ePlus (PLUS) 10 Nov 192020 Q2 Earnings call transcript

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

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

joining for us you today. Thank

call Marion, Chief the is Stoecker, Mark Elaine President; and CEO Financial Counsel. Marron, General On Officer; Erica and

uncertainties company that certain on issued this anticipated vary information this to in our statements periodic release to any historical update year Actual filings or detailed XX-K be Securities when want the new the take forward-looking and and moment undertakes ended these including light future with of risks plans, deemed remind of The I materially September XX-Q we are estimates statements based the Form future projections. Commission, our in no afternoon and a facts maybe ended may we responsibility for current and our and earnings XXXX, due that afternoon you quarter make Exchange to and forward-looking are management’s XXXX, events. to statements not results for the to March XX, the and XX, Form filed.

during the call, we on to and investor posted measures, GAAP which of addition, included section website at release, make our may information a earnings financial reconciliation have non-GAAP financial the reference is www.eplus.com. in we our In

over like to turn Mark I would the to Mark? call Marron.

for Kley in Thank our thank today’s results. everyone you, second participating you and call quarter to discuss

on quarterly service in her prioritized investments we and that to the over people, We quarter that drive remarks. and higher sales, heels made growth, support strategy This as the and solid more performance solutions achieved results we a believe on year-to-date that strong will double-digit engineering detail offerings Elaine identified go of growth is second technology came teams. key by focusing were our demand from from and in the strong in metrics, customers IT compelling. long-term across and which of we QX our the benefiting Our and have have performance growth execution demonstrates areas support our our in

clearly been solutions provide committed Services. is also our flexible has and Our marketplace the Lifecycle long-term dynamic the of This ahead margin and preparing assessments and customers through with to to their capabilities overall for our infrastructure ability This existing has security new by In ePlus driven second subscription clients. organic adjusted shows around growth focus cloud, spend. solutions with our to to to provide the and and increased to quarter, today, full creative business primarily run reflecting have enterprise advantage and mid-market solutions with grow migration anticipating consumption shifts gross segments deliver reduce complex from end-to-end our the XX.X%, show along clients leveraging profit, solutions to enabled staying of to our digital from financing gross curve. and creative to with technology needs gross customer industry areas support, growth customers. Today, key increasing ePlus by our they like positioning for options. the ePlus has This models. strong It create allows finance build and payment finding and one-off ways their the transactions sales while fast-paced, we flexible to and need us share both billings with means and and

in our performance XX business, a quarter. second of and of increase and is was XX%, our Net gross consecutive this drove year, last margin dollars business for points. XX.X% The gross favorable increase of increased growth sales by XX% services mix which strong over key the profit a basis XX.X% component an

and on managed and by engineering who sales implement, strategy. our IT the in significant and professional, and to that investments advise to adding those enable headcount strategies out offerings clients can solutions technical made As you optimize design, know, we services then backgrounds, most with staffing effective have build

recent enhanced maintenance have revenues, of have revenues of of our quarter services, in and cornerstone and ability the annuity-like existing additive This brought our customer year, of half managed the complemented time, us to increased strategy. which strengthened revenues we up-sell growth, drive offerings. this considerably profit and first that enhance are At same time. our Additionally, capabilities acquisitions set over and corporate quality represent our second that the sales providing gross on with predictability are to completed incremental the across our to

Our remain ePLUs. a for capabilities broad key services differentiator

XX.X% over XX-month of Another up trailing and from area of sales services. basis for security XXX today, adjusted is increased year-on-year accounts year. focus billings, points our security the basis, X/X of On a key prior products and gross

an growth expect this important spend be for to in this continue corporate as increase. ePlus area driver continues to to We

We that we engagement space continue long-term entered multiple hit them a recently govern can with see A into check, security in resources. which to users our malware. with security service struggle and providing will After disruptive devices system customers full a end market was customer health ransomware events. help of access families

were profit year-on-year report growth operating income in also second into convert quarter and earnings performance pleased strong able sales share. significant that we to am per I to and gross

