ePlus (PLUS) 5 Feb 202020 Q3 Earnings call transcript

Good day, ladies and gentlemen, welcome to the ePlus Earnings Results Conference Call. [Operator Instructions]. I would like to introduce your host for today’s conference, Mr. Kley Parkhurst, SVP. Sir, you may begin.

us joining for you today. Thank

I projections. is On are forward-looking plans, that Darren and and the based CEO a not Counsel. President; are statements be we afternoon facts Marron, Chief the Erica to Operating that estimates you General Officer; historical call to Raiguel, Financial Officer, and Chief may statements current take deemed this Mark and Elaine remind to management’s want make on Stoecker, moment Marion, be

the Actual results detailed to the filings this future undertakes December for The and events. statements and or ended when risks filed. earnings certain XX-K responsibility XXXX no in quarter our information ended Form Securities and the of XXXX, issued due March light anticipated Exchange materially vary may XX-Q year XXst, our these Company XXst, future update and Commission, we and to periodic in any our uncertainties new forward-looking of the for afternoon including with release Form

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

call the to now to like I’d turn Mark Marron. over Mark?

thank And quarter. to discuss participating you, our Kley. you, in Thank third for everyone, today’s call

are strong There pleased are growth. and half first position results. a important results to of us our upon significant year-to-date We report a built solid quarter fiscal takeaways third which for year from XXXX several

adding offerings. services base expand strategic headcount, selling customer we to and in digital of of security the facing investing successfully our in higher up our infrastructure areas on and cloud, acquisitions and solution strategy products First, growth and our executing are executing customer

of build and acquisition source Second, our ePlus provides business. and to annuity is growth gain base approach a of quality growing share that predictable market of revenue a enabling balanced organic

a supported offering broad services and approach mid-market enterprise year-to-date with our financing highlight Lastly, and range portfolio well solutions, of options, third that additional results technology base our resonates by customers. of quarter and expanding of our

posted In sales due margin, XX%. and to first quarter, net the in showed up increased sales an product acceleration services growth Technology XX% profit areas we gross of the increase increased while the third year-on-year Both of of a in and operating XX%. grew were gross our year. income XX% the improved half XX% from these pace impressive

Our spending. federal difficult but and large is flows our in synergies are spending and ePlus. we project, benefiting offers financing marketplace federal segment programs federal our from to are from Transaction technology believe IT opportunities demand with financing segment, sizes vendor the for future IT

Let year. wins initiative we within more with growth several via our higher to our me in quarter had customers with with business which sales where existing expand that this XX% fiscal aggressively the sell We compared we on our XX% customers reach intention at half favorably technologies and new first of speak reported third pursue other successful and the for margins. the services land or broaden the

can service can tend augmentation generally share. customer strategic Staff a market. today’s stickiness our third to margins professional service in our expanding to in offering however, wallet a From staff Also, quarter, augmentation margins pickup saw margins, standpoint higher we sales product are particularly our in job be increase and a considerable is in services. but than augmentation which managed yield solution than demand gateway a the lower staff high and customer

same period its runway profile points gross quarter, ePlus. on XX.X%, XX-month continues year-on-year the a industry-leading XX% represented to expanding ePlus year. third for for offer in one-fifth our basis margin grew trailing services last basis and of retained XX and to roughly Security adjusted solid margin gross products Security billings. ahead a the of growth

We and invest into the solutions today future. continue needs our and in needed to serve to acquisitions customers’ people,

industry we growth investments off sales in margins, leading curve. paid and have are to ahead committed date Our and of to the staying

meet examples the full of their These current to uncover capital and potential needs. our that of strategies growing current contracts cloud customers to challenges identifying multi-year Some benefit and and face areas result to in solutions needs. future realize and our offset business infrastructure, this customers assessments IT cost gains providing in meet customers cloud expenses efficiency often help large of structured include help upfront hybrid creating savings the

helping acquire finding IT their a for complete and operations to the providing management outsourced by it include customers equipment and finance streamline examples customer. automated capital technology customers make Other a as bundles and provide structure ways or to processes budgetary for infrastructure providers such pre-selected program utilizing the lifecycle minimize number can to that benefits easier of ordering providing our needed for

