ePlus (PLUS) 7 Aug 232024 Q1 Earnings call transcript

Good day, everyone, and welcome to the ePlus Earnings Release Conference Call. At this time, all participants are in a listen-only mode and later we will take your questions.

I would now like to hand the call over to Mr. Kley Parkhurst. Please go ahead.

us joining for you today. Thank

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

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

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

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

using In addition, we will certain non-GAAP during call. the measures be

included GAAP Information which Investor in posted reconciliation website is a financial our the release, of www.eplus.com. earnings on our at section have We

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

our our land a across our strategy, consistently our for results. key Kley. great you, thank you, first marking to fiscal the Double-digit acquisitions, high markets. driven expand start solid sales and year. end delivered executing fiscal execution, chain was all level, to at contributions improvements growth supply quarter, performed strong in ePlus team I a takeaways. from quarter and by everyone, Thank call today's discuss will And start some first XXXX participating with results in

our management significant of operating drove disciplined platform growth and operating sales scalable net XX%, leverage. along with Our cost

meet environment, today's and to performance suite in solution are products IT generate optimize highlighted on diluted with EPS faster-growing the security, rose the investments spending. serving that and focus of our year. overall our where areas last customers' rapidly XX% In compared excess EBITDA The cost to and growth enables deliver how prioritizing again to organizations well the enterprises strategic Adjusted market and value strength efficiently. for our continued of needs and same positioning that XX% improved have period and services of we us

to During quarter, in an easing the first we continue chain see constraints. supply

improved the a overall to we benefiting delayed lead of remainder sales projects our in availability, and availability With the growth. conversations improvement on Based product partners, were our complete able times customer with anticipate over year. the number continued product of we previously

growth represent net quarter. acquired basis, combined component we and of of acquisitions our our know, Future and results XXXX. On from our approximately July benefited first in growth sales in first fundamental Solutions the X/X the strategy, of these of our who quarter you Com, contributions As Network Group contributed a acquisitions the

increased sales improving business end product demand most technology XX% with categories. across Our all across markets and

all remote we organizations get We of well up as in across segments, cloud-based customer the experienced enhancing led as primarily to as mid-market, security with to as in The technology by size operating our cloud XX% strength cost-optimized leverage We almost business customer continue versus architectures on focused which segment. to mid-market adopting XXX hybrid employees is XX,XXX accommodate work. define year. a in the first income being evidenced segment broadening trends last operating demand by quarter our and

as partner key with their Mid-market align of are technology as modernization. cybersecurity workplace particularly need areas strengths in well with suited transformation, and ePlus areas customers to our such

we as and see technologies, AI evaluate it emerging driver. to continuing growth an are customers Our

well industry security as response provide infrastructure strategic through cutting-edge Many simplify with customers as AI remediation of operations incorporated empower partners our to the We detection, optimized into NVIDIA. on AI partnerships and optimize their with have solutions core front. offerings faster leaders as such

adopt customers help to market. designed increasing are technologies the speed services while latest AI to their Our

customers building and are deploying, help strategy designing, can proper governance an supporting our applied and managing and and projects plan, complexity and AI policies AI. expertise implement include AI ensure This of to the providing out structure resources Our then utilize identifying manage to priority projects, monitored.

expansion overall will being the of to Networking quarter the related as with to increased and opportunities networking, believe of security, and modernization billings cloud provide was We benefits and hardware gross this performer data standout networking in the infrastructure XX%. embedded platforms collaboration. AI continue for

and solutions recent projects growth, complete facilitate well to reflecting customer as and organic collaboration contribution certain growth workplace improved allowed drivers The demand as product from networking acquisitions. transformation us enable that included the that solid for availability

Security XX% to gross billings. providing XX% XX-month billings remains organizations of for we We believe approximately the remain sizes, priority on is IT cybersecurity services and customers mitigate basis increased that all gross trailing product year-over-year focused our an a and of and that on enable products total risk.

