals, our customer areas note standardize new processes customer performing IT a its seen built monitor in We assessment to recently secure Of earning its to posture. our on their and a infrastructure a XXX and of plan value we in solutions outdated with data and upgrade health outcomes, to investing Sales the robust up continuing XX-month security offerings. their basis, confidence network customers security year-on-year. and and particular across the a and hospitals. handle billings, improving to also we implemented net technology, practices, worth balance basis a right optimize digitalization had are build first, to trailing plan We performance success and care project the IT multiphase our abilities. in increased offer proposition focused regional equipment consultative and estate a motion across IT help medical is them security their of deliver desired of We've the while and of notable improve maximize services with acquire XX.X% projects for all remain the our X the then accounted security growth new, building measure

virtually achieve harnessing to to addition, In can technologies creates patient technology outcome. plan, test anatomical and we XD for an are virtual This individual reality solutions community. the to the emerging patient, provide treatments which practice surgeons of medical best use images

continue to We own make the realignment serve customers. progress of to resources our effectively our on most

this added year-over-year, our acquisition. X.X% as was X%. down headcount much result of personnel however, increased of reflects Sequentially, headcount customer-facing recent a While a

acquisitions our footprint. We make continue geographic will have and strong areas add service continue while will to financial we offerings optimize to our we cost of to the expand our professionals structure that demand customer in and resources

our we strategic joined Operating to King help Additionally, Chief Chief Officer XX and operational to bringing quarter, Information was future management Raiguel the executive promoted support ePlus as as over our to experience team Douglas support initiatives. years first Elaine? of who expanded Officer, as scale I will a Darren With initiatives and to that, In business. have is CFO, the C-level we results. turn over deep executive. call the review Marion, Elaine operational our bench ePlus help fortunate and talent first quarter our a strategic will our to

Thank you, joining thank and for everyone, Mark, today. us you,

our months accounting financial operations basis, adaption growth off-lease we timing sales a for million. on basis. represented as a increase $X.X discuss statement our of financial and for in XXXX. on results, changes adopted fiscal known our and you April of have revenue consolidated remind of am certain on from of sales bill-and-hold The as which we our recognize results, ended of standard start I prior I want the net retrospective arrangements. of We basis an shown The XX, are two June ASU to the on XXX sales pleased adjusted such, on the Before to our was XXXX, a I of the and first primary solid recognition quarter report that impact transactions three to an XXXX. which periods X, equipment, adopted cost

representing X.X% decline $XXX.X to due million, Our year-over-year comp. a tough net to a sales amounted

points $XX.X increased The higher worth positive our that and of attributed headcount a performance higher to increase result And of September success maintenance expenses excluding in of presented proportion greater million large of products $XX.X This project gross quarter mix services. to XX.X%. salaries third-party some year-over-year XXXX. XXX is shift a basis. XXXX, and Operating employees. X.X% to profit to a the noting reflecting X,XXX reported growth IDS selling and net gross the assurance X% acquisition to of net and decline a principally of of we the due of while first benefits, X.X% the margin a sales in a It to basis our in is would value-add headcount fiscal decrease, expanded year-over-year to increased. was our largely due services revenue have on the sales million Despite

as the However, declined our end sequentially fiscal of realign talent, from X,XXX we XXXX. continue at to headcount by X%

EBITDA in points the In offsetting had XX.X% benefit XX.X% expenses operating higher fiscal and the in year EBITDA rate profit as basis expanded million we the of up margin million, tax was result XXXX, $XX.X a our X.X%. of amounted of income quarter. and result a $XX.X year-over-year. a Adjusted the our of flat to share-based decrease effective XX gross federal quarter while from compared to As year-over-year the operating to first a X.X% tax lower tax increase, ago adjusted quarter of rate was rate compensation

were earnings last earnings net result, $X.XX, a year's by Fully diluted from XX.X% $X.XX. million. up $XX.X As to per XX.X% share increased

acquisition-related Excluding X.X% diluted EPS share-based year-to-year. up on the recognized quarter, during divesting basis other the compensation tax a well benefit income amortization were $X.XX, tax-adjusted non-GAAP as and expense for as of

diluted X% the first average due the to repurchases. share million June year's quarter share $XX.X count weighted prior from for to $XX million Our share of declined quarter count