early while our in boosting and acquisition to our to combination August. closed adding in both The selling are and our integrated capitalizing Turning brought expanding and offerings revenue. the ePlus has in portfolio particular. The of our we on which managed ABS capabilities stages ABS footprint the service base late the and well these has to opportunities Mid-Atlantic into service business client additional in converting them

that strong space from they awarded the One help of to were customer ABS our and we transaction meeting of period is In technology the was budgetary share capabilities the execution this while market gains a an example ePlus. in now large leveraged a third quarter financing constraints. procure summary, that needed for them recently educational

results. the third turn Marion, who Elaine? our of now will Elaine I will CFO, a through over to you our walk review call quarter detailed

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

the our strong quarter prior driven share Net the million financial increased third of fiscal XXXX. year’s sales from from in share some XX.X% growth to both details third $XXX market more performance performance quarter, segments. of fiscal and strong Let me by

second increase in revenue professional Similar across managed of Technology the year-over-year and services revenue, increased the staff quarter the product in augmentation. XXXX, $XXX.X service to services reflecting board to XX.X% the in services, XX.X% sales XX.X% and was million Net segment and growth fiscal sales respectively. in

While was gains driver were the the organic gross service technology to in $XX.X the of up growth segment from large revenue generating Financing the acquisitions of million due overall, ABS mainly SLAIT higher to roughly primary XX.X% business. increase transactional XX% primary adjusted was billings. growth and the contributors primarily year-over-year, segment for government-related

Please keep in to and from period segment financing large driven by transactions. our tend be mind that from results to period may uneven be

basis, XX% accounted XX% XX% in and end the accounting several distributed and Healthcare entertainment our XX% for our the on with trailing each to Looking customer was media SLED client at while technology, largest types. a accounting and remaining XX-month be telecom, XX%. respectively, segment, continues vertical and technology markets for among financial services for other

million of The $XXX.X the Adjusted declined year wins contributions same driven as technology billings ABS from the gross in acquisitions a to by from sequentially. increased was new SLAIT demand from technology. strong period and sales the well gross as ago, of billings adjusted XX.X% year-over-year adjustment compared $XXX.X mainly million net flat larger segment in to and to customers existing XX% customers,

year the XX.X% Consolidated ago to million expanded and $XX.X compared the to Consolidated gross prior XX.X% to quarter. XX.X% fiscal was margin basis technology quarter. to million gross and $XX.X year-over-year. the profit to profit year points was gross up for $XXX.X Gross margin million increased compared in third segment XX.X% XX XX.X% amounted in

profit and XX.X% enhanced increased to staff $XX.X augmentation of gains. expand due customers million an points a product larger to basis narrowed the additional gross to quarter competitive to managed due as effort margins in margin the well fiscal positioning large XXXX sales pricing for existing yield of that in sales to customers. proportion third primarily the XX.X% Technology was in XX.X% segment, In to our to lower increase gross compared due margins. financing services Services XX transactional as XX.X% to

headcount headcount ago SLAIT acquisitions, to compensation and in variable and from of was the additional costs. the increased third million salaries at due variable in ABS and consolidated XXXX. as December an and increase operating added X,XXX of resulted higher quarter primarily XXX XXst, quarter, to benefits, rose to compensation SLAIT employees Our technology profit. as and of XX.X% year the expenses end the increases as $XX.X in X,XXX ABS Consolidated and compared addition gross healthcare well Salaries benefits the reflecting

consolidated pleased of net operating million. earnings were income share $XX.X income per up per are our million or increase $X.XX Consolidated XX.X% and XX.X% share. with diluted to respectively to $XX.X diluted We very XX.X% and

be effective fiscal our adjusted quarter margin compared XXXX, the approximately quarter. increased Our of to the third Adjusted XX.X%. was third our million was to prior of EBITDA rate tax for XX.X% X.X%, with XXXX. $XX.X year to flat when EBITDA quarter quarter year-over-year consistent while XX.X% In rate we tax expect fourth the fiscal the

the diluted share per Non-GAAP quarter XXXX. earnings up were of third from fiscal XX.X% $X.XX

will for million year-to-date quarter XX.XX XX.XX to year totaled months our turn now due outstanding consolidated to XXXX nine the sales and XX.X% profit repurchases. first Our share gross diluted shares in sales Net the to increase. fiscal billion. up I to to increased of million million, ago compared $X.XX Technology gross increased segment reflecting a $X.XX billion were billion. adjusted Consolidated the to to in XX.X% XX.X% amounted XX.X% $X.XX Net billings $XXX.X results.