than Our by Services. Managed offset as services growth revenue improved slight revenues by decline services a robust more professional in was in X%

complex particularly a and saw services change customers support and of demand and and recruiting services. pace These strong enhanced who IT We terms managed in cybersecurity technological to with managing talent. our value retaining challenges face keeping for SOC other significant offer maintenance risk,

our months ePlus annuity capabilities to Several focused ePlus services, services automated our managed introduced life such virtual we cloud assistant services collaboration as ago, and cycle that storage-as-a-service, support. continue We out with build spaces. proprietary in new ePlus for our managed offerings markets expands

utilizes services in the This video-enabled ePlus managed innovative and in to workspaces. with user robotic solution conjunction experience processes enhance rooms meeting automation

last a five last building have almost offerings, Services XX.X% differentiating are strengthening of in By annuity perspective, has CAGR services years. quality the the while over three our our over proposition. against increased generated last Managed we XX.X% unique of value and competition this To put over doubled years. out ePlus year portfolio revenues our

were outsized creating to year's last produced specific gains quarter-over-quarter. segments. consistent Moving quarter compare for quarter with a from expectation finance financing our the our first Results transactional given deals, tough

customers Earlier, noted market positive the is our flexibility our business from a contributions a for competitive recent to technology compared provides as and As I reminder, peers. acquisitions. differentiator financing our the

balance we look affords sheet element forward, will in to an the additional of As flexibility strategy transactions. strength us important acquisitions growth value-accretive our and our remain pursue the

Our our can to M&A variety that further currently are our customer well and I'd strong capabilities as ePlus like success all drive supplement pipeline financial thank we active, teammates for growth. extend our quarter evaluating a and efforts results, our of remains as numerous innovation organic to targets stories. their this

results call turn in financial now will to outlook our remarks, the detail. Elaine? for I will more discuss provide financial I XXXX. Elaine Elaine's After fiscal to over our

reflecting fiscal good acquisitions. as pleased strategy and am success everyone. Thank report strong year on our growth well the contribution of from I XXXX, you, our to our the as Mark, start afternoon, to recent

sales and Broad-based end sales, which grew increase XX% across to strength million. markets -- also of key from XX.X% million factors a $XXX.X to XXX.X evident in business are consolidated to acquisitions net these led our net revenue technology

we have three this which comprise quarter, managed our professional with product, Beginning introduced segments, technology business, and operating services. services

segment sales software includes products, Our services. third-party including and of product

professional contains staff engagements augmentation, our services project-related project segment service consulting Our and management services.

segment as and managed Services comprises security services services infrastructure cloud desk. and managed our Managed Our service offerings, such various

of million products by sustained from operation new support business. enhanced In XX.X% business forward, will and sales technology networking revenue the segments increased grew growth maintenance center Products in led Services our as by our Managed revenues and segment, to services. Going to reference $XXX.X $XX security segment, million, collectively we these XX.X%

segment, our $XX.X for X.X% In primarily staff to Services Professional to augmentation due revenue reduced year-over-year, declined million services. demand

and focusing XX.X% business on and $XXX to Our gross by acquisition easing strategy year-over-year. by led to of boosted billings faster-growing growing technology areas contribution supply chains million

goods a taxes. services, total and during reminder, billings of of the including memos customer dollar other and sales the purchases returns and charges shipping As gross of customer period, and net credit denote value

our markets markets. Health continue for telecom, and sales and XX%, trailing to basis. and Within our respectively, technology, care respectively, and a media remaining and services XX% our XX%, XX% be entertainment, end other technology financial XX-month with technology XX% on SLED, business representing largest X%, business, of the from accounted net two

fiscal a segment, $X.X million of the decline quarter transactional led $X.X In gross first and year's profit lower million. in to from in post-contract the compared financing of to million gains earnings which our first in revenue resulted lower million, $X.X quarter, financing segment of last XXXX $X.X

have vary widely the segment due business. mentioned, can in to nature transactional of financing As the we our results

$XXX.X Our consolidated profit with to prior the of gross that increased with line consolidated XX.X% a year. million, in margin gross of XX.X%,

to Technology business, points and XX.X% expanded basis basis increased $XXX.X our XX million, to XX% profitable to margin Due points higher expanded basis product more margins XX.X%. Within profit to mix, by service a by gross XX expanded gross margin three to professional XX.X% points segments. and gross technology XX driven across all gross and margin

higher the reflecting increased lower XXX improved XX.X%. Solutions scale, which hires from XX.X% Group, services compensation XX.X%. to profit, increased year-over-year, members addition gross increased managed margin our SG&A expense, from variable of still Benefiting organic and basis Network expenses points team gross than

At head in of customer-facing from quarter The first million. the additions Through mainly tax increased year-ago reflecting employees. year discipline, of X,XXX quarter our end, to quarter. the operating XX% $XX.X in was operational X,XXX grew the fiscal continual in effective to count to XX.X% income rate XX.X% prior XXXX quarter compared

the Xst period. ago or diluted XX.X%, and were from per a $XX.X share $X.XX from were diluted respectively, earnings earnings share, quarter increase million $X.XX, year net XXXX XX.X% both Non-GAAP consolidated up ago Fiscal quarter. the per XX.X% year