And a with has to the XX.X% Our EPS broader for our inorganically expanded of ABS continue were solutions while education and through region. XX.X%, Mid-Atlantic which operating acquisition in our share and Technology. it additional strong state, ePlus, increases second XX.X% service transaction out strengthens offerings technology, income through and people positioning ABS variable the build In in market compensation the quarter, GAAP strategy, we market respectively. absorbing and expenses our EPS increased investments also and in by and increased the the local organically up and Aligned traditionally costs. after acquisition been acquisition-related non-GAAP we vertical,

that We and portfolio base. supplement expand will customer growth acquisitions our our continue footprint, with to our existing solutions

was this up, ePlus. for sum quarter solid To a

of well and appreciate We global recognition achieving the this partner for addition Cisco’s as In strong to for pleased clients. was financial the commitment our to partner of of are year. transformation to innovation tremendous performance, innovation and year ePlus positive just U.S. its ePlus we that named outcomes note as

regional complementary X recognizing excellence U.S. awards, won ePlus addition, and market. across specific In vertical

now I call Elaine results. quarter a the second Marion, review for CFO, Elaine? our of turn over our to will detailed

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

growth increase across period mainly sales fiscal in the customers board derived to service quarter and revenue Entertainment We and with services our sales results. uneven of transactions. year are services, product XXXX were the segment a was technology reflecting period. Net in second an technology from from pleased $XXX.X XX.X% to in prior million, a second XX.X% sales in increase services SLED several health the to gain very $XXX.X from was XX.X% professional staff care revenue. increase in the sales augmentation. & of increased to quarter. million, The be from Results Net increased increase from The and Telecom, million, our in due XX.X% in tend year-over-year year-over-year, large segment Media from financing $XX.X XX.X% financing industries. managed segment Revenue the

end from from were to year Looking among $XXX.X ABS to million billings SLED services XXXX, segment end financial subscription-based markets software well in accounting demand XX% Adjusted and for the driven sales billings XX.X% for point client reflecting increase types. compared remaining in from the segment SLAIT continue the net gross in a Telecom, customer mainly Media fiscal other XX%, was The second our XX% increased respectively. XX% our the in quarter, quarter XX.X% year technology ago, & several and of of was XX% by healthcare XX-month higher and of gross Entertainment proportion larger a of adjusted distributed and The same by ago Technology. XX our maintenance. at as sales XX%, $XXX.X and technology basis technology largest respectively, contribution some followed million and be trailing and accounting on period to markets, a third-party a from a adjustment customers strong acquisitions, as recent basis,

Consolidated to the gross while XX $XX.X last was gross of million $XX.X line $XXX points margin in XX% for million, XX.X% margin Gross from basis gross increased profit basis prior augmentation. an expanded with technology staff profit last of increased a segment primarily services segment, profit Consolidated million, gross proportion year. Service to versus margin points increased down XX% year. in XX%, due gains. transactional third financing quarter. increase $XX.X was XXX in due to XX.X%, the from to year-to-year larger In XX.X% million year’s to gross

operating million, increased to expenses reflecting care compensation Consolidated health and $XX.X XX.X% increases salaries, costs. variable in

in We second the ABS of It’s contingent also G&A $X.X that includes our acquisition. prior the expense from had quarter, SLAIT to higher worth of G&A, primarily an a final also noting accelerated Technology consideration million and due acquisitions.

on the SLAIT XXX ago additions XX.X% X,XXX at consolidated to and to compared Technology, was Consolidated which ABS million. brought quarter Most headcount income X,XXX quarter. operating Our from $XX.X came of increased in the employees. year end

or amounted income per diluted per $XX.X respectively, to diluted year-over-year. or $XX share Our XX.X%, These million compared million $X.XX $X.XX net and metrics XX.X% consolidated increased share. to