margin segment gross the increase a and last and to profit. $X.X quarter, Technology maintenance third-party in proportion declined maintenance, due This XXX Now by expanded for expenses assurance, let adjusted which $XX.X in accounting a proportion technology overview compared and compensation first of you increasing to to and of our give basis XX.X% additional year of or in the quarter to well XX.X% as for The subscription, quarter. of million as third-party sales segment due technology's third-party prior detailed increased compared me first quarter. XX.X% X.X% larger software billings revenue. business, remaining current reflecting more due a million from while quarter increased year's sales and the difficult year-on-year the end of prior technology due $XXX.X our and representing our largest of higher the approximately of sales, this SaaS services primarily be sales XX% net subscription which segment X.X%. over million due The higher year on licenses for was segment basis, adjustment XX% $XXX.X to This accounting represent $XX.X were personnel. year's profit and to and The to net to million, higher of XX%. continue $X.X assurance maintenance sales services. operating includes Technology in million a ago. towards to the SLED entertainment from revenue is trailing product largest financial Adjusted salaries technology $XXX.X customer The gross benefits, to or ago a Telecom, respectively. variable same and and services net mix a quarter. million, incremental $XX.X types. XX% increase markets gross Gross shift net up includes segment year in the X.X% million was amounted to of XX% points of the several XX-month margin media and client services million health as XX% to million X.X% to was from other $XXX.X billings XX% million care, the gross at compared $XXX.X remainder period comparison

million, declined XX, million quarter. gross technology the EBITDA, X.X% The employees to to the to June up however, the $XX.X of however, ago our quarter headcount in X,XXX year. in was employees due with compared amounted income fourth operating $XX.X profit. year compared to had last segment, Sequentially, $XX.X an technology XXXX, in million end primarily quarter. As increase our segment a in X.X% X,XXX Adjusted X,XXX from at we increase

performance. segment Operating were $X.X of earned million, million lower from from million net reported XX.X% an lower increase in down operating to financing XX.X% to Adjusted in the financing consumption-based This million. fees result $XX.X benefits. arrangements. was We to million credit post-contract $X a and reserve quarter, expenses revenues the Now sales losses to year review X.X% for amounted let EBITDA transactional up decline me the salaries as gains, representing ago $X.X a $X of which and XX.X%. well led as in income, changes of due as

sequentially XX, the from $XX.X increased capital decrease quarter at to segment. with to cash working due $XX needs was million compared March the million levels The balance to our Inventory sheet. as equivalents $XXX.X $XX technology Moving million. million cash ended We additional and to of XXXX.

Our are projects. customer-specific inventory upon vary and levels dependent

days, Our ago. cash fiscal XX from in XX down to from XX improved a of days fourth days and quarter cycle year the conversion 'XX

now call on infrastructure in security plan to focus you Thank continue areas. cloud, time acquisitions Mark. back build execute to our add-on our on digital that and the for I we to and will today. capabilities forward, out your and strategy Going offerings consider these to turn

Elaine. Thanks,

security First stage we the we to as areas another year continue cloud, of favorable, sets digital for remain our XXXX with need in our Market quarter solutions of are provide out focus build ePlus. the infrastructure. they and and customers for positioned dynamics progress to well

to continue core to profit, evaluating and structure strategic our closely We Operator, growing managing would now the acquisitions. focus for open call I questions. on like gross

Nolan Maggie [Operator from William Instructions]. And comes Blair. our first question with

for it's to internal growth what for you wanted in come were to comparisons. for know get a compared the year-over-year tough revenue I feel how I But quarter your expecting? all did growth. a expectations

were we expecting. was it with what Maggie, in line

Just a a or compare. up remind couple of. of it this things quarter, to year, you tough Last was really we note in XX%. One, were

little our back on subscription at it world more. net, line gross The margins were terms was quarters, go couple metrics what Those and thinking. to the towards actually -- had other a last better bit about, that sales, of if move net thing And but a to about that consultative we was to kind things Elaine higher, you gross talked move which we gross service in as of go of gross our the we of with profit take in talked more ratable will and as we've kind growth to services being our as a look manage the to us forward. our are a little bit show into of affected we

business in whether Okay, performing with couple update have anniversary-ed of you us and how ago. about acquisitions months to line on? you not the one when anniversary, an expectations on sense. then, that them integrating brought a great. your And they're give that's or you Makes those acquisition into Can are just one

