ePlus (PLUS) 7 Feb 232023 Q3 Earnings call transcript

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

As a reminder, 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,

joining for us you today. Thank

call Raiguel, COO the CFO; Erica is Technology; Mark Darren President; and Counsel. General and CEO Stoecker, and Marion, Marron, Elaine On President ePlus of

this to to want that we estimates, not to be take plans, facts moment be and projections. afternoon I on remind forward-looking management's are that current statements a the you statements may deemed historical make are and based

earnings uncertainties release vary may issued materially to the detailed results in our future and and the Commission, including and the anticipated and afternoon annual our Actual with with most quarterly SEC. XX-K, in Form Securities we reports Form Exchange certain this XX-Q, due documents filings other recent filed risks periodic on on report and we

as in forward-looking update the information, of statement undertakes statements which the the only statements made to future no or responsibility the forward-looking of light speaks is these date and company otherwise. new events, of of any And

we'll be reconciliation in In financial during on is www.eplus.com. release, which website of that earnings the at GAAP using posted call, our measures addition, Information a our section included certain non-GAAP Investor the

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

today's Kley XXXX. third you for you, for call strong quarter for ePlus. was everyone, Thank financial results to a quarter participating thank our This in discuss fiscal and the of and operational

our on plans, IT deliver to successfully solutions digital strategy to cloud. and security, workforce growth transformation, on continue hybrid execute We focused

stack. some of enterprise projects With third believe share, by the our reflected in aided customers across also the chain. solutions of in broad-based customer market supply several The part gaining due of our we we the are growth strength all to large results markets, technology and relief segments quarter fulfillment size breadth vertical across

in are our growth XX.X% gross net customers. Technology have and capabilities investments growth our particularly increased value delivering strong our in sales with in adjusted billings our driving increased Consolidated and to teams and XX% The we made our segment.

supported to solution balanced continuing strong driven growth are our expanded operating generate leverage, by topline has offerings. and We which management, SG&A

$XX.X increased diluted on rate EPS earnings net continues. and as increased above XX.X% to revenue Our both million growth our focus operational our and efficiency XX.X%

to hybrid upgrading ePlus As our their is transformational systems well-positioned continue work, invest remote integrated and workplace and to to in IT systems. accommodate provide customers flexible

Our offerings include an life management, in as center provided as-a-service our multi-vendor cycle Storage-as-a-Service model, architecture such on-premises support, and vendor solution. infrastructure data

With cloud, more solutions these more and our comprehensive of roadmaps to sophisticated the new protect look more more workplace develop they build customers to to security processes strategic transitioning virtual and these ePlus to workloads security increasingly and environments.

result, a more the XX% last business of XX% our as over trailing year. As security months billings our compared grown to XX to adjusted gross almost has than

than quarter more Our services revenues professional comprised X% services in and increased X.X% managed fiscal and year-to-date. the of

rates services for our While solutions to recurring aligned from ratably to top are contract, be service portion fundamental as the we over expect line managed providing recognized customers. term don't of with significant the are our comprehensive revenue, growth capabilities expanded a services

margins, Service stabilized sequentially. have down year-over-year, while

services some in delays mix, constraints to deals chain pressure supply larger margins and see We and continue margins. due lower some to at project land-and-expand services

cost revenue Managed the reduced a for deliver. value generate complexity who services savings sticky and solution customers. key customers we growth and driver with These annuity value-added financial that relationships are differentiated higher-margin a offerings long-term quality IT of and create

security cloud broaden leverage business opportunity, to serves market also areas such as advisory expertise our to as specialized available and IT services our services. in adjacent capabilities managed provide Our we

financing Moving on to our segment.

due equipment. from quarter last the sales sales to proceeds million were period Third leased in of primarily compared to same $XX.X $XX.X million year, lower

differentiator, providing unique IT our to timing its offerings they transactions. the important investments. with due customers their in That As quarter-to-quarter of results financing large our we competitive produces flexibility optimize said, have noted, segment acquire frequently remain how variable and an