We XXXX. XX.X% the the fiscal million comparable or with the ended cash Adjusted of of end cash EBITDA ahead was at equivalents quarter compared million $XXX.X in fiscal $XX.X and quarter to $XXX.X million of XXXX.

constraints. past inventories, the three Over years, been chain impacted flow supply in growth has operating cash by which reflects partly the

we or inventory operating needs cash working With enhancing expect improving, supply reducing to flat capital chains and our now flows. remain decrease

to remained XX Inventory inventories the XX preceding versus close level to quarter turns improved the of quarter. fiscal flat First at XXXX. in days the days relative

compared days from the March ago of cycle improved cash significantly days to the end in conversion days XX quarter XXXX. the was Our XX but XX year at

and team thank Finally, persistent their the execution quarter to our I to growth. for in drive efforts first solid ePlus want

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

off and strong base faster-growing In an more positioned continued is end where from our payback customers year, rapid serving ePlus growth. diversified markets. our focus strategic investments, our on are remains for customers start a their this to environment well on benefiting prioritizing ePlus Elaine. you, IT Thank of

on the security core our operations. across deliver capabilities stack focus customers their leveraging costs, business enable optimize our to enhance and solutions technology are to that extensive We effective

we sales in projected remain As the result, market. deliver exceeds that confident spending growth our IT ability XXXX in in a fiscal the growth to

of therefore, We guidance fiscal $X.XX XXXX initiating billion sales are, $X.XX billion. to net

adjusted We EBITDA expect million of EBITDA between $XXX to adjusted an margin to $XXX million, representing to be X.X%.

part, enables supply complete delayed previously guidance Our leasing and projects. gradual chain to a assumes us constraints that in continued customer

ePlus team our shareholder focused long-term through strong allocation to execution remains the evident performance. efficient their building want value the which for on of and ePlus closing, I our In strategy of in dedication, thank capital. again is growth

Operator, please call the questions. open for

you, Thank your now sir. And we questions. will take everyone,

First Jesse Blair. up is Wilson, William

growth upper range Maggie. is in, end. some I you This the year calculated just and of assumptions see end? the it's talk on a to in first, like upper you've seems and a at versus of you to made, results guess, nice gets about for guidance, bit kind Congrats to Jesse terms dig lower you but the initiate lower on full of of the Can end the what it

Sure.

here. So Mark Jesse, it's

couple a different So of things.

start So now. with providing let we're guidance why off me one

had back actually few COVID years hit. guidance then a we on So providing planned and

So back. pulled of kind we

we folks they provide As if and other we've like thought yourself talked helpful investors, would it guidance. to be

line. our into we both growth, We differences there this with and the help big visibility terms would modeling of have because between our some really of backlog, different line in pretty analysts top was good pipeline some thought bottom and and the

little trying granularity. a So to more we're just provide

but As What had relates from net nice I'll adjusted numbers, few in it really we the some there quarter. the saw a QX, to chain One, that and a we happened things we saw quarter, call are EBITDA. supply it, in easing. a, both sales actually

source we some space that were forward. pulled in deals So specifically the networking

I net out will of acquisitions. in subsequent X/X our point quarters. about had was sales from also We

already. One and of in off fall will are projections the acquisitions your

the and land large quarter. that some expand had deals also We affected

So, forward. there was some pull

about net the then of There acquisition is easing. chain which and were supply X/X related, some sales

to our at As top metrics, that were and XX% the quarter. last very X% approximate on year we comfortable where it the put looking rough to the And after about growth at was we first seven numbers. pipeline backlog especially line. over looked on us, This is

for solid compare Mainly point different out lot income a will finance a in I QX space. tough our of is especially segment, quarter had year, in us we a for last operating the reasons. really

some into tough forward, this a and tough with as a might that to we thought to be it the QX that pull it's And will tighter we go quarter, normally -- quarter. compare bit for is be think match I in So of us solid QX. little but normally

level as on high process year. on to we some on margin the the expectations based we throughout thought the But And as X.X% was that's X% continue EBITDA percentage adjusted forward investments with making the on it plan we relates. in the thought line

And Got in on because both of couple then it. first really you a That's questions hit answer. all helpful. just your follow-up

seeing my some over And are and ramp you multiyear follow-up… a which that you seems thinking Are of then So those that basis? the quarters, case. on expand few up. might of about like land deals be Or a second kind

Go ahead, Jesse.