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

to Moving $XX.X XXXX, our at XX.X% is August million to end XXXX. and attributable to quarter of balance $XX.X the levels the cash cash repurchases. ABS The financing fiscal to $XX.X equivalents in to and portfolio sheet, million of compared XXXX. increased March XXst, the compared ended share acquisition Inventory with million decrease investments in we the

levels inventory customer As a reminder, under on way. our depending specific vary projects

days, the conversion the days and quarter XX quarter cycle at from XX the was quarter end fiscal XXXX. year in cash up of to similar the of ago Our second

strategically investments portfolio business balanced well terms our capital as in through financing of investments and allocation, repurchases. drive making In to as share growth acquisitions we

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

Elaine. Thanks

stage fiscal for ePlus. a considerable have Our the year-to-date results of set to be for XXXX growth year

of our reach. optimize to demand growth solutions explore proven protect continue from our and initiatives. base to we expand geographic And to for with capabilities organic our that and opportunities mid-market enterprise technology complement have their would that complex acquisitions our We ability customers and capture IT

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

[Operator Instructions].

Your of comes from the line Maggie Nolan William from first question Blair.

I the this the Mark, you this a success work of little engagements Strong and is maybe on land was and in give us you Can types commented saw of engagements? interested quarter. these you what nature of detail longevity that of expand the quarter. type that Hi. more

for Mark off first Maggie, the Hi here. Thanks question. So,

divisions. within working been as of we’ve and/or the bringing fairly for new On as Normally existing years services. in is we it into net get as and to both different our everything all you works security, solution that’s digital we’ve customers sets that terms doing land and been infrastructure cloud, the know, sell, across new well on the way expand, from something, successful offerings staffing customers

on So based it really the varies customer.

expand then beginning, and it show try What of does normally land affect little a sales to the normally over might help gross the beginning are value back able lower the at. of time, and the within we time originally in customer up come we in and ways all will different our bit margins them types bit they’re be the to levels to and that little potentially then the margins our over the drive they a so

with were customers? new these Now, customers or affected that these existing engagements quarter, this

Both.

in there that profiles existing do across were and it those many how the Roughly both given new customers? was and vary margin

call Yes. very To both customers as XX grew you our give varies. at high level, rates. our, customers a well a I’ll at other profile as what top varies. The It margin significant feel

of just third give maybe you picture, M&A, in to if To sales and our on With little two-thirds the a expect few a we was grow little would than will. the that. over was adjusted on to that and maybe in you had fill a nicely lower overall with then grew margins a billings, color overall, used more kind from expand, organic we’re to terms of bit net time and sales land we customers large gross

then, years? has of services the business continue and And last couple as as How revenue total you. a Thank much you to changed over increase a the the of see mix mix as obviously annuity percentage changing. revenue of is

increased as margins this, our terms the Annuity through in piece back and it Maggie. contract everything MRR, run you’re continues about actually to process, we’ve our for that have. foot as the sometimes annuity margin services. margins What’s total continue of bit with that revenues growing of annuity in it, What it’s is go our the then to seeing right, in staffing we door value, service try smaller nicely, relates nice our professional and and services now should grow a a annuity us, are some kind nice But little move than customers we the quarter-over-quarter, our which we space. else to right we into with It to the is of sell if year-over-year. increase business traditional

me Thank you. thoughts Thank And one your of environment, supply looks around thoughts all last the updated just types what chain, from the then demand things. those on like, you. macro

Okay.