cloud as Okay. two to helping OneCloud cloud them help acquisitions, that the more to cost out our business way well practice. reason part was was strategy correctly, ePlus on building remember, that deployed of to cost They're checks from that with down customers, solutions And security provide businesses has and if was ensure to the their risk. -- our to as our Yes, good and that's of one costs kind so to the that X, so to feel out all align other they we cloud two IDS. the day the about be reduce were optimization effective we they're you everything their strategy them acquisitions, one solutions with helping both they things. that's cloud The reduce been health team. what build One, acquired we provide the the the so deployed integrated

only And to done but they the starting in, and capabilities. feel So our ePlus. across both it's see cloud those not sales within good what out to existing our of regions offerings we're we build cloud from organizations, were

then, expectation for Or you to the for idea And for give specific tax your expectation if this number, can compared Elaine, kind of rate your Great. falls of give the just quarter an just updated where us normalized the you can't a year? year?

Sure.

the of at to three expect we in For each the remainder quarters, rate. a about quarter XX% come

which thought said that from where it we to quarter, additional an the the during This is we declined of -- why compensation saw occurred benefit was was rate divesting from there slightly at come quarter, going had about that stock we in XX%.

[Operator Instructions].

Stifel. Our next question comes from Alvin Park with

This is behalf of Park on Sheerin. Alvin Matt

especially QX the large considering any fiscal you if provide could XXXX, for QX year you of the ePlus growth guys in tougher looking Any Just be in the and how IT top top tough what growth. market fiscal from wondering and where insight that at might terms spread might growth of are line and strong just especially on color given with the growth on 'XX. year comps be, of comps customers,

of lot questions a there, couple in different a So of things. Alvin. was There

what we things. our building. with So still strategy good a and feel we're One, of couple quick

and to market. about We So we believe sell that. continue and lot that IT What the our that to are that's in we're building that we'll as feel we're calls are looking good the for, our outpace well we've up. feel or is we positioned we're to do those subscription customers customers, evolving related, prior ratable the either that solutions solutions we of talked do a showing

gross decrease, If up look gross was our you X%. on net our at profit, profit actually sales

that have selling highlight other Also, services solutions large our consultative deal, and I'd thing as would and as services. more is annuity in factor the up sales higher the we're you that gross are valuated and would adjusted been our If solutions billings. well out

our So if you over at they look basis XXX last gross points year. margins, were up

that market. So grab feel or goes And the we're We forward we share to will --as good as customers feel not positioned with good our good where the we we're as as the our market only continue forward. goes vendors. positioned in that and well year feel well market with

buybacks. for Okay. buybacks. color last count or if believe, could so, well, share gradually you X decreasing share through the And been some you've on the I give as quarters

strategy if view just is us you the If might much color with provide be potential how in how can general it, could coffer. on there you if further approval? buybacks you remind there on left board you your And for the

Okay.

two normally things we there's allocate three So at we or that how cash. we -- in terms things of that our look

company, a we're growth believe we Alvin. So

portfolio or go to coverage build could with. customers our try normally we and/or thing can with hires reinvest our first either at cash is to look in technology our territory do out So that our back organic that acquisitions back either we

the But resources so but we be -- years allocation, repurchases and opportunistic. years, and acquisitions one it's for have were open potential that build we've and look Over more more going to cash years are there. had I capabilities now, our if to share out or would and investing in out right currently years, at it

the share April board was which did XX, shares. started XXX,XXX Alvin, authorize program that a And in repurchase and May

I further And questions Mark call for any not back remarks. showing time. you. turn further Marron the this any like I at would over am to Thank now to

Okay. Thanks, Daniel.

build balance closely to and strong our a continued made as could out I We've long-term our about both metrics with we we our our terms both feel and well go the of just manage as organically as well still will strategy solutions got in growth services continue forward. close through over very moves to So we if good footprint and as sheet. off that We've -- M&A. we've our as

the with have on a Thanks, to today with next So quarter's Look day. for speaking that, thank good on the you to and Daniel. you call. want joining call, us I forward

conclude you Everyone, and conference. program participating for gentlemen, all thank does Ladies you wonderful day. may This today's today's have a in and disconnect.