Our second in effective quarter of increased XX%. second year-over-year to fiscal diluted X.X% fiscal $XX.X the in quarter XX.X% up XXXX. quarter was approximately XXXX, fiscal we was rate quarter. earnings XX.X% share year of to compared for margin Non-GAAP XXXX. million. And compared our XX.X% Adjusted per tax from of expect half $X.XX, the to our to XX.X% be second the were rate In the ago X.X% EBITDA tax adjusted the EBITDA

down X.X% year ago from outstanding shares million, Our diluted quarter. totaled the $XX.X

increased consolidated year-to-date our Net increase. segment million, profit for of and X in fiscal amounted results. Net XX% technology $XXX.X to the the will months gross Consolidated sales million, billings to turn sales I $X.X to XX.X% a to gross million. XXXX $XXX.X $XXX.X billion. now first reflecting increased adjusted XX.X% to XX.X% increased

XX.X%, XX.X%. XX.X% segment grew EBITDA of XXX consolidated non-GAAP Diluted $XX basis income last by and basis increased $X.XX. year. $XX.X share by were diluted expanded technology margin XX.X% earnings Our ahead gross million. Adjusted points to XX% earnings increased and $X.XX, our per margin XX million, share per to to increased to X% points Net to gross

$XX.X sheet, balance acquisitions. cash the end repurchases March cash compared due we fiscal the million compared share XXXX, equivalents equivalents $XX.X of to at in cash to the million XXXX. $XX.X and decrease to quarter million levels million and XX, was of to cash increased Inventory $XX.X to the Moving ended of XX.X% and with

our projects customer depending we inventory have said on specific levels vary before, underway. As

the in year the conversion XX cash quarter days Our was cycle first ago and days XX XXXX. fiscal days XX in of quarter the compared end of the to at quarter

balanced financing portfolio As and investment growth. continue to capital acquisitions, will business drive to allocation, our between repurchases in share take for we a investments, approach

your for time will the you Thank today. Mark. call to turn back over I And

Elaine. Thanks,

year-to-date fiscal XXXX. ePlus for positioned have results growth Our continued in

all customers our our investments way to or ongoing to or in Thanks and our market meet We middle infrastructure. business talent IT continue their and three. this digital same ePlus. all of market At solutions driving a programs initiatives differentiated to supporting to that customers, technology, the These cloud are customize consultative lifecycle large a demand our the enabling customers. advisory means middle are of provide strategies, requirements IT were roster well business expanding their of to across outsource and resonate their able cybersecurity are see we implementing to from able to for staffed strong of their with solutions to Lifecycle time, and we our their requirements whether needs, staffing services to enterprise their their managing combination the especially who Services portion

ones. existing Our customers outlook and customers ability our and us gives in confidence our long-term upsell new continue position to both in enterprise and gain mid-market to with

In addition, provide enhance and customer through and we base. to acquisitions continue and the expand footprint, for that grow solutions reach expand to organically we will both and our and look ways services our

questions. Operator, like I now call to for open would the

question from Your first Nolan Instructions] Maggie William from [Operator comes Blair.

is line go please ahead. Your open

a particular am customers, the additions, something Hi, Elaine. on wondering vertical strength, us logo quarter. Mark us in granularity give the there really this? you and just of Was drove strengths little to can help new more I if what understand existing

are Okay, across lot you? a areas. a first off, for quarter hey Maggie. So different strong ePlus of How it was

top of relationships revenue. the metrics a financing our incremental another income gross our XX% the drive the billings, find on were with our and teams the think all strong press and technology leverage services gross in financing trailing operating quarter the this not but as to both noted had capabilities growth up for teams nice and X that will affected ways our areas adjusted those There quarter, I verticals. verticals, net to We we’re quarter, increase only growth. nice XX in saw and X our year-to-date well months, to as As seen continuing call, QX. to team, The nicely. similar profit was sales, release top we’ve across and that, the our We again between

We of that enterprise the some customers previously. also land expand our talked uptick on nice saw based with about some program of we’ve a and

so, more broad-based it is there positive this characterize fair mean broad-based. quarter more something that as environment to there particularly driving the is was does or So positive And if environment? was that

Yes.

things. I will few Across uptick Maggie, all a Enterprise, and key also XXX think We there first some telecom was One, then one our I trend. quarter worry note, we healthcare But a mid-market half positive customers, enterprise well the from XX we about a saw market was never us. nice it months. we actually but enterprise. across I growth. is growth employees up both But saw certain our we I the were enterprise had think But for down, thing, in verticals. the as the to saw with that saw segment no segment’s the trailing way SLED, quarter, finance, growth well customers, is nice and as too but technology, our in areas. year-over-year

now. we the So verticals it seeing across are all right

transactions type hitting a the can lot the of we you how this here, one-off of of of this as kind are or and of in quarter? terms then of seeing the we in And sustainability of kind we’re revenue about think characterize subscription some projects that revenue would those

Okay.