As our ahead believe Despite IT this remains for single-digit the rate an a and workforce of focus, support is economic slowdown potential spending to for they we organizations networking that areas plans. XXXX, this year, spending including low cloud transformation a outlook. grow calendar their an at in to on expected many Gartner, to necessity global security, hybrid economic execute and reflecting as we a uncertain digital look year, according

corporate IT time, tight same labor services. continues spending workers the drive for outsourced the market At tech to on

to to is retain hire labor competitive professionals skilled customers. a this and ability market our service in tight Our and valued a differentiator

we'll and the optimize staffing We to solutions necessary market delivery continue and to make adjustments as monitor levels.

pleased In progress our broadening financial and growth strengthening future our closing, position capture to capabilities have our with in and results we the very opportunities. I'm made

As a marks fiscal strong, many seasonally our third year end is the reminder, as quarter of it of the for customers. our budget

expand our sheet, we financial acquisition our strength aligned with and that have the balance of flexibility our by growth footprint geographic attractive Backed opportunities continue strategy. to pursue are to the

will call I over Elaine? on Marion financial provide our Elaine turn to results. details quarter to third the now

everyone. Mark, and good afternoon, Thank you,

reflected Our continued strategy capturing opportunities on our ePlus markets. execution XXXX focused high-growth in results the of third solid by success quarter fiscal end the team and

rose X.X% increased quarter driven by services product Third in growth growth net $XXX.X and million. in XX.X% revenue. revenue year-over-year Technology to consolidated $XXX.X sales segment to XX% sales XX% net million,

the $XXX.X billings and the XX.X% million, in million $XXX of ago to compared were sales year fiscal increased up adjusted net XX.X% to billings in to quarter third compared XX.X% The to quarter. adjustment XXXX. gross gross Adjusted

mix XX-month trailing end periods. Our on market remained consistent previous basis with a

of XX% Our technology two largest markets, segment sales, telecom, net and represented media XX% and entertainment technology respectively. and

remaining for Health with care, respectively, from and X%, XX% XX% other end accounted financial the services markets. XX%, and SLED

a year-to-year, third $XX.X in due our from equipment quarter. financing $XX.X revenue year's proceeds million to sales As segment totaled Mark million decline leased mentioned, last to in compared

decrease to margin increased Consolidated was million. gross down and services in compared margin. contracts the gross was XX.X% $XXX.X quarter. managed XX.X% to Within increased XX.X% compared the margin increased due was segment project-related segment, million, for XX.X% $XXX.X by services year-ago competitively in large several gross well quarter. costs our as to profit gross previous margin Technology XX.X% to XX.X% as gross that The to in Technology year's priced our profit blended

Product $XX.X was XX.X% last compared declined gross margin mainly segment by the due to partially Financing million, higher to to XX.X% gross sales in leased profit third year's stable offset transactional of XX.X% gains. equipment, quarter. decreased of

of needs. quarter. year-over-year increased better change headcount members. support end, XX.X% quarter to we to invest technical SG&A totaled quarter includes growing strategically and year the our XXX are X,XXX XXX services professional customer-facing At in X,XXX staff team and Third The year-over-year our continue to as serve IT prior customers' compared our whom in employees,

more in-person Increased third also up gross client on our was as compensation variable increased Interest due expense improved quarter travel higher reflected meetings. frequent profit borrowing SG&A facility. performance higher spend to interest and credit higher our tied as year-over-year expenses for rates well to

below XX.X% our expense year XX.X% tax operating quarter well resulting million. The the in of an was growth growth, net consolidated in increase fiscal to rate income effective Overall, the ago in operating XXXX sales to third quarter. was XX.X% of $XX.X compared

claim includes year or ago quarter. compared and of of proceeds third fiscal from class were or per earnings million share action in diluted $XX.X which to diluted income, other inclusive the per currency gains million, $X.XX foreign in $XX.X Consolidated the $X.XX quarter transaction XXXX, a net share