demand, haven’t terms any of seen So in far in demand. terms slowdown of overall

never somewhat. to still no things changed what’s prior In revenue have it, another terms in maybe going little at of for it relates you’re A election that obviously as that exposure the an happen you going our on pieces have not quarter if the on, of terms in quarter forecast and two and actual touching of lot to looking know from quarters. to Asia-Pac. to One coronavirus, then we year

We China. it a kind are some our in of out supply little tracking knows vendor partners, a chain it’s pushed different early, logistics they’ve everybody as from things with

so and we’re should if over I it’s things So potentially Maggie. but it affect early, or too could see that track nothing to closely say there time, going far,

Mark. Thanks,

see you soon, Maggie. We’ll Okay.

comes from from Sheerin question next line Your of Stifel. the Matt

you Yes, Matt Sheerin. hi, questions. Swartz this taking is on for my Kurt Thank for

Kurt. Hi,

Kurt. Hi,

in though as the perhaps the how the going has when over in see So, think of higher? profile, perhaps OpEx been kick or whether to margins first expecting growing on been as it but operating more percentage business I’m just investments has sales and we margin all, few margin forward, leverage touching seems a starting wondering should the improving, so quarters also if we of that, I’m and sort off reflects that’s gross to that overall the continued related about operating should steadily of some be drive wondering past acquisitions

good Yes, question.

and it’s actually things. It’s acquisition-related of costs the the that two the investments also point this So and acquisitions some we’re making. at

also been we our that fairly based market as grab areas some ability the over Kurt going believe the we’re in have we’ve that in So can the have And share we’re we out are to years, support only in our and services facing and new technologies headcount, newer not existing invest customers, customer capabilities to clear but coming on we of continue the touch meaning of sales customers. that prior out. to investing some so reach also focus

So we watch it is OpEx currently. We over leverage. affecting our to it closely expect and would operating margins time get

just for on demand your on commentary outlook, the And up XXXX. Understood. then particularly following

into may software in. particularly we’ve that refresh into the I know, and areas much know I that And of some strong such we guess of not of off that’s coming maybe too play shift security. very you part an expectation PC XXXX. spending move As in a of area you been really is But sort as cycle XXXX, as

positioned of these from you year whether into how moving benefit potentially spending some stand to think and I’m is of the shifts. wondering So ePlus sort you

Kurt, think And Yes. we’re positioned. I well really

hit that you on true. something So is

of play get security in we the terms call security? that XX, digital that, didn’t and we’re really PC In it we much. because in more in we in very commodity sales think than bit but the positioned software play, ever uptick infrastructure. didn’t rarely Windows cloud, We’ve we maybe played that, stayed refresh space. a the a little the in if Do Yes, I’ll

it’s say where market that where have well and we’re an check adjusted XX and investing resources trailing up was XX%. billings subscription are I up But to XX% were the want standpoint double in our think I’d significantly, think technologies. we that. new range. software positioned months to we gross and licenses with security But Our is I from in going

you thank all very Great, me. much. from That’s

Okay, see Kurt. care. We’ll soon. Take you

question & line the Company. of next Your comes Greg Sidoti Burns from from

feel large we of that of some wanted kind tough be broad as of broad the there just that quarter. closed deal expand up kind you touch was just had to particular two this quarter [ph] - because to coming we larger a look just any wanted for particular going or quarter forward was a Was it I more projects in the just I quarter? to against of landed or a afternoon. in in mentioned. comps of deals any type the that are number one of larger get it based Good one land based band saw or kind and on you that the deals in

Greg. Good Yes. question. Hi,

was probably you replicate, So to it expand, will. about some the was if tough flush, deals pull be tune I’ll will, there much more or but multiple so would two and $XX $XX of things, customers, that from land but if million million it one, call the year-end, probably across to not forward budget you

probably was want about customers, multiple budgets $XX from be year-end million across or you and to So it if it kind pull that a end. call forward million through pull of $XX this that to from would

that Is see was year kind that unusual for every you this of pull Okay. something forward or quarter?

that think the quarter. little a unusual I was for

forward call a I’ll end, year see and You this calendar customer was always little but norm terms size. outside in pull of this in it the every

So the I say norm it not it’s to relates would as that.

our to numbers The other and little expand. be thing overall, land different is, bit may a related than

quarter some in also a of large solid We our group. with deals had terms real finance