So one overall, that’s a Maggie. tough

and that I of the seemed if out always This that’s flatten little, got yet. we factor. first know talk As a quarter, trend was We’ve don’t about. to gross-to-net kind a it

seeing still subscription a We’re lot deals. of

think months were I points. trailing noted So XXX up – the our we security XX basis

that in kind time out. we did actually subscription-related. gross-to-net for subscription-related. lot sell also flattened of long are a So times that a There’s is first other some see one But of we – solutions of that the

XX% if that know that’s a is a again, was don’t We thing. just year-over-year. or quarter did which yet a I up services So have trend quarterly strong

So things there few of kind a affected that. were that more than

quarter Mark. billings Thanks the Thanks you us Elaine, was growth in Okay. of inorganic? understand And for all then guys. both That’s help me. gross adjusted rev can growth how much and

organic About yes. in billing, adjusted XX% gross was

of to organic. of back what to going we nice a able time. some Maggie, and as us. was into be Elaine seeing nice we’re service was strong up noted, offerings organic, And quarter, we’re as billings It well gross that that as our acquisitions, some to really for to we’re customers some over go are going to a the is three-fourth picking adjusted was But about leverage for with which able sell nice be quarter

Great. Congratulations guys.

Alright. Thanks Maggie.

We you see soon. will

comes Burns from & Sidoti Company. next Greg Your question from

ahead. is open. line Your go Please

Good afternoon.

between So to we’ve again outpacing and recently, More seen I adjusted billings. revenue on wanted that gross revenue. dynamic just touch billings adjusted gross

there to drove you a see product shift the sales? had software-type So in mix did and of higher dynamic? where quarter Was as you sales opposed in percentage that this that a maintenance maybe mix shift

a we was basis still a But quarter-over-quarter. XX are on basis, point difference in a it mix. don’t think I X-month shift was up. Yes. It

XX%, was reclassed at versus We’re year XX.X%. at last

it’s think didn’t what’s a of Mark said, that and recognized what recognized But really I flattened us. the kind Like out was in So of comparison. in terms for that. mix change quarter-over-quarter growth

Okay.

of rate, And we just going some OpEx run kind Is good leverage operating quarter, this how current amount forward? the should of nice leverage a we the expect? think think how really level about of this about should to

Good Greg. Hey, Yes. question.

The this comp. I probably good I just realize a want quarter to note, the think, yes, is metric. thing variable

our GP, if you profit, XX.X%. up gross are was at there it So look

models. your a believe good But variable and the variable this do I the comp that’s So quarter. for OpEx is the – obviously,

we our benefits significant see some in made investments operating some to that income. We are starting have

XX look If months, months you trailing about quarter, versus operating over at XX X%. this is up trailing our income

fees quarter, was XX.X%, earn-out as it up This onetime with well. some

it little So a have bit been would higher.

we’re starting there. movement some to see nice So

Okay.

to – outpace So I operating are to from continue incremental am you growth? revenue assuming expect but to you do to going kind expense of invest,

one, a Greg. tough That’s

easier the thing. is Here

some are continue believe we to where we because will invest we market are We seeing share. grabbing

of need, the the built it. that the then it that customers services cloud with or and we be So digital services whether all lot solutions security or a space our and out in go

opportunistic, in as M&A. So we’re of as both be well organic to terms going hires

to you’ll our What you the – of think we’re still is, trying I I’m gross to continue So are that. in to probably some see highest say margins industry. the

So drive it’s going be tough to to to continue that.

where that driving OpEx service probably at blended overall, but up margin is is Now will are numbers a help starting probably drive good our point. we up,

maybe are Mid-Atlantic – you with where with in have geographies have Okay. ABS, don’t yet? did maybe there And there don’t then you what geographies you Are what where footprint region. a other SLAIT, out other

Yes, question, Greg. good Okay.