$X.XX XXXX. were diluted in the Non-GAAP share $X.XX of to third compared per quarter fiscal earnings

count XXXX. end totaled quarter the share XXXX. comparable the compared third EBITDA quarter million, Our the the $XX.X diluted quarter of to fiscal at fiscal in was million million $XX.X ahead of $XX.X of in Adjusted XX.X%

attributable the another to in sales sales XX% net performance, of to $X.XX XXXX were billion. first year-to-date of Adjusted segment our reaching Technology gross billings billion. fiscal of net by increased Summarizing billion, nine again, milestone $X.XXX growth XX.X%, mainly XX.X% months up $X.XXX to

with gross of to the of to reported compared Technology margin fiscal XX.X% The $XXX.X ahead a the XX.X% XXXX. of to nine consolidated period. year amounted Year-to-date profit segment was margin gross first XX.X% months ago compared year XX.X% consolidated for XX.X% gross million, ago,

to non-GAAP X.X% per Adjusted to up Net $X.XX share year-over-year $X.XX share. share. EBITDA diluted earnings million, per increased or $XX.X per by X.X% diluted earnings diluted to and was million, X% $XXX.X increased

year-to-date while inventory working services, products well Our capital The cash of inventory and the share of XX.X% increased increased to by as XXXX, of compared second a balance for XX, with demand basis in needs $XXX.X strong from at and reflected quarter. as our due on fiscal sequentially compared $XX and sheet cash cash million effect to equivalents to XXXX. we end to strong repurchases reduced million equivalents at the cash December the $XX.X fiscal decrease million remains fiscal million $XXX.X year-end, XXXX

third March XXXX, increased our cycle, primarily in to Shifts levels conversion cash fiscal the compared quarter in changes XXXX, ended by and third XX of the days. XX are with in quarter uncertainty. XX, pleased days quarter our current explain while results spite which days in sequentially balance, to in positioned in believe are the inventory of improving well we On financial economic the three we market our

call will the With that, now I back to Mark. turn Mark?

uncertain share, well position continued incremental expensive supported growth, cautiously and team, to and across the with remains for we we By strong was targeting talented customer long-term size markets. of broad-based of with demand To vertical industry competitive continue despite balance all remain partnerships recap, capture market by this markets for and strong solutions, and our our a end environment. bolster end our quarter suite segments integrated positioned ePlus sheet, ePlus optimistic economic a faster-growing comprehensive

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

[Operator Blair. Instructions] ahead. the first Our Nolan of with Maggie question Please William from go come line will

Thank Hi. you.

detail -- types might solutions of the maybe that you You of financial and projects an large magnitude of mentioned idea more were enterprise the customers impact the or projects sequentially? little Can to we results quarter. what how that fulfillment of for on several or in give expect these a us for

Sure. So nicely the and touch so then there, up a the of could. things Hey, different I you? work in quarter couple Maggie, are on try I'll if overall, deals. to was how why

nicely. bottom strong a had All and line. top verticals both to grow. to customer we off, continues first segments up tech from size our line were quarter really Security So

us expand. that's we where quarter. on enterprise the land and of grew for we're mid put the in counts this and Some about talking focus nicely And

a have and deals really margins. deals the decent in few data nice center services cloud in security, We with the with space the nice-sized in

the supply some added with this also said, saw of things We easing some positives. the chain. that that Now were that to of quarter

the trying you are some line. think orders in And above to sequentially, movement and have see historical that's I by in bring did down we may open X% supply It's noticed still So our that levels. chain. design,

center sequentially some big customers budget. some with service are Our of cloud, talked just your down the land year-end million some then enterprise as to about, of get and expand data to deals and inventory security XX trying the door, product expand But and and was I out the by as land design, you said, across, mid opportunities.

great. or for we That's any impact how consider thoughts that should the next about year-over-year year? basis of And a sequentially on

Okay. Yes.

is In by look solution terms to of fluctuating at our I QX and QX, of quarters. by We and if Maggie. quarters, QX QX, lot still of chain, smaller a vendor traditionally one are have supply it, area, it's bigger the had

as So moving in it's literally out we go forward. and

I be would sequentially, a look had last at compare really tough Finance some to QX it going is down. year. We If be early us. buyouts for