Sorry.

acquisition. My follow-up on Yes. was second the

for some it very recently me. sales acquire customers just are some Or more? you talented spending new persons that That's did acquired were winning So business?

Okay.

So question. good

the we've that try a land on the everything -- to the to customers. foothold expand more with I'll and work side, side with sale where We'll work while, mid-market try for enterprise it's the we'll we there, expand, from on had strategy have. we on And say a get but then that account. in a it's also So the it's we the and

we'll a So the pop get in a opportunity. on big based or hit sometimes quarter big

Normally, go or little is we those to tighter across that and with expand margin value-added try try multiple can it. it and years deals, bit then the on we expand our multiple to services. solutions a as And quarters

years it that the see the all So that's right? on quarter multiple we could two, in not be just strategy, something benefit that a or that's

the second And was around acquisitions. question

in we good in are XXXX acquisitions good people think them Com, acquired and acquisitions, We acquired of us. gave customers to additional the talented and which a Texas both access some and July space great for on think mainly security So, like two we really we salespeople. Future and the it's of in really region. us the --

provider they slow of network things QX. actually I service as some had But acquisitions well a little space. Most in first a expect that we that a to is was group nice service a quarter. I the down up that they chain network And the the supply some move and systems And think in quarter. closed. as open to due struggle bit nice forward, would then really Jesse, And they normally had quarter, nice but that to as jump

Greg from Sidoti. question a take we'll Next, Burns.

really backlog just Can this like still stands I of delve So into inventory quarter, process? -- that but you be too how it much? where pipeline on now because left guess did sounds to and you you're down some much didn't there deliver projects those go would in backlog the is

Yes.

orders about I got systems So at our CRM as was Greg, what talking so as open we've visibility. our both very is looking well backlog, good and in

they're As $XX probably it sequentially. our relates to orders, backlog/open down million about

of some we the where runoff saw quarter. that's the So into

that were up help XX%. the that side networking There say, times networking on our about was lead also what I'll some, improved numbers

opinion, I that's the much we'll high the as the know some don't throughout move kind year. as we quarter forward see on there my But if of was So in there. that pull level

money then had companies is you it your And products products is is demand -- you maybe give they the seems Okay. and are your signs a for broad-based indications segments. Or just sense of us any of any and But flowing. just pulling that the demand services broadening where are caution, like you are and market? are where customer back? reprioritizing Can outlook seeing across

Yes.

interesting, Greg. it's So

done believe sure. IT things do the different to do One, We've continue continue So, believe a to that and couple market, spend it. we'll we'll of there. for we pace

economic there's and the cycles uncertainty. deal longer some seeing are We

nice -- some out of revenue. from projecting our been layoffs is terms vendors some tech public some of There of the some size there. And the of you declining terms some in from see what there's of in they're projections peers

relates you So as will, immune to I resilient, if to it, to want business. never say our are it but we we're

that thing I the to We commodity that that long still is see space We do decision the time business. some think didn't some we -- some space. PC the in in of out in are really the made a a of of bigger it The don't customers. laptop of space. But others our headwinds, get play other ago for we

the then that our up. is was our And segment which size we're size the customer I need What every on really providing. customers thing types solutions customer other believe nice -- real was was is up, segment, for was have those of mid-market

feel guidance. overly our the we can jumping good in the economy second about but and up down yet quarter, of We -- So, go about terms feel good in where not half. the not

lastly, why that into Is services difference managed their an like provide own then And Like or of split terms now? margins? in growth why Okay. a professional granularity out there extra for you rates did segments. expectation

Yes.

the help our managed to what services/annuity for or professional know think transactional what, out to an We a and well. it's services staffing give You over decided guidance would sense Greg, modeling. about uptick. of made see break quality to as with call years. some we it services services to as thought revenues time, We've start I'd you'll I talked

held Some overall. is of by chain that supply back

the relates So mentioned, year-over-year. last or was saw I that's And is that think up five years as thing. services, to XX% this And it we quarter managed the one XX%. as CAGR I over

a visible to So, over well. very a stream up would profitable and But it's reverse. as services our professional a expect time it's I revenue -- it's transactional pick