Not finance, land of also much two that play in. were just on the and kind plays things came so So there. but to there into expand

color you do the when these - model, guess Those large side mean of visibility large have to in deals transactions to I difficult when on any should of financing commentary us? of like gains I transaction - side about business, the transactions the Is next side it’s the how question. that And you think I of the guess potential give my come, kind Okay. that leads close or into Do of we have you will a pipeline they come business? [ph]. business do can or they these just that modeling there

we’ve tough talked Greg, and one. that’s about Yes, the a throughout it years quarters. the

to financing how come be. because a are their variables deals the different always into they bigger Our leasing, all business will lumpy them. always only deals, hard of up, size, was, often business selling These our is go that forecast

not pat tell ourselves we They’re to the we What when to of easy tough to for worried is, they’re that’s quarter you So our we terms of predict. was solid This I’d forecast of when some replicate. back, and transactions. But team is real them, get or on to the don’t, tough a compare. about finance a lumpy kind we’re these in it predict. forecast business

Okay, And lastly. thanks.

you soon. See right. All

So I it’s got one okay. more if

Okay.

Sorry, up. you not it? What’s rushing

So gross billings the quarters, grown in roughly each and with revenue other. adjusted last have two line

a I like you pace saw in faster in more gross think you just you’re prior has now, selling why billings revenue, this, to mix that is line been the go what at dynamic? dynamic there Why what a that line in than quarters growing over of there? adjusted is, growing shift could closely they’re the

Well, and - affect net subscriptions, that seeing and it in terms year-over-year, to a What gross yes, line is about which you if the now between will. year-over-year, is the there down, to which of which bigger would quarters, bring sales to net delta prior comes closer renewals net net down was the we is gross gross effect. talk to in maintenance it we’re

Okay, thank you.

Yes.

Instructions]. [Operator

Your Berenberg next the comes Capital. of Brett question Knoblauch from line from

open. is line Your

guys, is well. my Hope Hi for thanks all question. taking

Hi, Brett.

Brett. Hi,

up to Would the the maybe delta to shifts I software about of spend that to product year. next cycle to on securities the year kind talking spend you’re year maybe in more maybe one, this first gross upgrade question, - spending the the widen The net from software cause if other and security anticipating next guess, spend? following on related

net the subscription on software Potentially moving basis. to which be lot would yes. of A models, a are vendors

depending selling could are what on and we Sure. vendor the what their that net sales, selling product. they affect potentially are of So or

had guys media XX-month maybe and that? segment guess, there would basis Okay I in say, really looking telecom, a you trailing just then strong, and the entertainment. a worth anything at I in the breakdown. flagging on Is

No, we’re actually, we felt good.

So the up trailing five top they for of through But we when nine was were up, months were so flat little vertical first of verticals, flat. our the the fifth months, quarter kind look bit, at just year-to-date and top nicely. a all verticals somewhat XX down our five four

so So pipeline we’re and say, seeing far a verticals across progress nice opportunities should I in nice five. top the all or the

compete important And and Okay. have business. drives in more, I think guess, business going factor to to just would capabilities is play? have the is guys the Like you’re new finance similar of then see a - guess you trying that I new sales, for financing wins? out how one and if you capability product didn’t growth really what do you you the or what

think or affect good work per it them question, them got to but would a complementary, get in it teams, it’s I two That’s we’ve don’t deals. compensated place together think I meaning, sales put separate comp to on we’ve plans se,

at had example where have have able leverage or it were don’t customers some budget happen. to to deals folks for call financing make our options payment for deals We I’d that year-end

the it end-all definitely say will. - it if be-all, wouldn’t helps, you but I would So it’s be

guys. Thanks perfect. right, All

Take All soon. We’ll right. see you care.

Okay?

Yes.

too. You

questions CEO President. Mark the back call no this are Marron, there further And will at over time. turn I and to

and thank a right, in speaking participating Thanks day. Take meetings look and Hi, today’s you. taking great time upcoming call. just call. on want thank next everybody to We the for you investor seeing in quarter’s to All the have to care. for forward

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

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