I tough -- we we and we'll be on I at with put relief if the of compare much the So finance this look think I chain, quarter. will as if a get focus don't as the some did know then supply --

that to with might supply Just the considering the that next fiscal chain results affect year constraints. XXXX? when or a follow-up respect fiscal How on for you're comment performance last

in tough of Maggie, by moving -- are vendor starting I These that a that loosen We up. -- struggling with. are times out think actually the kind moving is and loosened some you lead are saw times networking know, variable, That's up. are to as there everybody

the business. had networking with our So nice quarter we actually in -- of a section

do that couple for this of will quarters. expect a continue I

business. supply One relates us of I guess, chain, the for laptop, not it that, things as in PC we're a the benefit to really

for but I over the are chain seeing decline not that the issues we've space fiscal supply So some think dealing folks that be were the affected to by some going last the in have so. or -- the year year, been still we'll of that of with

Okay. Thanks, Mark.

Thanks, see soon. Maggie. you We'll

of line the Stifel. from go Please ahead. come will question with next Sheerin Matt Your

Good you. Thank everyone. Yes. afternoon,

than were like sounds on into although you the in Just lot the are than give able fulfill than pull-in up. had opened pulled expected? inventory, sounds December was than It you you question the other some faster supply sales you It indicated And quarter, quarter that think quarter? higher consensus. where a backlog a higher the to guidance But strength that follow-up higher In because there was loosening own I orders demand some your didn't supply this certainly call. in good. like you or words, regarding last had of

little say Yes, wouldn't Matt, through. a I pull I think there's probably significant, though.

you look are I the the down at touched sequentially. So back if X% on, -- as open it, orders

there's down on effort So million. We've we by as soon inventory the equipment door getting $XX some out put there. very is focused The it. a get as

pull definitely be through, honest. not though, some potential So to there's dramatic

out net with deals you that help sales the I that benefited pulled some of the supply know but up due XX we And I in think growth in we my our saw. were expand almost also don't percent. if in tech quarter it and some the I things change on piece, a we land also, to little came that than So, saw some of quicker chain thought.

tech So that's we by And like to customer and all sizes. nice across in saw design. verticals quarter think a we'd really

and land these deals. expand And

So we're were gross a margin able dollar orders least that talking up fill some down because orders more giving there and perhaps what to significantly fulfill or was price competitors discount about, multimillion at were then pretty efficiently you quarter-on-quarter. your you than at

Yes.

yes, competitors, Matt, deals. I'm I'd dollar What comment watching you, not business. multimillion their since on I are So the large tell can't these

really As medium play on enterprise. of mid We size if you in said, the don't the we're to focused will. small we've small base, customer -- always to segment in the

deals advisory that of are are lead services the require because it's So traditionally, these little a dollar these work tighter to margins deals multimillion a larger competitive upfront. then that that upfront lot

are margins bit a the little So down.

The down margins our our gross to margins thing a other service contributed that being down, bit. were little

affected pieces margins. So gross that's -- that the two those are the

backlog you the well levels. how that levels? been And open does your down of normal And I to it's compare Okay. orders above to that sort backlog sequentially. were your down? know said normal Was

Yes. Backlog Matt. actually was up,

Your backlog is up.

Okay.

Yeah.

and are still to What are hearing suppliers constrained you're product from across orders not some seeing but of demand you're the seems I the areas supply that and some -- we're board? what improving, Because distributors the that networking -- that mean, seeing? be

and probably not times and seeing The piece the Matt. longest across has lead We're it's board. got that's I'll some, supply biggest chain lead networking it Yes. from the improving standpoint, say, the a, but time

Okay.

you. Okay. Thank

to soon. Talk you Matt. right, All

& Burns come line Please from Company. of Instructions] next Your will [Operator question the Greg with Sidoti ahead. go

afternoon. Good

off quarter. start the strength the to just in some So you of with saw

market guess, the dipping to I relative maybe to upside, expectations towards was It I demand. consensus, open or was So, internal more guess, into opposed as your just mainly driven your orders? by demand weighted