Matthew the Sheerin, take Stifel. next from we'll question And

streams. revenue appreciating echo and well everyone comments outlook of of disclosure, the Yes. your as guidance Thank the about you. the and as also I others' Good afternoon, and some Mark, breakdown

conservative for as guide mean, that. guiding you're said, first up it So you your I is be year-on-year, quarter. year, looks I it you're like up in the XX%, your forward Mark, But looks to XX% to appreciate because just guidance the relative

So you're facing December, to very, be comps that know going be half to that quarter very in would imply going last is had flat tough you year. also the to a second I strong down December because

maybe don't some earlier more So that to are just have full just conservative made be of -- you you the reasons about maybe into you wondering, because or is I'm comments of just conservative? visibility the year

with that of down get or I'm flattish more for September also, all going the think Just whether up the be rest that's the year. sequentially. typically if pull-ins sequentially? quarter, And to about But a trying about, how you -- feel the to you're you talked wondering

Yes.

So in a lot that was there, Matt.

of out, couple called one a is, the on see So think different some of I comps things, finance I starting we're piece. tough to the

operating So in we had it big believe QX. quarter I $XX.X million income a really in was

going tough that's really be replicate. to So to

So that's to thing first QX. the relates as it

in You strongest weren't we do our had solid that some I is saw that is of popped expecting. at quarter, forward but We a some into the popped normally the that things are normally pull this right. that QX believe the quarter quarter quarter. end in QX quarter. we

So, think off throwing bit little because what a you that's was I the is big. so quarter part maybe of

a that The are reserved to we're other competitors guidance, in digits. others our it but from the on very what are guidance. we market down hearing to relates single from little good double is, Based as and the yes, thing our about feel we

to on seeing. that everything based based we trying backlog, make on on just our sure that pipeline, out we're put something that's fair we're based our So

market, don't think above year. X% I companies up thing which million in you're have in that's quite is year of most in to last I announced did ballpark what $XXX highlight, The seeing will And million guidance honestly, other of last on the terms we XX% this to that $XXX results. it over

you undercutting it's but think need Matt. if not know I there, that somewhat you I realistic gave everything target, a don't it. aggressive So so

and have is still to down $XX relative regarding like some elevated? it is Well, follow-ups, backlog, how still I your but down. elevated, it quarter-on-quarter? It And normal sounds much was just million backlog? it Was it

our orders, almost open pre-COVID, normal it's Matt. sequentially of It's backlog, it's it's in honestly, almost $XX million. terms Yes, elevated down quite double to but normal our still

to to UR X.X%, be the Okay. guidance, flat but guidance in significantly the QX. that's And in then year-over-year, margin on year-on-year X% basically you're up EBITDA going

expect Why So leverage not year? you is I'm some play that wondering the going because maybe up? through see continue that OpEx to

there's two I we think network One, Matt. things, service Yes, group. the acquired

only this you months the saw in quarter. So OpEx of two

So that can believe as we And I'd market continue little move expect share. we to a be up we to grow forward. yes,

to adding going our are customer-facing practices, we across more So headcount. invest

right early we you it's a but the is believe some now, if example, think I on it generator artificial growth big an intelligence, with don't For be of about believe, that, for going revenue could -- stuff a the not us, it's innings. I area driver. in

to advisory of over So, advantage understanding in things space risk from services out we'll understand, invest of look to time there. that solutions that by the helping how understand customers government our around some the embedded AI in they that providing the areas partners and to and take have are

we there acquired So some plan headcount, relates in we on which that's not do yes, May. also making expense the investments some but Network Group, in Services additional to in as additional it's it

helpful. just question That's Okay. me. for super last And

Just regarding at has recent level the increases. Are pricing in the becomes and been everyone trends -- starting know and availability been Or as to vendor better. pass pressure have all? the that you price to you any off see component along I able quarters, pricing

been Matt, it as pass deals are No, strong that you'll to able it where seen. that and to had any we been have sales, we've was pressure I I to related Elaine haven't discounts. up mentioned with product in relates think on Yes. to pass from on, our seen haven't XX%. There pricing anything. a some pressures, go will able competitors aggressively which But certain We've quarter

space. that much change So that didn't see of in

there hand back further to this closing additional any for questions. are our at or everyone, things I'll speakers time, And no remarks.

Okay. Thanks, Lisa.

results did. for really was to year. everything quarter nice start want to was fiscal to produce they that and close, did a could I it I It if So we our ePlus and the team the a congratulate solid thank

for look like thank us everybody safe. our care call call. and earnings and be to to for next I'd forward that, joining Take this with And

everyone for Once again, conference. today's participation. does Thank that conclude your you

disconnect. now may You