So much and probably would be covered one. both build have India at if can presence you Michigan think Lakes pretty out Minneapolis. know ePlus, We’ve Great tightly. we got I a area. coasts the area pretty in Ohio, Chicago would We and

the the think do some little talked off out. top that’s of opportunities a build other bit. my build we be done. in going as Those to that ones out can about more but a the head. be as got little would some south probably to Texas also expansion, of think got a can global the We’ve but we bit about I Southeast I that presence calls on We’ve well,

and and sense some where methodically of the that scale make we make really difference. to where it to makes do scales and size to build going can really size a We’re kind analyze most –

you. thank Okay,

you. Will see Greg. Alright,

Sheerin from Your next Stifel. comes from question Matt

Your line is open. Please ahead. go

Matt on afternoon. Good Kurt is for This Sheerin. hello. Yes, Swartz

what on impact insight we be any question ABS particular, the the coming contribution can the recent can on gain And follow-up quarters? OpEx for as well? you sort hoping quarters Technology light in more looking shed coming at on another in some of acquisitions, Just maybe the might

Yes.

can I is acquisition for the but capabilities good you, thing I our Mid-Atlantic, It it call, rounds Southern in, territory at Virginia us. we ABS, acquisition. tuck-under tell easiest think a of think what out a I really would was

So expect big start. I wouldn’t anything to

kind Now offerings that the a can that ePlus normally, their ABS different it over of offerings a then base. to the you’ll as is then all of local customers up they to really out customer it kind of acquisition has, be from was the all education team that as get a their tuck-under and understands as back as couple the more really and well a to to go up that acquisitions able time, was capabilities hopefully, of there. state see, pick it different But portfolio we good to takes of for – have and some and team. of types understand speed health But add quarters build good care build well we’ll what as kind some to

pretty about We’re team. the excited picked up what we with ABS

of sort closing Understood. to we offer affecting then if just a deal And whether timing just been of sentiment? have large news just little timing deal and any issues you the gears the at customer – color seeing, about or that’s could looking anything wondering deals shifting some – continue general you on bit, push-outs, been hear that’s deal other

on and were have Yes, both well haven’t pretty XX% to GP over the come as to of I a quarter honest. out we billings XX.X%. this way. as up sales And over Based that, gross be want seen net any adjusted solid the where quarter, right

So didn’t pushed being deals see out.

the but time, Now at case for period long a time the obviously been here deals that’s of good some of ePlus. take

customers seeing anything are where slower moving not yet. So

just We things out yet. are pushing

very much. Great. Thank you

Alright, see thanks. soon. you Will

from Knoblauch comes Your Capital Brett Instructions] Markets. next from [Operator Berenberg question

Please Your go open. line is ahead.

effective taking year-over-year? why on increasing there Maybe bit looks for Elaine Is its you for any be a reason rate guidance question. one that tax Thanks tax that to particular guys. Hi, my just gave.

year-over-year Yes. seeing. prior some permanent the On in we’re were we counteracting stock basis, year that basis – increase for benefits there differences vesting, is a that an year-to-date in received that some

the to the of year. about rate expecting remainder XX% for So we’re actually be tax the

of And kind then XXXX, in see maybe directionally that you general area? same just for do the falling

area. would I Yes. in going general to be probably that say it’s

for it guys. that’s Thanks, me. And Okay.

Thanks. Take care.

Thanks.

would further to Difficulty] and [Technical like There are CEO call the time. questions no turn at I back President. this

for Thank Hey, Thanks you appreciate call Okay. the everybody. you. with today. us. joining the We spending time

all IT a ePlus. of continue solid the on first for you holiday stated, and we And you well. spend outpace it and Thanks season today. on thought of for some Take As our the the half strategy. enjoy With for we your to overall the quarter we believe market I joining execution care. wish Thanksgiving, that, I best as us we’ll hope was based

and concludes today’s call. Thank gentlemen, participating. conference Ladies for you this

disconnect. may You now