Well, no, two. the a combination actually say of I'd Greg, it's

nicely. planning go quarter, So that mid the I'll if design to by things looked there. the by I when customer We our with do of the once -- in some we're some actually again, segments of you just enterprise. very that's to at trying grew account And size and

as our actually Maggie on quarter, net the mentioned XX.X% well were sales as where think for tech up a or very strong I segment overall. tech it Matt I to had

in, was orders also get it chain as with $XX inventory internally some try out was got by get soon that, but real some the terms the down the million, in focus a there to X%. easing we supply product was going think going so as design out it the And I of of door. So open down to on there it

supply team. it's chain little plus a easing quarter by of nice So bit the a

in magnitude of Okay. turns decline left orders on we about like the in revenue, inventory how revenue of balance into -- what's X:X, potential? think terms of the open Is it million of sheet terms or $XX should the that

yeah. Yeah,

on But you percentage, X:X that's small inventory, inventory. the sales, as imagine, the be the overall a it on our numbers. On with can Greg, would at

yeah, on So it's a for X:X the sure. inventory,

way then from and the to is why forward, And good going any quarter, or level or here? other might OpEx this puts decrease is Okay. that there model it takes a increase

Yeah.

there. couple a there's think things I of

overall on OpEx. the think I the is level good

obviously on largest smaller on revenue our so terms think in based a QX based movement I quarter of in there will being quarter-to-date far. some GP be

will an from range variable It the be OpEx. in will be will, that if overall that less that Greg. you difference, So

are watching it realize pretty But closely. we

And about uncertainties, watching think if watching accordingly. market. we're very you tech we're all adjust closely, So with and layoffs, the the to going the we're economic different all

closely pick potentially the opportunity have, Actually, be overall, look the some going layoffs this those to sets a we direction little you the spend the very We're at right of actually, I of able look I But that. everything actually Gartner AGB terms IT like and a opportunities. and X.X% think percentage with Greg. OpEx watching for OpEx. it’s it at skill an tech in it went sure, It and as us. of and stuff GP we sounds bit might managing on. crazy projecting But up with quarter when our solutions for in It

And point terms seeing tech anything see that you maybe the Okay. customer your cautious the layoffs, give Are maybe forward? then we going cycles industry. are seeing in sales more in extending, you of commentary cycles, decision anything more would to some that you or some caution about

in always ePlus, you Yes, as I some budget see in caution some there's Greg. and know, market. I tightening. kind But definitely there's do this challenges opportunities of mean

bigger Some customers. a are sales little longer, getting cycles with especially of the bit some the

there's of stay of, economic on definitely So there. some going as out that kind the uncertainties,

sales longer the cycles sure. for yes, So are

works? to your new customers that that reselling service? as lastly, just a like -- market or you have it service. see launch you have been driven? it talk then is opportunity? you Like a that, been net it Storage. an you asking is providing new something you do, is how Are something And just about as something you actually you storage Are when just that it? And launched Pure Okay. Can service, you

Greg, their data say Hi, the customers know they customized other What components center been selling is Darren. as were cloud their is as we know approach Pure for when saw their which offering a We and for Service, it's of environment. we've our I'll more play. for now, years that a we looking their

So this as customers we're and over potential, calls, centers looking the helping time pure our to we're at to it providing upfront. services powered provide managed storage buy having ePlus services, additional by all currently, where all Storage engaging investments as future a value-add taking sizing, is opposed Service additional with the consumption and to

a saw the it, where are excited the and that really its we customers now team really out play announcement. So that is reaching demanding nice about customers recent with

So come. more to

Great. Okay.

Sounds good. Thanks.

All right. Thanks, Greg.

have further over remarks. at questions to management I'll conference no We this for concluding turn time. any the back

Regina, for for call. our look have Thanks, thanks, to Thanks, us a right. with and All you QX. joining XXXX and everybody forward day. speaking conference QX good We in

Ladies today's conclude and you all Thank gentlemen, joining. does meeting. that for